This month, I plan to add more to speculative positions since I already have the foundation structured. I have also sold off several positions in my portfolio that I feel are not completely aligned with my goals. I tend to avoid cyclical companies. I prefer highly stable non-cyclical companies with decent earnings and dividend growth. I do not like moderate gains and high volatility. I want high returns with higher volatility. As a result, I removed several industrial sector companies that have moderate gain prospects but not worth in my view in terms of volatility. The companies removed are all great companies but I see better risk reward prospects elsewhere. Perhaps I will be proved wrong in the future :)
I have no attachment to stocks and am fine with selling. However, I do not sell often since I prefer having the effects of compounding take effect. These positions are small and I do not like having too many positions in my portfolio so they had to go if they weren't of my liking.
Sold positions:
TROW - $1179
PH - $1116
LMT - $901
CAT $860
EMR $735
PH - $1116
LMT - $901
CAT $860
EMR $735
Added positions so far:
KMI - $1798
Speculative Positions adding on 6/16
ROST
GILD
Possibly AMGN / UNP
Morningstar assigns ROST a fair value of $54. S&P gives a fair value of $55. ROST is $48.5 as of today after the split. This is a double discount that is highly interesting. ROST has increased earnings for many consecutive years including the great recession. ROST's financial status is solid and their debt is low. Their historical P/E is above historical norm but that is due to their exceptional performance.
GILD now is offering a dividend and I consider them attractive. S&P gives it a target over $180 and GILD currently stands at $117 with a very low P/E ratio of 13. Morningstar gives GILD a fair value of $114. I see GILD as a strong buy because of its low valuation. I am also looking to expand my holdings in healthcare. I will admit I have missed the bandwagon when GILD was in the $90s. However, it still looks darn cheap from a P/E point of view compared to everything else on the market. I will start with a small position and continue to add if it's still priced attractively.
Additional stocks I am considering that are selling at double discount is AMGN ($176 and $189 price targets) and UNP (below fair value according to FastGraphs). AMGN has a yield of 2% and a short dividend history. The P/E is high and I prefer to stick with GILD because of GILD's low P/E. I always wanted a full position in a railroad. I see UNP as best in class and its price has finally come down. The yield is decent at 2.2%.
Core & established positions considering for addition after 6/16:
CL, PG, GIS, KMI, PM, WMT, HCP
SO / WEC / XEL / PNY
I am loving the fall in price of KMI. I welcome it everyday and will continue to add if it falls more. KMI is now my 3rd largest position. I want more in consumer staples since these companies tap into everyone's daily expenditures. I will always be overweight in consumer staples and will not hesitate to drip to a position even if it's overweight.
I have been waiting for a fair valued utility for a very long time. SO is right now undervalued. WEC and XEL are a tiny bit overvalued and PNY is still overvalued. I want all 4 and will have cash on the side to add when they are finally shot down. I am going to use these utility plays plus KMI and PM to expand my total portfolio yield higher.
Stay tuned :)
I was just thinking about KMI for my next purchase as well but I chose another stock instead. KMI has taken a beating recently with the negative Barrons article not helping matters. Good luck.
ReplyDeleteHi CD,
DeleteKMI's business model and fundamentals have not changed for me since I bought them in their lows last year (before the mergers). I'll be tuning out the noise and sticking with my DGI plan. Kinder also has his money on the business and that gives me more confidence in the company.
YD
Interesting sells -- I own TROW and CAT in my portfolio. I'm wondering if both of those fall into the cyclicals category and if that is your reason for selling them? KMI looks like a solid addition. Thanks for sharing!
ReplyDeleteTROW and CAT are great companies but they fall in the cyclical category for me. Both have excellent dividend increases in good times but my goal now is capital preservation and the acquisition of core (non-cyclical) companies.
DeleteDuring the great depression TROW and CAT dropped significantly. This proved to be a temporary price drop since their businesses remained intact and dividends continued rolling in.
TROW = -64% drop
CAT = -69% drop
For comparison, here are my favorite consumer defensive picks that also have demonstrated dividend growth and capital appreciation:
CL: -24%
PG: -34%
JNJ: -28%
KO: -32%
GIS: -26%
That's what I'm talking about!
I remember an interesting observation shared on SeekingAlpha before:
DeleteA 70% drop in share price needs a capital gain of 233% to get back to where it started
A 50% drop needs 100%
A 30% drop needs 43%
A 20% drop needs 25%
A very large reason the dividend aristocrats have done so well since the great depression is that they avoided the serious capital price destruction seen by the index.