It’s time for another edition of Portfolio Thoughts! Just like every month, there’s plenty to cover.
I’ve got a new entrant in my top 10 Portfolio stocks to share, not to mention plenty of jockeying for positions within that top 10 group.
After a quiet June, I have some purchases to note this month, so that’s nice. I’ve got to do something to boost my forward dividend income and attempt to offset those unwelcome dividend cuts that exist these days (looking at you, WFC).
Over the past month, the stock market kept moving higher in the face economic uncertainty. This makes 4 consecutive months of gains after that massive decline to end the first quarter of the year. So we know I had gains, but what was the breadth of winners to losers in my Portfolio?… I’ll go over that.
I certainly don’t have any idea of what the market will do next, so I just remain invested, knowing that with strong likelihood, in the long run, the market will be headed higher. Along the way, I’ll be looking for quality dividend stocks that appear to offer a favorable purchase price, and either initiate a new position for my Portfolio, or add to an existing one.
That’s where my watchlist comes in. In recent months I’ve been focused on examining existing positions for additional buys rather than looking for new positions to initiate. Did that continue?
Let’s get to it. Here are my Portfolio Thoughts for July…
Value Movement
It’s always interesting to me to see the movement of stock values within my Portfolio each month, especially at the top. Very rarely do stocks in my top 10 hold their positions, and this month was no different, as only one top 10 stock finished the month where is started in the rankings.
Of course, RPM International (RPM) and Qualcomm (QCOM) switched positions at #1 and #2 this month (as it seems they always do), with RPM now claiming the top spot.
Switching places occurred at the #3 and #4 spots as well. Procter & Gamble (PG) managed to move ahead of Visa (V) this time around.
The next two positions are claimed by a couple of companies with little or no debt…
My biggest top 10 rankings mover this month was T. Rowe Price Group (TROW), moving up two spots to the #5 position.
Meanwhile, dropping a spot to #6 was Skyworks Solutions (SWKS). SWKS has recently been increasing in price quite nicely. The stock had actually climbed all the way to my #3 spot less than a week ago, but faded as the week came to a close.
Sliding back a spot to #7 was Pepsico (PEP). PEP has been trading sideways in recent weeks, allowing other stocks to pass it in the rankings.
Holding down the #8 spot for a 2nd consecutive month was Union Pacific (UNP). However, as you can see from the Weight in the table, it was quite close to surpassing PEP, too.
At #9 is this month’s lone newcomer to the top 10, Fastenal (FAST). A couple of months ago, FAST established a new high at $40, and since then has just powered higher, approaching $46 now.
Despite price gains during the month, slipping a spot and rounding out the top 10 was BlackRock (BLK).
Just outside the top 10 and hoping to move back in is JNJ. Meanwhile, right behind JNJ is Lowe’s Companies (LOW), which has been rising quickly up the ranks since the lows in March. LOW has more than doubled its price in the past 4 months.
Looking at the totals in my table above, my top 10 holdings comprise 38.04% of my Portfolio value. This is a rise of 0.17% compared to last month.
Regarding the dividend weighting of my top 10, this didn’t change much at all from last month. It was a drop of 0.01% to 30.26%. SWKS boosted the total thanks to their dividend raise this month. In addition, all stocks moved up slightly in weighting due to my Wells Fargo & Co. (WFC) dividend cut. However, what lowered the dividend weighting of my top 10 was JNJ dropping out of the top 10 and FAST moving into the top 10. FAST has a yield that is a roughly 0.5% lower than that of JNJ, and it offset the weighting gains I noted.
Transactions
I managed to get off the sidelines and make a couple of purchases in July. Yippee! I love building those Portfolio positions and adding to my forward dividend income, for sure.
You can read all the purchase details in this post from earlier in the month.
Since both of the stocks I purchased were already in my Portfolio, the number of stocks in my Portfolio remained at 50. What a nice, round number. 🙂
Price Movement
Note – my price changes cover closing prices from 6/26/20 to 7/24/20.
As I was calculating all the price movement numbers this month, I was surprised at how strong the month ended up being. Sure I knew it was a 4th straight month of gains for my Portfolio, but the ratio of gainers to decliners caught my eye.
