September provided another dismal month for stock performances overall. Historically, September and October have not provided good results. Stay on alert for falling prices.
My Portfolio slipped into negative territory for 2023 thanks all my declining stocks. Portfolios that are more mega-cap tech heavy than mine have probably fared better performance-wise, as the S&P 500 has returned 13.07% with reinvested dividends so far this year.
Three sectors are contributing significantly to that S&P 500 Year-To-Date (YTD) return: Communication Services, Information Technology and Consumer Discretionary. Strangely, most of the stocks I have in those sectors don’t seem to be performing particularly well this year… hence my disappointing Portfolio return in 2023.
Rising interest rates have negatively affected the Real Estate and Utilities sectors this year. These are the two worst-performing sectors in 2023. Other sectors in the red for 2023 include Consumer Staples, Healthcare and Financials.
When the stock market heads south, some stocks take the brunt of the decline. Whether the issue is a bad economy, supply chain issues, labor problems, rising interest rates, or something else, we really get to see how well company management can handle the adversity. Tough times often expose some companies. In my Portfolio, I’ve got a few companies that aren’t performing well. These include Walgreens Boots Alliance (WBA), V.F. Corp (VFC), Verizon Communications (VZ), and perhaps Altria Group (MO). Their falling stock prices have led to some abnormally high (and troubling) yields. Right now I’m most worried about WBA and VFC. Both could be ripe for a trim, or an outright purge from my Portfolio, if signs of a turnaround don’t materialize in the coming quarters.
I’ll be covering my usual 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 September 2023…
Price Movement
Note – my price changes cover closing prices from 8/25/23 to 9/29/23.
Stock price declines were somewhat bad in August, but they got worse in September. It doesn’t feel like there’s any particular place to hide in the market. Oh well, I’m just planning to ride out the turbulence and make some selective purchases to bolster my Portfolio while I wait for more favorable times for stocks.
My ratio of stocks with price declines compared to price gains was exactly 5 to 1. This meant that for my 60 holdings, 50 moved lower in price, while only 10 moved higher. This was a tad worse than the 4 to 1 ratio my Portfolio had last month.
Here were the stocks with the biggest moves to the upside and downside…
Of my 10 stocks that rose in price, none topped a 20% gain, a 10% gain (the usual threshold I monitor for), or even a 5% gain. It was tough sledding in September, even for those stocks that ended up in the green.
My top gainers in September were:
- Amgen (AMGN), rising 4.83%
- CVS Health (CVS), advancing 3.71%
- Aflac (AFL), climbing 3.37%
- UnitedHealth Group (UNH), moving up 3.08%
- FedEx (FDX), gaining 2.39%
A trio of Healthcare stocks are visible in the top gainers list: AMGN, CVS & UNH. Another Healthcare stock of mine, AbbVie (ABBV) also managed a positive price gain in September (1.62%), which unfortunately wasn’t good enough to make the list.
For the 2nd month in a row, AMGN has led my top gainers list. Gains have been sub-10% each time, but posting price gains when the market is sliding is nice. AMGN has risen for 4 straight months now.
AFL has also climbed in price each of the past 4 months. As you’ll soon see, AFL has become my 2nd largest Portfolio holding thanks to this streak.
Of my 50 stocks that fell in price, none declined more than 20%, but 3 fell more than 10%. Another 20 stocks (one third of the entire Portfolio) dropped at least 5%.
My worst decliners in September were…
- NextEra Energy (NEE), freefalling 15.70%
- Walgreens Boots Alliance (WBA), sinking 11.96%
- Realty Income (O), diving 10.82%
- National Retail Properties (NNN), dropping 9.73%
- Lockheed Martin (LMT), declining 9.34%
Topping my decliners list is NEE. Utilities stock NEE saw its stock price get slashed again after lowering its growth forecast this past week. The stock is finally approaching a realistic valuation for the first time in years.
For the 2nd month in a row, WBA posted the 2nd worst decline for the month. A repeat offender!… never a good sign. WBA is currently looking for a new CEO after its previous one stepped down last month amid the mounting pressures of a business gone bad.
A pair of triple-net lease REITs made my top decliners list in O & NNN. Both are looking attractively priced for the long-term right now.
LMT hasn’t been part of my decliners list since I can remember. Fellow Industrials stock Union Pacific (UNP) almost made an appearance on the list, too, as it retreated 9.17%.
Note – for the 2nd month in a row, 5 of the 10 sectors from my Portfolio had all their holdings in the red. The majority of these were Cyclical sectors. 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), Communication Services (5), Real Estate (4) & Materials (3).
Top 10 Review
Movement in September looked very similar to that from August.
Four of the ten stocks maintained their position once again this month. My biggest mover to the upside rose 3 spots. There were no new entrants to the Top 10.
Broadcom (AVGO) has now secured the #1 spot in my Top 10 for the fifth straight month. It held the spot even though it declined 2.49% during the month. A big lead in weighting provides a margin for error.
Switching spots to finish at #2 and #3 were Aflac (AFL) and RPM International (RPM), respectively. With a 3.37% gain this month from AFL, and a 4.95% decline from RPM, it was easy to understand why these stocks switched rankings. AFL is one of my Portfolio stocks that’s positive for 2023.
