The divergence between my Portfolio return and that of the S&P 500 in 2023 continues to grow as the months go by.  Unfortunately, my Portfolio is not on the good side of that comparison.  Being underweight in the Information Technology sector has hindered the relative performance of my Portfolio.

Only 3 sectors in the S&P 500 are in positive territory in 2023: Information Technology (+33.97%), Communication Services (+32.35%) and Consumer Discretionary (+18.35%).  All other sectors are down between 0% and 11%.

Even for the stocks that I own within those ‘hot’ sectors, I only have a couple of outperformers: Broadcom (AVGO) and Microsoft (MSFT).  In the case of MSFT, it’s one of my smaller positions, so it doesn’t help significantly.

It appears that the mega cap names in the Information Technology and Communication Services sectors are carrying the S&P 500 in 2023.  If those few stocks aren’t in your portfolio, then your return relative to the S&P 500 is being left behind.  That appears to be where my Portfolio stands thus far in 2023.

Let’s hope more than just the mega cap names start contributing to 2023 returns.

So, what’s on tap in this month’s Portfolio Thoughts post?  It’s the usual…

• 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.

Here are my Portfolio Thoughts for May 2023…

 

Price Movement

Note – my price changes cover closing prices from 4/28/23 to 5/26/23.

The nice rebound my Portfolio experienced in April became a distant memory in May.  My holdings have generally struggled to gain any footing in 2023.  While a handful of stocks have done well, it hasn’t been nearly enough to keep my Portfolio in the green.

In May, my ratio of stocks with price declines compared to price gains was an ugly 6.5 to 1.  Thus, for my 60 holdings, 52 moved lower in price, while only 8 moved higher.  That’s not pretty at all.

Here were the stocks with the biggest moves to the upside and downside…

 

Of my 8 stocks that rose in price, one spiked nearly 30% higher.  However, no others even topped a 10% increase (the usual threshold I monitor for).  A group of 5 stocks did manage at least a 5% gain.

The top gainers in May were:

• Broadcom (AVGO), launching 29.73%
• Microsoft (MSFT), popping 8.34%
• Accenture (ACN),  rising 8.32%
• Amdocs Ltd. (DOX), climbing 6.03%
• Cisco Systems (CSCO), perking up 5.52%

 

Jumping out from the list above is the fact that all of my top gainers were from the Information Technology sector.  I can’t say I’ve seen that before.  In fact, my 6th best gainer (+5.44%) was Texas Instruments (TXN), which also hails from the same sector.

TXN, DOX & CSCO were all part of my worst decliners list from last month… so a nice turnaround, no doubt.

AVGO has been on an absolute tear in May, with most of the gain coming this past week.  Early in the week AVGO announced a deal with Apple (AAPL) to continue supplying certain components for iPhones.  Later in the week AVGO seems to have benefitted from the thought that their switches/routers would benefit from generative AI adoption given that connectivity needs to keep pace with advances in computation.

Making an appearance on my top gainers list for the 3rd month in a row was MSFT.  However, unlike the last two visits, MSFT couldn’t manage to record a 10% gain.  I can live with that.  🙂

ACN has risen in price over each of the past 3 months, crossing $300/share to end May.  I like what I’ve seen from ACN since they were added to my Portfolio last November.

I purchased DOX for the first time in November, too, back in 2021.  The stock has been a steady performer within my Portfolio over that time.

This month’s performance of CSCO has the stock approaching its 52-week high from early April.  A good earnings report during May helped offset some of the concern about declining orders.

 

Of my 52 stocks that fell in price, one dropped more than 20%.  Another 8 stocks sank over 10%.  Yet another 17 stocks fell more than 5%.  To my dismay, losses were widespread in May.

My worst decliners in May were…

• V.F. Corp (VFC), tanking 23.22%
• Nike (NKE), plunging 15.16%
• Walgreens Boots Alliance (WBA), sinking 14.87%
• The Walt Disney Co. (DIS), retreating 13.86%
• Starbucks (SBUX), dropping 13.79%

 

As you can see, my Consumer Discretionary stocks litter the top decliners list: VFC, NKE, SBUX.  Consumers are having their pocketbooks squeezed to a greater degree as interest rates and inflation remain high.

