For the 2nd straight month, the S&P 500 started fairly strong, only to fade by month’s end. However, in February’s case, the S&P 500 still ended up positive overall (+3.1%).
Most S&P 500 sectors finished positive in February… but 3 of the 11 turned in a negative month: Utilities, Consumer Discretionary, and Healthcare. For the year, Utilities, Consumer Staples and Healthcare have been the biggest laggards.
So far in 2021, Energy stocks (+25.9%) are leading the way. However, since I don’t own any Energy stocks, my Portfolio has not benefited from this.
Next in terms of 2021 sector performance are Financials (+9.2%) and Communication Services (+4.6%).
In any case, February saw gains posted by my Portfolio, which I’m always happy about. Yet, this is only one aspect of my Portfolio that has me thinking.
Top 10 Portfolio stock movement was fairly contained in February. The stocks within the top 10 did not change overall, and my top 5 did not see a shakeup in position when the month was done. However, this belies what transpired during the month. I’ll take a closer look shortly.
Transaction activity heated up for me in February. This wasn’t a result of me adding a bunch of investment capital to my Portfolio though. Rather I eliminated a position and trimmed a couple of others, then used the proceeds from those sales to invest elsewhere. In most cases, I invested in existing Portfolio holdings. However, some new stocks were introduced to my Portfolio as well.
As always, my watchlist changes with the changing stock prices. Coming up, I’ll share what’s garnering my interest these days.
No more waiting… here are my Portfolio Thoughts for February, 2021.
Value Movement
Despite some intra-month movement, the top 5 stocks within my top 10 remained the same when February came to an end.
Qualcomm (QCOM) still holds the #1 spot by a wide margin, despite a noticeable decline in stock price during the month.
At #2 through #4 are RPM International (RPM), Skyworks Solutions (SWKS) and T. Rowe Price Group (TROW). This group got much closer in weighting as a result of a dip in stock price by RPM, a trim of SWKS by me, and some good gains from TROW.
Meanwhile, Nike (NKE) still has a hold on the #5 spot, but its grip is weakening.
The stocks in my #6 through #9 positions were shuffled during February.
Visa (V) had a good month and rose three spots to #6. Union Pacific (UNP) also had a positive month, allowing it to climb a spot to #7.
On the other had, both BlackRock (BLK) and Procter & Gamble (PG) slipped a couple spots each, with BLK settling in at #8, and PG slipping to #9.
Lastly, it was Lowe’s Companies (LOW) holding on to the #10 position, which is where it started the month. LOW dropped more than 10% after surging to a 52-week high earlier in February.
Almost cracking the top 10 was Broadcom (AVGO). It could very well make the top 10 next month if it can keep up its performance from the past few months.
Aflac (AFL) and Johnson & Johnson (JNJ), a couple of my legacy stocks, aren’t far away from getting back into the top 10 either.
From the table above, my top 10 holdings now comprise 36.47% of my Portfolio value. This is a decrease of 1.65% compared to last month. The big drop was primarily due to losses from QCOM in February, as it accounted for 0.97% of the drop. Losses from RPM didn’t help either, nor did my trim of SWKS.
As for the dividend weighting of my top 10, this ended the month at 26.21%, which was actually an increase of 0.17%. Most of my top 10 declined in dividend weighting, as my investment dollars were invested outside the top 10. In addition, the SWKS trim hurt. However, overall it was positive due to one stock… TROW. TROW delivered a healthy 20% dividend raise during February and this resulted in a 0.63% boost in dividend weighting from that stock alone. I love the power of a dividend raise!
Transactions
I made 9 transactions in February. It started with a group of 3 transactions in the 2nd week of the month, and finished with the remaining 6 transactions in the final week of the month.
In both groups, I made sales to fund my subsequent purchases… so primarily, some Portfolio tweaking took place, as opposed to new capital investment.
The initial group of transactions had a pair of stock trims, followed by an addition to an existing position.
The last group of transactions had an eliminated position lead to adding a couple of new stocks to the Portfolio, as well as additions to a couple of existing positions.
All the details can be found in the following pair of posts…
Recent Transactions – SWKS, TCF, UNH
Recent Transactions – TCF, NEE, PNW, AMGN, LMT
With the elimination of TCF Financial (TCF), but the initiated positions in NextEra Energy (NEE) and Pinnacle West Capital (PNW), the number of positions in my Portfolio has grown by 1, to 52.
Price Movement
Note – my price changes cover closing prices from 1/29/21 to 2/26/21.
This month I posted a 2:1 ratio of stocks with price gains compared to price declines. The Portfolio swung back to positive after a slightly negative ratio in January. Of the 51 holdings (not counting new Portfolio additions NEE or PNW yet), 34 moved higher, while 17 moved lower.
