The Crazy Stuff That Happens To A Stock Portfolio

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Includes: AAPL, ABBV, ABT, AMZN, BLK, BRK.B, CL, CVS, IVV, JNJ, LOW, MDT, MMM, MSFT, NKE, NOBL, PEP, QCOM, RTN, TXN, UTX, VIG, WBA, WMT
by: Dale Roberts
Summary

In 2015, I skimmed 15 of the largest cap Dividend Achievers.

Incredibly, many companies have seen sizeable transformations including mergers and acquisitions, lawsuits and regulatory rulings with major implications.

The latest 'big news' day was the merger of my United Technologies with Raytheon.

As investors we should perhaps trust the management team; at least we might sit tight and take our time to evaluate the implications.

It seems that every few months I get a portfolio shocker. There's often big news surrounding the individual stocks. I'll admit that I do not watch my holdings all that closely, but I certainly get all of the news feeds of my portfolio holdings courtesy of my Seeking Alpha home page.

Yesterday, there was news on United Technologies and Raytheon.

And of course this is on top of those previously announced spin-offs of two business lines for UTX.

We'll get back to the United Technologies (UTX) and Raytheon (RTN) merger in a minute, but this is another in a long stream of major business announcements for our US portfolio of 15 Dividend Achievers (VIG).

The 15 companies that we own are 3M (NYSE:MMM), Pepsi (NASDAQ:PEP), CVS Health Corporation (NYSE:CVS), Walmart (NYSE:WMT), Johnson & Johnson (NYSE:JNJ), Qualcomm (NASDAQ:QCOM), United Technologies (NYSE:UTX), Lowe's (NYSE:LOW), Walgreens Boots Alliance (NASDAQ:WBA), Medtronic (NYSE:MDT), Nike (NYSE:NKE), Abbott Laboratories (NYSE:ABT), Colgate-Palmolive (NYSE:CL), Texas Instruments (NASDAQ:TXN) and Microsoft (NASDAQ:MSFT).

We have 3 US picks by way of Apple (NASDAQ:AAPL), BlackRock (BLK) and Berkshire Hathaway (BRK.B) (BRK.A).

If we go down that list of stocks we can find major events for more than half of those companies. With 3M here's one that I missed, to be honest with you.

And of course CVS offered perhaps the biggest fundamental change within the group with its acquisition of Aetna. That is described as transformational.

CVS, along with my Walgreens, also faces that ongoing threat or perceived threat from Amazon (AMZN). There's a non-stop barrage of reports or speculation that Amazon will enter the pharma space in a meaningful way and hurt my pharma oligopoly. Still waiting on that event. But that contributes to the price pressure on these two companies. The market does not like uncertainty.

And on that retail front Walmart is within the sights of Amazon and that online retail juggernaut. And Walmart is often in the news with some 'add-ons' or 'tuck-ins' as the analysts like to put it. But it is fighting back on the e-commerce front and the results are impressive.

You'll find a lot of analysis and opinion and speculation on all sides of the e-commerce wars.

And of course my Qualcomm is a perpetual newsmaker. It often fights with one of my other holdings that goes by the name of Apple. As you likely know, they settled some of their disputes and Qualcomm's share price soared, quickly turning a losing stock into a stock that at least was showing some green on the portfolio performance page.

What an incredible roller-coaster ride, with more news that appears to come in waves.

And soon into my index skimming adventure Dividend King Lowe's acquired a Canadian company Rona. Apparently, that was not a good acquisition.

The share price has performed well and of course those dividend increases keep on coming. The market makers appear to like this story.

With Medtronic, just hit its news page and you'll find a non-stop barrage of news and acquisitions and reports on regulatory approvals and setbacks, and on and on.

One could spend a week reading up on Medtronic.

And on the medical front, when I had made the initial purchase, Abbott Labs was fresh off of a spin-off of its research-based ventures in the form of AbbVie (ABBV). I'd invite you to read up on this article from The Dividend Guy.

The company was again active on the acquisition front. From that Dividend Guy article.

Note that the recent growth is due to the acquisition of St. Jude Medical as stated in ABT's most recent quarterly statement. Comparable operational sales only rose by 3.2%.

Comparable operational sales growth excludes the impact of exchange and for Total Abbott and Medical Devices, also includes prior year results for St. Jude Medical, which was acquired on Jan. 4, 2017, and excludes prior year and current year results for the Abbott Medical Optics (AMO) and St. Jude Medical vascular closure businesses, which were divested during the first quarter 2017.

For me, I am glad that I ignored all of the noise and speculation and doubts that can surround a company as it moves through large acquisitions and transformational change. Abbott Labs' share price came under pressure and then went for a nice ride.

In this article I had asked or suggested, Can You Add To Your Quality Dividend Growth Stocks When They're Down, Because They're Down? Well, I did add to ABT on a couple of occasions in 2016 and 2017 (without any evaluation) and that one worked out more than well. This is our largest holding by value thanks to those additions. The stock value is even greater than the high flyers known as Microsoft and Texas Instruments.

That averaging down without evaluation certainly worked well with Walmart and Nike and a couple of others. That strategy has yet to pay off with the perpetual 'losers' CVS and Walgreens.

What about that UTX and Raytheon Merger?

Obviously, that's a massive event for shareholders of both companies. It is the partnership of 2 very profitable companies, both with dividend growth histories. And in fact, Raytheon is also in the Vanguard Dividend Appreciation fund.

I'll ignore this news too, just as I ignored all of the above (and the volumes that I did not have the time and space to show). What would I know as a retail investor? I have no expertise in the sector. And not even the managers of the new company know how things will work out. The analysts only take their best guess. I'll stick by management, once again. I'll stick by my evaluation process (trusting the Dividend Achievers Index methodology).

I am able to ignore all of the news and events. I think that running away from companies every time there is trouble or doubt or major change is not a good investment approach. The success of index-based investing over active management is that it is rules-based, not emotion-based or based on speculation. An index does not run away thanks to news or uncertainty. An investor who owns a stock portfolio can apply that same discipline.

I can't imagine the number of hours it would take for an active manager to stay on top of 15 stocks. It would be near impossible to stay on top of 25 or 30 companies. And in the end could an investor really know those business operations well enough? Could we be an industry expert in several sectors? That would be more than a challenge. We'd spin ourselves into the ground.

If you have trouble ignoring the news, then of course an indexing strategy and ETF may be the more beneficial route. If you like dividend growth you can buy that VIG or the Aristocrats by way of ProShares (NOBL). I recently wrote on that fund, on total returns it's beating the market (IVV) when it's not supposed to, during an extended bull market run.

Of course NOBL won't react to any news. It's simply watching the dividend growth history.

Author's note: Thanks for reading. Please always know and invest within your risk tolerance level. Always know all tax implications and consequences. If you liked this article, please hit that "Like" button. Hit "Follow" to receive notices of future articles.

Disclosure: I am/we are long BNS, TD, RY, AAPL, BCE, TU, ENB, TRP, CVS, WBA, MSFT, MMM, CL, JNJ, QCOM, MDT, BRK.B, ABT, BLK, WMT, UTX, LOW, NKE, TXN, PEP. 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.