Slowly but surely the markets have climbed higher yet again this month.  My Portfolio has followed suit.

While I’m happy about the upward trend, a pullback of significance seems more likely with each passing week.

Still, I won’t be trying to time the market.  I’ll keep investing small amounts over the months ahead.  I’ll stay invested, with a plan to deploy additional capital when the pullback eventually comes.

All the while, I’ll probably be making minor adjustments to my Portfolio.  I’m always looking to improve it.  That could mean targeting better stock performance, better dividend growth, or as it has been the case recently, better dividend safety.

Usually I cover my Top 10 stocks in each Portfolio Thoughts post.  However, this time around I’m going to take a look at Bottom 10.  I did this once before… over a year ago, I think.  I’ll be targeting which of my smaller positions I want to have grow in size, in order for them to become a significant part of my Portfolio.  So, we’ll mix it up a little this month.

Portfolio activity ratcheted up a bit in August.  I made 3 separate groups of transactions.  I try to get you caught up on all the changes.

As I mentioned, my Portfolio moved up in value in August, but not by too much.  I’d say August results were rather similar to those from July when comparing the up/down ratio for my Portfolio stocks.  I’ll provide the numbers in a short while.  I’ll cover my top Portfolio movers, too.

Thanks to my Portfolio transactions noted above, I was able to make some headway on moving my Portfolio sector weightings closer to desired percentages.  Coming up I’ll let you know which sectors I made progress in.

Of course, I’ll cover my watchlist, too.  I’ve had a couple stocks outside my Portfolio hit my radar, so you’ll definitely hear about those.

Let’s get to it… here are my Portfolio Thoughts for August 2021.

 

Bottom 10 Review

Alright, check out the Bottom 10 in the table below.  Here’s what I see.

As a result of this month’s transactions, Amgen (AMGN), Omnicom Group (OMC) and Bristol-Myers Squibb (BMY) have been moving up the Bottom 10 list.  I’ve got more work to do to see them move up and off the list, but that’s my plan.

I’d like to see Microsoft (MSFT) graduate from the list as well, but I’m finding it hard to add to my position given the current valuation.

Still, I’m hoping that by the next time I take a look at my Bottom 10, each of these stocks will be absent the rankings as a result of becoming larger Portfolio positions.

 

 

At the very top of the list is OGE Energy (OGE), one of the Utility stocks I initiated a position in earlier this year.  The pair of stocks at the bottom of the list, NextEra Energy (NEE) and Pinnacle West Capital (PNW) are my other Utility stocks in my Portfolio with the same designation of being new.

Since Utility stocks tend not to have the best price appreciation or dividend growth, I like to see these stocks in my Bottom 10.  However, I see NEE and PNW needing to at least double in size, and preferably triple, if they are going to stick in my Portfolio and be more significant contributors.

In positions #50 through #52 are three of my REITs.  I like seeing these stocks in the Bottom 10 as well, so that their dividend weighting remains in control.  As it is, I’d like to see the dividend weighting of Omega Healthcare Investors (OHI) be smaller, especially given the fact that the Dividend Safety Score was lowered to Unsafe by Simply Safe Dividends this past week.

Not seen in the table, I’ve got a trio of stocks that are sitting above the Bottom 10, but each has some breathing room before they might fall in.  Closest to the Bottom 10 is The Walt Disney Co. (DIS), then Lockheed Martin (LMT), followed by Air Lease (AL).  I wish to build my DIS and LMT positions, so hopefully their proximity to the Bottom 10 will fade.  However, as you might have seen recently, I’ve been trimming AL in an effort to minimize my exposure to their Dividend Safety Score that’s rated Very Unsafe.  Thus, AL slipping into my Bottom 10 could become a reality.

 

From the table above, my Bottom 10 holdings comprise 4.68% of my Portfolio value.  This is quite the reduction from the 8.22% number I posted the last time I reviewed my Bottom 10.

As for the dividend weighting of my Bottom 10, it ended the month at 8.31%, which is a decrease of 3.22% compared to the 11.53% from last time.

There are 8 more stocks in my Portfolio than the last time I reviewed my Bottom 10, so the percentages dropping as they did seems like an expected outcome.

 

Transactions

Portfolio activity was elevated this month.  I can’t say that was the plan going into the month, however, that’s the way it played out.

In the first set of transactions I actually invested some cash.  I established a new position and added to an existing one.

In the second set, I reallocated some money.  I trimmed one position where dividend safety looked concerning, then reinvested the proceeds into my newest position.

In the third and final set of transactions, things really got busy, but again it was more reallocation as opposed to new capital investment.  I continued to trim the same position as before, but to a larger extent this time.  I then spread out the sale proceeds among a handful of existing positions.  Lastly, I purged all my shares of a recent spinoff, eliminating what was my smallest position.

You can find the details for all these transactions in the following 3 posts:

 

Recent Transactions – OMC & AMGN

Recent Transactions – AL & OMC

Recent Transactions – AL, OMC, LMT, AMGN, BMY, OGN

 

All totaled, I invested $1,029.38 and increased my forward dividend income by $132.16.  That’s an effective yield of 12.84%, only made possible by selling a low-yield position and reinvesting in stocks that have higher yields.

Since I added one new stock to my Portfolio, but eliminated one as well, the number of stocks in my Portfolio held steady at 54.

 

Price Movement

Note – my price changes cover closing prices from 7/30/21 to 8/27/21.

