After a couple of good months, the stock market has taken back some of the gains we scored over the early summer.  Such is the nature of the stock market… ups and downs in the short-term, but over the long-term the trend is up.

Sadly, it was a noticeable decline in August.  My Portfolio took one on the chin this month.  We haven’t really seen such downward pressure for a single month since this past February.

Most S&P 500 sectors were in the red over the past month.  All except for a couple of sectors – Communication Services and Energy, both of which were slightly positive… in the 1.5% to 2.0% range.

Year-to-Date (YTD), five S&P 500 sectors are in the green, while the other six are in the red.  Three of the five sectors in the green are up significantly [Communication Services (38.57%), Information Technology (37.92%) & Consumer Discretionary (29.11%)], carrying the S&P 500 index to solid YTD returns of 14.75% (not including dividends).  Most of the sectors in the red are down less than 3% on the year, all except for the Utilities sector, which has declined more than 10%.

Earnings season basically finished up about midway through August, so we should see a little less market volatility for the next few weeks.

Enough about the stock market, let’s dive further into how some of my Portfolio holdings fared.

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 August 2023…

 

Price Movement

Note – my price changes cover closing prices from 7/28/23 to 8/25/23.

There wasn’t much to like with regard to positive returns in my Portfolio in August.  There was a lot more red than green, and even when I did see some green, the returns were minimal.

My ratio of stocks with price declines compared to price gains was exactly 4 to 1.  This meant that for my 60 holdings, 48 moved lower in price, while only 12 moved higher.  This was a big reversal compared to last month.

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

 

Of my 12 stocks that rose in price, none topped a 20% gain.  There were also 0 stocks that provided at least a 10% increase (the usual threshold I monitor for).  As a matter of fact, only 2 of the 12 positive stocks managed to surpass a 5% gain for the month.  That’s slim pickings.

The top gainers in August were:

• Amgen (AMGN), popping 8.47%
• Cisco Systems (CSCO), rising 6.93%
• Caterpillar (CAT), climbing 4.66%
• Merck & Co. (MRK), advancing 3.64%
• Visa (V), higher by 2.89%

 

For the 2nd month in a row, stocks from 4 different sectors paced my top performers.  A pair of stocks came from the Healthcare sector.

AMGN, one of the Healthcare names, topped my gainers list.  It got a nice boost from its top & bottom line beats when it reported earnings at the beginning of the month.  The stock has now posted gains for 3 straight months.

Another stock benefiting from a solid earnings report was CSCO.  There’s some hope that improved enterprise spending will support revenue growth for CSCO.  This stock has posted gains for 4 straight months.

Joining the consecutive months of gains club is CAT.  It’s seen 3 straight months of gains now.  CAT announced its earnings at the start of August and it was a good report.  The stock popped in the days that followed, but has since given up a good chunk of that.

My 2nd Healthcare name to show on the top gainers list was MRK.  This was a rebound from last month, when MRK made an appearance on the top decliners list.  MRK posted a non-GAAP EPS loss at the beginning of August when it announced earnings.  However, this was tied to a one-time charge related to its buyout of Prometheus.  The stock recovered over the past few weeks after this news was digested by the market.

Rounding out my list of top gainers was V.  This stock has also recorded gains for a 3rd consecutive month.  V reported earnings in late July, mostly in-line with expectations.  The stock didn’t move much as a result, and hasn’t really moved much over the subsequent weeks, but it has trended up ever so slightly.

 

Of my 48 stocks that fell in price, one declined more than 20%, while another 6 dropped at least 10%.  Still another 22 stocks dropped at least 5%.  That’s nearly half my Portfolio with 5% or worse declines in August.  The damage was widespread!

My worst decliners in August were…

• Medical Properties Trust (MPW), plummeting 25.37%
• Walgreens Boots Alliance (WBA), plunging 15.23%
• Qualcomm (QCOM), tanking 14.80%
• Nexstar Media Group (NXST), sinking 13.89%
• T. Rowe Price Group (TROW), dropping 13.48%

 

Each stock in the top decliners list is from a different sector.  That happens from time to time.

