It was a very promising start to 2023, but returns in February have put a damper on things. Still, the S&P 500 index is positive for the year.
Yet my Portfolio is hovering around 0% for 2023 due to its under-performance. Maybe that’s why I feel a bit more negative about how we’ve started the year.
In any case, we are not even out of the first quarter yet, so I need to give it more time before I rush to any judgements regarding 2023.
Year-to-Date (YTD), 7 of the 11 market sectors are in the green, led by Consumer Discretionary, posting over 11% gains. Only 4 sectors are in the red, with Utilities being the biggest drag thanks to losses of nearly 6%.
I can’t say my Consumer Discretionary holdings have fared too well this year, but I do know my Utilities stocks have struggled so far in 2023, so that lines up.
If the stock market continues its downward trend started in February, then I’ll be looking for ways to invest my capital. If I don’t find anything interesting enough to commit my capital to, then at least rising interest rates will provide a decent return on my cash.
Here’s what I intend to cover with this Portfolio Thoughts post:
- Price Movement – I’ll look at my top advancers and decliners in my Portfolio during the past month.
- Top 10 Review – I’ll update my Top 10 Portfolios stocks and how they changed rank this past month.
- Weightings – I’ll examine the sector weightings within my Portfolio and let you know where I’ve made progress with regard to getting into my preferred weighting ranges.
- Watch List – I’ll share which stocks I’m looking at as I prepare to invest my capital in the coming months.
Let’s get to it… here are my Portfolio Thoughts for February 2023…
Price Movement
Note – my price changes cover closing prices from 1/27/23 to 2/24/23.
There was definitely a negative shade to the February results. Whatever was gained in January was essentially given back in February.
My ratio of stocks with price declines compared to price gains was a bit more than 2 to 1 in February. Of my 60 holdings (still counting MMM, but not counting AMT yet), 19 moved higher in price, while 41 moved lower.
Here were the stocks with the biggest moves to the upside and downside…
Of my 19 stocks that rose in price, none could even manage a 10% rise (the usual threshold I monitor for). Only 3 stocks advanced at least 5%. Stocks in the green were hard to come by, and when they did present themselves, gains were small.
The top gainers in February were:
- Omnicom Group (OMC), gaining 7.41%
- Altria Group (MO), advancing 6.86%
- FedEx (FDX), rising 6.68%
- Lockheed Martin (LMT), higher by 4.53%
- AbbVie (ABBV), climbing 4.40%
OMC led the way. The stock has been a gainer for me for 5 months in a row. That’s a nice run without a doubt.
It was good to see MO on this list as well. MO managed to finish the month with its highest price to close a month since last May.
A pair of Industrials stocks made my top gainers list, too, in FDX and LMT. I’ve gained about 33% on FDX since I established my position back in September, making me wish I’d bought more at the time. As for LMT, it’s been up and down over the past year, but it’s currently within 4% of its 52-week high.
ABBV was on my worst decliners list last month. It was obviously nice to see the reversal.
Of my 41 stocks that fell in price, 1 retreated more than 20%, while another 3 declined more than 10%. Yet another 15 stocks sagged more than 5%. It was a month to forget, for sure.
My worst decliners in February were…
- V.F. Corp. (VFC), tanking 20.59%
- Medical Properties Trust (MPW), plummeting 19.22%
- Caterpillar (CAT), plunging 10.72%
- Air Products & Chemicals (APD), sinking 10.56%
- BlackRock (BLK), dropping 9.98%
This list is comprised of 5 different stocks from 5 different sectors. Losses were apparently widespread among the sectors.
As VFC grapples with declining earnings and manages its debt, it recently slashed its dividend over 41%. That’s usually a recipe for a declining stock price and that’s exactly what VFC got this month. Ouch.
Tenant issues continue to persist for MPW. Just when it looked like MPW might be on the mend, news of trouble with its 3rd largest tenant has the stock sinking again. The dividend is now less safe and a cut may be on the horizon if conditions don’t improve. This makes me question my continued investment.
While 10%+ declines from CAT and APD showed up in February, I’m not really concerned. Both are pulling back after some significant runs upward in price.
BLK has been up and down to close out the past 4 months. Stocks in the Financials sector have been trying to gain their footing in recent months, but that’s proving to be a difficult task.
Note – All my stocks in the following 4 sectors were negative for February: Consumer Discretionary (6), Real Estate (4), Materials (3) and Utilities (3). That’s three months in a row for all my Utilities stocks being in the red!
Top 10 Review
February movement within my Top 10 Portfolio stock rankings was fairly average. Only one decent move, with all others stocks contained to moving 1 or 2 spots up or down.
The big mover rose 4 spots. A couple of stocks didn’t change ranking at all. One stock fell out of my rankings, with a corresponding one moving in.
It was my top two stocks that held tight to their existing rankings. Qualcomm (QCOM) and Aflac (AFL) continued to hold the #1 and #2 spots, respectively, despite each declining around 6% or so during the month.
RPM International (RPM) and Nexstar Media Group (NXST) swapped their #4 and #3 spots by month’s end. Both stocks dropped in price during the month, but RPM slipped less than 1%, while NXST slumped over 6%.
On the back of its 4.4% gain in February, AbbVie (ABBV) rose a couple of spots to settle at #5. ABBV is my largest dividend payer and has a dividend weighting just south of 5% (my preferred upper limit for a single stock) for my Portfolio.
