After months of my Portfolio lagging the S&P 500, it finally outgained the index in July. With the Information Technology and Communications Services sectors performing poorly and my Portfolio being underweight those sectors, and with Value outperforming Growth in the stock market, my Portfolio was able to make up some ground performance-wise.
The Real Estate sector was a big winner in July… so much so that the sector is now positive for the year. Last month, Real Estate was the only sector in the red for the year. How quickly things can change. Financials (especially banks) and Utilities fared well in July as well.
Broadcom (AVGO) and Qualcomm (QCOM) retreated significantly over the course of July. This certainly impacted my Portfolio performance given that these are my two largest holdings. However, the rest of my Portfolio performed very well (as you’ll soon learn). I was impressed by my Portfolio’s ratio of gainers to decliners in July. My Portfolio finished in the green, while the S&P 500 was close to flat.
As I share more of my Portfolio Thoughts below, 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.
Let’s get to my Portfolio Thoughts for July 2024…
Price Movement
Note – my price changes cover closing prices from 6/28/24 to 7/26/24.
My Portfolio managed to add significant value in July, as the breadth of winners was noticeable. The ratio of stock gains to stock declines finished at 4.7 to 1.
Of my 57 holdings, 47 gained in price, while only 10 declined in the same period. Helping solidify the positive outcome… those handful of decliners had manageable retreats.
Here were the stocks with the biggest moves to the upside and downside…
Of my 47 stocks that rose in price, one provided a 20% gain (3rd month in a row with exactly one stock reaching this level). Another 7 stocks posted a 10% gain (the usual threshold I monitor for), while a whopping 22 additional stocks exceeded a 5% gain. So, over half of my Portfolio stocks (30 out of 57) rose more than 5%. Impressive!
My top gainers in July were:
- Bristol-Myers Squibb (BMY), rocketing up 21.48%
- Lockheed Martin (LMT), jumping 12.35%
- Fastenal (FAST), popping 11.99%
- UnitedHealth Group (UNH), surging 11.87%
- Pinnacle West Capital (PNW), rising 10.91%
A couple of Healthcare stocks (BMY & UNH), and a pair of Industrial stocks (LMT & FAST), claimed spots in my top gainers. In fact, all of my Industrials holdings and all but one of my Healthcare stocks (Medtronic (MDT), -0.01%), finished in the green. Considering I have 9 stocks in each sector, that represents a good chunk of my Portfolio.
With it being earnings season, many of the advances in price came on the heels of the company’s earnings releases. In the top gainers group, only PNW has yet to report, but news is imminent.
In one month, BMY was able to recover half its losses over the past year. Let’s see if the gain will be short-lived.
After hovering in the $460-$470 range for 3 months, LMT broke out in a big way.
FAST climbed in price for the first time in 3 months, but it’s still off 10% from the high it reached in March.
With strong gains in July, UNH has reached a new 52-week high. The same can be said about PNW.
Note – five sectors in my Portfolio had all its holdings in the green this month: Industrials (9), Consumer Staples (5), Real Estate (4), Utilities (4) and Materials (3).
Of my 10 stocks that fell in price, none declined by either 20% or 10%. Only 3 stocks dropped at least 5%. With losses contained, the big increases from the gainers were allowed to pack a good punch.
My worst decliners in July were…
- Qualcomm (QCOM), sinking 9.61%
- The Walt Disney Co. (DIS), falling 9.43%
- Broadcom (AVGO), retreating 5.53%
- Starbucks (SBUX), sliding 4.83%
- Microsoft (MSFT), slipping 4.81%
Big Cap Tech (QCOM, AVGO, MSFT) dominated my top decliners in July.
In the past 2 months, QCOM has dropped about 15% in price. Could a further decline be on the way after a seriously strong run-up since the end of last October?
It’s been 4 months in a row that DIS has declined in price. Could $90 be the floor from which future gains will start?
AVGO went from my 3rd biggest gainer last month to my 3rd biggest decliner this month. I’m always amazed by big swings in price from month-to-month.
Make it 5 months running for a declining SBUX stock price. I’ve added recently as the stock has been looking comparatively inexpensive to its history.
MSFT has been on a price gain bender for the past 9 months. Thus, it’s no surprise to see a pullback along with the rest of the big-cap tech names.
Note – no sector in my Portfolio had all its holdings in the red this month. I’m always happy to report that.
Top 10 Review
This was a strange month with regard to movement in my Top 10. When the month came to an end, only one stock ended in a different position relative to where it started the month… and that was in the #10 spot.
