In previous articles, I explained how I screen and find suitable candidates and how I analyze them. I also wrote about my sector allocations, and how important it is to diversify your holdings. Part of having a plan is also to know when to sell. In this article I am going to share my methods for monitoring my 70+ stocks portfolio.
Monitoring your portfolio is extremely important to make sure you are on track to reach your goals. Many readers commented that the problem with the size of my portfolio is that I cannot really monitor the stocks I own. Thanks to technology and innovation, monitoring my portfolio is a relatively simple task.
I developed my method over the past several years, and while it suits me, I believe it can be beneficial for every dividend growth investor. While every investor must choose his strategy of buying and selling, he shouldn't forget to choose his monitoring strategy, because monitoring leads to buying and selling.
My method uses several simple tools. While complex monitoring can be time consuming, I use apps services, which allow me to focus on what really matters for me. Therefore, I can focus on the crucial metrics, while having the possibility to have a more thorough analysis if necessary.
Keeping my portfolio simple
I invest mainly in blue chip companies like Johnson & Johnson (JNJ) and Procter & Gamble (PG). These are just two examples of these mature and well-diversified companies. My portfolio is less volatile compared to the broader market, and it consists of stable companies that grow steadily, but don't change quickly.
These companies usually don't rely on a single market or a single product, and therefore won't implode if there is a temporary failure, or if one product lags others. Pfizer (PFE) is a very well diversified company, and it won't fail if one of its tests or studies disappoints like a small biotech company. Disney (DIS) is diversified enough to sustain weakness in its media networks segment.
These companies don't require me to follow them meticulously daily. They have a long history of well-run operations and their diversification means that there is a very little risk for a sudden failure. While a black swan may always hit a single company, I am protected with diversification. If you buy an ETF on the Dow Jones or the S&P 500, you don't monitor daily the 30 or 500 companies, so why would you monitor your ~100 companies personal ETF?
Therefore, I monitor my portfolio periodically. This checkup is enough, and it gives me all the essential information, while I always can make a more thorough analysis if needed. I monitor my portfolio to make sure that things are working according to plan, and I am on my way to reach my goals. I am usually not concerned with the details, since as a shareholder I hire a talented management team and a board to look over them.
The first tool I use is the portfolio tool in Seeking Alpha. Download the app, and make sure you added every stock you own, want to own or just follow to the portfolio. You may want to create several portfolios and change the notification settings accordingly. Once you have all the stocks you are interested in in the portfolio, you are ready to go.
You will probably get 50 notifications every day. There are several topics I never miss. The quarterly reports, which consist of top- and bottom-line results, are important. I also read the following notification, which usually consists of several bullets, which were the most important issues in the report. I also follow dividend announcements to monitor dividend increases and dividend cuts, which will make me sell the stock.
You will also great additional quality content from Seeking Alpha contributors. I use skimming to quickly understand the general idea, and then I decide if I want to read it more thoroughly. If I do, I'll leave it in the notification part of the app and read it when I have some time. This way I get all the essential information, and some analysis that helps me understand the situation of companies in my portfolio at large.
If there are red flags regarding several companies, I will follow them more specifically. For example, I used to follow British Petroleum (BP) closely in 2015 and 2016. Right now, I follow Omega Healthcare Investors (OHI) closely. However, there is no reason to follow closely companies that perform well, such as PepsiCo (PEP) or Microsoft (MSFT).
Fastgraphs is another great service. It isn't free to use, but from my personal experience it is worth every penny. I use the portfolio tool in Fastgraphs as well. I add all my stocks, and there are some great screening and monitoring tools. The service is not expensive, and it is extremely useful, and is very helpful in monitoring your stock portfolio.
After you add your stocks to the portfolio tool you can use unique criteria that you care about. I then monitor it on a monthly basis and look for abnormalities that may require a more thorough analysis. Personally, I look at criteria like 3-year earnings growth and current valuation. I will look deeper into a company if the earnings growth over the past three years is negative, or if the valuation is extremely low or extremely high.
When I look more specifically at stocks that fail to meet my criteria, I read about them on Seeking Alpha and other resources. I also try to understand the reasons for this abnormality. If I find it problematic, I will follow the stock more closely. If I understand the reasons for the abnormality and they make sense, I will get back to my monthly monitoring.
The combination of Fastgraphs and Seeking Alpha is extremely powerful, and it will save investors precious time monitoring their portfolio. While it cannot substitute for an in-depth analysis, it can for sure reduce the number of in-depth analyses you need to do as part of monitoring your dividend growth portfolio.
Your brokerage account can also offer some great monitoring tools. Personally, I believe that the fees should be your No. 1 consideration, but some low-fee brokerage firms also offer some great research. I know that both Chase (JPM) and Bank of America (BAC) offer great research, and at the same time you can trade for free if your portfolio is big enough.
Use your brokerage account to monitor stocks that underperform or outperform; you may want to add to these positions. The underperformance may be an opportunity, and the overperformance may be a winner that you want to increase your exposure to. Also look that no company is becoming too prominent from the perspective of percentage of income and portfolio.
The combination of these three tools is very useful for every investor, and specifically for dividend growth investors. They can help you monitor your portfolio easily, and if needed make a more thorough checkup. The in-depth analysis will include reading investor presentations, quarterly reports and analysts' reviews. Monitoring my portfolio probably takes 5-10 hours every month. It may take some more if the stock market becomes more volatile.
In addition, I analyze several stocks every month when I consider new additions to my portfolio. Sometimes I already own these stocks, so it also assists me in monitoring my dividend growth portfolio. I believe that my method of monitoring my portfolio can be used by any investor and amended according to their needs.
Disclosure: I am/we are long ALL STOCKS MENTIONED BESIDES MICROSOFT. 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.