A pair of stocks that claimed their same #4 and #5 ranking as last month were Qualcomm (QCOM) and Visa (V). QCOM was slightly positive (0.67%) in September, but V slumped 5.18%.
My biggest Top 10 mover for September was AbbVie (ABBV). It used a small gain of 1.62% to jump three spots and lay claim to the #6 ranking. As you’ll soon discover, the jump from ABBV was aided by poor returns from the three stocks it leapfrogged.
The next three stocks in the rankings all slid one spot. Lowe’s Companies (LOW) lost 6.83% during the month, while Procter & Gamble (PG) dropped 5.00% and Pepsico (PEP) pulled back 5.56%.
Despite a 9.17% decline in September, Union Pacific (UNP) managed to hold onto the #10 spot and avoid falling out of the Top 10. Over the past couple of months, UNP has given back all of the impressive gains it achieved in July.
Just outside my Top 10 now is Fastenal (FAST). BlackRock (BLK) trails by a much wider amount… you could say it’s on the fringe of striking distance.
From the table above, my Top 10 holdings now comprise 36.82% of my Portfolio value. This is a slight increase of 0.11 percentage points compared to last month.
As for the dividend weighting of my Top 10, this finished the month at 29.73%, a decrease of 0.2 percentage points compared to last month. With no new capital investment inside my Top 10, and no dividend raises either, the dividend weighting of my Top 10 gets whittled down over time.
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.
My number of overweight and underweight sectors remained the same as last month. I have 3 overweight sectors and 2 underweight sectors.
I’m farthest off in my preferred weighting in the Information Technology sector. However, I did make some progress in reducing the weighting difference after adding to my Microsoft (MSFT) position this month. My short term goal here is to get the Information Technology sector to be the largest in my Portfolio. Currently, three other sectors have a larger weighting: Industrials, Healthcare and Financials, all of which top a 16% weighting.
The good performance of the Energy sector this month made my weighting difference for that sector (where I don’t own any stocks) worse.
Financials are close to coming into my preferred weighing range. It should soon if I keep investing new capital outside of that sector.
Consumer Staples got a bit closer to the center of my preferred weighting range in September. Sadly, I believe that’s due to the poor performance of my stocks in that sector, all of which had price drops of at least 3.43% in September and were led down by that horrible 11.96% WBA loss.
As always, I’ll keep all these weightings in mind as I continue to adjust my Portfolio, and my watchlist.
Watch List
More and more stocks are hitting my radar each month as stock declines persist. I’d say there are plenty of attractive stock buys these days.
Recently, I’ve been trying to add to many of my smaller positions, making them a more significant part of my Portfolio. I’ll probably continue with that strategy in the short-term.
In September, each of my stock additions were already present on my watchlist. Also, each of my stock additions in September were buys I made in August, too. Those stocks were American Tower (AMT), NextEra Energy (NEE) and Microsoft (MSFT).
Within my Portfolio, here are a few stocks that I’m watching for possible additions…
Information Technology stocks Skyworks Solutions (SWKS) and Amdocs Ltd. (DOX) are more tempting after declining again in September. SWKS below $100 is attractive for me while the same can be said for DOX below $85.
After buying a couple more MSFT shares around $310. I’ll look to add again should the price fall below $300.
While I was early in my buy of NEE this past week, the recent fall seems overdone to me with the price now hovering around $57. I’m going to consider adding more shares at this level.
All the REITs I was looking at last month only got cheaper. I’m now targeting Realty Income (O) below $50, National Retail Properties (NNN) lower than $35, American Tower (AMT) below $160 and VICI Properties (VICI) south of $29. I did add some AMT this past month so I suspect one of the other three stocks would be preferred this time around.
Whirlpool (WHR) is another small position that needs to grow. I saw the stock drop below $130 in September, then recover a bit. I’ll see if I can find WHR trading below $130 again.
My price target for Cummins (CMI) from last month remains… $225. Ideally, I can snag a share or two below $220.
Shares of The Walt Disney Co. (DIS) dipped below $80 recently, and I could convince myself to add a few more shares below that level. The near-term looks rough for DIS, but I still like it long-term. I’m looking forward to the dividend being reinstated (to some degree) in Q4, too.
I’m going to add McCormick & Co. (MKC) to my watchlist this month, too. The stock is close to dipping below my $72 target.
As for non-Portfolio stocks that I’m watching…
Corning (GLW) is high on my list if I purchase outside of my Portfolio. Adding another tech stock would be good. I was looking to add below $31 last month, but I think entering below $30 is a possibility now if the stock market continues to drift lower.
Essential Utilities (WTRG) fell right through last month’s $37 target and now approaches $34. I’ll keep watching, even though adding another Utilities stock is not high on my list.
After having to sell my Target (TGT) position back in January, 2020 due to a call option I sold being ‘in the money’, I’d consider initiating a new position below $108, which is approximately where I had to sell.
Thoughts?
Which of my watchlist stocks do you see as having good value right now? Do you foresee the stock market trending up or down in Q4? Please share your thoughts!