It appears the stock market is off to a good start in 2024. Seven of the eleven sectors have posted a positive month (thru 1/26), with Communication Services (+9.13%) leading the way, and Information Technology (+6.15%) not too far behind. Real Estate (-4.11%) is the sector that’s the early laggard.
My Portfolio is off to a decent start as well, but my early calculations show me already trailing the S&P 500 return by more than 1%. Of course, there’s plenty of time for me to make up ground. Still, to be trailing out of the gate is no fun, especially after getting outshined performance-wise in 2023. I haven’t calculated my final numbers for 2023 yet, but I want to say the S&P 500 was about 10 percentage points better than my Portfolio.
Earlier this month I was able to post a Review of 2023 Portfolio Goals and also my 2024 Portfolio Goals. Check those out if you haven’t already. Despite lackluster goal achievement last year, I’ve got higher targets in sight for 2024. Hopefully, I can notch a clean sweep of my goals this year. If so, it would be a first.
I’ve already made several Portfolio moves in the new year – 8 already. You can read about them in these two posts:
In summary, the moves included removing one stock from my Portfolio (HRL), trimming one holding (GD), establishing one new position (HSY) and adding to several existing holdings (CVS, SBUX, NNN, CMI, NEE). The GD trim helped me decrease my Industrials sector weighting – something I’ve been trying to do for months. In the Consumer Staples sector, I effectively swapped my HRL position for a position in HSY. Meanwhile, my adds to NNN, CMI and NEE boosted the weighting of a few of my smaller holdings, bringing them closer to that 1% Portfolio weighting that I target for a Portfolio position.
In any event, one can see I’ve wasted no time in starting to re-shape my Portfolio in the new year. It’s hard to make sudden, big changes to a sizable portfolio without making drastic moves, so I’ll continue to make minor adjustments over time.
In 2024, I’m inclined to keep my Portfolio Thoughts posts as they’ve been. Thus, expect the following topics in this 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 examine my first Portfolio Thoughts of the new year…
Price Movement
Note – my price changes cover closing prices from 12/29/23 to 1/26/24.
My Portfolio was in the green in January, but you wouldn’t know it from my ratio of stock gains to stock declines. The ratio was essentially 1:1. However, the top gainers I had generally posted larger gains than my top decliners moved to the downside. Thus, I was able to stay in the green for a 3rd consecutive month.
Of my 59 holdings (still counting HRL, but not yet counting HSY), 29 moved higher in price, while 30 moved lower. A slightly negative ratio, but a generally positive month. I can live with that!
Here were the stocks with the biggest moves to the upside and downside…
Of my 29 stocks that rose in price, none of them provided a 20% gain. However, 3 stocks notched a 10% gain (the usual threshold I monitor for). In addition, another dozen stocks recorded at least a 5% gain. That’s 15 of the 29 gainers climbing more than 5%. The gains were good when the stocks were green!
My top gainers in January were:
- Nexstar Media Group (NXST), soaring 15.23%
- Verizon Communications (VZ), jumping 12.47%
- Merck & Co. (MRK), rising 10.82%
- Amgen (AMGN), popping 8.25%
- Broadcom (AVGO), advancing 7.94%
A pair of Communication Services stocks led my top gainers list. Both NXST and VZ posted double-digit gains! I’d say that’s not an unusual occurrence for NXST, but that’s definitely not normal for the slow-moving VZ.
A couple of Healthcare stocks graced my top gainers list as well. Both MRK and AMGN represented the sector well, with MRK eclipsing a 10% gain. As for AMGN, this marks its 3rd consecutive monthly advance.
Then there’s AVGO. Make it two months in a row being part of the top gainers list. Last month AVGO settled in the #3 spot, this time around it was #5. Despite the slip, it was another great month of gains for AVGO.
Note – one sector in my Portfolio had all their holdings in the green: Communication Services (5). All 5 holdings topped gains of 5%. Kudos all around to my stocks from this sector.
Of my 30 stocks that fell in price, none sank more than 20% or declined more than 10%. Make it 3 months in a row achieving that. However, I did have 9 stocks that declined at least 5%.
My worst decliners in January were…
- American Tower (AMT), sinking 8.61%
- CVS Health (CVS), falling 7.55%
- Skyworks Solutions (SWKS), dropping 6.96%
- OGE Energy (OGE), sliding 5.84%
- UGI Corp. (UGI), retreating 5.81%
After gaining for 3 straight months, AMT pulled back in January and managed to be my top decliner this month.
Both CVS and SWKS were on my top gainers list last month, and now sport a spot on my top decliners list just one month later. How quickly things can change.
Rounding out the list are a pair of Utilities in OGE and UGI. I’ve owned OGE for close to 3 years and this is the first time the stock has closed out a month below the $33 price level. The decline from UGI snapped a two-month winning streak.
Note – four sectors in my Portfolio had all their holdings in the red: Consumer Discretionary (5), Real Estate (4), Utilities (4) and Materials (3). I’m not counting Energy since I only have one holding in that sector.
Top 10 Review
Movement within my Top 10 wasn’t especially notable in January… I’d call it average. I had 7 of the 10 stocks change ranking, and 1 stock was a new entrant in the Top 10.
In January, I had 3 stocks finish with the same ranking they started with. This included Broadcom (AVGO) at #1, Qualcomm (QCOM) at #2, and Visa (V) at #5. That’s two months running that AVGO and V have locked up those positions. I already noted the strong gain from AVGO this month, but the 4.21% gain from QCOM and the 2.92% rise from V were pretty good, too.
My biggest climber in the rankings was actually the one stock to work its way into the Top 10 – Procter & Gamble (PG). PG used a 6.55% gain this month to climb three spots in the rankings, from #11 to #8. This advance pushed BlackRock (BLK), which lost 3.02% this month, down and out of the Top 10.
