Happy Halloween!  It’s time for another edition of Portfolio Thoughts, where I discuss those thoughts dancing around in my head (including scary ones) as it pertains to my dividend Portfolio.

I didn’t have much movement within my top 10 this month, but a former top 10 stock did manage to work its way back onto the list.  That means one stock dropped out of top 10 as well.  Any idea which stocks traded places?

My only transaction in October was made on the 1st day of the month… so it was rather quiet with regard to trades.  That trade ended up being an addition to an existing position though.  Every addition helps to keep the Portfolio growing.  You probably know which stock I added based on my last monthly dividend report, but if not, stay tuned.  At least I didn’t sell any stocks this month!

My Portfolio value was generally climbing for most of the month, before a sharp pullback in the final week.  Unfortunately, the past week resulted in a negative return for the month overall.  Still, it wasn’t a big move down, so I can accept that.  I don’t mind if the market consolidates some of those gains over the course of the next few months.  However, if the market decides to turn south, I’ll be looking for buying opportunities.

There still seems to be a clear separation between stock winners and losers in 2020.  Perhaps I’ll sift through some of those losers when I discuss what’s on my current watchlist.  As always I’ll be looking both inside and outside my Portfolio for possible additions.

Let’s get to it… time for my Portfolio Thoughts for October…

 

Value Movement

Stock values were trending up in the first 3 weeks of the October, but turned and ran for cover in the final week.  Despite the ups and downs, the upper half of my top 10 didn’t see much movement.  However, the bottom half got shaken up a bit.  Here’s where things stand at the end of October…

 

 

For the 2nd month in a row, there was no change in my top 3 stocks.  My top stocks in terms of value continue to be Qualcomm (QCOM), RPM International (RPM) and Procter & Gamble (PG).  There’s decent space (weighting) between them at this point, so I’m not expecting their positions to change any time soon.

Climbing a spot to #4 was Skyworks Solutions (SWKS).  This technology firm is up thus far for 2020.  The 5G prospects for SWKS offer upside potential.

Nike (NKE) rose two spots to #5 compared to last month.  NKE had gained about 30% in price in two month’s time ending earlier this month, but has since cooled off.  The company has managed to transition a significant chunk of its business to digital sales paths faster than expected.

Next we get to the stocks in the bottom half of my top 10.  As you can see from the table, the #6 through #10 stocks are closely bunched, so expect further movement by next month.

Staying put in the #6 spot was Visa (V).  The pandemic has muted their transaction business for the past couple of quarters, and that’s being reflected in the stock price.

The biggest fall within my top 10 belongs to Union Pacific (UNP).  UNP fell 3 spots to #7.  The stock was on a decline just prior to its earnings report, and that decline continued with a revenue and earnings miss being reported for the quarter.

Hit hard this past week was T. Rowe Price (TROW), which relinquished some nice gains posted earlier in the month.  However, TROW stayed in my #8 spot.  The company beat expectations for revenue and earnings, but reported net client outflows in Q3, which apparently spooked investors.

BlackRock (BLK) is my new top 10 entrant, showing up at my #9 spot after a short stint outside of the top 10.  Similar to TROW, BLK had an impressive run up earlier in October, helped by good earnings, but could hold the majority of the gains.

Lastly, I have Pepsico (PEP) holding down the #10 spot this month.  Last month, with PEP at #9, I said I didn’t foresee PEP falling out of my top 10.  One month later, PEP is sitting at #10 and is on the verge of doing just that.  PEP has been trading in a fairly tight price window since mid April ($128-$143), allowing my other stocks to overtake it during the market recovery over the past couple of quarters.

Falling out of the top 10 this month was Lowe’s Companies (LOW), which was a newcomer just last month.  LOW was on fire recently, allowing the stock to surge into my top 10.  Yet, after pulling back a bit recently, the stock slipped outside my top 10.

LOW, Fastenal (FAST), Johnson & Johnson (JNJ) and Illinois Tool Works (ITW) now sit outside my top 10, in that order.

 

From the table above, my top 10 holdings now comprise 39.45% of my Portfolio value.  This is a drop of 0.32% compared to last month.

As for the dividend weighting of my top 10, this saw a boost.  It was a rise of 0.58% this month.  This was primarily a result of the better dividend weighting of BLK (3.05%) replacing that of LOW (1.88%).  My one stock purchase (outside my top 10), contributed to small declines in the dividend weighting of all top 10 stocks.

 

Transactions

Just one transaction in October.  It was an addition to my Cisco Systems (CSCO) position on the first day of the month.  Adding to my technology holdings is always a plus, as is adding to smaller names in my Portfolio that I wish to grow.

I happened to write about the addition earlier this month, and the post included purchase info for a buy I made in late September as well.  This is why you’ll see two tickers noted in the link below.

Anyway, it wasn’t a big CSCO add, but the buy did boost my forward dividend income a bit.  Check out the details…

 

Recent Buy – WBA & CSCO

 

Since this purchase added to an existing holding, my number of Portfolio stocks remained at 48.

 

Price Movement

Note – my price changes cover closing prices from 9/25/20 to 10/30/20.

