In May, the S&P 500 continued its 2024 climb after a 1-month hiatus. The index managed to add another 4% to its 2024 return and now tops 11% for the year.
Unfortunately, my Portfolio stocks didn’t fare as well in May. My Portfolio value was up some thanks to a high flyer this month. However, it was nearly 50/50 with regards to gainers & decliners for my Portfolio stocks in May.
Stocks in the Information Technology sector led the way for the S&P 500 this month with regard to performance, returning 11%. Surprisingly, Utilities were strong, too, gaining better than 7% during the month. Most sectors were actually in the green, but only by 0%-2%.
Only a couple of sectors were in the red: Consumer Discretionary & Energy. The former was slightly negative, but the latter dipped over 4% in May. My lone Energy stock was up a 1% or so, so I didn’t feel the impact of the poor Energy returns.
Year-to-Date (YTD), only Real Estate remains in the red. It’s down more than 7%.
After putting Whirlpool (WHR) on negative watch last month, it’s now gone from my Portfolio. Its poor performance, weak outlook and declining dividend safety motivated me to pull the plug on the stock and reinvest the proceeds elsewhere. WHR was my smallest position. That title goes to McCormick & Co. (MKC) now, but The Walt Disney Co. (DIS) could easily be that stock tomorrow. I foresee myself adding to MKC & DIS over time. Right now each has a weight of ~0.42% in my Portfolio. I’m trying to get all of my Portfolio stocks to a 0.5% weighting by year’s end, and eventually to a 1% weighting.
Broadcom (AVGO) and Qualcomm (QCOM) continue to grow in Portfolio weight. The potential for a AVGO trim has been a possibility for a few months, but now QCOM has joined the party with recent strong performance. Both stocks exceed a 6% weighting, with AVGO pushing 7%. Each is more than 50% bigger than my 3rd largest Portfolio holding, Aflac (AFL). I’ll be keeping a close eye on these two stocks.
Alright, it’s time we get to my normal Portfolio Thoughts. As usual, I’ll be discussing the following 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 May 2024…
Price Movement
Note – my price changes cover closing prices from 4/26/24 to 5/24/24.
After a rousing start to May, my Portfolio return stalled out in the 2nd half of the month. Still, gains were had and I won’t complain about that. When all was said and done, my ratio of stock gains to stock declines was narrowly positive, at a little better than 10 to 9.
Of my 58 holdings (still counting WHR), 31 moved their way higher in price, while 27 slipped to one degree or another.
Here were the stocks with the biggest moves to the upside and downside…
Of my 31 stocks that rose in price, one provided a 20% gain… in fact it nearly reached 27% – Wow! Another 4 stocks posted a 10% gain (the usual threshold I monitor for), giving me a top 5 that all provided double-digit returns. Throw in another 7 stocks exceeding 5% gains and there were many solid contributors. However, over three-fifths of the gainers added less than 5% in May, holding back the potential upside.
My top gainers in May were:
- Qualcomm (QCOM), rocketing up 26.98%
- NextEra Energy (NEE), surging 16.09%
- Amgen (AMGN), advancing 13.28%
- Texas Instruments (TXN), popping 12.23%
- Air Products & Chemicals (APD), rising 12.08%
After a slight dip last month, QCOM got on its horse and advanced almost 27% in a single month. That’s quite an impressive feat for a large-cap stock. During its earnings release at the beginning of the month, the company noted net income gains that were solid, and promised new offerings including devices with AI capabilities which excited investors. QCOM added more than 1% in Portfolio weighting as a result of this month’s price climb. QCOM is on the verge of a 50% gain for 2024.
NEE made its 3rd consecutive showing in my top gainer list. This month it was 2nd, after finishing in 4th both prior months. This month’s gain was nearly 3x the gain from last month, too. The gains further solidify NEE as my largest Utility holding.
AMGN popped early in May after providing a favorable update on its GLP-1 weight-loss drug. The stock held those gains for most of the month before retreating some in the past week.
Make it 3 months of gains for TXN. Investors seem to think the company may be at the beginning of an analog recovery. In the first half of May, TXN had managed to rise in price for 10 consecutive trading days. Impressive!