My biggest riser in the Top 10 was Pepsico (PEP). PEP was able to climb 4 spots and lay claim to the #6 ranking. PEP rose 3.74% during the month thanks to a good earnings report.
Dropping a couple of spots to land at #7 was Visa (V). V fell a bit over 5% in February and that led to it sliding in my rankings.
Another stock falling two spots this month was Broadcom (AVGO). AVGO retreated a little more than 2% in February, which wasn’t bad at all. However, it did snap the 4-month winning streak the stock had going.
Lowe’s Companies (LOW) slipped one spot in the rankings to end at #9, despite being basically flat in February. The stock has finished each month over the past year in the $182-$213 price range.
Despite a nearly 1% loss this month, Procter & Gamble (PG) rose in the rankings to claim the #10 spot. It replaced BlackRock (BLK) in the Top 10, which dropped two spots from #9. That’s the opposite of last month when BLK replaced PG.
Now sitting just outside my Top 10 is BLK. Farther down the list and requiring a good upside move to crack the Top 10 are Union Pacific (UNP) and Fastenal (FAST).
From the table above, my Top 10 holdings now comprise 35.45% of my Portfolio value. This is a decrease of just 0.02 percentage points compared to last month.
As for the dividend weighting of my Top 10, this ended the month at 31.08%, which is a decline of 0.14 percentage points compared to last month. The decline would have been greater if not for the dividend cut from VFC that slightly increased the dividend weighting of all other Portfolio stocks, including my Top 10 holdings.
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.
Well, last month I had two overweight sectors… this month it’s three. I added Consumer Staples to the list during February.
The good news is that my two other overweight sectors in Industrials and Materials got closer to my preferred weighting range. My sale of 3M Co. (MMM) this month reduced my weighting in Industrials by nearly 0.5 percentage points. My Materials weighting came down just a bit… probably due to me putting my investment dollars in other sectors.
As for the underweight sectors, I made some headway in my Energy sector. However, I didn’t have anything to do with it, as I don’t own any Energy stocks. It just so happens that the Energy weighting of the S&P 500 got smaller in February.
For my other underweight sector, Information Technology, I fell further behind due to not investing in the sector this month. In addition, I don’t think my tech stocks fared as well as those in the S&P 500 sector. Surprisingly, I got 0.76 percentage points worse than where I was last month. I’ve still got a lot of work to do in this sector.
My Verizon Communications (VZ) buy got my weighting to nominal in the Communication Services sector, while my multiple purchases of NextEra Energy (NEE) has me closer to nominal in Utilities. Adding American Tower (AMT) helped my weighting in Real Estate. However, my Whirlpool (WHR) purchases didn’t overcome my weighting losses at all in the Consumer Discretionary sector.
As always, I’ll keep all these weightings in mind as I continue to adjust my Portfolio, and my watchlist.
Watch List
After a dip in the markets in February, I’ve got more stocks to watch now. That’s one benefit to stocks declining.
I’ve got some cash to invest right now, and I’m sure I’ll find something to buy in March… I’ve just got to prioritize since I can’t buy it all.
Within my Portfolio, here are some stocks that I’m watching for possible additions…
I’m going to focus on adding to my Information Technology holdings this month.
High on my list is Automatic Data Processing (ADP). I’d be willing to add under $220 (almost there), but I’d really prefer a dip below $200.
With this month’s retreat from Skyworks Solutions (SWKS) to $112, the stock is back on my radar. I’d certainly buy below $110, but would love to buy below $100.
Accenture (ACN) is also of interest to me, especially if I can lower my cost basis while growing the position. A price decline below $259 would do the trick.
A drop from Visa (V) south of $215 would work for me. I’d probably add 1 or 2 shares to inch that position closer to 100 shares.
Also on my tech radar, but farther away from my preferred target prices are Texas Instruments (TXN) and Microsoft (MSFT). I’m looking for TXN around $160 and MSFT below $230. Would I buy before I see those respective levels? Sure, but the purchases would probably be limited to a share or two.
Two stocks from the Healthcare sector I like are Medtronic (MDT) and Bristol-Myers Squibb (BMY). Both could afford to be bigger positions for me. I am targeting MDT below $80 and BMY below $70 (very close now). I like CVS Health (CVS) here in the mid $80s, too, but I’m comfortable with the current size of my position in CVS, so that deters me.
Even though I bought NEE two different times in February, it remains on my watchlist. I’m hoping to add further on any dip below $70, beefing up the holding in my Portfolio.
As for non-Portfolio stocks that I’m watching…
I had American Tower (AMT) in this section last month, and I went and established a position in the stock in February. So, I’ll be removing AMT and fellow cell tower REIT Crown Castle (CCI) from here.
Sticking with the Information Technology theme I had going, I’ve been watching Jack Henry & Associates (JKHY) recently. This is a fintech company that’s raised its dividend for 32 consecutive years now. Its yield is only 1.25%, but the dividend growth is solid and makes up for the lower yield in my mind. I’ll be looking for a price under $165.
Lastly, I’m eyeballing the stock of Charles Schwab (SCHW) in the Financials sector. The stock seems fairly valued at its current level in the upper $70s. It has a yield of 1.28%. Its dividend growth history is rather spotty though. Thus, I’d probably be looking for a price below $75 to start, and preferably below $70.
Thoughts?
After one positive month and one negative month to start 2023, how do you think we end up the year? How confident are you in that prediction? Please share your thoughts!