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

by: RoseNose


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
CAH Cardinal Health A- Sold GILD
CVS CVS Health Corp BBB+ Sold GILD
BDX Becton, Dickinson BBB+ Sold GILD
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.


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.

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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.

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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.


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.

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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%
NHI 0.82%
CCP 0.58%
HCN 1.18%
HCP 0.63%
VTR 1.59%
OHI 2.24%
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%
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%
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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.