Monday, November 14, 2016

What I'm doing about the latest corrections

I was traveling last week so I didn't do as much research as I normally do. When I sat at the airport I flipped through the numbers and saw a lot of changes over the last few days especially after the Trump election (talk about a change!) and the large rise in US Treasury yields.

The rise in yields definitely had a larger impact on my portfolio I think than Trump becoming the commander in chief. When yields rise, people flee away from higher yielding stocks. For me this primarily means my consumer staples, utilities, REITs, and telecom (although I don't hold much anymore). Other high yielding sectors like MLPs will also be affected. My largest holdings are in the consumer staples and it is my favorite sector so seeing it pull back so much was a nice change. I like consumer staples because the companies are not cyclical. They provide products that people use everyday, which makes it more likely that their dividends will continue to raise year after year.

Take a look at the recent drop. This is like a 10% drop over the entire staples index. For more of the other indexes I track visit:

I want to own companies that have growing earnings. That way they can increase their dividends they pay me every year. Here are some names I am having on my watchlist. There are definitely better valued buys in the staples sector but I want to only reserve my additional buys to growing companies not slow growers. I will try to balance my buys into some higher yielders and lower yielders. Lower yielders usually grow faster while higher yielding companies are more mature.

Likely better return companies:
CHD (still pricey), lower yield high growth
CLX (fair value), high yield moderate growth
HRL (fair value), lower yield high growth
MO (a bit pricey), very high yield stable growth
PM (fair value), very high yield stable growth but with forex challenges
BF.B (still pricey), lower yield moderate growth
MKC (still pricey), lower yield moderate growth
SJM (undervalued), high yield good growth

Slower growers but very high quality:
CL (fair value), moderate yield slow growth
KMB (fair value), high yield slow growth
GIS (fair value), high yield slow growth
PEP (fair value), high yield slow growth

In addition to other sectors, I am liking Realty Income (O) for REITs. It has pulled back a lot and is starting to look attractive. If the healthcare medical devices pull back more I am very interested in BDX, SYK, and BCR. That space is still holding up strong. I am not very interested in Utilities right now aside from Next Era Energy (NEE). I am also not interested in Telco (AT&T and Verizon) since their growth rates are too slow for me.

Stay tuned for my buy choices.


  1. I am keeping an eye on "O" too. It could dip below $50 when interest rates rise.

  2. I am in XLP also.

    It is a Sector SPDR ETF with top holdings in the following stocks.


    XLP just hit an all time high of $56.02 in July 2016 and pays a 2.5% dividend.

    It has pulled back to $50 which is a long term support level.

    I think it may go sideways for a while then go back up.

    Meanwhile we get paid for owning the stock.

    I am going holding on.

    What about you?

    1. Yes I hold on to my consumer staples. No reason to sell them. None of their fundamentals have changed in the last few weeks. Their company values fell because of rising interest rates and the rising dollar. This is a time to buy not sell.