My Portfolio Update: I Have 83 Stocks Now - 9 New Including 3 Defensive Picks With Selling 4

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Includes: ARCC, BDX, CAH, CCP, CLX, COP, CRC, CSCO, CVS, CVX, KO, MAIN, OXY, PG, VLO, VTR, VZ, WPG, XOM
by: RoseNose

Summary

Winners have goals and plans; losers usually don't. I want to review mine thus far into this year.

I added 3 stocks to my Defensive Sectors - 2 in Healthcare: Cardinal Health and Becton, Dickinson, and 1 in Consumer Defensive: CVS Health.

I discuss my sells including moving from IBM to Cisco.

I show the portfolio by sectors along with the new stocks, BDCs and mREITs by value.

In my December article here I presented my 2016 goals. I had 7 of them, which I will review. As the portfolio sits right now, I feel like a winner with a number of touchdowns, and I believe I am winning as well with my goals.

I am still working on many of my goals and success will be known at the end of this year.

I will start by discussing the first 2 goals in my plan.

GOAL #1- NO MORE STOCKS and Limit the amount of Trades

The #1 goal was NOT to increase my total number of stocks, which was 74. I lasted until April when I was "given" California Resources (NYSEMKT:CRC), value $1.05, from Occidental Petroleum (NYSE:OXY). I wrote an article here at the time that conveyed my feelings of sadness for receiving that stock. It however opened the door to owning more stocks. Valero (NYSE:VLO) was purchased shortly after that and I still own it. To own VLO, I sold ConocoPhillips (NYSE:COP) to lower my energy exposure in IOCs (integrated oil companies).

I sold CRC eventually for $1.50/share and don't miss it. However, I was shocked recently seeing it was now $15. My first thought was, my goodness, that was a huge mistake. I then learned it did a 10:1 reverse stock split and really has gone nowhere. Never a dull moment in investing.

Now those moves did keep me at 74 stocks. I have since then increased my holdings to 83. I did fail in the true sense of the goal, but I have become a winner with my new stocks, which I will discuss a bit later.

Limit Trades - I punt here. I have no real answer for this other than I never knew how much I traded, but I also believe I didn't define trading properly. I don't trade in and out of stocks. I add to my positions or trim. I buy new ones, but not real often. I sell very few stocks totally, thus the reason I now have 83. I have cash to do so, as the portfolio generates about 4% value in dividends every year. I am not harvesting the dividends as yet, so I can use them to invest, and so I do. I will continue to pursue great value, so I decided I will do what it takes to make me SWAN (Sleep Well At Night) with the holdings. Thus, I will NOT limit my portfolio to a specific number again, now or in the future.

Chuck Carnevale just wrote an excellent article here, about when to sell. I agree. I keep most of my stocks, as I need a great and good reason to sell. Overvaluation is a good one, but rarely occurs. Clorox (NYSE:CLX) is one that is making such a move and I admit I did trim some. I have also lowered my exposure to Energy by trimming Exxon (NYSE:XOM) and Chevron (NYSE:CVX) now that they are back to nice prices.

My biggest sales I will reveal next.

IBM for Cisco and GILD out for other Healthcare stocks

One big sale I made was of IBM as I wanted CSCO in its place, and this is why:

IBM has been increasing its debt and the Dividend Growth Rate or DGR is slowing. The last dividend raise was ~7.6%, while still not bad, it is a decrease. CSCO has lower debt of 28% and a 70.2% 4-year DGR, with the last raise of 23.8%. I traded an almost equivalent yield for a better DGR, less debt and increased earnings. Not saying it was right or wrong. Just me, I jumped ship.

Here is a chart of my new purchases and what I think I did to get them. It is not exactly as it happened, but gives you an idea of what I do to manipulate the portfolio to my liking:

New Stock Name Credit Rating What I did
Ticker
CAH Cardinal Health A- Sold GILD
CVS CVS Health Corp BBB+ Sold GILD
BDX Becton, Dickinson BBB+ Sold GILD
ARCC Ares BBB Trim MAIN
ARI Apollo Capital 51% D/C Trim MAIN
CCP Care Capital BB+ Trim WPG
HD Home Depot A Sold EMR
HOG Harley Davidson BBB Sold EMR
NEWT Newtek 33% D/C Trim MAIN
NRZ New Residential 55% D/C Trim MAIN
CSCO Cisco AA- Sold IBM
STWD Starwood BB Trim MAIN
VLO Valero BBB Sold COP
Click to enlarge

I will discuss the new defensive healthcare stocks in more detail and give a brief accounting to the BDC ((NASDAQ:ARCC), (NEWT_) and mREITs ((NYSE:ARI), (NYSE:NRZ)) at the end of the article.