Volatility seemed to ratchet up in February, and that was reflected in price movement within my Portfolio. Whereas last month didn’t have many big movers, February saw that number triple.
Of my 34 stocks that rose in price, two stocks increased over 20%, while nine others managed to move up over 10% (the usual threshold I monitor). Another eight stocks gained over 5%.
The top gainers were:
- TCF Financial (TCF), which gained 23.52% by the time of my sale
- Nexstar Media Group (NXST), which advanced 21.01%
The next batch of leaders included these 10%+ gainers:
- Caterpillar (CAT), popping 18.07%
- Air Lease (AL), flying higher by 15.72%
- Main Street Capital (MAIN), rising 15.27%
- JPMorgan Chase & Co. (JPM), jumping 14.38%
AL made a nice recovery after showing up on my leading decliners list last month.
In these 6 top-gainer stocks you will find 3 Financial stocks and 2 Industrials, which makes sense given that these were 2 of the 3 best performing S&P 500 sectors in February.
Of my 17 stocks that dropped in price, I did have a couple drop over 10%. That’s the first time I’ve had that happen in 3 months. In addition, another 4 stocks moved down at least 5%. Still, compared to my gainers this month, these declines were well contained.
Here were my worst performers in February:
- Qualcomm (QCOM), sagging 12.86%
- Quest Diagnostics (DGX), declining 10.50%
- Amgen (AMGN), dropping 6.84%
- Gilead Sciences, falling 6.40%
- Merck & Co. (MRK), pulling back 5.77%
- Pepsico (PEP), retreating 5.40%
The QCOM decline hurt quite a bit since it’s my largest holding.
Also, as you can see, 4 Healthcare names appear on this top decliners list… a bad performance from that sector to say the least.
Watch List
My LMT additions over the past couple of months aren’t helping me to trim my Industrials holdings in my Portfolio. This remains my most overweight sector.
I’ve got goals to increase my weighting in Information Technology and Communication Services in 2021. However, I haven’t made much progress on this front in the first couple of months this year.
Utilities have had a poor start to 2021, and I took advantage of that recently to add a pair of Utility stocks and gain some sector representation there for the first time in about 2.5 years. Still, I could afford to increase my weighting in Utilities despite the recent adds.
I’ll keep all these weightings in mind as I adjust my Portfolio, and my watchlist, moving forward.
Within my Portfolio, here are some stocks that I’m watching for possible additions…
MRK and Lockheed Martin (LMT) still lead my watchlist again this month. With the price for MRK having dropped below $73 since last month, it probably moves to the forefront. MRK has an earnings release coming this week, which will most likely move the stock price.
Fellow Healthcare stock AMGN remains on my watchlist despite my add this month. I’d keep adding AMGN in the $220s.
PNW is a target, too, despite me initiating a position days ago. The stock dipped below $70 the day after I bought, which makes it even more appealing now.
Fellow newcomer NEE is also a consideration for another purchase. I’ll probably target a price below $70.
Realty Income (O) is still ripe for an addition below $60, which isn’t far away.
I’m mainly focused on adding to some of my smaller-valued positions in an effort to make them be more significant holdings within my Portfolio. At a minimum, if they are going to exist in my Portfolio for the long-term, they need to be no less than half the size of my average Portfolio position. Average is currently ~$10K, so I’m looking for the holdings to get above $5K in value. An exception here would be some of the high yield stocks, which I consider significant positions due to their large dividend weightings, despite their lower Portfolio values.
As for non-Portfolio stocks that I’m watching…
Flowers Foods (FLO) has reached my target price below $22, yet a $21 price would provide some additional margin. I like this Consumer Staples company as a defensive holding, and for its nearly 3.68% yield. However, I’ll have to decide if I want to add another small position to my Portfolio, or build up some of my existing smaller holdings.
If Costco Wholesale (COST) managed to continue falling to $310, I might be inclined to open a small position.
Bristol Myers Squibb (BMY) still remains an option for me on any dip below $60. Unfortunately, I need to work on building up my similar Healthcare positions in AMGN and MRK, so perhaps my investment dollars should go there.
After years of middling performance, I’m considering moving on from GILD. If I do sell, I could put the proceeds into BMY, as the growth prospects for BMY are more appealing. The downside is that the switch would lower my forward dividend income.
If I go back to the Utility well, Xcel Energy (XEL) is a consideration, especially if the price gets to $55. Earnings growth in the 6%-7% range and double-digit dividend growth have the stock on my radar.
Thoughts?
What have you been thinking about doing with your Portfolio recently? Any plans for activity in the near-term? Please share your thoughts!