The market pullback finally arrived in September. Will it continue? Who knows.
It did bring some lower stock prices though, putting a few more stocks on the discount rack. So that’s nice if you are looking to buy.
Unfortunately, the decline also means a lower Portfolio value. However, as expected, dividend income remained steady – gotta love that aspect of a dividend portfolio.
This month, I’m back to reviewing my Top 10 Portfolio stocks after checking in on the Bottom 10 last month. Given that 2 months have transpired since I last checked in on my top 10, there was more movement than normal among the group. I’ll cover all the movement shortly.
Transaction activity stayed elevated in September. I made 3 separate groups of transactions, comprised of 9 total transactions. As part of these 9 transactions, 2 stocks exited my Portfolio while 2 new ones arrived. Thus, there will be plenty to cover.
Lots of red this month as I look over the price movement of my Portfolio stocks. There was a decidedly negative tilt in my advance/decline ratio. Prices can’t rise forever, so declines have to be expected from time to time. I’ll share with you which stocks took it on the chin, as well as mention those that managed to sport some positive results despite the market tide rolling out.
I’ll check in on my Portfolio sector weightings, too, to see if I’m making any headway towards the sector re-allocations I targeted in 2021. Right now I’m noticeably underweight 2 sectors, while being overweight 1 sector and marginally overweight 3 others.
Lastly, I’ll update you on my watchlist. Some of the stocks I mentioned last month were part of my transaction list this month. I’ve got a new stock hitting my radar as well.
Let’s check out my Portfolio Thoughts for September 2021…
Top 10 Review
The top two stocks in my Top 10 remained the same over the past 2 months. After that, there was plenty of movement recorded. Only 1 of the remaining 8 stocks managed to lock down the same position it started at.
It was Qualcomm (QCOM) and T. Rowe Price Group (TROW) continuing to hold down the #1 and #2 rankings, respectively. QCOM was able to hold on to #1 despite falling in price each of the past 2 months. TROW had a terrific August and slumped a bit in September, but was up over the entire time period.
I don’t expect the positions of these 2 stocks will change anytime soon given their weighting differences from each other and the other Top 10 stocks.
BlackRock (BLK) climbed one notch to secure the #3 spot, mainly on the back of its performance in August, not September. It was up slightly over the 2-month period.
My biggest Top 10 mover over the past 2 months was Lowe’s Companies (LOW). LOW leaped six spots, all the way to #4 on the back of positive price performance in each of the past two months.
Falling a pair of spots to #5 was Nike (NKE). After trading sideways in August, NKE lost enough wind in its sails in September to drift lower.
Dropping one spot to #6 was RPM International (RPM). RPM has dropped in price in each of the past 4 months, leading to a corresponding drop in its ranking over that time. It wasn’t long ago that RPM was holding down the #2 spot.
Slipping a spot and coming in at #7 was Visa (V). August was a little rough for V before it found its footing in September.
Outside of QCOM and TROW, my only other stock to hold the same position in my Top 10 that it had 2 months ago was Procter & Gamble (PG). PG maintained the #8 spot with pretty much flat price performance in each of the past couple of months. Should the stock market get even more choppy, I expect PG to hold up well.
Dropping a couple of spots to #9 was Skyworks Solutions (SWKS). After holding steady in August, SWKS tailed off in September, leading to its falling rank.
You’ll notice that the weighting difference between #4 and #9 is rather small. Thus, expect to see some additional movement within the Top 10 ranks in the coming month(s).
Falling one spot to #10 was Union Pacific (UNP). August was slightly up for UNP from a price perspective, but in September UNP gave it back, and then some. UNP actually fell out of the Top 10 for a brief time during the past month, but managed to secure the spot as the month came to a close.
In summary, the Top 10 stocks remained the same over the past couple of months… albeit with a little re-shuffling.
Still, 5 other stocks are well within striking distance of cracking the Top 10 by next month. Thus, UNP could be at risk of saying goodbye to the Top 10. Hot on the heels of UNP are Fastenal (FAST), Pepsico (PEP), Nexstar Media Group (NXST), Aflac (AFL) and Broadcom (AVGO).
From the table above, my Top 10 holdings now comprise 36.64% of my Portfolio value. This is 0.54% lower compared to last month. Decent price drops from QCOM, NKE and RPM over the past 2 months have contributed to this, as did new investment dollars being put into stocks outside my Top 10.
As for the dividend weighting of my Top 10, it ended the month at 25.98%, which is a decrease of 0.68% compared to last month. All Top 10 stocks saw a decline in their dividend weightings as none of them experienced a raise in the past 2 months, and none captured any new investment.
Transactions
September was a busy month with regard to Portfolio transactions. About mid-month, I made quite a few moves. There were enough that I split them into two separate posts in order to share them. Later in the month I made a few more moves to finish things off and followed with a 3rd post.
In total, I made 9 moves, consisting of 3 sales and 6 purchases.
With 2 of the 3 sales, I eliminated a position. The other was a trim.
With 2 of the 6 purchases, I initiated new positions. The other 4 moves involved just 3 stocks, as I added to one stock twice.