VFC is down over 60% in the past year as their business continues to struggle.  A turnaround never seems to take hold.  If there’s no uptick in the business soon, allowing margins to expand, VFC may need to consider yet another dividend cut.

Dropping to its lowest level in about 6 months, NKE hasn’t been immune to the pullback in consumer spending.  I’ll look for a chance to add NKE should its price drop continue.

During May, WBA agreed to settle another lawsuit related to the opioid crisis, this time with the city of San Francisco.  This is yet another payment that WBA will be making over the coming years.  While the payments are probably not enough to become a financial burden, it’s less money to invest in growth, or to continue paying a rising dividend.  The near-term outlook for WBA is not looking good.  I probably won’t be investing further dollars into WBA despite its stock price hovering at its 52-week low.

One stock I did recently purchase as its price has come down is DIS.  It may take some time to right the ship at DIS, but their collection of assets is impressive and still in demand with consumers.  Here’s hoping Bob Iger can get DIS moving in the right direction again.

After a stock price surge in April, SBUX gave up all those gains in May.  A trip to the mid $80s could be in the cards if the stock can’t hold the upper $90s.

Note – 7 of the 10 sectors from my Portfolio had all their holdings in the red in May.  Ouch!  Here’s the list of sectors that saw nothing but red (along with the number of stocks I own in that sector):  Healthcare (9), Consumer Discretionary (6), Consumer Staples (6), Communication Services (5), Real Estate (4), Materials (3) & Utilities (3).

 

Top 10 Review

Lots of movement in the Top 10 this month.  Nine of the ten stocks changed ranking, including the top stock!

After having no new Top 10 stocks for the past two months, that streak ended in May, with one new stock pushing its way into the group (and one exiting, of course).

The biggest movers inside the Top 10 include one stock rising 4 spots in the rankings, and one dropping 4 spots.

 

 

A banner price rise during May allowed Broadcom (AVGO) to vault four spots in my rankings and lay claim to the #1 position.  A monthly gain of nearly 30% not only allowed AVGO to move to #1, but provided it with a good cushion on top of that.  Let’s see if AVGO can hold onto those gains in June.

One of my tech stocks that didn’t post gains in May was Qualcomm (QCOM).  Instead it was a 5.52% decline, leading to QCOM slipping one spot in the rankings and settling at #2.

The lone Top 10 Portfolio stock to hold steady in its ranking was Pepsico (PEP).  PEP retained the #3 spot.  Its 3.83% pullback in stock price looked good relative to many of my other Consumer Staples stocks.

Aflac (AFL) tumbled a couple of spots to #4 after posting a 7.67% price decline during May.  This was my worst-performing financial holding for the month.

Climbing one spot to reach the #5 ranking was Visa (V).  The stock didn’t move up thanks to a gain though, as V instead recorded a 3.32% price drop in May.

Another stock rising one spot in the rankings, to #6 in this case, was RPM International (RPM).  Just like V, RPM did this despite a pullback during the month, sliding 2.38%.

Slightly negative for the month was Lowe’s Companies (LOW), which slipped 0.63%.  Such a small decline while other stocks were losing much more allowed LOW to rise two spots in the rankings and land at #7.

The Top 10 stock with the largest slide in my rankings was Procter & Gamble (PG).  A price fall of 7.02% translated into falling four spots to #8.  If it wasn’t for WBA, PG would have been my worst-performing Consumer Staples stock in May.

AbbVie (ABBV) dropped in price by 8.97% during the month, one of the more significant slides in my Portfolio.  However, ABBV only fell one spot in the rankings to #9 since there weren’t too many contenders behind it in the rankings.

At #10, we arrive to the newcomer in the Top 10.  It has resided in the Top 10 before.  Fastenal (FAST) was my lone Industrials stock in the green in May, gaining 2.45%, and that coupled with the hefty 12.07% decline from Nexstar Media Group (NXST) led to FAST surpassing NXST.

Currently sitting outside my Top 10 is BlackRock (BLK), with Union Pacific (UNP) and NXST much further behind.  BLK was slightly positive in May, which is an accomplishment given all the negative performances during the month.

