Portfolio Thoughts (Aug. 2024)

More good progress was made in my dividend Portfolio in August.  Dividend income stayed strong and Portfolio gains were obtained.  The gains have been fairly consistent in 2024, despite a few questionable weeks along the way.  The S&P 500 is sitting on gains of better than 17% two-thirds of the way through the year.

Value stocks appear to be making up some of the lost ground from early in the year when growth stocks were on fire.  It’s been two months in a row favoring value stocks.  This has helped my Portfolio during this time given that my Portfolio tilts towards large-cap value stocks.

August had a couple of the smaller S&P 500 sectors performing well.  The Real Estate sector led the way with better than a 6% gain, while Utilities weren’t far behind, posting gains of about 5.5%.

Consumer Discretionary continued its 2024 struggles in August, returning a loss, but it was outdone by the Energy sector which performed the worst.  These were the only two S&P 500 sectors in the red in August.  Strangely, all my stocks in these two sectors posted positive returns in August.

Most of my Top 10 stocks did well in August.  Eight of ten were in the green, but the two that were negative this month were in my top 5, so the impact was noticeable.

No stocks have entered or exited my Portfolio in about 3 1/2 months.  I’ve been stuck at 57 holdings for what feels like a long time.  Instead I’ve been focused on building up a lot of my smaller holdings in an effort to get them to a minimum 0.5% weighting in my Portfolio by year’s end.  Only two stocks left!

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.

Here are my Portfolio Thoughts for August 2024…

 

Price Movement

Note – my price changes cover closing prices from 7/26/24 to 8/27/24.

August turned out to be another good month for my Portfolio.  It finished with a ratio of stock gains to stock declines of slightly better than 2 to 1.  I’ll take that any month!

Of my 57 holdings, 39 gained in price while 18 declined.  There were plenty of stocks topping 5% gains, too.  Nearly half of the gainers reached that mark, which obviously allowed my Portfolio to post a solid gain over the course of the month.

Here were the stocks with the biggest moves to the upside and downside…

 

Of my 39 stocks that rose in price, one provided a tremendous 30%+ gain.  No other stocks exceeded a 20% gain, but that’s OK, as that’s a tough bar to clear.  Another 3 stocks posted a 10% gain (the usual threshold I monitor for), while a solid 14 additional stocks exceeded a 5% gain.

My top gainers in August were:

  • Starbucks (SBUX), launching 33.08%
  • Nike (NKE), surging 17.54%
  • Aflac (AFL), roaring 13.59%
  • Medtronic (MDT), rising 12.83%
  • Automatic Data Processing (ADP), advancing 8.72%

 

A couple of Consumer Discretionary stocks (SBUX & NKE) were my best August gainers (despite the same S&P 500 sector doing poorly).  SBUX went supernova and posted a gain topping 33%.  This was a good rebound after notching losses over each of the previous 5 months.  SBUX was on my top decliners list last month.

NKE hasn’t been performing well in recent months either.  After retreating in price in each of the past 3 months, NKE managed a turnaround in August.  Good to see!

Rising for the 4th consecutive month was AFL.  I always like to see one of my Top 10 holdings end up on my top gainers list, as it certainly aids in my Portfolio gain.  This long-time holding of mine continues to perform well for me, even after 25 years.

My last double-digit gainer this month was MDT, which is now trading near a 52-week high.  Despite the good month, MDT is still trading in a range.  The stock has essentially been between $75 and $90 for over 2 years now.  I’ll be interested to see if it can break out.

Rounding out my top gainers list is ADP.  With its August gains, it appears the stock is now trading at an all-time high.  This stock seems out of place in the Industrials sector, but that’s where it technically lives.  Its reclassification into Industrials 1-2 years ago helped make my Industrials sector quite overweight, and I’ve yet to bring the weighting back down.

Note – two sectors in my Portfolio had all its holdings in the green this month: Real Estate (4) and Consumer Discretionary (3).  I’m not counting Energy since I only own one stock in that sector.