While APD’s earnings were mixed, and its outlook was only reaffirmed, the stock has risen nicely after hovering in the $230s for 3 months. The stock has now rebounded all the way from its price drop resulting from the disappointing earnings guidance it issued at the beginning at February.
Note – one sector in my Portfolio had all its holdings in the green this month: Materials (3).
Of my 27 stocks that fell in price, none plunged more than 20% (whew!), but 3 did drop more than 10%. Another 6 stocks declined at least 5%. The number of decliners and the magnitude of their losses closely resembled the gains I achieved above. Thus, it’s no surprise I was only slightly positive overall for the month.
My worst decliners in May were…
- CVS Health (CVS), sinking 17.33%
- Skyworks Solutions (SWKS), retreating 11.64%
- Starbucks (SBUX), dropping 10.63%
- The Walt Disney Co. (DIS), sliding 9.73%
- Bristol-Myers Squibb (BMY), falling 8.05%
CVS blew right past a new 52-week low and kept going after a Q1 earnings miss. After finishing 2nd on my worst decliners list last month, CVS went and “improved” on that by securing the #1 spot this month. The past two months have been ugly for CVS as uncertainty with regard to Medicare memberships is also weighing on the stock. Is the end of the price decline in sight?
Bucking the trend of good performances from stocks in the Information Technology sector was SWKS. The stock sank at the start of May on the heels of a Q3 outlook that fell short of investor expectations and near-term headwinds with regard to mobile demand. After finishing each of the past 4 months with a price around $104, SWKS now trades more than 10% below that price.
After sinking early in May due to an earnings announcement that disappointed on revenue and profit, with an accompanying guidance slash, the price of SBUX got rocked, dropping to a new 52-week low. The stock has been somewhat on the mend since then, but still hasn’t made up half the drop yet. It seems Consumer Discretionary is not the sector to be in these days.
DIS dropped in May after reporting mixed earning results. That was soon followed by notes of spending cuts from the CEO. DIS has lots of moving parts and they don’t all appear to be moving in a positive direction. The stock has traded north of $100 since late January, but I expect a drop below that level real soon.
BMY managed a showing on my top decliners list for a 2nd straight month. That’s no good. After being 3rd on the list last month, at least it was only 5th this month. Still, the past two months have been horrible for BMY, plummeting over 21% in that time… with no end in sight.
Note – one sector in my Portfolio had all its holdings in the red this month: Consumer Discretionary (4).
Top 10 Review
Top 10 movement settled down in May, as 6 of the 10 stocks (including the top 5) retained the same position they started the month with.
The biggest move was three spots to downside by Union Pacific (UNP), which put UNP out of my Top 10. There was also a two spot move to the upside by Pepsico (PEP), which resulted in the stock breaking into the Top 10 once again.
The highlight of the month was the huge gain posted by Qualcomm (QCOM), although despite the nearly 27% gain, the stock didn’t move up in my rankings. However, QCOM did add about 1 percentage point to its weighting within my Portfolio due to that price gain.
Procter & Gamble (PG) and AbbVie (ABBV) were both able to rise one spot in the rankings in May.
The largest price decline from my Top 10 stocks came from Lowe’s Companies (LOW), which declined 6.38% in May. This led to LOW falling two spots in the rankings to land at #8.
Lurking just outside the Top 10 now are BlackRock (BLK) and UNP.
From the table above, my Top 10 holdings now comprise 40.09% of my Portfolio value. This is a increase of 0.89 percentage points compared to last month. That weighting increase from QCOM was the primary reason for the overall weighting gain this month.
As for the dividend weighting of my Top 10, it finished the month at 30.20%. This is an increase of 0.93 percentage points compared to last month. The majority of the gain was due to PEP and its higher dividend yield 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.
I now have one less underweight sector – Energy. The S&P 500 sector performed poorly in May, but my lone holding in that sector held up well, allowing me to narrow the weighting difference and just sneak into my preferred weighting range. However, this could easily change by next month, as it could for my Communication Services sector, where I’m just inside the preferred weighting range as well.