MPW was easily my worst Portfolio stock for August, but this will be the last time.  Why?  Because its business troubles and the rising potential for a dividend cut led me to sell my position on the 17th of this month.  Its performance was actually worse than what I posted above, as I have the sale price capping my return.  However, the stock currently trades below my sale price.

Another stock that performed horribly in August was WBA.  Its YTD performance is poor as well.  The yield for WBA has gotten disturbingly high and dividend growth has stopped.  I might have to consider parting ways with WBA.  If I do hold on, I suspect I’ll quit automatically reinvesting its dividend and instead take the cash to invest elsewhere… something I did with MPW.

QCOM is basically flat on the year.  It started the year off well, but then gave back all the gains over a 4-month period.  A second attempt at a recovery has now failed, too, after QCOM posted another down month in August.

Remaining as volatile as ever has been NXST.  The stock has reached beyond $215 this year, but dipped below $150 as well.  The stock currently sits near the lower of those two numbers after another lackluster month.

My final stock from the top decliners list is TROW.  Just last month TROW was sitting pretty making an appearance on my top gainers list.  How quickly things can change.  TROW has now finished 6 of the 8 months in 2023 in the $106 to $112 range.

 

Note – 5 of the 10 sectors from my Portfolio had all their holdings in the red in August.  All of these were from the Cyclical or Defensive subsectors.  The following sectors provided nothing but stocks with negative returns (I share the number of stocks I own in that sector, too):  Consumer Discretionary (6), Consumer Staples (6), Real Estate (5), Materials (3) & Utilities (3).

 

Top 10 Review

Movement within my Top 10 was fairly minimal in August.  Four of the ten stocks maintained their position by month’s end.  That’s a fairly high number for my Portfolio given that many of my Top 10 stocks are similar in value.  In addition, there were no new entrants to the Top 10.

My biggest mover to the upside was a stock that rose 3 spots, while a pair of stocks dropped a couple of spots.

 

 

Broadcom (AVGO) claimed the #1 spot in my Top 10 for the fourth straight month, despite a 5.33% decline in August.  Its stock price has closed the month above $800 in each of those four months.

Rising one spot to #2 was RPM International (RPM).  That was no easy task given its own 4.68% price drop this month.  RPM is still positive for the year, thanks in part to a terrific July.

Also climbing a spot was Aflac (AFL).  However, this stock managed to gain 2.57% in August, allowing it to grab #3 in my rankings.  This was the third consecutive month of gains for AFL.

Falling a couple of spots to #4 was Qualcomm (QCOM).  QCOM managed to wipe out two months of gains in June & July by posting a sad 14.8% drop in August.

Next up was my biggest Top 10 ranking climber in August.  Visa (V) gained 2.89% for the month, propelling it three spots higher, to land at #5.  V seems to be gaining some momentum as 2023 progresses.

Slipping one spot to #6 was Lowe’s Companies (LOW).  A 5.11% decline for August occurred despite a decent earnings-related pop late in the month.

Procter & Gamble (PG) was able to secure the #7 spot for the 2nd consecutive month by posting only a 1.83% decline in a month that ravaged some of my other holdings.

My other stock that dropped a couple of spots in the rankings was Pepsico (PEP).  PEP finished with a loss of 5.72% in August after steadily falling for the majority of the month.

My last two Top 10 stocks finished the month where they started.  AbbVie (ABBV) slid 2.76% in August, but that was good enough to maintain the #9 spot.  Meanwhile, Union Pacific (UNP) declined 3.69% but retained the #10 spot.

Lurking a little outside my Top 10 now is Fastenal (FAST).  Nexstar Media Group (NXST) and BlackRock (BLK) are much further behind, but could rise up should troubles beset one of the stocks at the lower end of the Top 10.

 

From the table above, my Top 10 holdings now comprise 36.71% of my Portfolio value.  This is a slight decrease of 0.07 percentage points compared to last month.