 

Of my 18 stocks that fell in price, none can be categorized as big losers.  In fact, only 4 stocks dropped more than 5%.  I love it when the losses are held in check.

My worst decliners in August were…

  • Nexstar Media Group (NXST), descending 7.76%
  • Skyworks Solutions (SWKS), dropping 7.31%
  • Merck & Co. (MRK), falling 6.99%
  • CVS Health (CVS), deflating 5.80%
  • Bristol-Myers Squibb (BMY), pulling back 4.62%

 

After generating a gain of better than 10% last month, NXST gave back a good chunk of that gain in August.  The stock has been bouncing around between $155 and $185 for most of 2024, and is roughly in the middle of that range now.

My Information Technology holdings were split between green and red in August.  Unfortunately, SWKS was the worst of my holdings in the red.  That’s too bad, because SWKS had closed last month at its highest level in nearly 2 1/2 years.  It seemed there was some good upward momentum.  Things change quickly in the stock market though.

My next 3 biggest decliners for August all reside in the Healthcare sector: MRK, CVS, and BMY.  My Healthcare sector stocks provided a myriad of returns in August, with these 3 stocks and Amgen (AMGN) being the losers.  For MRK, this looks like a blip on the radar, while it’s a continuation of tough times for CVS and BMY.  BMY was my top gainer in July and still had a long way to go on the road to recovery, so I’m sad to see another retreat in its price.

Note – no sector in my Portfolio had all its holdings in the red this month.  Make it two months in a row for that!

 

Top 10 Review

Movement within my Top 10 was limited again this month.  However, there was a tad more shuffling this time around compared to July, especially in the lower half.

The top 6 stocks held firm in their same positions as last month.  Yet, Qualcomm (QCOM) posted a negative return in August and is now in jeopardy of slipping into the #3 spot.

Procter & Gamble (PG) was ever so slightly positive for the month, but it still slipped two spots to #9.  That’s because Lowe’s Companies (LOW) and BlackRock (BLK) managed decent returns in August and each climbed one spot in the rankings, landing at #7 and #8, respectively.

Claiming the #10 spot, as my only stock new to the Top 10 this month, was Union Pacific (UNP) (+4.16%).  It replaced Fastenal (FAST) (-3.83%).  These two stocks swapped positions last month, too, but it was FAST knocking UNP out of the Top 10 then.

 

 

Now lurking just outside the Top 10 are FAST and Pepsico (PEP).  Nexstar Media Group (NXST) and the fast-rising JPMorgan Chase & Co. (JPM) are next, but they have a much bigger hill to climb to penetrate the Top 10.

Eight of my Top 10 stocks recorded price gains in August (1 more than last month).  Sadly, the two Top 10 stocks that did decline in August (QCOM and RPM) finished in the #2 and #4 spots, so given their weight, their losses were a noticeable drag on my overall Portfolio gain this month.

 

From the table above, my Top 10 holdings now comprise 39.82% of my Portfolio value.  This is an increase of 0.25 percentage points compared to last month.  Having a good number of gainers at the upper end of my Portfolio helped the weighting of the Top 10 grow month-over-month.

As for the dividend weighting of my Top 10, it finished the month at 29.12%.  This is a decrease of 0.20 percentage points compared to last month.  About 40% of that decrease was the result of UNP replacing FAST in the Top 10, but the rest was just the result of most of my dividend reinvestment and new capital investment 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.

My Portfolio is still overweight in 3 sectors: Industrials, Financials and Materials.  The weighting difference in Industrials and Materials was reduced, so that’s good.  However, the negative returns from RPM International (RPM) probably explains the smaller weighting difference in Materials.  My weighting difference got a bit worse in Financials with the strong gains posted by Aflac (AFL) this month.

As for my underweight sectors, there’s only one now, which is great!  Thanks to the performance of my Consumer Discretionary holdings in August [namely Starbucks (SBUX) and Nike (NKE)], my Portfolio is no longer underweight in that sector.  However, the lone underweight sector I have remaining is severely underweight… it’s Information Technology.  Finding value in this growth sector is difficult, so my additions tend to be spotty.

