The stock market continued to power higher in July after rising in June. My Portfolio is now marching toward a recovery of value not seen since the end of 2021.
All S&P 500 sectors have a 1-month return that’s in the green. However, three S&P 500 sectors remain in the red Year-to-Date (YTD) near the end of July: Utilities (-5.01%), Energy (-2.45%) and Healthcare (-0.71%).
In July, I believe my Portfolio closed some of the performance gap it has relative to the S&P 500. Some of the unloved components of the S&P 500 this year are contributing more in recent weeks and that’s benefiting my Portfolio.
Earnings season is in full swing, and overall, earnings have been positive. However, that’s no guarantee that stocks continue to rise, especially after packing on the gains the past couple of months.
The summer months are usually fairly quiet for the stock market, but it hasn’t felt that way in 2023. We’ll see what the remaining 5 months of the year will bring with regard to stocks.
I’ll be covering my normal topics for this month’s 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.
Here are my Portfolio Thoughts for July 2023…
Price Movement
Note – my price changes cover closing prices from 6/27/23 to 7/28/23.
The majority of my Portfolio stocks finished in the green in July. Even better, I had a good handful of stocks with double-digit moves to the upside in July.
My ratio of stocks with price gains compared to price declines was exactly 3 to 1. This meant that for my 60 holdings, 45 moved higher in price, while only 15 moved lower. While that ratio declined compared to June, it remained quite healthy for the 2nd consecutive month.
Here were the stocks with the biggest moves to the upside and downside…
Of my 45 stocks that rose in price, there was one big mover topping a 20% gain. There was also a group of 5 stocks that delivered at least a 10% increase (the usual threshold I monitor for). Another group of 17 stocks brought home at least a 5% gain – that’s the same number as in June.
The top gainers in July were:
- RPM International (RPM), rocketing 23.76%
- Automatic Data Processing (ADP), launching 16.23%
- T. Rowe Price Group (TROW), surging 16.08%
- Union Pacific (UNP), popping 14.68%
- AbbVie (ABBV), advancing 13.76%
Stocks from 4 different sectors graced my top performers, with the top pair of stocks residing in the Industrials sector.
RPM returned to price levels not seen since late last year after a nearly 24% gain during the month. The majority of RPM’s boost came after its top and bottom line quarterly results topped expectations.
Another stock showing some good upside movement after announcing earnings was ADP. The stock added better than 16% over the past month. However, ADP was climbing all month, with the earnings pop just adding to already substantial gains.
One stock that hasn’t seen my top gainers list in a while is TROW. However, a 16% gain over the past month ended that streak. The stock popped this past week after better-than-expected earnings were announced. TROW has basically traded sideways for the past year after getting a 50% price haircut from Nov 2021 through June 2022.
UNP didn’t jump due to earnings, but rather an announcement that a new CEO would be taking over effective next month. The 14.68% jump put UNP at its highest price level in nearly 11 months.
Lastly, there was ABBV posting a move up of close to 14%. ABBV was on my biggest decliners list last month, so call this a nice turnaround. The price climb put the stock over $150, a level the stock hadn’t seen in about 3 months.
Note – 3 of the 10 sectors from my Portfolio had all their holdings in the green in July. They were all Cyclical sectors, too. The following sectors provided nothing but stocks with positive returns (I share the number of stocks I own in that sector, too): Financials (6), Real Estate (5) & Materials (3).
Of my 15 stocks that fell in price, only one declined more than 10%. Another 4 stocks dropped at least 5%. With so few stocks dropping to a significant degree, that usually means good things for the month, and that was the case in July.
My worst decliners in July were…
- Omnicom Group (OMC), plunging 14.68%
- Verizon Communications (VZ), sinking 6.89%
- Merck & Co. (MRK), dropping 6.16%
- Quest Diagnostics (DGX), retreating 5.66%
- Bristol-Myers Squibb (BMY), falling 5.16%
A pair of Communication Services stocks led my decliners list. This was followed by three Healthcare stocks, which happened to be my only stocks in that sector that declined.
After a lackluster earnings report, where revenue fell sort of expectations, OMC declined roughly 15% in three days, enough to equal the entire amount it dropped for the month.
VZ dropped 6.89% in July after a new concern surfaced regarding the extent of lead-sheathed cables in its network. This makes it a price decline of more than 25% over the past year for VZ.
Trading in a fairly tight range in 2023 has been MRK. The stock pulled back over 6% in July but still resides in the $103 to $118 range it’s been in YTD.
DGX retreated 5.66% after posting earnings that failed to excite investors. This wiped out the stock price recovery that DGX notched in June.
Another poor month for BMY has its stock at a 52-week low. Its decline of more than 5% is typical of its performance in 2023.
Top 10 Review
There was not much movement in July among my Top 10 stocks. Of the stocks that were in my Top 10 both last month and this month, only one stock managed to move more than one spot. Two of my Top 10 held their same position as last month.
However, I did have a couple of new stocks join the list in July, and it seems that multiple stocks moving in/out of the Top 10 in a single month hasn’t happened for some time.
Claiming the #1 spot for a third month in a row was Broadcom (AVGO). With a gain slightly above 6% in July, AVGO retained the top spot with ease.
Holding down the #2 spot for a third consecutive month was Qualcomm (QCOM). An 8%+ gain for the 2nd month in a row was nice for QCOM after a 4-month rough spell.
My big mover of the month was RPM International (RPM). Its 23.76% gain in July (the best performer in my Portfolio this month) allowed the stock to leap three spots in my rankings and secure the #3 spot.
