It’s time for my final Portfolio Thoughts post of 2021.  What a year it’s been!

I would gather the U.S. stock market performed better than most of us thought in 2021, especially considering a pandemic that didn’t come to an end as we’d hoped.  Due to the stock market out-performance, our portfolios should reflect a positive tilt and we should be staring at some gains.  That’s certainly the case for me.

I think I achieved the vast majority of my Portfolio goals in 2021, but I’ll save the details on that for next month when I post the review of my 2021 Portfolio Goals.

The dividend progress in my Portfolio this year has been outstanding, too.  I’ll be sharing the year-end dividend totals in about 1 week when I post my Monthly Dividend Income for December.  I can tell you that my dividend income total and annual forward dividend income total exceeded my expectations.  The number of stocks in my Portfolio has crept up this year, too.

As for my normal Portfolio Thoughts content…

My Top 10 Portfolio stocks remain the same this month, but they did get shuffled a bit.  Half of the Top 10 stocks changed rankings in December.  All but one of those five stocks moved two or more spots in the rankings.  That’s some decent movement and I’ll cover it soon.

There was not much in the way of Portfolio transactions in December.  However, I made one cluster of moves (4 trades) this past week as I attempted to prepare my Portfolio for 2022.

I finished off the year with a bang, as December provided way more stocks in my Portfolio posting positive returns than negative returns.  When you see the ratio of stocks sporting green instead of red, you’ll be impressed.  I even had a 20%+ gainer this month.

I’ll check in on my preferred Portfolio sector weightings, too.  I can’t say I was actively trying to work on this aspect of my Portfolio in December, but I’ll see where I stand heading into year-end.

Lastly, there’s my watchlist to examine.  With all the sharp gains in December, I’m looking over my Portfolio these days and having a much harder time finding stocks I want to buy.  Of course, there’s always something on my list, so I’ll cover what I do have.  I may lay low in the early part of January (with regard to new capital investment) to see how things shake out.  The beginning of the new year is always an interesting time in the stock market as we wait to see which direction the market goes first.

Anyway, let’s get this started… here are my Portfolio Thoughts for December 2021…

 

Top 10 Review

As noted in my opening, half of my Top 10 stocks changed rankings in December.

One stock that more than likely won’t be changing ranking anytime soon is the stock holding down my #1 spot, Qualcomm (QCOM).  Due to recent price gains, QCOM is now a full 2 percentage points ahead of it’s closest competitor in weighting.  That’s quite the lead.  It’s the reason I did a little trim of QCOM last month, as I prefer not to have any one stock have more than a 5% weighting in my Portfolio.  Right now I hope to keep investing in my other Portfolio stocks and see my QCOM weighting come down naturally over time.

 

 

After notching a double-digit gain in December, RPM International (RPM) moved up a pair of spots to #2.  RPM has been here before, as recently as 6 months ago.  The stock retreated about mid-year, but has since recovered with a strong 4th quarter.

Maintaining the #3 spot was Lowe’s Companies (LOW).  LOW has been on quite the run in the 2nd half of 2021 and that continued in December.

T. Rowe Price Group (TROW) fell a couple of spots to #4.  It essentially switched places this month with RPM.  TROW was actually one of my laggards in December.  This is now the 4th month in a row that TROW has ended the month with a small drop in its stock price.

Holding onto to their #5 and #6 spots were BlackRock (BLK) and Nike (NKE), respectively.  Both stocks were marginally higher in December, less than 1% each.  Considering the stock market strength in December, this was under-performance from both BLK and NKE.

Jumping up three spots in the rankings to #7 was Broadcom (AVGO).  AVGO was my top performer in December after a stellar earnings report.  AVGO cracked my Top 10 for the first time last month and now it’s already moved up to #7.  It nearly surpassed NKE in the rankings as well.  This is 6 months straight of a higher stock price for AVGO… sweet!

Keeping its grip on the #8 spot was Procter & Gamble (PG).  PG posted a 11%+ price gain in December.  I consider that a big one-month move for a Consumer Staples stock.

Despite gaining nearly 5% in price during December, Union Pacific (UNP) fell a pair of spots to #9 in my Top 10 rankings.  It was surpassed by hotter stocks AVGO and PG.  On a brighter note, UNP declared a 2nd dividend raise of 2021 earlier this month… love it!

Falling a single spot to #10 was Fastenal (FAST).  The stock had a good month, gaining over 7%… it even powered to a new 52-week high.  However, it couldn’t help but concede the higher ranking to AVGO this month.

Sitting just outside my Top 10 is Pepsico (PEP), with Visa (V) and Aflac (AFL) not too far behind that.  All of these stocks have previously been in my Top 10.  Will any of them get there again?

 

From the table above, my Top 10 holdings now comprise 37.87% of my Portfolio value.  This is just 0.01% lower compared to last month.  AVGO had the largest increase in its weighting, while TROW posted the biggest decrease.

As for the dividend weighting of my Top 10, it ended the month at 28.97%, which is an increase of 0.06% compared to last month.  AVGO and UNP recorded dividend weighting gains due to their dividend raise announcements during December while the dividend weightings of the other Top 10 stocks each pulled back slightly.

 

Transactions

It was a total of 4 transactions in December – 3 buys and 1 sale.