Relative to last month, Aflac (AFL) and RPM International (RPM) swapped places at #3 and #4. AFL gained 3.41% in January, while RPM pulled back 3.78%.
Both AbbVie (ABBV) and Fastenal (FAST) rose two spots each in the rankings, to settle at #6 & #7. Gains of 6.09% and 5.60%, respectively, helped propel them up the ranks.
My biggest sliders in the Top 10, Union Pacific (UNP) and Lowe’s Companies (LOW), finished the month in the #9 & #10 spots, respectively. UNP slid two spots as a result of its 2.13% January decline, while LOW had a larger tumble of four spots due to its 4.75% drop in value.
AVGO has now reached a weighting of more than 6% in my Portfolio after another impressive gain in January.
BLK, NXST and Pepsico (PEP) are the 3 stocks just outside my Top 10 that could work their way in by next month.
From the table above, my Top 10 holdings now comprise 38.62% of my Portfolio value. This is an increase of 0.34 percentage points compared to last month. With 7 of the Top 10 gaining in price during January, having the Top 10 weighting increase is a logical result.
As for the dividend weighting of my Top 10, this finished the month at 29.59%. This was a decrease of 0.29 percentage points compared to last month. Outside of FAST (recent dividend raise), all the other holdings saw a decrease in their dividend weighting this month due to capital investment and other dividend raises occurring outside the Top 10.
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.
I ended the first month of 2024 with 3 overweight sectors and 2 underweight sectors – same as it’s been for a while now. I made minor progress in the underweight Energy sector with regard to getting into my preferred weighting range. My marginally overweight Financials sector got a tad worse. With both of these sectors being just outside my preferred weighting ranges, these are the most likely to come into compliance.
I made progress in my most overweight sector – Industrials. This was thanks to my GD trim, but despite the headwind I created by adding some CMI shares. My weighting difference in Industrials went from 7.93% to 7.60%. That’s progress to be sure.
My most underweight sector, Information Technology, only got worse in January. The weighting difference went from -11.61% to -12.23%. Oh no! This was all due to the under-performance of my Tech holdings relative to those in the S&P 500 this month.
My Portfolio has more than double the weighting of the S&P 500 in the Materials sector. I’d consider selling or trimming some Eastman Chemical (EMN) to reduce my weighting difference, but I’ll wait for a price recovery first. In January, my weighting difference in Materials went from 4.16% to 3.95% due to under-performance of my Materials holdings relative to those in the S&P 500.
Despite being my most underweight sector, Information Technology has the largest value weighting in my Portfolio (17.59%), but not by much. Financials (16.25%), Industrials (16.15%) and Healthcare (15.46%) aren’t far behind. There’s a steep falloff before reaching the next largest sector, Consumer Staples (7.93%).
As always, I’ll keep all these weightings in mind as I continue to adjust my Portfolio, and my watchlist.
Watch List
A new year means new cash to invest. I’ve got a small cash pile to work with, so I’m on the lookout for good buys, or simply fair buys that move my Portfolio in the direction I want to go (see those 2024 Portfolio Goals).
Of the buys I made in January, three stocks came from last month’s watchlist: NEE, SBUX & CMI. Having my price targets ready to go makes buying on short notice a tad easier. All three stocks were below my primary targets, but only NEE was purchased below my more aggressive preferred target.
Within my Portfolio, here are a few stocks that I’m watching for possible additions…
I’m keeping NextEra Energy (NEE) on my watchlist despite purchasing some shares this month at $56.90. I’ll target another addition should the stock happen to get lower than that. I’m open to buying some shares below $60, too, but obviously prefer the lower price. Let’s see how this pans out.
Starbucks (SBUX) and Cummins (CMI) are staying on the watchlist, too, but I’ll hold out for a dip below $90 and $220, respectively, this time.
Whirlpool (WHR) dropped in price again despite exceeding revenue and earnings expectations this quarter. Poor earnings guidance did the stock in. This sank the stock price to ~$110, pushing the yield to nearly 6.4%. The lower price sounds great, but it’s difficult to get behind the stock when the near term outlook isn’t too great, and it doesn’t appear the dividend will be raised any time soon (currently frozen). I may have to pass on putting my investment dollars here right now.
I’d like to see my McCormick & Co. (MKC) position grow given that it’s my 2nd smallest holding right now. I’ve got my eyes on a price below $66. That’s only about $2 away.
I’m looking to build out my newest Portfolio position in Hershey Co. (HSY). I initiated my position at $188.22, so I’ll look for something south of that number, probably $185. The stock is currently trading around $193.
Lockheed Martin (LMT) has dipped recently, now trading around $430. I’d like to add 3 shares at $400 if I can get them. I’ll be on the lookout. I don’t need to increase my Industrials weighting, but this would bring my LMT position in line, size-wise, with the one I have in General Dynamics (GD).
In the Tech sector, Skyworks Solutions (SWKS) is trading around $104. I’d like to scoop up some additional shares below $100 should they get there.
As for non-Portfolio stocks that I’m watching…
Cactus Inc. (WHD) is still on my radar. I missed a chance to establish a position around $38 earlier this month. My price target was $40. The stock is now hovering above $42. I’ll watch for another dip below $40, with each subsequent drop driving up my interest.
I continue to watch Elevance Health (ELV) as well. I’m lowering my initial target $6, to $464, but will seek something below $450 for an additional margin of safety.
I’ve discussed The Charles Schwab Co. (SCHW) here before. It would interest me below $60, even more at $55. It currently trades around $63.
Thoughts?
What do you make of the start in the stock market this year? When do you expect interest rates to begin coming down in 2024? Please share your thoughts!