Saturday, April 18, 2020

Portfolio Summary April 17, 2020

I have not had much time in the last few months to write a portfolio summary. This post is to try and recap what has happened in the last few weeks.

As every one knew, Coronavirus has been wrecking share prices, there was a precipitous drop when investors started realizing the economy of many countries will have to be shut down. Although the drop down sharply really happened around February 20th, people were already seeing vast effects of the virus in China where it originated.


From around the beginning of December 2019 until February 21, 2020 I did not add anything in my portfolio. This is around a 3 month window where my dividend income did not really increase except for dividend raises. I really felt before the S&P500 tanked, the market was incredibly expensive and the yields paltry in comparison to what I was able to get before. By the time Coronavirus appeared my cash pile has reached $30K and peaked at around $40K, this is cash saved from my vocational income.

When the S&P500 started dropping by 10% every day, I started adding. I have been adding all the way down to the bottom and am still adding on the way up as I want to acquire more shares with higher yields than before. At the moment I till have around $22K in cash to invest.


My whole view of the Coronavirus situation is that it is a temporary natural disaster and not a systematic problem arising from financial systems or economies failing, and it will soon pass with time. I am willing to have hits to earnings all throughout 2020 and may tolerate a few dividend freezes or cuts, but from 2021 and onward I expect this all start to recover.


My portfolio took a sharp nose dive. It was quite exhilarating on one hand seeing dividend yields of stocks like Altria reach 10% or Realty Income at 7% or Coke close to 4% or ADP at over 3%. The market was also very rocky on that slope downward, the DJIA and SP500 easily could surpass 10% in declines just in one day, and just to have it all come back the next day. Right now the deviations daily are around 2-3% instead of 5-10% at the onset of the virus scare.

On the other hand, it was (how should I say) interesting to see my portfolio net worth drop from $868K to $641K. I did not pay as much attention to the net worth of my portfolio as much as the dividend and safety of my dividends, which I felt are largely in tact. I honestly thought my net worth would fall below $600K but it looked like the Fed and government provided massive liquidity helicopter money policies to raise asset prices back up. Unfortunately now, the yields are now back at their low levels. Although the SP500 has not fully recovered, a lot of stocks I own are now over their original highs, like Abbott Labs.

In the net worth graph above, you can see that the future dividend income grows up sharply after the sharp nose dive downward of my portfolio. This is because I started initiating a lot of purchases after the market started tanking 10% day after day. I call this the divergence, when people are panicking and worrying about their net worth and selling on the news, I am buying constantly on decreasing share prices to increase my dividend income. It's a different thinking style I suppose, worrying about income verses worrying about where the share price is going. I do not plan to sell any stock that I hold as core. I did sell Boeing before the virus crash, around the 3rd week of February as I wanted to buy more resistant companies, at that time my Boeing position was under 1% of my portfolio and I will use it to tax loss harvest for 2020. The Boeing sell is probably the first sell I had in the last 12 months.

Name Ticker Sector       Value   Weight        Divies      Yield SP Fin VL Fin VL Safety
Visa Inc V Financial $45,860.45 5.64% $324.60 0.7078% AA- A++ 1
Johnson & Johnson JNJ Health $41,168.49 5.07% $1,029.08 2.4997% AAA A++ 1
NextEra Energy Inc NEE Utilities $36,103.24 4.44% $820.99 2.2740% A- A+ 1
Clorox Co CLX Staples $35,067.33 4.32% $768.40 2.1912% A- B++ 2
Philip Morris International Inc PM Staples $32,838.70 4.04% $1,971.33 6.0031% A B++ 3
Altria Group Inc MO Staples $32,775.83 4.03% $2,695.88 8.2252% BBB B++ 2
PepsiCo PEP Staples $31,015.68 3.82% $861.36 2.7772% A+ A++ 1
Home Depot Inc HD Discret $30,695.55 3.78% $879.44 2.8651% A A++ 1
Becton Dickinson and Co BDX Health $26,650.17 3.28% $322.17 1.2089% BBB A++ 1
Mastercard Inc MA Financial $24,638.21 3.03% $151.64 0.6155% A+ A++ 1
Automatic Data Proc, Inc ADP Tech $23,580.38 2.90% $608.40 2.5801% AA A++ 1
Xcel Energy Inc XEL Utilities $23,274.32 2.86% $596.16 2.5614% A- A+ 1
Realty Income Corp O REIT $22,951.50 2.82% $1,225.37 5.3389% A- A 2
WEC Energy Group, Inc. WEC Utilities $22,943.51 2.82% $578.50 2.5214% A- A+ 1
Air Products & Chemicals, Inc APD Materials $22,865.64 2.81% $553.32 2.4199% A A+ 1
Kimberly-Clark KMB Staples $21,641.05 2.66% $652.56 3.0154% A A++ 1
Procter & Gamble Co PG Staples $21,323.87 2.62% $510.31 2.3931% AA- A++ 1
Microsoft Corporation MSFT Tech $21,240.95 2.61% $242.62 1.1422% AAA A++ 1
Abbott Laboratories ABT Health $20,537.72 2.53% $308.03 1.4998% A- A++ 1
McCormick & Company MKC Staples $20,236.05 2.49% $319.88 1.5807% BBB A+ 1
Ross Stores Inc ROST Discret $19,810.64 2.44% $246.23 1.2429% A- A+ 2
AT&T Inc T Telecom $18,934.06 2.33% $1,261.06 6.6603% BBB A++ 1
Illinois Tool Works Inc. ITW Industrial $18,841.44 2.32% $508.52 2.6990% A+ A++ 1
Stryker Corporation SYK Health $18,224.06 2.24% $221.18 1.2137% A- A++ 1
The Coca-Cola Co KO Staples $17,846.27 2.20% $608.99 3.4124% A+ A++ 1
3M Co MMM Industrial $15,921.56 1.96% $639.21 4.0147% A+ A++ 1
Colgate-Palmolive Co CL Staples $14,900.76 1.83% $349.08 2.3427% AA- A+ 1
Church & Dwight CHD Staples $14,450.79 1.78% $188.62 1.3052% BBB+ A+ 1
Starbucks Corporation SBUX Discret $14,371.94 1.77% $305.71 2.1271% BBB+ A++ 1
General Mills, Inc. GIS Staples $14,091.95 1.73% $455.25 3.2306% BBB A 1
Dominion Energy, Inc. D Utilities $13,555.81 1.67% $625.32 4.6129% BBB+ B++ 2
TJX Companies Inc TJX Discret $10,778.97 1.33% $199.41 1.8500% A+ A++ 1
General Dynamics Corporation GD Industrial $9,352.13 1.15% $297.77 3.1840% A A++ 1
Medtronic plc MDT Health $9,344.67 1.15% $195.34 2.0904% A A++ 1
McDonald's Corporation MCD Discret $9,097.22 1.12% $244.42 2.6867% BBB+ A++ 1
Honeywell International Inc. HON Industrial $7,555.47 0.93% $196.64 2.6027% A A++ 1
Misc Type ……….. Partial Totals Weight Yr Dividends  Avg Yield …..832 …..9 …..82
Equity Stocks   $784,486.41 96.55% $21,962.77 2.7996%      
Investable US Dollars   $22,261.53 2.74%          
Miscellaneous Assets   $5,764.00 0.71%          
. .. Equity + Misc Weight …..2 ….. …..222 …22 …..223
Total     $812,511.94 100.00%          