I trimmed Gilead Sciences (GILD) due to ongoing under-performance.  It looks to me like the dividend growth will be slowing down, too.  Thus, reducing the size of my GILD position makes sense for me.  I’d like GILD to be the smallest Healthcare position I have should I continue to hold it.

I took the GILD sale proceeds and added to my Amgen (AMGN) and Pinnacle West Capital (PNW) positions.  Adding to AMGN made it a slightly bigger holding than GILD.  Adding to PNW stops it from being my smallest Portfolio position.  These two purchases replaced the dividend income I lost with the GILD trim.

Finally, in order to reach my 2021 new capital investment goal, I rounded up some cash and bought a few shares of Bristol-Myers Squibb (BMY).  While, BMY is still not bigger than my GILD position, I’ll be working on that in the new year.

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

 

Recent Transactions – GILD, PNW, AMGN, BMY

 

Factoring in all the trades, I invested $563.72 and increased my forward dividend income by $21.24.

The total number of stocks in my Portfolio remained at 55.

 

Price Movement

Note – my price changes cover closing prices from 11/26/21 to 12/29/21.

December has turned out to be a terrific month in the U.S stock market, and thus for my Portfolio, too.  What was a good month leading into the week prior to Christmas has turned into a terrific month with the market performance since then.  I guess we’ve seen the Santa Claus rally.

My ratio of stocks with price gains compared to price declines came in at nearly 6:1… impressive!  Of my 55 holdings, 47 moved higher in price, while only 8 moved lower.  In addition, the gains were much higher in percentage terms compared to the declines.

One stock stood out relative to the others with its positive performance in December, and that was AVGO.  That performance is not a one-month event either.  When I was done building out my AVGO position in March of 2020, it was the 24th largest position in my Portfolio.  It’s now the 7th largest.  What a move!

Here were the top movers in each direction in December…

 

Of my 47 stocks that rose in price, 1 of them gained over 20% (AVGO), 13 more increased over 10% (the usual threshold I monitor for), and another 18 stocks posted gains of at least 5%.  That’s some widespread green throughout my Portfolio.

The top gainers in December were:

• Broadcom (AVGO), powering higher by 23.06%
• Cisco Systems (CSCO), surging 16.99%
• AbbVie (ABBV), jumping 16.18%
• UnitedHealth Group (UNH), rising 14.93%
• Walgreens Boots Alliance (WBA), popping 13.83%

It was a pair of Information Technology stocks leading the pack and a pair of Healthcare names not too far behind.  All my Consumer Staples stocks fared well in December, too, so it’s no surprise to see one of them (WBA) round out the best performers.

Again, just an outstanding pop from AVGO.

That’s two months in a row with ABBV being part of my best 5 performers for the month.

 

Of my 8 stocks that dropped in price, none dropped more than 10%.  Moreover, only 1 stock even declined more than 5%… and barely at that.  The rest of the lot all declined less than 3%.  Not a lot of red… just the way I like it.

My worst decliners this month were…

• Nexstar Media Group (NXST), dropping 5.08%
• Merck & Co. (MRK), slipping 2.79%
• T. Rowe Price Group (TROW), fading 2.52%
• VF Corp (VFC), pulling back 2.15%
• Gentex (GNTX), sagging 2.14%

Nothing to be worried about here.  The losses were pretty well contained in December.

A couple of Consumer Discretionary names are at the bottom of the list, but otherwise the sector representation was varied.

 

Weightings

 

In general, for the Sector Diversification, I target being within +/-3 percentage points of the sector weightings of the S&P 500.  For the SuperSector Diversification, I target being within +/-5 percentage points.

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.

I haven’t been able to change the Weight Difference shading since last month, even though the percentages have changed a bit.  What would help me get closer to my target sector and supersector diversification is to trim my Consumer Staples or Materials and move the proceeds into Communication Services and/or Information Technology.  Also, when investing new cash, targeting the Communication Services and Information Technology sector would be ideal.

As it turned out, all my additions this month were in a pair of Defensive sectors – Healthcare and Utilities.  I’ve been trying to invest where I think the value lies.

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

 

Watch List

Good values seem to be drying up with the markets pushing higher.  I’ve noticed my watchlist thinning out a bit, for sure.  Still, there’s always something out there of interest.

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

Skyworks Solutions (SWKS) is still hovering in the mid-$150s.  I’d like to buy back the 10 shares of SWKS I sold in February at $190.  Of course, this is an Information Technology stock, so it would also help boost my allocation in that sector.

Healthcare stocks Merck & Co. (MRK), Amgen (AMGN) and Bristol-Myers Squibb (BMY) recovered well in December, but still remain in value territory for me.  I’d like to continue to add some to my BMY position so that it’s comparable in size to my AMGN position (and also ahead of my GILD position).  I’d need to invest about $700 to get there.

I’m looking at adding a few more shares of Comcast (CMCSA) as well.  This would help with my Communication Services weighting, too.  I see fair value adding below $48, so the price would need to drop about 5%.

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

With Medtronic (MDT) still trading below $105, it’s a candidate to be a new stock for my Portfolio.

Even though I don’t need another Industrials stock, I’m watching Cummins (CMI).  A price below $210 would be tempting.

 

Thoughts?

Were you satisfied with what you accomplished in your portfolio in 2021?  In hindsight, would you change anything you did?  Please share your thoughts!