After a couple of months with a 7:3 ratio of stocks with price gains compared to price declines (which is quite good), July was even better at over 6:1. Of the 50 holdings, an impressive 43 moved higher and only 7 moved lower. On top of that, the declines I did have were relatively small in the grand scheme of things. We’ll get to that in a moment. First, lets see what the gainers did.
Of the 43 stocks that rose in price, 1 was up over 20%. This stock really stood out, with a gain of 23.51% for the month. The next best stock was nearly 10 percentage points behind. Which stock led the pack this month? I can tell you it isn’t normally a high flyer. It was Air Products & Chemicals (APD). A Materials stock!
Well, Materials must have been a hot sector, as my next best performer in July came from the same sector. Eastman Chemical (EMN) notched a 13.91% gain this past month. My other Material stock, RPM, had a nice gain in July, too (even though it didn’t finish in the top group).
No less than 8 other stocks also posted gains over 10% (the usual threshold I monitor), while yet another 17 moved higher by over 5%. A strong month, indeed!
Some of those other 10%+ gainers included: LOW with a gain of 13.62%, Quest Diagnostics (DGX) rising 13.40%, TROW climbing 12.64%, Caterpillar (CAT) moving up 12.41%, and Comcast (CMCSA) advancing 12.16%. These 5 stocks reside in 5 different sectors, too.
Of my 7 stocks that fell in price, none reached a decline of 10%. In fact, only one declined 5%, and just barely. That’s a sweet nugget of info, no doubt. My worst July performer was Air Lease (AL), with a loss of 5.05%. AL was a top 10 stock of mine before the pandemic, but as you probably know, the airline industry has not fared well during the pandemic. AL is fighting to get back into my top 20 these days. I don’t have any plans to change my AL position despite the recent poor performance.
My next worst decliner, retreating only 2.34%, was Main Street Capital (MAIN). That was followed by Realty Income (O) falling 1.69% and Gilead Sciences (GILD) dropping 1.25%. Pretty tame declines I’d say.
Watch List
Rising prices usually mean a smaller watchlist, but I still seem to find plenty of stocks on my radar. The market gains seem to be carried by a small group of stocks (Technology & Consumer Discretionary), leaving many stocks in other sectors at reasonable prices.
Energy and Financials have been hit hard. With an uncertain outlook in the near-term, those are perhaps a couple of sectors to avoid for now.
Regardless of sector, if I am going to add in the short-term, I’m focused on adding quality companies (stocks with strong financial positions and a history of dividend raises).
Within my Portfolio, here are some stocks that I’m watching for possible additions…
Shares of Automatic Data Processing (ADP) and General Dynamics (GD) are still high on my watchlist again this month, despite purchasing both earlier this month. Again, a purchase of 5 shares seems about the right quantity to add. I’ve been slowly building these positions. I’d like to get either stock below $140.
UnitedHealth Group (UNH) remains a buy candidate for me. Last month I said I’d prefer to add below $275. Maybe I raise that target to $285. UNH does not belong near the bottom of my Portfolio given its performance since I initiated my position. Its stellar dividend raises over the past decade are another reason to make this stock a bigger part of my Portfolio.
More recently, I’ve considered adding a few shares of Aflac (AFL). I haven’t added to AFL in years, but its recent price makes it ripe for an addition. AFL has not participated at all in the market rally over the past quarter.
Also, garnering some interest from me is CVS Health (CVS). Just a couple of days ago the stock touched $62.50 and I was intrigued. CVS still has some work to do to continue reducing their debt after the Aetna acquisition, but the company seems to be headed in the right direction. I’ve been wanting to boost my Healthcare weighting within my Portfolio, so CVS becomes a possibility.
As for non-Portfolio stocks that I’m watching…
I’m still keeping my eyes on Waste Management (WM), NextEra Energy (NEE) and Costco Wholesale (COST), but all have moved up in price since last month, so I’m in no rush to establish a position in any of them right now.
I’ve been looking at a couple of other defense stocks recently in Lockheed Martin (LMT) and Huntington Ingalls Industries (HII). LMT has been basically flat over the past year. A pullback to the $350 level, which it reached about 3 weeks ago, would be interesting. As for HII, it looks reasonably priced right here. Perhaps I’ll look for a retreat below $170 as an entry point.
Thoughts?
Already one month down in the 2nd half of the year. What do you want to accomplish in your Portfolio before this wild 2020 comes to an end? Please share your thoughts!