Portfolio Thoughts (Oct. 2024)

After an extended period of gains this year, I’d say my dividend Portfolio cooled off a bit during October.  It wasn’t bad, as my Portfolio basically traded sideways for the month, but it wasn’t up to recent standards, that’s for sure.

Still, a little consolidation now could set us up for another leg upward.  I don’t expect the stock market to do much in the week leading up to the U.S. presidential election, but after that event is in the rear view mirror, we could be in for another big move, either up or down.  Corporate earnings are still being reported though, so maybe that could be a market mover.

Year-to-Date (YTD) the S&P 500 is up over 22%.  The Information Technology and Communication Services sectors have led the way.  Utilities have surprisingly been a strong performer in 2024 as well.  All S&P 500 sectors are in the green for the year.  Even the worst sector, Energy, is up nearly 6% so far in 2024.

I’d like to see my Portfolio hold its gains in the final two months of 2024 (or add to them, of course).  We’ll see what we get.  I’m sure it will be an interesting finish to the year regardless.

As usual, in my Portfolio Thoughts post 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.

Wait no longer… here are my Portfolio Thoughts for October 2024…

 

Price Movement

Note – my price changes cover closing prices from 9/27/24 to 10/25/24.

The minimal overall monthly movement for my Portfolio was reflected in the percentage movement among my top gainers and decliners, as well as my ratio of stock gains to stock declines.  My ratio was nearly 1:1, but it did finish slightly negative.  This was quite the departure from recent months where the number of stocks in the green was quite noticeable.

Of my 58 holdings, 27 gained in price while 31 declined.  Only a handful of gainers and decliners managed more than a 5% move, and it was roughly equal on each side of the ledger.  This makes sense for a Portfolio that basically moved sideways.

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

 

Of my 27 stocks that rose in price, no stocks managed a 20% gain.  In fact, I didn’t even have a stock with a 10% move to the upside (the usual threshold I monitor for).  What I did have was 5 stocks that advanced more than 5%, and these stocks comprise my entire list of top gainers.

My top gainers for October were:

  • Fastenal (FAST), jumping 6.05%
  • Air Products & Chemicals (APD), climbing 5.88%
  • JPMorgan Chase & Co. (JPM), advancing 5.61%
  • Automatic Data Processing (ADP), gaining 5.53%
  • Cisco Systems (CSCO), rising 5.13%

 

A couple of Industrials made my top gainers list in FAST and ADP.  Both stocks have had a good 2024, with ADP doing a better job of keeping pace with the S&P 500.

Staying on my top gainers list for a 2nd consecutive month was APD.  This Materials stock has posted gains for 4 straight months, too, rising better than 23% in the process.

JPM moved from my top decliners list last month, to my top gainers list this month.  Neither move was extreme, basically +/-5% moves.  Overall, though, JPM has been trending up nicely over the past 6 months.  Call it a 15% gain for JPM over that time.

Last but not least, I’ve got CSCO on my top gainers list.  The stock has risen for 5 consecutive months.  Some AI buzz has surrounded CSCO in recent months and its upside move has accelerated.  Despite this, CSCO is only up about 10% for the year, trailing the index, and certainly many other tech names.

Note – only one sector in my Portfolio had all of its holdings in the green this month: Energy (2).  Financials (6) was only one stock shy of having all its holdings in the green, too.

 

Of my 31 stocks that fell in price, one notched a loss of at least 10%.  Another 7 stocks fell at least 5%.  Considering most of these declines were offset by other stocks with equivalent gains, I wouldn’t call this a horrible result.

My worst decliners in October were…

  • Nike (NKE), plummeting 11.84%
  • Merck & Co. (MRK), tumbling 8.54%
  • CVS Health (CVS), sinking 7.97%
  • Verizon Communications (VZ), dropping 7.82%
  • McCormick & Co. (MKC), sliding 6.46%

 

A less than exciting earnings report at the beginning of the month tanked NKE.  The stock continued to decline after a 7% initial drop on the news.  Analysts see a turnaround taking some time.  Here’s hoping the new CEO (as of mid-October) can get NKE back on track.

A pair of Healthcare names dot my top decliners list.  Both MRK and CVS turned in a poor October.  After sinking more than 20% over the past 6 months, MRK is now down for the year.  As for CVS, it’s repeatedly cut guidance this year, leading to more than a 28% decline.  Like NKE, it’s changed out its CEO in an effort to return to better days.  The poor performance has prompted some investors to call for the company to be split up.

After making an unusual appearance on my top gainers list last month, VZ wiped out those gains with a subpar effort in October, making my top decliners list in the process.

Rounding out the decliners list is MKC.  This month’s drop has led to MKC becoming the smallest position in my Portfolio.

Note – two sectors in my Portfolio had all their holdings in the red this month: Real Estate (4) and Utilities (4).  Consumer Staples (5) and Consumer Discretionary (3) were only one stock short of having all their holdings in the red, too.

 

Top 10 Review

Not a lot of activity existed in my Top 10 this month.  To start with, all 10 stocks in the Top 10 remained the same.  I think it’s been a few months since that’s happened.

There was some shuffling of the stocks, but even that was limited.  There were two pairs of stocks that switched places, but otherwise things were quiet.

The top 5 stocks held their positions relative to last month.  Broadcom (AVGO) remained the clear front runner with a big weighting difference between it and #2.  I thought Qualcomm (QCOM) had a shot a getting back to the #2 spot, but Aflac (AFL) retained the position.  RPM International (RPM) has a good grip on the #4 spot, but AbbVie (ABBV) is close to giving up the #5 spot with 3 close pursuers.