Fastenal (FAST) climbed from just outside the Top 10, to just inside, replacing Union Pacific (UNP). With FAST being one of my top gainers in July (11.99%) and UNP posting a more modest gain (6.23%), the two switched spots in my rankings.
Typically, about half my Top 10 gets shuffled around on a monthly basis, but not this time!
Now residing just outside the Top 10 are UNP, Nexstar Media Group (NXST), and Pepsico (PEP). There’s a gap that needs to be overcome for any of my other stocks to be considered contenders to crack the Top 10.
Seven of my Top 10 stocks recorded price gains in July, but of the three stocks that didn’t, two are my biggest holdings and were included in my top decliners this month.
From the table above, my Top 10 holdings now comprise 39.57% of my Portfolio value. This is a decrease of 1.02 percentage points compared to last month. The big declines from AVGO and QCOM this month put a dent in my Top 10 weighting.
As for the dividend weighting of my Top 10, it finished the month at 29.32%. This is a decrease of only 0.14 percentage points compared to last month. My AVGO trim more than outweighed the small Visa (V) addition I made this month and the dividend weighting bump I obtained by FAST 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’m now overweight in 4 sectors after my Healthcare holdings had a good month of July. Healthcare joined Industrials, Materials, and Financials as overweight sectors in my Portfolio. Over the course of the month, my weighting differences in Financials got better, but got worse in Industrials and Materials.
I still only have two underweight sectors: Information Technology (big deficit) and Consumer Discretionary. The weighting difference in Information Technology got worse with my AVGO trim, but got better in Consumer Discretionary thanks to my Nike (NKE) and Starbucks (SBUX) additions. I made some good headway in adding margin in the Communication Services sector this month as the S&P weighting dropped significantly with the declines from several big cap names that dominate the sector, including Alphabet, Meta Platforms, Netflix, etc.
Despite a July weighting decline of 1.76 percentage points in Information Technology, it easily retained my largest sector weighting at 19.21%. Financials, Industrials and Healthcare are each about 3-4 percentage points behind in weighting.
As for Dividend Weighting, Healthcare still leads with 16.86%. This is followed by Financials, Information Technology, Industrials, and Consumer Staples, each of which provides more than 10% in dividend weighting. Communication Services isn’t too far behind at over 9%, before there’s a falloff of the dividend contributions from other sectors.
To help with the weighting difference in the SuperSectors, I need to trim some of my Defensive sectors (and to a lesser degree the Cyclical sectors) and move the proceeds into the Sensitive sectors.
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 three purchases from my watchlist in July. Those stocks included Nike (NKE) and Starbucks (SBUX) from the Consumer Discretionary sector, and The Walt Disney Co. (DIS) from the Communication Services sector.
I bought DIS a bit above the $95 target price I had, and it proceeded to trade well below that level in the days that followed. I should have been more patient. As for NKE, I added shares above my target as well, but I said I might make a move before it gets there. SBUX was added just below my target though.
I still haven’t re-invested all my AVGO trim proceeds from early July yet, so cash is ready to go. My eyes remain peeled, looking for an opportunity. The rising prices in July will probably make finding those opportunities a bit more difficult.
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, as they are the only two stocks in my Portfolio with less than a 0.5% weighting – a weighting level I’d like all Portfolio stocks to have by the end of the year. My current target prices are $68 for MKC and $90 for DIS. The $90 level was breached by DIS in July, but I didn’t act quickly and the price moved back up. I’ll try to exercise some patience here and wait for DIS to dip again.
I’m open to adding more Nike (NKE) and Starbucks (SBUX) to bolster my Consumer Discretionary sector, despite having added to both this month. I’m still looking to add SBUX below $75, and I’ll plan on NKE south of $70 for now.
Should Microsoft (MSFT) drop below $400, I could be inclined to add a share or two. It would boost the size of my Information Technology holdings (which I’m always looking to do).
Not much else is sticking out to me after the run-up in prices in July.
As for non-Portfolio stocks that I’m watching…
I’m still watching Mondelez (MDLZ). It recently boosted it dividend again by double-digits. My price target is currently $65.
Just starting to get a look from me is Academy Sports & Outdoors (ASO). I don’t know much about the company yet (research is needed). This small-cap company only has a short trading history and sports a sub-1% yield, but it would add to my Consumer Discretionary sector (where I’m underweight) and diversify my Portfolio holdings a little by size. A price under $50 would make it more interesting.
Thoughts?
Can the rally in value stocks continue past July? Are you finding current stock prices too elevated? Please share your thoughts!