Due to the market declines this past week, my Portfolio ended down for the month by just a bit (approximately -2%).  That’s two months in a row of losses, albeit small ones.

This month I saw exactly a 2:1 ratio of stocks with price declines compared to price gains.  This was an improvement compared to last month, which sported a 4:1 ratio.  Of the 48 holdings, 32 moved lower, while 16 moved higher.

Of the 16 stocks that rose in price, two managed to move up over 10% (the usual threshold I monitor).  TCF Financial (TCF) was the leader, notching a gain of 19.29%.  TCF was my biggest decliner last month, so this was a good snapback from depressed levels.  TCF, along with other banks, have not fared well during the pandemic.

My other 10% gainer was Automatic Data Processing (ADP), rising 17.41% for the month.  Surprisingly, ADP recorded most of those gains this past week, while most other stocks were on the decline.  ADP beat revenue and earnings estimates in their quarterly report, and also boosted its full-year outlook.  The payroll processor had not really participated in the market rally over the past few months, and so the gains resulted in making up some of that lost ground.

My next best Portfolio gainers in October were:

• BLK, rising 9.38%
• Quest Diagnostics (DGX), advancing 9.35%
• Gentex (GNTX), moving up 9.32%
• QCOM, gaining 7.74%, and
• Caterpillar (CAT), climbing 7.63%

A couple of Financials showing up in my top 3 gainers… I can’t remember the last time that occurred.

 

Of my 32 stocks that fell in price, three fell more than 10%, but not by too much.  The decliners were led by Nexstar Media Group (NXST), which retreated 11.78%.  This was followed by losses of 10.80% and 10.58% from Sysco (SYY) and UNP, respectively.

Furthermore, I had 8 stocks with losses of at least 5%.  The worst of this group included…

• Main Street Capital (MAIN), dropping 8.49%
• Comcast (CMCSA), falling 8.47%
• V, sinking 7.88%
• CSCO, declining 6.63%, and
• Gilead Sciences (GILD), drooping 6.59%

You can see a pair of Communication Services stocks in this group.

I still don’t hold any stocks from the Energy or Utilities sectors.

 

Watch List

Plenty of companies continue to be on my watchlist radar.

I’m still underweight the following sectors: Information Technology, Communication Services and Healthcare.  So, I prefer to add here if I can.  However, these are some of the best-performing sectors in 2020, so I may not find value and opportunity here.  So, I continue to look in nearly all sectors.  Energy and Utilities remain my least favorite sectors at this point in my investing life.

Within my Portfolio, here are some stocks that I’m watching for possible additions…

ADP was on my watchlist last month, but I’ll remove it for now after a recent pop in the stock price.

Adding to UnitedHealth Group (UNH) under $300 is of interest to me.  Another bad week in the markets could get the stock there.

CVS Health (CVS) has gone lower than I would have expected, hovering around $56 these days.  Adding a few shares to my current position seems like a good idea.

Rounding out some possible Healthcare additions, I’d be interested in Abbvie (ABBV) under $80 (was there just prior to earnings this week), and GILD under $58.

Although I feel my Financials are a big enough part of my Portfolio already, I’d be interested in adding some shares of JPMorgan Chase & Co. (JPM) at $95 or lower.

Shares of General Dynamics (GD) are still high on my watchlist.  GD trades just above $131 as of this writing.  This is plenty low enough for me.  I just need to scrape up some cash.

Despite an add early in the month, CSCO remains on my buy list, especially since it trades at enticing levels.  I wouldn’t mind adding more shares at the current $36 level, as this is lower than any of my previous 3 purchases of this stock.

I’d love to add to my smallest holding, which is SYY.  I don’t like seeing this stock at the bottom of my Portfolio.  SYY’s price dropped swiftly this past week.  Should it dip into the upper $40s, I’d be inclined to add some shares to increase my position.

As for non-Portfolio stocks that I’m watching…

I mentioned Walgreens Boots Alliance (WBA) here last month.  Since then, I added the stock to my Portfolio, so, off the non-Portfolio stock list it goes.

My first choice Utility stock is NextEra Energy (NEE), so I continue to look for an entry point.  Now that the stock has split 4-for-1, a price under $70 might entice me to add a few shares, just to initiate a position and track it more closely.  However, a better entry would be $50 (based on a more historical P/E ratio of 20), yet that seems so far away at this point.

Shares of another utility, Pinnacle West Capital (PNW), have run up over the past month, so it will move the watchlist sideline for now.

In terms of a newcomer for my list, I’m looking to do some research on a name in the Communication Services sector, Cogent Communications Holdings (CCOI).  The earnings growth looks great over the past 6 years, as does the dividend growth.  The stock price has been slashed since the end of July, and hit a 52-week low this past week.  CCOI currently yields 5.05%, and has been raising its dividend on a quarterly basis for a while.  Analyst earnings growth estimates for each of the next two years look terrific at 30%.  Lots to like…. just need to make sure nothing scary is lurking behind the scenes.

 

Thoughts?

Has the recent market volatility got you feeling a bit scared?  Or will you use any weakness to add new positions, or build existing ones?  Please share your thoughts!