The first pair of stocks that switched places were BlackRock (BLK) and Lowe’s Companies (LOW), with BLK moving up to #6 and LOW slipping to #7.  LOW was basically flat for October, but BLK managed a 3% gain and surpassed LOW in the rankings.

Visa (V) retained its #8 spot, but I could easily see the stock move up to #5 with some good performance next month.  Perhaps the strong earnings report from V this week will be the catalyst to get that done.

The second pair of stocks to switch places in my Top 10 were Fastenal (FAST) and Procter & Gamble (PG).  In this case, it was FAST climbing a spot to #9, while PG slid down to #10, putting it in jeopardy of exiting the Top 10.

 

 

There aren’t really any stocks hovering just outside the Top 10, as there’s a sizable gap from PG to its closest competitor.  However, that list of next stocks after the Top 10 includes Union Pacific (UNP), Pepsico (PEP), Nexstar Media Group (NXST) and JPMorgan Chase & Co. (JPM).

 

From the table above, my Top 10 holdings now comprise 40.50% of my Portfolio value.  This is an increase of 0.38 percentage points compared to last month.  Seven of my Top 10 stocks finished in the green for October, so perhaps this explains the growing weighting.

As for the dividend weighting of my Top 10, it finished the month at 28.90%.  This is a minor increase of 0.04 percentage points compared to last month.  The increase was due to the nice dividend raise from RPM this month, which was nearly completely offset by the weighting of the other nine stocks dropping marginally as my investment dollars were put to work 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.

I added another overweight sector to the mix this month, as Healthcare creeped over the +3% weighting difference.  I suspect this will correct itself in short order, but once it does, I’ll still have the three regular overweight sectors in my Portfolio: Industrials, Materials and Financials.  Unfortunately, the weighting difference in all three of these sectors got worse this month.

As for my underweight sectors, I still have the two.  Each of the weighting differences here got worse as well.  So much for progress in October!  The biggest weighting difference change showed up in Information Technology.  My Consumer Discretionary holdings held up much better relative to its corresponding S&P 500 sector.

Information Technology remains the largest sector in my Portfolio, even though it’s well off the S&P 500 weighting.  Financials, Industrials and Healthcare are each substantial sectors as well, all holding down a weighting north of 14%.

Healthcare is my sector with the largest Dividend Weighting, at 16.5%.  Financials is less than 1% behind.  Meanwhile, Information Technology, Industrials and Consumer Staples each provide better than 10% of my dividends.

I’d like to see a larger weighting in Information Technology and Consumer Discretionary.  A $3K investment into a Consumer Discretionary stock should bring that sector into my preferred weighting range and result in one less underweight sector.

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

 

Watch List

My lone purchase this month, Hershey Co. (HSY), was on last month’s watchlist.  I was ready to go with my price target and my cash, so I added some shares when the time was right.  Sometimes prices don’t stay down too long, so coming to the party with the information on what I want to do is helpful.

I’ve still got some capital I need to invest before year’s end in order to meet my annual investment goal, so let’s check out what’s on my radar this month.

 

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

HSY remains on my watchlist.  It’s trading lower than where I bought this month.  It’s already dipped below $178 and I’ll look to add a few more shares below that level.

Another Consumer Staples stock that I wish to see with a larger position in my Portfolio is McCormick & Co. (MKC).  Right now the stock is hovering around $78, but I’m looking for a price south of $75.  We’ll see if I’ll get the chance to add.

On the Consumer Discretionary front, Nike (NKE) is dropping in price due to its turnaround struggles.  Should the stock cross below $73, I could see myself adding shares again.

I’m always in the market to add to my Information Technology holdings.  Skyworks Solutions (SWKS) hit my radar last month and it’s only declined since then.  My patience has led to an even better potential purchase price – I’ve just got to pull the trigger on the buy.  The stock now trades under $88.  Should the stock dip below $83 I could even lower my cost basis.

Another Tech name that’s pulled back recently is Microsoft (MSFT).  A dip below $400 could entice me to add a share or two.

I’m still looking to trim Altria Group (MO).  My target price hasn’t changed, it’s $58.  A recent pop in the stock price has the stock trading north of $54… I need it to run up a bit more.  Selling my Bristol-Myers Squibb (BMY) position is still of interest to me, especially since I’m now overweight in the Healthcare sector.  BMY’s stock popped recently, too.  I haven’t figured out a price where I’d like to sell though.  Speaking of selling a Healthcare holding, unloading my CVS Health (CVS) position is a possibility, too.  I believe this is my biggest loser in my Portfolio at the moment (although there are only 4 stocks in the red).  I could use some capital losses to offset some of the capital gains I booked earlier in the year.

 

As for non-Portfolio stocks that I’m watching…

I mentioned Concentrix (CNXC) last month, noting that I needed to understand the reasons behind its 50% price drop in 2024.  Well, I’ve yet to research that, so CNXC will remain on the watchlist for now.

I don’t know if I’ve mentioned Dolby Laboratories (DLB) in this section before, but the stock is currently on my radar.  Having another Tech stock to possibly buy is always a good thing.  At just under $73 the stock seems undervalued, but I’d really like to establish a position below $70.  Sales and earnings growth have been a bit spotty over the past decade, but dividend growth has been in the double-digits.  The yield is currently 1.65%… well below my Portfolio average, but many of the company’s metrics look good, and there’s minimal debt.

 

Thoughts?

What are your plans for your portfolio as we head into the last two months of the year?  Portfolio clean-up?  Keep investing and watch it grow?  Purge a loser or two and take advantage of the capital loss for your taxes?  Please share your thoughts!

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