As for the dividend weighting of my Top 10, this finished the month at 29.93%, a decrease of 0.33 percentage points compared to last month.  The primary reason was some significant capital investment (highlighted by my UGI purchase) that took place in August with stocks outside of my Top 10, reducing the dividend weighting of the group.

 

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.

Compared to last month, I have one less overweight sector… Consumer Staples… not by much though.  I’m still significantly overweight in Industrials, and somewhat in Materials, but Financials could swing into range by the end of next month.  We’ll see.

Information Technology and Energy continue to standout as my underweight sectors.  I’m primarily focused on beefing up my Tech holdings and reducing the weighting difference I have there.  Perhaps a short-term goal should be to at least make my Information Technology sector the largest within my Portfolio.  Currently it’s only the 4th largest, but that could change quickly with some effort, as my largest four sectors are tightly bunched from a weighting perspective.

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

 

Watch List

With the spanking the market endured in August, plenty of stocks look more favorably valued now.  Still, I’m trying to remain selective.

In August I focused on building out many of my smaller holdings.  This included Microsoft (MSFT), National Retail Properties (NNN), NextEra Energy (NEE) and American Tower (AMT).  I also added to Realty Income (O) and added a new stock in UGI Corp (UGI).  I dumped Medical Properties Trust (MPW) though.

NNN and O were stocks I mentioned right here in last month’s watchlist.  Having their price targets handy made quick decisions a bit easier.

I hit price targets I had for a few other watchlist stocks, but figuring out how to sell MPW, then replacing its lost dividend income, prevented me from realizing some of those other opportunities.

As always, adding to my Information Technology sector will be high on my list.

 

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

Nearly all of the following stocks were listed here last month.  The stocks declines from August only makes them better buys.

Skyworks Solutions (SWKS) below $108 looks like a decent add, especially since this price is below my target from last month.  Adding 5 shares seems about right for me.

Also in Information Technology is Amdocs Ltd. (DOX).  Its stock price dipped below my $88 target before rising above that level again.  I’ll keep my eyes peeled for a 2nd chance.

Securing another share of Microsoft (MSFT) interests me for sure.  I’ll be hoping for the share price to drop below $318.

Adding to any of my REIT positions seems like a reasonable move, as most stocks in the sector have moved down in price noticeably.  I’m looking for Realty Income (O) below $56, National Retail Properties (NNN) south of $39, American Tower (AMT) below $175 and VICI Properties (VICI) to fall lower than $30.

NextEra Energy (NEE) is high on my watchlist, too.  I added at the beginning of August just south of $70, but a slip below the $67 level would make adding another 5-10 shares appealing.

I had a chance to buy Whirlpool (WHR) this month below $133, but missed out.  It’s possible it happens again in the near-term.  Will I be ready to pounce if there’s a next time?  A price under $135 would still be acceptable to me.

A smaller Portfolio holding that needs to get larger is my one for Cummins (CMI).  I was planning to add just a share should the stock dip below $225.  It happened recently and I didn’t pull the trigger.

I could see adding a handful of shares of The Walt Disney Co. (DIS), too.  Shares dipped below $83 recently… that price works for me.

There are plenty of stocks within my Portfolio that I can focus on, no question.

 

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

One stock that’s new to my watchlist is Essential Utilities (WTRG).  A return below $37 would be interesting for this water and natural gas service provider.  However, I may need to reconsider adding another Utilities stock to my Portfolio after purchasing UGI recently.

Insurer Allstate (ALL) remains on my radar.  Its stock price came down this month to around $106, but I’d prefer a lower price for a larger margin of safety.  Is a dip below $100 in the cards?

Another stock I’m still watching is Corning (GLW).  Its price has now dropped below $33, but I’m looking for the stock to breach $31.

 

Thoughts?

Which direction do you see the market moving from here until the end of the year?  Which market sectors seem to have good values at the current time?  Please share your thoughts!