Thursday, August 29, 2019

July 2019 Portfolio Summary

The July review is a bit late, not so much free time this month.
I'll post what happened as of 8/30/2019.

The S&P500 has pushed through the 3K barrier a few weeks ago. Recently stocks have retreated from the highs and are bouncing at some resistance levels below the 3K peak. The trade war with China has escalated, and this is creating uncertainties for many industries that rely on business in China or need goods supplied from China.

My portfolio has not changed much in this time. Right now I am sitting around $750,000 USD. The portfolio has run up a lot due to increase in the market and also from very heavy contribution and savings rate from my vocational income. So far 2019 has been a very good year.

My purchase frequency has been very slow in 2019. I have been buying more in large batches instead of continuously buying like in past years. You can see that from the dividend graph, it goes up in steps instead of continuously. This is because I just cannot find any good deals in 2019. 2019 has been a very sad year for adding to new positions since everything is so expensive, even the recent pull back is not really a pull back at all. As a result I feel my growth in dividend is not very good in 2019 compared to past years from capital allocation. Right now I am sitting on $15K in cash. And not really having much to look at investing.

MO and PM have retreated a lot and are interesting yield now but I am not sure how if the merger goes through the dividend policy will play out.  I am not sure if the combined entity will have less of a dividend than the sum of the parts, which makes me hesitant to add despite the very high yield and safe payout ratio. Another issue I have is that MO and PM count for too much of my portfolio's total income generation, so I want to diversify away from that. I also wanted to add to ATT when it was over 6% yield but it just keeps going up, and gets less and less attractive. Same with General Mills (GIS), I wanted to add more but it just keeps climbing back up and now only yields a measly 3.68% instead of 4-5% yield. I think I have to just swallow the hero price target and just go and buy and focus on increasing my annual income instead of getting the deal of the year.

Visa has been incredibly strong. I have not added to it a lot recently, but it is now the #1 by far. The growth from Visa is basically all self generated, not from contributions. My large bet (relative to portfolio value) in Visa (and also Mastercard) in the earlier years of my investing is paying off. Mastercard is a sister position at #8, and together Visa and Mastercard have grown to a huge $70,000 USD total value which is quite a decent chunk in my portfolio.

Johnson and Johnson, Home Depot, Next Era, Pepsico are next on the top list now. I think I have a very diversified top list group now, I got fintech, healthcare conglomerate, home improvement, diversified utility, and drinks and snacks staples. MO and PM now have fallen to #6 and #7, previously being quite large positions in the portfolio. The capital appreciation performance of tobacco has been disappointing in the last 3 years, however the dividends have been great. The dividend increase performance of Altria has also been very good, but PM has not really been a good grower of dividends, acting more like a utility. I like the positions in Juul and cannabis in Altria, they are findings ways to branch out and moving with the times. I think if there is a merger, PM can help MO expand the distribution capabilities of Juul which will be very strong. However, I want to see MO or MO+PM take a controlling share of Juul if that's even possible. The merger of the two will also help drive IQOS synergies even more.

Name Ticker Sector       Value   Weight        Divies      Yield S&P Fin VL Fin VL Safety
Visa Inc V Financial $43,121.61 5.73% $238.40 0.5529% A+ A++ 1
Johnson & Johnson JNJ Health $34,077.78 4.52% $1,007.75 2.9572% AAA A++ 1
Home Depot Inc HD Discret $32,687.13 4.34% $781.41 2.3906% A A++ 1
NextEra Energy Inc NEE Utilities $31,529.21 4.19% $714.98 2.2677% A- A+ 2
PepsiCo PEP Staples $30,032.18 3.99% $842.93 2.8068% A A++ 1
Altria Group Inc MO Staples $29,662.98 3.94% $2,199.68 7.4156% BBB B++ 2
Philip Morris International Inc PM Staples $29,600.80 3.93% $1,839.71 6.2151% A B++ 2
Mastercard Inc MA Financial $26,540.14 3.52% $124.80 0.4702% A A++ 1
Becton Dickinson and Co BDX Health $25,733.19 3.42% $311.02 1.2086% BBB A++ 1
Clorox Co CLX Staples $25,568.15 3.39% $681.60 2.6658% A- B++ 2
Realty Income Corp O REIT $23,530.37 3.12% $868.64 3.6916% A- A 2
Air Products & Chemicals, Inc APD Materials $23,074.28 3.06% $474.43 2.0561% A A+ 1
Ross Stores Inc ROST Discret $22,922.65 3.04% $218.58 0.9535% A- A 2
Xcel Energy Inc XEL Utilities $21,452.36 2.85% $541.66 2.5249% A- A+ 1
WEC Energy Group, Inc. WEC Utilities $21,095.48 2.80% $522.13 2.4751% A- A+ 1
McCormick & Company MKC Staples $20,977.65 2.79% $291.94 1.3917% BBB A+ 1
Procter & Gamble Co PG Staples $20,357.07 2.70% $500.99 2.4610% AA- A++ 1
Kimberly-Clark KMB Staples $19,950.82 2.65% $580.90 2.9117% A A++ 1
Automatic Data Proc, Inc ADP Tech $18,530.23 2.46% $343.88 1.8558% AA A++ 1
AT&T Inc T Telecom $17,526.67 2.33% $1,014.60 5.7889% BBB A++ 1
The Coca-Cola Co KO Staples $17,461.62 2.32% $507.79 2.9080% AA- A++ 1
3M Co MMM Industrial $16,490.16 2.19% $592.20 3.5912% AA- A++ 1
Illinois Tool Works Inc. ITW Industrial $16,488.35 2.19% $477.37 2.8952% A+ A++ 1
Starbucks Corporation SBUX Discret $15,573.33 2.07% $229.39 1.4730% A A++ 1
Church & Dwight CHD Staples $15,526.19 2.06% $177.49 1.1431% BBB+ A+ 1
Stryker Corporation SYK Health $15,012.57 1.99% $140.99 0.9392% A A++ 1
Colgate-Palmolive Co CL Staples $14,744.56 1.96% $342.94 2.3259% AA- A+ 1
Microsoft Corporation MSFT Tech $13,524.71 1.80% $180.19 1.3323% AAA A++ 1
TJX Companies Inc TJX Discret $11,869.23 1.58% $197.07 1.6604% A+ A++ 1
Dominion Energy, Inc. D Utilities $11,669.36 1.55% $553.19 4.7405% BBB+ B++ 2
Abbott Laboratories ABT Health $10,663.57 1.42% $160.62 1.5062% BBB A++ 1
McDonald's Corporation MCD Discret $10,573.27 1.40% $222.35 2.1030% BBB+ A++ 1
General Dynamics Corporation GD Industrial $10,381.89 1.38% $224.69 2.1642% A+ A++ 1
General Mills, Inc. GIS Staples $9,909.48 1.32% $365.22 3.6856% BBB A 1
Medtronic plc MDT Health $8,069.36 1.07% $161.40 2.0002% A A++ 1
Boeing Co BA Industrial $8,025.46 1.07% $181.89 2.2664% A A++ 1
Honeywell International Inc. HON Industrial $7,762.84 1.03% $157.02 2.0227% A A++ 1
Misc Type ……….. Partial Totals Weight Yr Dividends  Avg Yield …..832 …..9 …..82
Equity Stocks $731,716.70 97.15% $18,971.86 2.5928%
Investable US Dollars $15,091.76 2.00%
Miscellaneous Assets $6,352.50 0.84%
. .. Equity + Misc Weight …..2 ….. …..222 …22 …..223
Total $753,160.96 100.00%