I did sell BCE, a Canadian Telecom, and added to Verizon (NYSE:VZ). Reason: BCE is Canadian. It reports dividends in those dollars and not US and therefore is subject to the exchange rate. I was perhaps too lazy to figure it out and follow dividend increases in the manner I wanted. I saw a very lucrative exit price and made a nice amount of money, so I sold. I am comfortable holding just T and VZ now. BCE is a great and good company and it might be considered again if it becomes a bargain.

Therefore, if I have 83 stocks or 63, I will not worry or limit my portfolio as long as I can SWAN and have the ability to monitor and watch what I own.

#2 - Build Up Group 1 Income holdings with S&P credit rated A stocks of quality.

This one is difficult to accomplish, as I have shifted my focus to Defensive holdings and the Group 1 Holdings have changed from that article. The defensive focus is now Consumer-Defensive, Healthcare, Utilities and Telecom. I want most of my income to come from these as well.

I have succeeded in adding to those sectors.

In Consumer Defensive I bought CVS Health Corp. (NYSE:CVS). In Healthcare I bought Becton, Dickinson (NYSE:BDX) and Cardinal Health (NYSE:CAH). I sold GILD at $88 and I did lose money, I will admit. I am glad I got out and very pleased with BDX which I bought at the time.

Let's take a look at GILD and these specific new holdings.

GILD

Here is the 5 year FAST graph of GILD:

The future earnings look FLAT, and actually shows a decrease in earnings from $12.51 to $12.20 in 2016. It does have an A credit rating and plenty of cash, but it is not growing those revenues. It currently is trading around $84 and 2.2% yield. It just started paying a dividend last year, thus I do not know if it will continue to grow it, it remains an unknown. On the upside, it does have the cash to pay.

Click to enlarge

BDX

Here is the 12 year FAST Graph of BDX:

I like the look of this graph much, much better with the growing earnings. It also has a 10.2% 5yr dividend growth rate and the cash to pay it. It is a dividend champion of 44 years, now that is history.

At the time in March, I thought I was over paying at $149.70 and ~1.9% yield. I paid 17.5 P/E (on earnings of $8.55) for 2016.

Click to enlarge

This is a touchdown for me with my first purchase of BDX, but I only scored 6 points as I didn't make the PAT or point after touchdown - I fumbled. I thought incorrectly this stock would go lower, so I didn't fill up on it. I am pleased with the starter position being 0.4% of portfolio value, but I did want more. The price has gotten away from me and I watch it. However, I could buy more thinking of 2017 earnings of $9.55 and then a fair price of $165 (for 17 P/E), but the P/E is currently 20.6. I sadly must have patience. BDX has BBB+ credit rating, which I find acceptable.

M* (Morning Star) also has a fair value of $165. I have made up my capital losses with selling GILD with just the BDX purchase, however unrealized gain that it is.

Amgen

I added to my Amgen (NASDAQ:AMGN) holdings at this time as well, as the price became a screaming buy at <$142.

Here is the FAST graph for AMGN with its A credit rating. I am watching to do so again. A lot to like with this excellent company. 62% 4-year dividend growth rate with lots of cash to pay it. M* has a fair value (FV) of $194, seems like a screaming buy to me, but it lags and there seems no hurry. I am glad to own it.

Click to enlarge

Cardinal Health

The next purchase was Cardinal Health (CAH). It popped up and became an excellent target for my Healthcare purchase with an A- credit rating. Dividend Contender for 20 years.

It has a 5-year 14.6% dividend growth rate and 2.3% yield. It is priced fairly. M* says FV is $79, so not a screaming buy, but I wanted it. I paid $77.08 for my shares. I will add to shares if it falls lower, right now I hold.

Here is the 7-year FAST graph:

(click to enlarge)

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CVS Health Corporation (Pharmacy)

I also purchased CVS (CVS) with a 32% 5-year Dividend Growth rate (DGR) and BBB+ credit rating.

Now this is a nice buy. M* FV is $104, S&P IQ is $107. Current price is $94 and 1.8% yield. Earnings growth around 13%. It is a 13 year Dividend Contender.

Here is the 7-year FAST graph:

Click to enlarge

Care Capital Properties (equity REIT)

I just recently added back Care Capital Properties (NYSE:CCP), a healthcare equity REIT. It has an 8.9% yield, but only a BB+ credit rating and probably a frozen dividend. I can live with that for now.

Brad Thomas wrote about it here and still believes it has potential and a strong dividend. It was spun off from Ventas (NYSE:VTR) last year but as yet is not a proven entity. I will watch it closely, but got it at a discount price and it should have a nice margin of safety built in the price @ 25.67. I admit I owned this earlier in the year, but saw the error of my reasoning and have bought it again about the same price I sold it, but now own fewer shares.

I had the money for this purchase from selling most of my holding in a different eREIT WP Glimcher (NYSE:WPG). It should have a name change coming soon to Washington Trust. I still hold a few shares with a nice margin of safety at ~ $6. It has become a speculative play and I became a bit chicken, and sold most of my holding. Brad Thomas and Bill Stoller have written (here and here) recently about it, if you wish a speculation with a nice yield.

