After taking stock of my Portfolio recently I appear poised to hit several of my annual goals this year. My annual dividend income goal and my forward dividend income goal could both be realized.
I usually have to wait until December of each year to get a feeling of whether I’ll reach my goals for not. However, 2021 has turned in some positive results thus far and thus I’m optimistic that most of my goals will be reached.
However, I don’t want to let up anytime soon. Instead, I prefer to push my Portfolio to the highest possible level, setting up a nice foundation to build upon in 2022.
Enough about goals for now though. Instead, let’s focus on my normal Portfolio Thoughts content…
Once again I’ll be reviewing my Top 10 Portfolio stocks. For the first time in a while, I had one stock fall out of my Top 10, which of course means that another stock moved in. We’ll find out which two stocks those were very soon.
With respect to Portfolio transactions, it was fairly quiet this month. I didn’t sell anything, but I did add to a pair of existing positions. Keep reading to find out about those additions.
After seeing lots of red in September, I got back to seeing green in October… which is the way I like it. While my advance/decline ratio wasn’t outstandingly positive, those stocks that did advance did so with some good returns. It certainly outweighed any downside movement from my decliners.
From month to month, I usually don’t see big changes in my Portfolio sector weightings. However, we’ll check in there nonetheless, just in case there are any developing trends.
I’ll finish with an update on my watchlist, which is par for the course. During October, I did make good on my mention of purchasing one of my internal stock candidates from last month’s post. So, be sure to check out the stocks on the watchlist this month, as it could provide a preview of what’s moving in or out of my Portfolio in the near future.
Here are my Portfolio Thoughts for October 2021…
Top 10 Review
This month I had no changes in the top four spots within my Top 10. That’s a bit unusual. However, plenty of movement existed in the other spots, as all of the remaining six spots found a new resident by month’s end. In addition, as previously mentioned, one stock exited my Top 10 while another moved in.
Let’s start at the top though…
Qualcomm (QCOM) and T. Rowe Price Group (TROW) managed to maintain their respective grips on the #1 and #2 rankings, despite a subpar month by each from a price perspective.
BlackRock (BLK) and Lowe’s Companies (LOW) held onto the #3 and #4 spots, respectively. Both of these stocks had a very good month as far as stock prices were concerned. Thus, they both made some significant progress with respect to moving into the top two spots.
The monthly movement began at the #5 spot, where RPM International (RPM) managed to climb a spot after slipping in the rankings in previous months. RPM made that move on the back of some terrific price movement in October, breaking a bad run in recent months. This month’s performance by RPM was one of the best in my Portfolio as you’ll see shortly.
Trading places with RPM and slipping one spot to #6 was Nike (NKE). NKE posted nearly a double-digit price gain this month, but it fell short of the performance from RPM, and thus NKE fell back in the rankings.
My biggest climber in the rankings, with a move up three spots to #7, was Union Pacific (UNP). My best return of the month was posted by UNP. The stock gained all the ground it lost in September, and then some, to establish a new 52-week high.
Falling back one spot in the rankings to #8 was Visa (V). V was essentially flat in October, but pulled back late this week, after I had locked in my ending date for price captures.
Also, moving down a spot was Procter & Gamble (PG). PG came in at #9 this month. It’s closed each of the last 4 months in the low $140s… so there’s not much moving this stock.
Claiming the last spot in my Top 10 was Aflac (AFL). A newcomer! Well, sort of. AFL is one of my five legacy stocks. It spent plenty of time in my Top 10 while I was building out my Portfolio. However, it hasn’t been part of my Top 10 recently. After a solid month in October it managed to pass a few other competitors and claim the spot. It did so with little margin though, so we’ll see if AFL is still holding down a position in the Top 10 by this time next month.
The stock falling out of my Top 10 was Skyworks Solutions (SWKS). The stock has lost 15%+ over the last 3 months, but it has bounced off the lows from earlier this month. Analysts cite slowing growth as the problem, which coincides with the growth concerns for Apple (AAPL), which is the primary customer for SWKS.
Besides SWKS, stocks within striking distance of cracking the Top 10 are: Pepsico (PEP), SWKS, Fastenal (FAST) and Broadcom (AVGO).
From the table above, my Top 10 holdings now comprise 36.96% of my Portfolio value. This is 0.32% higher compared to last month. A handful of stocks from my Top 10 performed very well in October, and they definitely contributed to the value weighting gain.
As for the dividend weighting of my Top 10, it ended the month at 27.33%, which is an increase of 1.35% compared to last month. The reason was two-fold. First and foremost, AFL, which replaced SWKS in the top 10, has a higher dividend yield compared to SWKS. Second, both RPM and V notched dividend raises during the month.
Transactions
Portfolio transactions in October were few and far between. It was a slow down in activity after 2 or 3 months of decent transaction volume.
I did end up with a purchase at each end of the month – bookend purchases, if you will. In total, just two moves.
Both purchases were additions to existing holdings. However, even after the purchases, both stock positions remain in the bottom 3rd of my Portfolio. Thus, both positions can still stand to grow in size.
You can find the details for both transactions in the following two posts:
Accounting for both moves, I invested $1,325.10 and increased my forward dividend income by $49.12.
