The market uptrend seemed to lose some steam in March. However, it was good enough to put my Portfolio in the green for a 5th consecutive month. The good run will come to an end eventually, but I’m enjoying it for now.
With the markets pushing higher this past month, only one of the eleven market sectors remains in the red for the year, and that’s Real Estate, which is still down better than 4%. The Energy sector had a nice month of March, but since I only have one Portfolio stock in that sector [Enbridge (ENB)], I didn’t benefit too much. Another sector delivering in March was Materials. I’ve got three stocks there and each finished higher for the month, paced by Eastman Chemical (EMN) by a wide margin.
The S&P 500 has returned a little over 9% Year-to-Date (YTD). That’s a nice climb for just one quarter of the year. The question is, can the market hold onto those gains?
I turned off my drips for Altria Group (MO) & Verizon Communications (VZ) during the month. The two positions are big enough and I’d rather direct the dividends into other Portfolio holdings. I haven’t decided if I want to include any other stocks in this plan. For now I’ll just plan on MO and VZ and determine how I like it.
As you may know, I’ve been working to either eliminate some of my smallest holdings from my Portfolio, or add to the position to get them to a 1% weighting. This will be a slow process. On the way to getting my smallest holdings to have at least a 1% weighting is to first get them to a 0.5% weighting. I’ve only got three stocks that don’t have a 0.5% weighting: The Walt Disney Co. (DIS), McCormick & Co. (MKC) and Whirlpool (WHR). DIS and MKC are ones I’d like to grow and they aren’t too far away from that 0.5% weighting. On the other hand, I’m struggling right now to keep WHR in my Portfolio. It’s far and away my smallest holding and it’s performed poorly since I’ve had it. Its dividend is frozen and its dividend safety is waning, too. I’ll let WHR hang around for now, but I’d be surprised if it’s a part of my Portfolio by year’s end unless I see a meaningful turnaround in the next few months (which appears unlikely).
As for the rest of my Portfolio Thoughts, I’ll cover the usual items…
- 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 March 2024…
Price Movement
Note – my price changes cover closing prices from 2/23/24 to 3/25/24.
Make it 5 straight months in the green for my Portfolio! My ratio of stock gains to stock declines was pretty healthy, too, at better than 2.4 to 1.
Of my 58 holdings, 41 climbed higher in price, while 17 slid lower.
Here were the stocks with the biggest moves to the upside and downside…
Of my 41 stocks that rose in price, none provided a 20% gain. However, there were 4 stocks that posted more than a 10% gain (the usual threshold I monitor for). In addition, tack on another 10 stocks recording at least a 5% gain.
My top gainers in March were:
- FedEx (FDX), shooting up 16.06%
- Eastman Chemical (EMN), surging 14.61%
- The Walt Disney Co. (DIS), advancing 10.79%
- NextEra Energy (NEE), popping 10.27%
- Caterpillar (CAT), rising 9.90%
After releasing a strong earnings report led by its Express segment, FDX rocketed higher, reaching a 52-week high and topping my gainers list this month.
EMN released earnings back on the 1st of February. The market reaction was a bit muted, but after a week or two of digesting the report, EMN has been on a tear. It’s been a steady 6-week climb since that time, and it doesn’t appear that it’s poised to stop. EMN set a new 52-week high to end the month.
It’s now two months running that DIS made an appearance on my top gainers list. Last month it topped the list. In March, it posted my third best monthly performance. Even better, DIS has moved up each month in 2024…. 3 for 3! It seems CEO Bob Iger has investors feeling better these days.
I’m happy to see NEE making a move higher. The stock has been hovering in the $50s for the better part of 6 months, breaking back into the $60s is definitely a positive.
CAT has powered higher each of the past 5 months, nearly posting a double-digit gain in March, and it looks overvalued now. It’s my 2nd Industrials stock to make the top gainers list this month.
Note – two sectors in my Portfolio had all their holdings in the green this month: Communication Services (5) and Materials (3). I’m excluding Energy since I only have one stock in that sector.
Of my 17 stocks that fell in price, none tanked more than 20%, but 2 did drop more than 10%. Only 3 additional stocks declined at least 5%. Losses were fairly well contained in March.
My worst decliners in March were…
- Accenture (ACN), sinking 11.53%
- Nike (NKE), retreating 11.25%
- UnitedHealth Group (UNH), declining 7.84%
- Starbucks (SBUX), slipping 5.18%
- Union Pacific (UNP), sliding 5.08%
A cut to its annual revenue growth forecast was enough to put ACN at the top of my decliners list in March. On a bright note, the drop only erased about half of the tremendous gains posted since the lows of last October. I’m sure ACN will be alright.
With footwear and clothing sales in retreat, NKE couldn’t help but give up the $100 level it had stayed above since last November. Now the stock is testing lows from last year. The consumer hasn’t been too eager to spend money as usual. Until that changes, discretionary stocks like NKE may languish.
Fellow Consumer Discretionary stock SBUX has struggled to gain some traction over the past year. The stock has reached a new 52-week low in recent trading days, too.
UNH closed the month under $500 for the first time in 6 months. An antitrust review by the DOJ dampened the month, as did a cyberattack causing outages and supposedly resulting in a loss of data records.
Lastly, there was UNP. It was only a 5% pullback for the stock. UNP is roughly flat for the year after the decline. In May, it will be 2 years since UNP’s last dividend raise. The company has always raised on a rather irregular schedule, but I’ll be disappointed if the dividend remains frozen.
Note – no sectors in my Portfolio had all its holdings in the red this month.