The next three stocks in my rankings all slipped 1 spot this month, despite positive returns in July…
Aflac (AFL) finished in the #4 spot after a 5.68% gain for the month. Meanwhile, Lowe’s Companies (LOW) also posted a 5%+ gain, landing it in the #5 spot.
While not able to keep up with the gains from AFL and LOW in July, Pepsico (PEP) did gain 2.2% during the month to grab the #6 spot.
Procter & Gamble (PG) and Visa (V) swapped spots this month. PG rose one spot after a 4.26% gain to finish at #7, while V slipped a spot to #8 after posting a 3.7% gain. These two stocks were closely matched value-wise in my Portfolio going into the month and remain that way at the end.
Now we get to my two new Top 10 holdings…
Fastenal (FAST) saw its two-month visit to the Top 10 come to an end after posting a slightly negative month (-0.05%). It was replaced in the #9 spot by a resurgent AbbVie (ABBV) which notched a 13.76% return for the month – good enough to crack my top performers list in July.
Grabbing the #10 spot this month was Union Pacific (UNP). Its stellar 14.68% gain had it pass both FAST and Nexstar Media Group (NXST) in the rankings. NXST lost the final spot in my Top 10 despite an 8.65% gain in July, which doesn’t seem fair.
Just outside my Top 10 now are NXST, BlackRock (BLK) & FAST. BLK gained over 7.8% this month, its fourth consecutive month of gains, putting it in striking distance of the Top 10.
From the table above, my Top 10 holdings now comprise 36.78% of my Portfolio value. This is an increase of 0.71 percentage points compared to last month. Strong, double-digit gains from RPM, ABBV & UNP helped increase the percentage weighting of my Top 10.
As for the dividend weighting of my Top 10, this finished the month at 30.26%, a noticeable increase of 1.13 percentage points compared to last month. ABBV replacing NXST in my Top 10 accounted for nearly all of this delta, as the swap of UNP for FAST didn’t change the dividend weighting much at all.
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.
At the end of July, I’m still overweight in the same 4 sectors: Industrials, Materials, Financials and Consumer Staples. Financials and Consumer Staples are close to being in my preferred weighting range (just like last month) so perhaps that will happen soon. Unfortunately, I got further away from my preferred weighting range in Industrials and Materials during July. The lack of progress in Industrials was probably due to the good performance from ADP and UNP. Meanwhile, the awesome July returns from RPM had my Materials sector fall further out of line. These are not bad problems to have though. 🙂
As for my underweight sectors, the same two remain: Information Technology and Energy. Neither of these two sector weightings moved much during July. My preferred weighting range for Information Technology is still very far away, but I’ll keep looking to improve there. My Energy weighting will probably remain out of whack while I focus my attention on sectors that I prefer more.
As always, I’ll keep all these weightings in mind as I continue to adjust my Portfolio, and my watchlist.
Watch List
After another month of stock prices on the rise, I’m finding fewer stocks on my purchase radar. There are enough bogeys out there to keep my attention, but I may need to be more selective moving forward.
My lone purchases in July were Bristol-Myers Squibb (BMY) and NextEra Energy (NEE). Both were listed on last month’s watchlist and both ended up getting added. The system works just as I intended!
Adding stock in the Information Technology sector remains my emphasis when bringing new capital into my Portfolio, but it often doesn’t work out that way. Still, it’s good to have a plan.
Within my Portfolio, here are a few stocks that I’m watching for possible additions…
Of my existing tech holdings, Skyworks Solutions (SWKS) still seems like the best place for an addition. The existing price of $114 is reasonable, but I’ll target a price below $110. It would only be an incremental purchase. Another 5 shares would keep my position growing.
Staying in tech, I’d like to see Amdocs Ltd. (DOX) become a bigger part of my Portfolio. The stock gets little fanfare but climbs steadily in price. The stock currently trades close to $94. I’ll be watching for a dip below $88.
Most of my REITs look fairly valued at this time. I could see adding shares of Realty Income (O) and National Retail Properties (NNN), especially the latter since it’s a smaller position that needs to get bigger to become more meaningful within my Portfolio. O currently trades around $61, but I’d like to see it drop below the $58 level before pulling the trigger. As for NNN, it seems to have been trading in the $42-$43 range for about 4 months now without breaking out either way. I’d like to add NNN should its price trade below $40.
Despite adding NEE this month, it remains on my watchlist. I’m open to adding below the $71.95 price of my last addition.
Another small Portfolio position that needs to grow is that of Whirlpool (WHR). The stock currently trades around $144. Any price below this level would be acceptable, but a dip below $140 would be preferred.
As for non-Portfolio stocks that I’m watching…
I’m going to stop tracking Energy stock Cactus (WHD) since it now trades far away from my $35 entry point. The stock topped $50 recently.
I still have an eye on insurer Allstate (ALL). The stock dipped down to about $101 in the past month, but I didn’t commit. ALL now trades above $112. This price isn’t unreasonable if FY24 earnings pan out as expected, but it’s a forecast that seems to have a large uncertainty.
One tech name that remains on my radar is Corning (GLW). While the stock is just below $34 at this time and sporting a 3.3% yield, I’d prefer an entry price below $31 if I can get it.
Thoughts?
Do you believe the stock market is due for a pullback after the good run it has had thus far in 2023? Are you enjoying the current interest rates on cash savings after years of virtually nothing, or would you prefer interest rates drop? Please share your thoughts!