I am pleased with these choices and my reasoning.

Goals #3-7

I continue with these goals to study balance sheets, learn about cash flows, payout ratios, and debt.

I am recording all of my transactions on a calendar which I am still studying and will know better by year's end how I am succeeding or not.

Some holdings with lower credit ratings I am examining and have not decided exactly if I will take action, as there has not been any mitigating reason to sell any of them. Even KHC with the lower credit rating I hold as it is such because of being a new entity.

BDC and mortgage REITs

Now, I think you are wondering how did I get to 83, sometimes I do too. I ventured out into BDC and mREIT investing. I trimmed some of my Main Street (NYSE:MAIN) at $33, which I believe is now entering into overpriced territory. I put most of those proceeds back into the same sector. Many, other than Ares Capital (ARCC), a BBB rated investment, are smallish in size.

You will find NRZ and ARI in the financial sector listing.

I have found over the years to trust and learn from many authors on SA.

I have owned some of these type holdings before and if you haven't read my last article here about knowing the rules of the game, then you shouldn't play with these. I know I haven't mastered it completely yet, but I think I have found some really great authors that explain it very well. This gives me confidence and if they stop writing, I will stop investing in these holdings. I admit to relying on their important articles. They are: Scott Kennedy, The Fortune Teller, Brad Thomas, and Bill Stoller. If you haven't heard of them, then you are missing some of the best articles and I hope you look into them. There are others and I read many, but these are my main tried and true contributors. I also enjoy Joe the High Yield investor and William Hilger who really showed me the light to even consider their mind set for these type investments. Now, when all 3 or 4 say to invest in something, I take notice and thus have headed into the names they mention. Time will tell if I am doing the right thing.

This is my current portfolio and the portfolio values. You will see it has VERY small holdings in some of these types, so I am not hurting my future income much by taking a bit of adventure.

Be warned they are not for everyone.

Sector-Stock Ticker- Name % Value Sector %
CONS-DEFENSIVE/Staples (16) 20.97%
Coca-Cola (NYSE:KO) 2.60%
Procter & Gamble (NYSE:PG) 1.32%
GIS 2.46%
TGT 1.77%
KMB 1.54%
MDLZ 0.78%
CVS 1.41%
CLX 0.31%
PEP 0.59%
DEO 1.26%
HSY 0.45%
CL 0.50%
UL 0.65%
PM 2.77%
MO 2.09%
KHC 0.47%
CONS-CYCL/Discretionary (8) 6.14%
GPC 0.80%
MAT 0.45%
MCD 1.12%
HAS 0.69%
HOG 0.22%
HD 0.44%
NKE 0.93%
VFC 0.45%
SBUX 1.03%
ENERGY (4) 7.28%
XOM 2.33%
CVX 1.92%
OXY 2.16%
VLO 0.87%
FINANCIAL (6) 4.06%
ARI 0.08%
NRZ 0.18%
MA 1.32%
TROW 0.85%
V 0.90%
WFC 0.57%
MET 0.15%
HEALTHCARE (5) 6.67%
JNJ 3.51%
ABBV 0.99%
AMGN 1.05%
BDX 0.40%
CAH 0.72%
HEALTHCARE REITs (5) 7.04%
NHI 0.82%
CCP 0.58%
HCN 1.18%
HCP 0.63%
VTR 1.59%
OHI 2.24%
INDUSTRIAL (8)-MATERIAL (0) 6.27%
BA 1.69%
UNP 1.43%
CAT 0.36%
MMM 0.80%
CMI 0.82%
GWW 0.52%
NSC 0.20%
LMT 0.44%
TECHNOLOGY (4) 3.80%
AAPL 1.99%
ADP 1.04%
CSCO 0.81%
IBM
TELECOMMUNICATION (2) 7.76%
T 3.86%
VZ 3.90%
UTILITIES (9) 15.57%
SO 4.23%
MGEE 2.03%
XEL 2.26%
WEC 1.45%
D 3.07%
DNP 1.11%
CNP 0.54%
LNT 0.71%
FE 0.17%
REIT (9) 10.52%
DLR 2.05%
WPC 3.49%
O 2.08%
LXP 0.45%
CLDT 0.90%
UBA 0.21%
WPG 0.05%
STAG 0.80%
STWD 0.48%
BDC (4) 3.89%
MAIN 1.06%
PNNT 0.77%
HTGC 0.57%
ARCC 1.06%
NEWT 0.43%
Total 83 Companies 100.00% 100.00%
Click to enlarge

I am sitting soundly with an extreme sense of calm and knowing I have built a sound foundation for the portfolio.

Thank you for reading and I hope you leave many interesting and valuable comments.

Happy Investing to All.

Disclosure: I am/we are long ALL STOCKS MENTIONED IF NOT SOLD.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.