 

From the table above, my Top 10 holdings now comprise 36.02% of my Portfolio value.  This is an increase of 0.69 percentage points compared to last month.  The surge from AVGO factored in here.

As for the dividend weighting of my Top 10, this finished the month at 30.54%, which is a decrease of 0.70 percentage points compared to last month.  FAST replacing NXST in my Top 10 accounted for the majority of this delta.

 

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.

Closing out May, I have 3 sectors where I’m overweight:  Industrials, Materials, and Consumer Staples.  All 3 are now a little farther away from my preferred weighting range than where they started the month.  Industrials will require a large reduction to get into my preferred weighting range.  The quickest way to get there might be to exit one of my positions altogether.  If I were to do that it might be to sell one of my defense stocks, General Dynamics (GD) or Lockheed Martin (LMT).  However, that’s not something I’m giving significant thought at the moment.

As for the underweight sectors, it’s still Information Technology and Energy where I need to add.  Relative to last month, Tech is now another half percentage point outside my preferred weighting range.  It’s hard to find Tech stocks I like at attractive valuations, but I’ll continue to look around.

Tech did become my most heavily weighted sector during May, inching past Healthcare, but not by much.  The four sectors having the largest weighting in my Portfolio are all very close in size, between 16.00% to 15.49%.  Stocks in the Healthcare and Financials sectors continue to provide the most dividends for me.

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

 

Watch List

With so many of my Portfolio stocks in the red in May, I have more stocks making an appearance on my watchlist.  Unfortunately, the sector where I want to add, Information Technology, is the lone sector of mine that was in the green this month.  QCOM looks a little undervalued currently, but I consider my position full, so I’m reluctant to add more.

I did add some Skyworks Solutions (SWKS) during May.  SWKS was on last month’s watchlist.  The purchase added slightly to my Tech weighting.

Even though I didn’t name The Walt Disney Co. (DIS) on my last watchlist, I have been keeping an eye on it.  I added some DIS during May which bumped up my Communication Services weighting some.  Even after the buy, I could see continuing to build my DIS position to twice its current size.

 

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

At the top of my list right now is REIT American Tower (AMT).  The stock has dropped well below my $195 target I noted last month.  It’s currently trading in the low $180s.  Buying some shares would increase one of my smaller positions and lower my cost basis, too.

REITs are the worst-performing sector over the past year.  That seems to be reflected in the stock price of Realty Income, too.  I like the price here below $59.  It has been a while since I’ve added some O and now may be the time for me.

I’m still targeting Whirlpool (WHR) below $130.  It dipped below that mark in the middle of May, but I didn’t act.  It too needs to be a bigger position in my Portfolio, and I can also lower my cost basis by adding at that level.

Even though I don’t need to increase my weighting in Industrials, I’d like to make Cummins (CMI) a larger Portfolio position.  I’d consider adding a couple of shares below $210.

NextEra Energy (NEE) is hovering around my cost basis level.  It’s another stock position that needs to grow in my Portfolio.  Adding some shares below $72 would be nice.

At $35, Verizon Communications (VZ) is lower than I ever thought the stock would get, but with no growth on the horizon, it’s hard to get exciting about the stock.  I’ll have to think about this one some more.

Amgen (AMGN) looks attractive to me below $217.  I could see beefing up my position to a small degree.

Looking at some of my larger positions that I’d be interested in adding to… Nexstar Media Group (NXST) below $150 is a possibility, Union Pacific (UNP) south of $190 intrigues me, and Johnson & Johnson (JNJ) trading below $150 could spur me to commit to a small purchase.

 

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

A stock I’ve mentioned before, one from the Tech sector no less, is Corning (GLW).  The price on this stock has come down to trade between $31-$32.  I previously targeted $30.  I might be inclined to initiate a position should it dip below $31.

 

Thoughts?

Do you see the only 3 sectors that are in the green, and up significantly, in 2023 (Information Technology, Communication Services & Consumer Discretionary) continuing to pace the markets through year’s end?  Or do you expect the remaining sectors to close some of that performance gap?  Please share your thoughts!