Information Technology is still my largest sector, but it no longer tops 19%.  It’s slipped to 18.87%, a fall of more than 0.5 percentage points in August.  Financials, Industrials and Healthcare are my other large sectors, each holding down double-digit weightings between 14.9% and 16.85%.  Then there’s a falloff to 8.01% for Consumer Staples.  My smallest sector is Energy, at 0.85% of the Portfolio.

My Dividend Weighting is more balanced.  Healthcare leads here with 16.81%, followed closely by Financials at 15.67%.  My other sectors with double-digit dividend weightings are Information Technology, Industrials, and Consumer Staples.  These sport weightings between 10.38% and 13.37%.  Energy is my smallest sector for dividend weighting, too, at 2.22% – all other sectors are at least double that.

As always, I’ll keep all my sector weightings in mind as I continue to adjust my Portfolio, and my watchlist.

 

Watch List

I only made one purchase in August, but it did come from my watchlist.  I bought a few shares of The Walt Disney Co. (DIS).  DIS is my smallest Portfolio holding (even after the buy), and I’m somewhat underweight the Communication Services sector, so the purchase served two functions… try to get all my holdings to have at least a 0.5% Portfolio weighting, and reduce the weighting difference in my Communication Services sector.

Thankfully, the price of DIS was right for me, otherwise buying would have been less attractive.  I was able to snatch some shares below $85 when my target was something south of $90.

With stock prices continuing to climb in August, I’m finding it harder to find good values in the market for the stocks that I want.  As a result, I’ve still got some of my AVGO trim proceeds from early July that still need to be invested.  I’m OK holding the cash for now.  A buying opportunity will present itself eventually.

 

Within my Portfolio, here are a few stocks that I’m watching for possible additions…

With The Walt Disney Co. (DIS) still my smallest holding and the stock trading at an acceptable level, another DIS purchase isn’t out of the question.  I’m targeting a level below $90.

Another Communication Services stock that’s on my radar is Comcast (CMCSA).  This stock seems undervalued quite often.  It’s not a strong earnings grower, but it is steady, and offers a yield north of 3%.  I’ll be looking for a fall below $38.

Hershey Co. (HSY) has dipped in price over the past quarter, but it has come off the lows of early-to-mid August.  It’s hovering around $193 at this time.  Should it drop below $187 (as it had earlier this month), I’d like to add more shares and get this stock out of the Bottom 10 in my Portfolio.

With stock prices looking elevated these days, I’m open to trimming a few of my existing positions, too, especially the non-core ones…

Altria Group (MO) has been on a rice run since March.  Should the stock cross the $58 threshold (trading a bit under $54 now), then I might uncork about 1/3 of my position.  This would lower my Consumer Staples weighting a bit, which is a benefit, but I’d lose out on some dividend income, too.

Bristol-Myers Squibb (BMY) could be on my chopping block.  The stock has performed poorly for me, and the near-term outlook doesn’t look very good (earnings downtrend on the horizon).  With a pop above the $50 level, I might sell and realize my loss.  I could use the capital loss to offset some capital gains I booked earlier in the year.  Plus, it would reduce my Healthcare sector holdings, where my Portfolio is a bit overweight.

 

As for non-Portfolio stocks that I’m watching… no change here.

Mondelez (MDLZ) remains on my radar, even though it’s running up and away from me.  The stock trades above $71 currently.  I’m holding out for another dip below $65 like it had in July.

I started watching Academy Sports & Outdoors (ASO) last month, looking for a price under $50.  That decline came in early August (a dip below $48), but I didn’t act as I hadn’t completed my research.  Of course, the stock has climbed in price since then topping $55.  I still haven’t done the needed research, but it looks like I’ve got more time for that now while I wait for another decline to a potential entry point.

 

Thoughts?

Are stocks looking overvalued to you?  Are there any pockets of value in the market that you are exploring?  Maybe a particular sector looks interesting, or perhaps just a handful of stocks?  Please share your thoughts!

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