You can find the details for all the moves in the following 3 posts:
Recent Transactions – IRM & MPW
Recent Transactions – AL, OMC, BMY, LMT
Recent Transactions – OHI, NNN, BMY
Accounting for all the moves, I only invested $180.34, but increased my forward dividend income by $64.60. This was possible since the majority of my sale proceeds came from AL (which has a yield below my Portfolio average), and I was able to redirect those proceeds into higher-yielding stocks.
While I eliminated two positions, I also established two new ones. So, the number of stocks in my Portfolio remained at 54.
Price Movement
Note – my price changes cover closing prices from 8/27/21 to 9/24/21.
I saw more red in my Portfolio this month than I’ve seen in several months. It was to be expected after such a prolonged market climb without much retracement.
In the grand scheme of things, while the pullback felt fairly significant, it pales in comparison to the advance the market has made over the past 18 months.
My ratio of stocks with price declines compared to price gains came in at roughly 4.78:1. Ouch… let’s hope we don’t see a repeat of this next month! Of my 52 holdings (not accounting for new holdings MPW & NNN yet), 43 holdings moved lower in price, while 9 moved higher.
As you might expect, I didn’t have any standouts to the upside, but I did have some on the downside. Here’s how it all came out…
Of my 9 stocks that rose in price, none of them gained over 10% (the usual threshold I monitor for). Sadly, only 3 stocks managed to post gains of at least 5%.
The top gainers in September were:
- Nexstar Media Group (NXST), advancing 6.50%
- Gentex (GNTX), moving higher by 5.87%
- Texas Instruments (TXN), climbing 5.32%
- Quest Diagnostics (DGX), rising 2.65%
- Omnicom Group (OMC), elevating 2.10%
A couple of my Communication Services stocks showed up on my top performers list in NXST and OMC. That’s nice to see.
GNTX made a nice recovery in September after landing on my worst performers list in August.
Of my 43 stocks that dropped in price, 4 retreated more than 10%. Throw in another 17 stocks that declined more than 5% and you can see why I mentioned I’m seeing lots of red.
My worst decliners this month were…
- Eastman Chemical (EMN), sinking 11.34%
- V.F. Corp (VFC), falling 11.31%
- Nike (NKE), pulling back 10.74%
- AbbVie (ABBV), declining 10.46%
- Bristol-Myers Squibb (BMY), tumbling down 9.56%
Materials stock EMN led to the downside. My other stocks in that sector fell, too, although not nearly as much.
A couple of my Healthcare names sadly appear on this list in ABBV and BMY. Amgen (AMGN) and Johnson & Johnson (JNJ) were negative for the month as well, but to a lesser degree. Pharmaceuticals and Biotechs will look to rebound next month.
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. However, that gap continued to narrow as I eliminated my AL position this month. Adding another share of Lockheed Martin (LMT) did put a small dent in the progress I’ve been making though.
I’m a little overweight 3 other sectors in Consumer Staples, Financials and Materials. I suspect those will come into line organically as I invest dollars into other sectors. The degree to which I’m overweight in the Materials sector has been declining as my stocks in that sector have been retreating in price recently.
As for the underweight sectors, there are only two: Information Technology and Communication Services. I made more progress in adding to my Communication Services sector weighting by continuing to add to my OMC position. I found another watchlist candidate to possibly help me in the Communication Services sector, so stay tuned for that.
Again, I didn’t make any headway in adding to my Info Tech holdings. However, if this market pullback continues I may get a chance to add to this sector at reasonable prices. I need to make sure I have some capital at the ready in case an opportunity presents itself.
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…
Pinnacle West Capital (PNW) has fallen below my target price, but I’ve yet to make a move. I believe that PNW is waiting to hear from the Arizona utilities regulator regarding rates PNW may charge its customers. I’m not sure if I’ll hold out for that news before adding any shares.
I’m looking to double the size of my newest REIT, National Retail Properties (NNN). I’ll probably fund this by continuing to trim my Omega Healthcare Investors (OHI) position, which I’m trimming in an effort to improve the dividend safety of my Portfolio.
Since last month, I’ve added to my OMC and BMY positions, so I probably need to find a way to add some AMGN shares next. The stock is certainly trading at a favorable price for me at $213.
The price drop in VFC has me interested in adding a few shares. If I could get the stock price to dip a bit further to $65, the yield would cross 3%, which would be a nice place to add.
As for non-Portfolio stocks that I’m watching…
I’m still watching Amdocs Limited (DOX) with interest. It’s an Information Technology candidate that I’d like to add at the right price. Right now, my target price is $72. The stock has been hovering in the upper $70s for most of the past month. More patience is needed here.
New to my watchlist is Activision Blizzard (ATVI) – a stock from the Communication Services sector. You are probably familiar with this company if you like video games. They produce some of the biggest titles in the industry in World of Warcraft, Call of Duty, Overwatch and Candy Crush, among others. While the stock only pays a dividend annually, and the stock’s yield is less than 1%, the dividend growth has been very good and the stock price looks attractive here at $76.
FedEx (FDX) might get a closer look from me if it dropped below $200. That would require another 10% drop from the current $222.
Hasbro (HAS), which I mentioned 2-3 months ago, remains on my radar. Below $90 it’s interesting, but I’m targeting less than $85 for an additional margin of safety.
Thoughts?
What do you think of the recent market decline? Expect more of the same in the coming months? Do you have a buy list ready to go? Please share your thoughts!