- Managing my own income and growth portfolio requires periodic reviews.
- From actual decisions that I make in the portfolio, I can get a better feel for my temperament.
- Part of my quarterly review is to check sector allocation to determine if too much capital is allocated to one specific sector.
- Another part of the review is to check dividend allocation to ensure I'm not getting too much dividends from one specific sector.
- These updates are kind of like a journal which shows exactly what I did - for better or for worse.
I'm primarily using a dividend growth and value approach, and occasionally taking quick (6 to 9 months) trading opportunities. Recently, I dipped my toes and started small positions in companies which do not pay a dividend; some are growth companies (such as Baidu (NASDAQ:BIDU)), while others are value plays (e.g. Express Scripts (NASDAQ:ESRX)). This article is a quarterly review to see exactly what I did. My hope is that as I continue to do this, I'll learn about myself, my temperament, my habits, and that I will act more rationally and logically in my investing journey towards financial freedom and security.
I hold a stocks-only portfolio and some cash. Continuous learning, tracking, and reflection are essential as a do-it-yourself investor. The quarterly reviews of my portfolio are a part of that process.
Core Holding Changes
- Initiated new core position: Raytheon (NYSE:RTN) - This month, I started a new position in Raytheon at a 10% discount, documented in detail in my last article.
- Added to International Business Machines (NYSE:IBM) - This quarter, I added a couple times to this international IT service company. Find out why I think IBM maybe a good company to add to your core dividend growth portfolio.
- Trimmed Scotiabank (NYSE:BNS) - I decided to trim Scotiabank, as it was my biggest position. But after the trim, it has gone up another 10%. And it is still my biggest position! The lesson learned here is that if a winner is doing well on its own, leave it alone. Other authors have mentioned that if there's an outsized position, new money added will steadily lower the percentage of the position. So, there shouldn't be a need to do any hasty trimming and clipping the wings of a winner.
Non-core Holding Changes
I bought small positions in:
Priceline (NASDAQ:PCLN) - Priceline is the global leader in online accommodation reservations. It operates mainly under the brands of Booking.com, priceline.com, agoda.com, KAYAK and rentalcars.com. Priceline has an S&P Credit Rating of BBB. F.A.S.T. Graphs estimates its 5-year annualized total return to be 16.5%, based on the July 11 closing price of $1215. I bought it as a speculative growth holding.
Express Scripts (NASDAQ:ESRX) - Morningstar describes Express Scripts as a company which "offers healthcare management & administration services such as managed care organizations, health insurers, workers' compensation plans & government health programs." Express Scripts is identified as a wide-moat company with bargaining power. (Morningstar video: 3 Long-Term Stock Picks in a Market with Few Opportunities) With Morningstar's fair value estimate at $89, ESRX is priced at a 31% discount with July 14's closing price of $67.9. I bought Express Scripts as a value play.
Amgen (NASDAQ:AMGN) - Amgen is a biotechnology company. I kind of switched out of Celgene for this one. Maybe I'm more comfortable with the fact that Amgen pays a growing dividend. It really depends on what you're buying the stock for. I see Amgen as a dividend payer with some growth. F.A.S.T. Graphs estimates a 5-year annualized total return of 10.7% from July 11's closing price of $119.77. Amgen could possibly become a core holding.
I sold Baxter International (NYSE:BAX) after I found out about its spin-off. I heard from other investors that if you're patient, value maybe unlocked after the spin-off occurs. The thing is, I bought a small position. Once it spins off, the 2 groups of tiny shares won't be worth selling (because of commissions) unless I don't sell for decades to come or add to the positions. It could also be because I didn't do enough research on the company to have held on to it.
I replaced Baxter with General Electric (NYSE:GE), which had a higher yield and priced at a fair value. In comparison, though, Baxter is still considered undervalued (4-star) by Morningstar.
1. Celgene (NASDAQ:CELG) ~ 8% gain
Looking back, it seems I should have held on to this growth stock. I started looking at CELG during the biotech pullback when someone mentioned about it in one of my articles. Too bad for me that it announced the split soon after I sold it. It has gone up about 10% since I sold.
2. Silver Wheaton (NYSE:SLW) ~ 20% gain
I've traded this stock a few times for capital gains, and this time it yielded the best result because I tried to play this with as little emotion as I could by setting a buy and sell target price. My bank notified me with an email when it went below my target buy price. I put in the order with the limited funds that I had, captured the targeted gain in 3 weeks. Yes, I didn't earn the full potential, but I also believe it's impossible to capture the bottom and the top.
Core Holdings in the Whistler Income and Growth Portfolio
Currently, core holdings make up about 68.6% of my portfolio.
Current Allocation for the Whistler Income and Growth Portfolio
Here's a look at my portfolio, including the core, the non-core, and the speculative.
|Sector||By Value||By Dividend|
|Materials||< 1%||< 1%|
My biggest sector holdings, whether in terms of value or dividend, land on Energy, IT, Financials, and Consumer Discretionary, the largest in value. I mentioned in my last quarterly portfolio update that my Consumer Discretionary stocks are diversified across at least 6 different industries, so I'm not too concerned about its allocation.
I'm happy to have added Raytheon as a core holding, since it increased my exposure in the Industrials sector. Just like the last quarterly update, I'd like to increase my exposure to the Healthcare sector... which makes me think I should have added to instead of selling Baxter.
35% of my dividends are from Canadian stocks, while 65% are from US stocks. I receive 70% of all dividends in Canadian currency, while receiving 30% in the US currency. In the tax-deferred account, I receive the full US stock dividends, but my bank only allows cash to be in the Canadian currency in that account. Each time currency exchange occurs, my bank takes a haircut of about 2%. Still, it's still more beneficial to buy US dividend stocks in the tax-deferred account compared to other accounts (non-registered, and tax-free savings account).
How are my Speculative Stocks doing?
In my last update, I identified LKQ Corporation (NASDAQ:LKQ) and Baidu as my speculative stocks, because they have higher P/E and are estimated to have higher annual earnings growth (20%+), which may or may not materialize. In addition, they do not pay a dividend.
I'm also adding Priceline to my speculative stocks list, because it has the above characteristics as well.
Since my purchase, LKQ is down by almost 6%, while Baidu is up 20%. A partial reason to why LKQ is down is because of the exchange rate. USD has dropped more than 3% compared to the Canadian dollar since my purchase. For Baidu, it's a 2% drop.
What I learned from this is that it's good to be diversified across several speculative holdings versus one. If I had bought one full position in a company and expected big gains from it soon, it could either be a jolly ride like Baidu, or could be a sad ride with LKQ.
Thankfully, speculative stocks collectively make up 3.7% of my portfolio.
I will continue to take opportunities coming my way as I pick up shares of companies which the market penalizes, expecting those drops to be temporary. I will continue to work on trading less by focusing on adding to core holdings and buying companies which are significantly undervalued (IBM and GM comes to mind).
By trading less and focusing on buying core companies, I will also be keeping my rights to receive my dividends. Having tracked how much dividends I'm collecting each month and quarter, and comparing to my last year's numbers, I'm beginning to see the compounding effect. However tiny it maybe to start with, in time, the growing income can only grow higher. Now I just need to track how much of it is organic growth and how much is from new shares purchased.
I will also look out for opportunities in sectors I have little exposure to, including Consumer Staples, Industrials, and Healthcare.
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Note: Please use this article as initial research material. Do your own due diligence before buying or selling a stock.