It is interesting to note, right now at the peak of the virus crisis, my best position is Clorox. Clorox wipes are basically gold in times like this. It is now my largest consumer staple position surpassing my big tobacco and Pepsi.


Going forward, I will still continue to buy a lot of stock. As the SP500 prices are still below their all time highs. I think the virus will still persist for many months, and countries will remain in lock down. However, my portfolio is highly diversified and largely concentrated around core products and services people will still purchase even though they are not working or locked at home. This is why I have always emphasized conservatism and safety of the dividend instead of growth. Although my portfolio may not keep up or grow faster than a high growth index during good times, it will fall much less and the income will be much higher and less at risk. I do not need to take substantial risk to achieve my financial goals, hence no need to amplify my portfolio by chasing alpha.

I will be continuing to monitor the safety of my position's dividends, we need to be very careful about free cash flow as some companies have shut down temporarily (in hopes of opening soon). For example, Realty Income (O) has tenants that may have hard times paying rent such as gyms or movie theaters. And Ross Stores and TJ Max have shut their stores to hunker down, and Starbucks had to shut many of their stores although some remain still opened. This will all hurt their earnings momentarily which are needed to pay dividends.

But for the most part, people will still shower, brush their teeth, use their iPhones to go online, drink beverages, eat food, pay for their electric bills, and pay for their online deliver to home orders (because they can't go outside) using their credit cards.... Although my portfolio has a small part in discretionary or cyclical, for the most part it is highly defensive to prepare for a crisis like this, or the financial crisis in 2008 or the tech bubble in 2000 or energy oil crisis in 1973. My portfolio is no where as bunched into cyclicals as the larger indexes are, which have positions in discretionary and raw material and energy and industrials in a much larger degree. For example, I own absolutely no energy companies so the recent plunge of oil down to $18 a barrel has no real effect for me, actually the lower oil price is a blessing for a lot of my companies as it is a raw input. I also do not hold discretionary like fashion clothing, automobiles, cruise ships, or hotels, or airlines, or theme parks, or movie theaters, or gyms for example; those are all under immense threat due to no travel or lock down social distancing mentality. I also have largely avoided any raw materials industries like mining, natural gas, or any industry that is highly dependent on commodity prices and supply and demand. These type of cyclical companies cannot guarantee the dividend, and are constantly going boom and bust due to the demand curve.

In times like this, it is best to have discipline. Investing needs to be done objectively with a plan and executed without emotion, it needs to be systematically.

Happy investing,
-YD

6 comments:

  1. Hi Going Dividend,

    First and foremost you are an inspiration to me. Second, since you a have a very nice portfolio, why don't you do a little options? You are going to buys the stocks anyway. I am not talking about all out massive hedging but creating in a way insurance policy with options. I do it for about my portfolio a d us working well.

    KR

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    Replies
    1. I met to write Young Dividend and not Going Dividend. Autocorrect incorrectly corrected. BTW I am so glad that you have mentioned few months back how you stopped buying because it definitely caused me stop buying as well. I was deploying about about $4,000 per month. Thanks for that.

      KR

      Delete
  2. Love all these very detailed charts. Our portfolio took a nose dive too. As you said, I expect things to recover in 2021.

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  3. Wow! As I can see, you are working in a sphere of trading. I know that it is becoming a very popular occupation now, though, it is very difficult.

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  5. Wow! Such an amazing and helpful post this is. I really really love it. It's so good and so awesome. I am just amazed. I hope that you continue to do your work like this in the future also cfa level 1 summary

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