As Halloween ushers in the end of the month of October, investors don't seem to be spooked by blanket market overvaluation. Earnings season is in full swing again, and many blue-chip companies are reporting solid results that continue to keep the Dow, Nasdaq, and S&P floating at very high levels. Blowout earnings for tech giant Amazon (AMZN) in particular sent the Nasdaq index rocketing higher in the last week. For the year, the S&P is now sitting at gains of around 15%, well above the expected 9-10% average rate of return. The Nasdaq meanwhile, has nearly doubled that, now sitting at a 28% return YTD. Who knows when or how this train will slow down, but it feels pretty near impossible to be betting against the market at this point.
I don't have reliable comparison numbers for my own portfolio on YTD basis due to complications with changing brokers at the beginning of the year, but as of the earliest reliable comparison I have (4/28/17), the New Div on the Block portfolio is outpacing the S&P 500 at 14.35% total return to the S&P's 8.01% in the same timeframe. Nevertheless, this month was actually a slight down month for me, fueled most directly by a painful 15% decline for CVS Health (CVS) and also a 14% drop for AT&T (T).
Though I'm not in panic mode over either stock, I have to admit my frustration with CVS is growing. Part of that is on me for catching the falling knife much too early last year, but it's a been a learning opportunity and I'm willing to stay patient for the time being. I know the potential is there, though the recent news of a possible tie-up with Aetna (AET) adds a whole new layer of wrinkles to my original investment thesis.
In any case, let's take a look at the portfolio as a whole before I digress entirely.
|Company||Sector||Shares||% Portfolio||% Income||Sector Weight||Global BMI|
|Archer Daniels Midland (ADM)||25.5627||3.37%||3.27%|
|Altria Group (MO)||16||3.31%||4.23%|
|Eastman Chem (EMN)||10.1175||2.96%||2.06%|
|Southwest Airlines (LUV)||36.2231||6.29%||1.81%|
|Union Pacific (UNP)||7.0368||2.63%||1.70%|
|General Motors (GM)||52.6294||7.29%||8.00%|
|Magna Int'l (MGA)||38.5716||6.79%||4.25%|
|Bank of Nova Scotia (BNS)||25.4233||5.29%||6.23%|
|T. Rowe Price (TROW)||21.3541||6.40%||4.87%|
|Realty Income (O)||12.223||2.12%||3.10%|
|Tanger Factory Outlets (SKT)||50.4179||3.70%||6.91%|
As I am still very much in the building stages of my portfolio construction, I am not too worried about the levels of variance from my targets as represented by the Global BMI breakdown. As I continue to build and add holdings, these numbers will even out and better reflect a diversified portfolio and one that includes holdings across all 11 GICS sectors.
At the end of the month, my current yield is 3.22% with a yield on cost of 3.66%.
Purchases & Sales
The first month of the quarter is always slow, as only 3 of my holdings (reliably) pay dividends on the JAJO schedule. It's nice to see a new face on this schedule though, as I received my first dividend from DGI stalwart Altria. I look forward to lots MO money in the years to come through the power of compounded reinvestment! In total I received a paltry $18.27 during the month of October, with the usual disclaimer that I received only partial dividends from BNS and so will report the full amount with next month's report.
Though bargain-hunting holiday shopping is fast approaching, looking for deals and steals in the stock market seems a much taller order. I don't anticipate having any substantial cash to contribute to investment until December, but in a hypothetical world where I was looking for opportunities this month, here's a few starting points:
I talked about T in this section a few months ago and could probably do so again, but it's being covered ad nauseam on SA at this point and I want to see dividend clarity before I go after any more shares. In the meantime, though, on the content side of the media biz, Comcast looks relatively cheap these days. Though the company did report a miss on its recent earnings, one has to keep in mind that the comps to last year's Q3 are skewed by the Rio Summer Olympics; excluding that, revenue was up nearly 6%. Consumer cord-cutting, or relying exclusive on online content streamers like Hulu and Netflix (NFLX), is going to remain a headwind for Comcast and peers going forward, but the company's NBC Universal segment remains a strong growth opportunity. The current dividend yield is a modest 1.75%, but with strong growth rates of at least 10% per year each of the last 5 years.
Eastman Chemical (EMN)
An existing holding of mine, Eastman remains an under-followed strong performer that just posted another round of quarterly results blowing past analyst expectations. Eastman now expects full-year EPS to come in at the high end of its previously disclosed range, and is signaling revenue growth of 9-10%. This kind of quiet, standout performance is a nice addition to the traditional DGI model, as it can add a nice mix of diversification into a sector and a name that is hardly talked about in the community. Though EMN has appreciated nicely since I first bought it in March, analysts continue to see it as undervalued and I would have few qualms adding to my position with the right opportunity. The yield is currently sitting at 2.25%, and I'd be tempted to increase my stake should the it tick back up above 2.3%.
Which companies are you watching this month? Did you purchase anything in October? Add your ideas to my watch list, leave a comment below, and thanks for stopping by!
Disclosure: I am/we are long MGA, TROW, ADM, GM, CVS, BNS, T, LUV, TD, QCOm, VLO, ABBV, PFE, EMN, JNJ, O, SKT, WSM, KR, UNP, D, MO.
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.