I’m hoping to add to my Consumer Discretionary sector holdings and eliminate that sector from being underweight. I’m still massively underweight in Information Technology. This sector is now more than 30% of the S&P 500, but less than 20% of my Portfolio. I’ve got some serious work to do here if I ever hope of getting into my preferred weighting range.
My overweight sectors haven’t changed from last month. It’s still Financials, Industrials and Materials. I got farther away from my preferred weighting range in Financials and Materials in May, but narrowed the gap in Industrials. To make a serious dent in the weighting difference for Industrials, I’d probably need to eliminate one of my positions in that sector, but I’m not ready to go there yet.
My Information Technology sector continues to grow nicely, even though I’m not keeping up with that sector’s growth in the S&P 500. The return from QCOM this month pushed my Portfolio towards having a 20% weighting in that sector. Information Technology is pulling away from my other largest sectors in Financials, Industrials and Healthcare.
Healthcare continued to hold my top spot with respect to dividend weighting, at nearly 17%. Financials isn’t too far behind, supplying a 15.5% dividend weighting.
As always, I’ll keep all my sector weightings in mind as I continue to adjust my Portfolio, and my watchlist.
Watch List
In May, valuations for many stocks continued to fall, providing more opportunities to add to my Portfolio at acceptable or favorable prices.
I’m looking primarily at some of my smaller holdings, in an effort to make these smaller positions more significant. Again, I’d like to see all my holdings have at least a 0.5% weighting within my Portfolio by year’s end, and a 1% weighting in time.
Cash is ready to invest. Having some stocks lined up, ready to possibly buy will be prudent, as many stocks don’t stay down for long.
Within my Portfolio, here are a few stocks that I’m watching for possible additions…
I’ve currently got only 3 stocks with less than a 0.5% weighting in my Portfolio: FedEx (FDX), DIS and MKC. I like all three companies and would like to add to each. FDX seems like the best value of the three currently. I’ll target a price below $240 for an addition. I’ll look to add to DIS below $95 and MKC below $68, but buying at those prices won’t be a screaming value.
My two smallest Tech holdings have prices that are looking more attractive these days. I’ve added to both positions already this year and would like to do more. With each of their prices dropping, the desire for me to purchase gets stronger. I’m targeting DOX below $80 and ACN below $290, and both stocks have fallen through that level recently. At those target levels, the value of DOX is more attractive to me. Unfortunately, ACN always seems to trade at a premium. Should ACN drop to $260 I might be inclined to add a big chunk.
The price declines for Nike (NKE) and Starbucks (SBUX) appear to have stopped, as they held up OK in May. I was able to add to SBUX on the 1st day of May below $74. Thus, I’ll target an addition for NKE next. I was holding out for a NKE dip below $90, but it hasn’t really reached that point in the past 6 weeks or so. If it did cross that level, it wasn’t there long. The price is currently just above $93, so I may still get an opportunity.
Speaking of opportunities, I may look for one to exit Bristol-Myers Squibb (BMY), take my capital loss, and re-deploy the investment. I could afford to lighten up in the Healthcare sector anyway, and the poor performance from BMY is motivating me to do just that. BMY has fallen so much that it’s now my 8th smallest holding, and I don’t want to invest any more in the stock.
As for non-Portfolio stocks that I’m watching…
The stocks I’ve been watching in recent months, Chevron (CVX) & Zoetis (ZTS), have been drifting higher, away from my target prices. Thus, no buy is imminent with these stocks. I’m still looking for an entry point of $145 with CVX and $150 with ZTS.
I’d still like to add Meta Platforms (META) and/or Alphabet (GOOG) in my Communication Services sector now that they’ve both initiated paying a dividend. However, I’d want to see a decent price drop first since they’ve run up quite a bit this year. I’m targeting META below $400 and GOOG below $150.
I can’t say I’m too focused on looking outside my Portfolio right now, as there’s so much to work on internally. But I’ll continue to glance around from time to time.
Thoughts?
Have you been finding decent values in any particular sectors? Maybe Real Estate stocks look attractive to you since that’s the only S&P 500 sector in the red for the year? Please share your thoughts!