Nothing too hectic took place in the markets in August.  Just like last month, it was generally a well-behaved stock market.  My Portfolio crept higher in value, which I of course like to see.

My ratio of stocks with price gains compared to price declines came in at roughly 1.62:1.  This was nearly identical to last month.  Of my 55 holdings (still counted OGN, even though I just sold), 34 holdings moved higher in price, while 21 moved lower.

No stocks registered any huge movement.  Here’s the movement I did have though…

 

Of my 34 stocks that rose in price, a couple gained over 10% (the usual threshold I monitor for).  Another 9 stocks registered gains of at least 5%.

The top gainers in August were:

• Organon & Co. (OGN), rocketing 16.17%
• BlackRock (BLK), surging 10.12%
• T. Rowe Price Group (TROW), jumping 9.06%
• JPMorgan Chase & Co. (JPM), popping 7.43%
• NextEra Energy (NEE), advancing 7.07%

Obviously, Financials had a good month for me, with BLK, TROW & JPM being 3 of my top 5 Portfolio performers in August.

OGN was my best performer this month, recouping about half of its losses after the spinoff from Merck & Co (MRK).  Yet, that didn’t stop me from eliminating OGN from my Portfolio.  I decided I wasn’t looking to grow my OGN position, and it was so small that it didn’t warrant keeping it around.

 

Of my 21 stocks that dropped in price, none dropped more than 10%.  However, 7 stocks declined more than 5%, bringing a little negativity to my Portfolio in August.

My worst decliners this month were…

• Omega Healthcare Investors (OHI), falling 8.93%
• Gentex (GNTX), declining 7.85%
• Amgen (AMGN), sinking 7.77%
• Air Products & Chemicals (APD), fading 7.74%
• Pinnacle West Capital (PNW), retreating 7.47%

That’s 5 stocks from 5 different sectors.  The market did not discriminate with regard to sector.

I will probably be looking to reduce my dividend weighting in OHI in the coming weeks, especially now that its dividend safety got a downgrade this week.  Continued poor price performance will probably just accelerate that process.

The AMGN drop drove the price low enough for me to accumulate more shares this month.

APD has drifted down from $300 over the course of the past 3 months – over a 10% retreat.  However, the shares still look overvalued.

 

Weightings

 

In general, I target being within +/-3 percentage points of the sector weightings of the S&P 500.

I’ve added the “Weight Diff.” column to quickly show which sectors sit outside my preferred weighting ranges.  If I’m overweight a sector, it’s shaded green.  If I’m underweight a sector, it’s shaded red.  If I’m within my target weighting range, then no shading exists.

You can see that I’m still overweight the Industrials sector the most.  That’s despite selling over $5K of AL stock in August.  Of course, buying some LMT didn’t help.  Still, progress was made on getting that overweight percentage down.

I’m a little overweight 3 other sectors in Consumer Staples, Financials and Materials.  However, those weightings are close enough to being within 3 percentage points of target that they could fall into place without any action from me.

As for the underweight sectors, there are once again only two: Information Technology and Communication Services.  I made progress in adding to my Communication Services sector weighting by initiating that OMC position, and then adding to it twice.

Unfortunately, no headway was made in adding to my Info Tech holdings.  I did identify a new watchlist candidate from this sector though, so stick around for that.

As always, I’ll keep all these weightings in mind as I continue to adjust my Portfolio, and my watchlist.

 

Watch List

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

During my Bottom 10 review above, I mentioned AMGN, OMC and BMY as positions I’d like to see get bigger, thus they are all on my radar.  I like all three stocks at their current prices.

Building my MSFT and NEE positions is a goal of mine, but at current prices I’ll be waiting.

Adding to PNW is a possibility.  I’ve been holding out for a dip below $75 and we are not too far away at this point.

Continuing to add to LMT below $360 is a strong possibility even though it would boost my Industrials weighting.  I came close to adding a second share last week, but missed my chance.

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

I’m keeping an eye on Amdocs Limited (DOX) in the Information Technology sector, software industry.  I’ve been looking for a Tech candidate that doesn’t appear overvalued and DOX may fit the bill.  The stock currently yields 1.87%, but has grown the dividend in the 10%-15% range over the past 7 to 8 years.  Their payout ratio is around 28%.  EPS growth has been steady and the company has little debt.  I’d like to establish a position below the $72 mark, which is roughly 7% lower than the current price.

I’ve been contemplating swapping out a couple of my REITs (IRM & OHI) for prospects with better dividend safety.

Iron Mountain (IRM) looks a little overvalued to me at this point, so now might be a good time to make a switch.  The replacement would be National Retail Properties (NNN), a Dividend Aristocrat.  While the value of NNN is probably only fair at this time, it would improve the quality and dividend safety of my Portfolio.

The 2nd REIT I’d consider moving away from is Omega Healthcare Investors (OHI).  Even though this is already a fairly small position for me, its dividend weighting is more significant since its yield is over 8%.  Given its dividend safety, a better candidate might be in order.  I’d be looking at Medical Properties Trust (MPW) to replace it.  MPW seems like a fair value right now.  It’s yield is lower at around 5.5%.

 

Thoughts?

What are you doing with the smaller stocks in your portfolio?  Building them out?  Closing them out and reallocating the funds?

What do you think of the current market environment?  Got you worried?  Please share your thoughts!