The total number of stocks in my Portfolio remained at 54.
Price Movement
Note – my price changes cover closing prices from 9/24/21 to 10/26/21.
After a down month in September, the market recovered nicely in October, and my Portfolio reflected as much.
It was a swift bounce back in prices, for sure. Any pain inflicted last month is all but forgotten now (well, not really).
My ratio of stocks with price gains compared to price declines came in at essentially 2:1. Of my 54 holdings, 35 holdings moved higher in price, while 18 moved lower, and 1 was flat – that would be Walgreens Boots Alliance (WBA).
In addition, I has some standouts to the upside, while containing any losses to the downside… always a good combination to have. Here were the top movers in each direction…
Of my 35 stocks that rose in price, 7 of them gained over 10% (the usual threshold I monitor for). In addition, I had another 12 stocks post gains of at least 5%.
The top gainers in October were:
- Union Pacific (UNP), launching 18.12%
- Air Products & Chemicals (APD), surging 13.42%
- RPM International (RPM), jumping 11.98%
- Merck & Co. (MRK), climbing 11.74%
- UnitedHealth Group (UNH), rising 11.68%
This is an entirely new group compared to last month.
Gainers were led by an Industrials name, with a pair of Materials stocks and a pair a Healthcare stocks in the mix.
The top 4 names here offered bounce backs from last month, while UNH continued its strong price gains from recent months.
Of my 18 stocks that dropped in price, none retreated more than 10%. Even better, only 3 of the stocks declined more than 5%. Losses were well contained this past month.
My worst decliners this month were…
- Pinnacle West Capital (PNW), slumping 6.80%
- Nexstar Media Group (NXST), dropping 5.06%
- Lockheed Martin (LMT), declining 5.04%
- Quest Diagnostics (DGX), fading 4.96%
- Omnicom Group (OMC), slipping 4.94%
Utility PNW paced all my decliners. News regarding rate increases the Utility was wishing to pass along to its customers did not turn out favorably.
A couple of Communication Services stocks made the decliners list in NXST and OMC. Sadly, these same two stocks were on my top performers list last month. I hate to see those gains given up.
Weightings
In general, I target being within +/-3 percentage points of the sector weightings of the S&P 500.
The “Weight Diff.” column shows 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. I like my current holdings in the sector so I don’t see myself making much headway in reducing how much I’m overweight there. If I can continue to invest in other sectors though, the degree to which my Portfolio is overweight the Industrials should ease.
I’m no longer overweight in the Financials sector this month. This change came about naturally.
Materials is more overweight this month after some strong price performance from my 3 stocks from that sector. Again, I like my holdings here, so this will have to come into line organically.
As for the underweight sectors, only two exist: Information Technology and Communication Services. I made more progress in my Communication Services sector weighting by continuing to add to my OMC position. Also, I have a watchlist stock from the Tech sector that I’m considering purchasing, but I’d like to see the price drop a bit more.
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…
After some recent negative news surrounding PNW, I’ve cooled off on adding more. The price is continuing to fall and at some point I could add again in an effort to average down significantly. PNW is currently my smallest Portfolio position.
I haven’t pulled the trigger on an additional trim of Omega Healthcare Investors (OHI) yet. The stock continues to have a frozen dividend, and I believe OHI will lose its streak of consecutive annual dividend raises. When I do trim, I’ll probably look to replace the income with some from National Retail Properties (NNN).
I added to AMGN this past month, but adding more shares could be in the works if the price stays at current levels. Anything below $210 would be great for me.
Bristol Myers Squibb (BMY) is another Healthcare stock that I find appealing, especially with the stock trading below $60.
OMC continuing its decline could warrant additional interest on my part, especially if it drifts into the $65 range.
Picking up a share or two of LMT would be nice after the 11%+ drop from this past week. This is still a position I want to build, despite Industrials being an overweight sector for me. Shares below $325 would be rather enticing.
I could see buying a share or two of Visa (V) and Starbucks (SBUX) as well, after both of their pullbacks this week.
As for non-Portfolio stocks that I’m watching…
Amdocs Limited (DOX) still has interest for me, especially since it’s in the Information Technology sector, where I’m looking to bulk up. My target price remains at $72. The stock touched $76 this past week… so it’s getting closer.
Activision Blizzard (ATVI) remains on my watchlist after being added last month. I could always use another Communication Services stock to help boost my weighting in that sector. I had a couple of chances to buy around the $75 level this past month, but I didn’t act. Perhaps I’ll get another shot.
A couple of new names I’m watching from outside my Portfolio are McCormick & Co. (MKC) and Medtronic (MDT).
I’ve watched MKC for some time, but it’s always seemed overvalued. The price moving down further to the $75 range would make initiating a position a stronger possibility.
As for MDT, it’s a quality stock – something I always want to add to my Portfolio. It’s a pure-play medical device company, which I don’t really have in my Healthcare holdings, so it would be nice for diversification. The price is roughly $120 right now… not bad, but I’d really like to see it come down to $115.
Thoughts?
Are you expecting these ‘scary good’ gains from October to continue through year’s end? Are you afraid to invest in the market at current levels? Please share your thoughts!