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Sold 25% Of My Actively Managed Portfolio And Bought Clorox And 3M, Here's Why

Mar. 02, 2020 10:43 AM ETCLX, MMM22 Comments
Trent Welsh profile picture
Trent Welsh
6.71K Followers

Summary

  • Coronavirus seems on the verge of becoming a truly pandemic and pervasive phenomenon with many unknowns still in play.
  • A list of stocks that I sold and those that I kept and reasons for each and my thoughts on my future portfolio evolution.
  • Why I bought Clorox and 3M and my plans on when I hope to revert back to the more broad based stock portfolio that I favor in traditional times.

As new geographical hotspots featuring the coronavirus's presence continue to appear almost daily in the global media, it seems highly probable that a sustained breakout throughout many U.S. states is almost inevitable. As stocks enter correction territory, irrational behavior might prevail in the coming months causing even further selling not based on fundamentals. Bear markets and events are situations where active managers can outshine index funds, which is why I took action and sold a solid chunk of my active portfolio to buy The Clorox Company (CLX) and 3M Company (MMM). These stocks could outperform the market by a wide margin in the coming months, and they will be easy for me to sell in a recovery as I expand my long-term portfolio holdings once the crisis is mitigated.

Image is a logo from Clorox.com

As the coronavirus spreads across the globe in new and exotic ways that are hard to trace back to a China source, U.S. markets have finally started to take the pandemic seriously after a rapid market correction from recent highs that has so far bucked any rebound attempts.

This correction, and the failed rebounds, have prompted me to take direct action in my actively managed portfolio as the markets and world have to start taking coronavirus more seriously. I currently manage two portfolios (each ~ equal in size) including a more passive one made up of mainly mutual funds and a few conservative stocks along with an actively managed fund made up of hand-picked stocks that I routinely hold or rotate through over time. All in all, I try to maintain about half a dozen mutual funds and 50 individual stocks spread throughout the sectors in traditional times.

Coronavirus though has altered my approach this year, starting now, as I have sold off a

This article was written by

Trent Welsh profile picture
6.71K Followers
B.S. Psychology University of Missouri-Columbia MBA University of Missouri-Columbia Full time investor looking to capitalize on market overreactions and looking for value where others see nothing but wreckage. Long term buys and short term trades to build wealth.Investing Better Than A Money Manager: The Rise Of Retail Investing - By Trent WelshI have an investing book with the title above on Amazon written for beginning retail investors looking to set up a self-directed portfolio with their IRA's, 401k's, or other retirement or trading accounts. It details how to pick and choose stocks amidst the different sectors and how to figure out how much in each sector an investor should have to help achieve diversification.Please take a look at it and let me know your thoughts. Thanks and Best of luck to all :).

Analyst’s Disclosure: I am/we are long CLX, MMM. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (22)

T
SELL SELL SELL !!!!!!!!!!!!!!!!!!! Markets going to 0000000000000000000000000!!!!
Trent Welsh profile picture
Lol. I sold some riskier stuff and banks. Plan to rebuy hopefully later in the year or when the market gets down 20% from recent highs. I'm hoping Clorox can nicely outperform in the meantime as a defensive stock with a nice dividend and hopefully growing revenues from a boost in preventative cleaning with bleach and wipes. Coronavirus is an event that could spur tons of additional irrational behavior and I hope to capitalize on it.
I
A good one to consider is Zoom (ZM). If worker start working and students start learning from home, then one useful platform is Zoom. It didn't fall and even rose during sell off although looks over valued.
Trent Welsh profile picture
Zoom was one a stock I considered but I didn't pull the trigger as I wanted to focus on only a couple of plays I thought could work out best instead of grabbing a basket of stocks. Zoom has a potentially good spot in the crisis but always hard to say especially valuation wise with a newer IPO stock like that. Everyone knows exactly where CLX and MMM sit fundamentals wise. Future is open though as crazy behavior and rises in consumer demand could spur both to outperformance. I can't wait for new earnings reports from them a couple months down the line. Thanks for reading and the tip. Zoom was a finalist for me.
B
CLX and MMM are event-driven bubbles. They have more problems underneath the surface.
Trent Welsh profile picture
hard to say MMM is a bubble when its still around 52-week lows. CLX's recent 6% drop in one day helped push out bubble investors in it and has already regained most of its mojo. Both have upside outperformance possibilities in the coming quarters in my opinion.
xKaotic profile picture
3M looks fairly attractive under $150. CLX hasn’t been cheap in years but that didn’t stop me from adding some more shares on the panic plunge last week. All of the staples are quite valued at the moment.
NINK profile picture
I did the same thing (on Feb 4th), but with different choices:
Sells:
AAPL - sold 1/3, high exposure to passive ETFs, buy back lower
GOOGL - high exposure to passive ETFs, buy back lower
DIS - high exposure to passive ETFs, overvalued, buy back lower
LRCX - overvalued, buy back lower
AEO - residual fractional unwanted future position
FOX - unwanted future position - got in merger
RCL - um, coronavirus!
FSKSX - passive ETF