Below are the sector distribution of my positions. I think by now, after 5-6 years of experimenting with what I am comfortable with and understand and what can meet my goals, my portfolio is in the following distribution below. I think this explains a lot about my risk and investing style. The portfolio is much more defensive, focused on recession resilience and income and income safety, and likely will have less alpha during good times. The portfolio has an emphasis on foundation and core positions instead of speculative positions or 'trades'. Cash is very low in this portfolio, cash is immediately put to use to increase the income generation. Cash received from dividends are immediately reinvested. Bonds are not utilized at all, everything is purely equities. I am not a fan of investing in bonds but bonds have a place in different investor styles' portfolios, depends on your goals and needs.

Below is the position weightings, over the years the portfolio has become more and more "equal" in weighting. No more monstrous positions compared to other tiny positions. I think every company here has a pretty decent say in my portfolio and the portfolio is diversified enough now such that any company going bust will not be a noticeable harm to the portfolio value or income generation capabilities. I do not "balance" the portfolio or move things around.  I just keep them as they are, and only add to them if I feel it is a good value or contribution to my portfolio's income generation capabilities and diversification goals. Over time, I find the losers just become bigger failures, and I don't try to change that. I have a more Darwinian approach to my portfolio allocation, I let the weak die and the strong grow. I let the winners run, I find that often times the strong get stronger. Although past results do not predict the future, often times, the strong have a consistent "success inertia". It's hard to change corporate culture and a business trend. Like hiring a prospective employee, I look at their resume and judge their past performance and how well they likely will do going forward. Good employees usually continue to be good employees. Same with companies, as a result, I usually pay high prices for high quality, like I would pay more salary for a good quality employee. Over a large sample size, I think the research and investing in high quality will overall (on average) yield high quality results.

That is it for this month's update. Stay tuned for next month's.

Happy investing


  1. I would slow down a bit in buying. Pretty soon there will be "stock discount sale" again. I bought last time little bit on a dip and can't wait for another dip.


  2. I tend to disagree that everything is so expensive, YD. There are certain pockets in the market that are still reasonably priced when we consider the future growth potential and brand power. I have been adding to TJX, LMT, HON, ATVI, APH as I think all these companies have incredible business lines along with superior cash generation capabilities (ROIC) compared to the overall S&P500. I am averse to buying utilities and consumer staples at this point as it looks like a crowded trade (due to low 10 year yields). So if we see those yields mean revert, there is bound to be a justifiable selloff given their growth rates are low for the absurd multiples, investors are willing to pay today

  3. I like that Darwinian investment style, YD! It's common sense - at least under current market conditions. We are in a bull market since a decade. Why focusing on those companies that don't perform well in a bull market? What I found a good way to manage a portfolio is only to add to companies in the green as you go forward. Don't add to it as long it turns green. This way you minimize losses if a company shows it can't improve going forward. Build on strength. This is basically what you've described by saying "I let the weak die and the strong grow". Some adjustments might be needed if the market conditions change. But as long as we see bullish conditions, building on strength is a good way to go.

    1. Well said. I have found better success adding to my positions that are at close to 52 week highs, than at 52 week lows. Stocks that are at ATHs continue to make new highs, while those at 52 week lows, can tend to continue making new lows. Of course valuation also matters, so if a company is growing earnings and FCF, but is just down due to sector/trade-war rhetorical, then I find that to be the ideal time to add to my positions or initiate a new one.