The S&P 500 pushed higher again in June, led once again by stocks in the Information Technology sector. The index added about 3% in June and now stands with better than a 15% gain (w/dividends reinvested) during the first half of the year.
Sadly, my Portfolio is lagging the index in 2024 (I estimate I’ve realized only half the index return). I’m underweight the Information Technology and Communication Services sectors, both of which are the primary contributors to the gains the index has seen this year. Both of those sectors are up better than 25% Year-to-Date (YTD), while all others are south of 10%. The Real Estate sector is the only sector that remains in the red for 2024 (-4%).
My work to get all my Portfolio stocks to have at least a 0.5% weighting is almost complete. Just two stocks are left on the list: McCormick & Co. (MKC) and The Walt Disney Co. (DIS). Both are over 0.4% and need a little nudge to get over the hump. Neither stock is looking undervalued at this time, but both are trading around their normal P/E ratio from the past 20 years. MKC has fallen over the past year, while DIS has gained.
Broadcom (AVGO) continues to become a bigger part of my Portfolio as it powers higher in price. At one point this past month, the stock soared past a 9% value weighting in my Portfolio. I try to keep each holding to a maximum of a 5% Portfolio weighting, but at the same time I didn’t want to stop my runner from running. As it is, there was a pull back since the peak price highs and AVGO settled with a weighting of 7.73%, about a percentage point higher than it had last month. Qualcomm (QCOM) retreated in price as we approached mid-year, too. It’s now below a 6% Portfolio weighting, which is a small dip relative to last month.
As for 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 June 2024…
Price Movement
Note – my price changes cover closing prices from 5/24/24 to 6/28/24.
June was a bit of a grind in terms of adding to my Portfolio value. My largest holding had a quality gain during the month and managed to ensure that I ended with a slightly positive month. This was despite my overall ratio of stock gains to stock declines coming in a less than 1:1… in fact, call it less than 5:6.
Of my 57 holdings, 32 fell lower in price, while 25 managed a gain. This was essentially a reversal compared to last month.
Here were the stocks with the biggest moves to the upside and downside…
Of my 25 stocks that rose in price, one provided a 20% gain (same # as last month). Another 2 stocks posted a 10% gain (the usual threshold I monitor for), while only another 2 exceeded a 5% gain. Not a lot of high upside returns during June. 80% of my gainers posted less than a 5% price increase.
My top gainers in June were:
- FedEx (FDX), surging 21.10%
- Skyworks Solutions (SWKS), bolting higher 15.65%
- Broadcom (AVGO), rising 14.04%
- AbbVie (ABBV), climbing 9.21%
- CVS Health (CVS), advancing 6.34%
A couple of Information Technology stocks (SWKS & AVGO), semiconductor stocks to be specific, graced my top gainers. A pair of Healthcare names (ABBV & CVS) made an appearance, too.
SWKS and CVS were my two worst decliners from last month, so they obviously had a nice rebound in June.
Much of the big pop from FDX this month came on the heels of its earning release, which offered a beat of earnings and favorable guidance.
Note – one sector in my Portfolio had all its holdings in the green this month: Real Estate (4).
Of my 32 stocks that fell in price, none sank by 20%, and only 1 dropped more than 10%. Another 5 stocks declined at least 5%. Not a lot of high percentage decliners this month either. This certainly helped in allowing me a positive month in terms of Portfolio value.
My worst decliners in June were…
- Nike (NKE), plunging 17.85%
- NextEra Energy (NEE), falling 7.57%
- Pepsico (PEP) declining 7.34%
- Hershey Co. (HSY), retreating 6.69%
- Omnicom Group (OMC), sliding 5.69%
A couple of Consumer Staples companies (PEP & HSY) landed on my top decliners list this month. Of my five Consumer Staples holdings, four were in the red, and the one positive one, Altria Group (MO), was by tenths of a percentage point.
NEE also makes an appearance here after being part of my top gainers list for each of the past 3 months. I hated to see NEE give up some of the quality gains it posted over the past quarter.
Topping the decliners list by a wide margin was NKE. The company reported earnings this past week and delivered a pessimistic outlook. Several downgrades ensued. NKE finished the day with its largest percentage decline in its trading history. Some analysts are beginning to question the NKE management.
Note – one sector in my Portfolio had all its holdings in the red this month: Materials (3).
Top 10 Review
I’d say there was an average amount of movement in my Top 10 in June. However, nearly all of it took place in the lower half of the rankings.
My top four positions held steady once again. However, AVGO pulled further ahead of QCOM in the top two spots, while AFL put some distance between it and RPM in the next two spots.
ABBV rose again in the rankings this month, climbing two more spots to land at #5. Both V and PG slipped one spot each to allow ABBV to move up.
Managing to hold down the #8 spot again this month was LOW.
The #9 and #10 spots welcomed two new stocks to the Top 10. BLK and UNP unseated Pepsico (PEP) and Fastenal (FAST). BLK moved up thanks to a gain in June, while UNP moved up solely because it lost less than PEP and FAST during the month.
This month’s biggest movers up the rankings included ABBV, BLK and UNP, which each rose 2 spots.
The clear leader to the downside was PEP, falling 3 spots to exit the Top 10.
Now residing just outside the Top 10 are FAST, PEP and Nexstar Media Group (NXST).
