Wednesday, June 10, 2015

Portfolio restructuring

We are approaching the end of the second quarter in 2015. What do you know. It has been already 6 months this year. Since starting my portfolio, the number of positions has grown substantially to 40. I am of the preference to keep things simple and reduce the number of companies I have to continuously follow. I am starting to feel that the number of companies I hold is exceeding the number I would like to manage.

My preference in a portfolio is to minimize volatility while maintaining predictable dividend increases and earnings. I have identified several stocks in my portfolio that are not Core to my holdings. Since the SPY is at an all time high, and the interest rate hike seems quite probable due to recent economic indicators, I am of the opinion of moving several of my Supporting positions to Core positions. This will increase the Core positions that I want to hold forever while limiting exposure to risk due to market highs. Core positions by nature are less cyclical than my Supporting positions.

For consideration at the moment are the following companies and the amount I have on them:
TROW - $1179
PH - $1116
LMT - $901
CAT $860
EMR $735
HCP $632
AMGN $572

I have many Core holdings I am wanting to add at this point and would always prioritize Core holdings over Supporting positions. When a Core holding becomes highly attractive to me, I will use the funds from Supporting or Speculative positions to fund.

Core holdings of interest at the moment:
BDX
XOM
O
SO
KMI
PM
JNJ
CL

Many of the Core companies I like are considered consumer staples or defensive in nature. Usually the downturn on average of these companies are much less than the standard index. In 2008-2009, these defensive companies as a whole can see drops from 20-30% as opposed to 50-60%. I am getting uneasy of the market highs at the moment and will prefer limiting my exposure to speculative positions until after a sizable correction.

I'll include a picture of the S&P500 right now along with the VIX. My hope is that the SPY will drop below the 200 SMA so that higher yields can be locked in for Core positions I want.


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