Held:
CCL - cruise line, already too late
BZUN - China, already too late
WB - China, already too late
MTZ - growth, unknown name, long term contracts and backlog
BLD - growth, unknown name, serial acquirer
DHI - U.S. builder, as yet not affected.. we'll see
AVLR - wide moat
BRK - wish I had more
AAPL - I kept 2/3 of this one
ENB - my favorite retirement acct. stock. Going to add more.
BMY, GILD, CRL - Biotech might be in for a bounce


Some large bond positions also cashed out at maturity. This all leaves me 63% cash, raised before the market selloff. Now planning where to put it to work, and when. Feeling pretty good right now. Sat on my hands today, however.
Trent Welsh profile picture
Yea, always hard to figure out when to pull that trigger. Good luck on your reentry point.
MikeFromNZ profile picture
SND is a better "hope and prayer" stock than HCR.
Trent Welsh profile picture
Yea, hard to pick any winners though when the whole energy conglomerate continues to be beaten down like a red-headed step-child. I do like SND though.
MikeFromNZ profile picture
I suggest starting with the balance sheet.
MikeFromNZ profile picture
The way to pick winners is to first identify the survivors, and to identify the survivors you start with the balance sheet.
M
Dividend king MMM, is undervalued and it's a buy. Solid companies MMM, and CLX, good for DGI.
Trent Welsh profile picture
Yea, with the large market cap and limited mask revenue, one of the reasons I bought MMM was its past underperformance and high dividend yield. A turnaround in some key numbers this year and some mask headlines and highlights could get it back to a more traditional valuation later in the year. If not, I'll enjoy the lucrative dividend :). Cheers.
Long-Short Manager profile picture
I feel like last week was phase 1, where the market went from complete denial that it would have any impact on US demand (and that it was purely an Asian phenomenon) to pricing in some slow down here. However, it doesn't feel like a US contagion/changes in consumer behavior and the feedback effects of layoffs in all travel related sectors have quite been priced in yet. This is mostly because a low level of testing has led to about a 6-week lag between when it first started circulating in Washington state and case counts in the US. Just take a look at daily flights to Seattle from all the different locations that have direct flights to seattle within the US. At this point they are potentially at the same phase that the Seattle area was at 4-5 weeks ago. As testing ramps up everywhere, we will probably see those little dots cover more and more states and grow into larger circles. Today's bounce is supposedly on Fed rate cut talk.
Trent Welsh profile picture
Yep, overnighters thought maybe an emergency fed rate cut was incoming but hasn't hit so far. Stocks still rallying which is nice to see. Will have to see how behavior changes when NY and other big cities get up to hundreds, thousands, or even 10's of thousands of cases. Don't think it will be full on panic in 99% of places, but it is hard to estimate the level of human irrational behavior in times of uncertainty.
u
Was ready to buy more CLX until it popped up 6+% this morning.
Trent Welsh profile picture
Yea, timing is hard to predict and always hard to pull the trigger after a big move. I just see CLX raising numbers next quarter when most companies might be dropping numbers as the coronavirus most likely will spread across the U.S. With less than $1.5B in revenues last quarter, might be some nice upward numbers and revisions as every school, business, and home in America (plus global sales) stocks up on Clorox wipes and bleach this quarter even after CLX's run today. Next quarter might be grand indeed compared to what the market does, although I see coronavirus as a 3-6 month issue for the U.S. before things settle down. Time will tell.
e
em72
03 Mar. 2020
Let us sincerely hope that every American home, school and business are not required to stock up on Covid-19 protection.

I could not bet on the loss of American lives.
Trent Welsh profile picture
Cleaning supplies are a preventative. buying tons of wipes and bleach should help contain the spread and prevent lives lost. It is not a bet on lives lost but on lives protected. Its the super flu so going to go around most of the globe I would think before it is over if it is ever over. Just being realistic. This isn't SARS or EBOLA that can be easily contained.
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Related Stocks

SymbolLast Price% Chg
CLX--
The Clorox Company
MMM--
3M Company

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