Given the relatively flat month, it was no surprise to see that half of my Top 10 posted gains in June, while the other half posted losses.
From the table above, my Top 10 holdings now comprise 40.59% of my Portfolio value. This is a increase of 0.50 percentage points compared to last month. Another stellar month from AVGO was primary reason for the overall weighting gain this month.
As for the dividend weighting of my Top 10, it finished the month at 29.46%. This is a decrease of 0.74 percentage points compared to last month. With BLK and UNP replacing PEP and FAST in the Top 10, the drop in Dividend Weighting was expected, due to the lower yield of BLK and UNP relative to PEP and FAST. On an individual note, the dividend weighting of LOW increased due to its dividend raise on the last day of May.
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’m still overweight in 3 sectors: Industrials, Materials, and Financials. I made very slim progress in reducing the weighting difference in Industrials and Materials in June, but due to my purchase of BLK this month, my weighting difference in Financials got worse, and has now climbed above 4%.
As for my underweight sectors, there are two: Information Technology (as always) and Consumer Discretionary. Both of their weighting differences got further away from my preferred weighting range. In Tech, this was the result of the strong performance of that sector in June, and me not having nearly the same weighting as the index. In Consumer Discretionary, the flop by NKE late this month did me in.
With my good semiconductor stock performance in recent months, Information Technology is now comfortably the sector with the largest weighting in my Portfolio, creeping up on 21%. Financials, Industrials and Healthcare are each roughly 5% behind in weighting, hovering in the 15%-16% area.
As for Dividend Weighting, Healthcare still leads the way at close to 17%, with Financials trailing by 1.3 percentage points. In addition, the Information Technology, Industrials, and Consumer Staples sectors all provide over 10% of my dividend weighting as well, bringing diversity to the companies that supply me with dividends.
As always, I’ll keep all my sector weightings in mind as I continue to adjust my Portfolio, and my watchlist.
Watch List
I made a couple of purchases from my watchlist this past month. I bought Amdocs Ltd. (DOX) below my target level and McCormick & Co. (MKC) just above my target price. I find it helpful to have target prices ready to go, as sometimes stock prices don’t stay below that level for very long.
I’ve still got cash ready to invest, but I can’t say I see any strong buy candidates in the areas I’d like to invest. Ideally, if I could find candidates in the Information Technology sector or Consumer Discretionary sector, that would be great. These are the two sectors in my Portfolio that are underweight relative to my preferred weighting.
Within my Portfolio, here are a few stocks that I’m watching for possible additions…
McCormick & Co. (MKC) and The Walt Disney Co. (DIS) remain on my watchlist from last month, even though they don’t appear to provide significant value at this time. This is because these are the last two stocks with less than a 0.5% weighting in my Portfolio. I might be willing to compromise a bit on price to increase their weighting in my Portfolio. I’m still looking to add to DIS below $95 and MKC below $68. Both are currently trading about 4% above their respective target levels.
In Consumer Discretionary, I’m watching both Nike (NKE) and Starbucks (SBUX). Nike dropped right through my previous $90 target and now trades around $75. I’d probably target $70 (or ~22x this year’s new $3.20 estimate) as my new price point. I may start nibbling at current levels. However, I probably wish to let the dust settle on the recent plunge first. It’s probably going to be 2-3 years before NKE will see a full earnings recovery. However, this could turn out to be a good addition point given that I’m willing to hold long-term. As for SBUX, this company has issues as well, but I’ve not lost faith that the business can recover. For now, I’ll target $75 for another addition.
Adding to my two smallest Tech holdings, DOX and Accenture (ACN), is certainly of interest to me. DOX is currently the better value. I’d like to keep the price below $80 for any addition – it’s trading there now. As for ACN, it always seems to trade at a premium. I last bought at $285 and I’d consider another share or two below that level.
Hershey Co. (HSY) looks interesting at its current level. Adding at the current level (just under $184) would lower my cost basis a bit. However, I’ll target a price below $180 for now.
One stock seemingly trading sideways for a while has been Medtronic (MDT). I’d like to add more below $76, and would consider a larger purchase should it dip below $70.
Last month, I spoke of possibly selling my Bristol-Myers Squibb (BMY) position, but that may have been the frustration talking. However, I could use the current capital loss I have on paper for tax purposes next year. One new thought is to sell my position, securing the capital loss, and attempt to buy back the shares a month later, hopefully trading at the same or a lower price. Or maybe I do nothing! Stay tuned.
As for non-Portfolio stocks that I’m watching…
Although I don’t really need any new Consumer Staples stocks (as I’m overweight in that sector), Mondelez (MDLZ) has garnered some of my interest at current levels around $65. Should the price dip below $60 I’d be inclined to start a position. Another stock from that sector, one that I used to own, is Sysco (SYY). Should the price drop below $69 I’d consider making it a part of my Portfolio again.
I’ll keep an eye on the few stocks I have been watching in the past, too, although none of these are really close to coming into target range. These stocks include, Chevron (CVX), Zoetis (ZTS), Meta Platforms (META) and Alphabet (GOOG). Potential entry points are $145 for CVX, $150 for ZTS, META below $400 and GOOG below $150.
Thoughts?
Do you have any high-flying tech stocks in your portfolio? If so, what is your plan with them? Trim? Let’em ride? Please share your thoughts!