Top 10 Review
Amazingly, Top 10 stock movement was the lowest I can recall seeing for any month. Eight of the ten stocks retained their spot from last month, including the top seven. That kind of stability is truly abnormal.
Most of the Top 10 posted gains during March. In fact, 8 of the 10 were in the green, and those that were in the red (PG and V) fell by less than 1%.
However, one stock did fall out of the Top 10. UNP slid three spots to fall just outside the Top 10. Taking UNP’s place in the #8 spot was Fastenal (FAST), which climbed two spots to do so.
Re-entering the Top 10 this month after a short hiatus was BlackRock (BLK). It grabbed the #10 spot despite only a 0.32% gain in March.
With another 4.26% gain during March, AVGO rose in Portfolio weight once again, finishing at 6.53%. QCOM had an even better month, gaining 8.14%. This has QCOM approaching at least a 5% weighting in my Portfolio, too. I’m keeping an eye on these two semiconductor holdings to make sure they don’t run too far ahead of my other Portfolio stocks.
UNP, Pepsico (PEP) and Nexstar Media Group (NXST) will have a chance to break into the Top 10 over the next month, as they are lingering just outside the Top 10 at this time.
From the table above, my Top 10 holdings now comprise 39.88% of my Portfolio value. This is an increase of 0.55 percentage points compared to last month. I wouldn’t have thought my Top 10 would approach 40% in Portfolio weighting, but these stocks continue to grow in size (despite no new capital investment on my part).
As for the dividend weighting of my Top 10, it finished the month at 29.76%. This was an increase of 0.47 percentage points compared to last month. This was the result of a recent dividend raise from QCOM, as well as BLK replacing UNP in 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.
After the trades I made last month, I’ve now got one additional sector that I’m underweight in: Consumer Discretionary. The elimination of Best Buy (BBY) from my Portfolio reduced my weighting in the sector enough to put me just outside my preferred weighting range. I might be inclined to add some Nike (NKE) or Starbucks (SBUX) over the next month to snap myself back into compliance.
For my other two underweight sectors, I lost ground in Energy during the month, but made some progress in Information Technology.
With regard to the overweight sectors, the needle barely moved for any of the three. The weighting for Financials and Industrials got slightly better, while it was slightly worse for Materials.
Good performance from my top two Portfolio stocks (AVGO and QCOM) allowed my Info Tech sector weight to breach 18%, opening up some distance to my next largest sector: Industrials. Healthcare continues to lead in dividend weighting, closing in on 17%.
If I were going to sell stocks from each of my overweight sectors in order to lower their respective sector weightings, I’d consider the following. In Financials, I think I might trim T. Rowe Price Group (TROW). In Industrials, eliminating FedEx (FDX) is a possibility (primarily since it’s a smaller holding). In Materials, I’ve talked about purging Eastman Chemical (EMN), but a trim of RPM International (RPM), is not out of the question due to its large size.
As always, I’ll keep all my sector weightings in mind as I continue to adjust my Portfolio, and my watchlist.
Watch List
After months of gains for my Portfolio stocks, many are no longer looking as attractive from a ‘buy’ perspective. Still, I suspect I might make small additions here or there.
Since the Real Estate sector is negative for the year, there happen to be some decent buy prospects there, but I can’t say I’m looking to add in that sector.
So, I’ll keeping looking around. Eventually, something to dip into my buy zone and I’ll hopefully be ready to pounce. The cash is ready!
Within my Portfolio, here are a few stocks that I’m watching for possible additions…
Of the stocks that were on my watchlist from last month, I didn’t end up purchasing any of them. None reached my target prices, and then they eventually rose in price, including NextEra Energy (NEE), McCormick & Co. (MKC) and Hershey (HSY).
In the tech sector, where I’m always on the lookout to buy, I might add some Amdocs Ltd. (DOX) if it dips to $86. DOX is currently my smallest tech holding. Adding to Accenture (ACN) is a possibility as well, especially after it retreated in price after its earnings release (revenue growth forecast was cut). I’ll set a target of $325.
After selling BBY last month, adding a bit in the Consumer Discretionary sector is in order. Adding to struggling stocks NKE and SBUX is under consideration. I’ll target a price under $90 for NKE and a price below $89 for SBUX.
I still have my $185 price target for HSY. Growing the size of my newest Portfolio position is needed if it’s going to obtain a 1% weighting within my Portfolio. I’ll consider adding below $188, but prefer the $185 threshold.
Adding some shares of Johnson & Johnson (JNJ) is a possibility should its price get below $150, as it did late last year. Of the five legacy stocks in my Portfolio, JNJ has performed the most poorly. Litigation issues have clouded the outlook for the stock.
As for non-Portfolio stocks that I’m watching…
I’m still watching Chevron (CVX) in the Energy sector. My target of $145 for a potential entry remains intact.
One new stock piquing my interest in the Healthcare sector is Zoetis (ZTS). This is a company that develops and manufactures medicines, vaccines and diagnostic products for animals. The stock retreated significantly in 2021 and has been trading in a more normal 30-35 P/E ratio range since then. The stock is at the lower end of that P/E range now. Its yield is only 1%, but it has a low payout ratio and its dividend growth has been strong over the past 5 years. Earnings growth is forecast to average a low double-digit percentage over the next few years. I’m looking to establish a position south of $160, but initiating a position below $150 would provide an additional margin of safety.
Thoughts?
Make it 5 consecutive months of stock market gains. Do you believe trimming some portfolio holdings and stockpiling some extra cash might be in order? (for buying during the inevitable downturn)? How big would you let a single portfolio position get before you’d consider trimming it? Please share your thoughts!