Stock Portfolio Update: Defensive Sector Positions Start Paying Off
By: Christopher Mistal
July 19, 2018
Over the past four weeks since last update, S&P 500 climbed 1.7% through yesterday’s close. Russell 2000 slipped 0.9% over the same time period. Overall, the entire Stock Portfolio climbed 0.5%. Mid-caps performed the worst falling 1.5%. Large-caps were best adding 5.7% while Small-caps edged lower by 0.2%. Compared to the S&P 500, the overall portfolio’s performance lagged due to a still sizable cash position and declines by small- and mid-cap positions.
Last month’s basket of Defensive Stocks is performing as expected for the most part. Of the 21 stocks selected sixteen are positive while five are lower. Four of the five decliners are from the Computer and Technology sector and can be found in the large-cap section of the portfolio. TE Connectivity (TEL) is the worst laggard, down 6.6%. Overall, technology has been leading for much of the year and these positions will likely turn around. The other laggard in the portfolio table is Algonquin Power (AQN) from the utilities sector. AQN climbed 2.7% today.
Of the sixteen positive defensive positions, ten of them are up more than 4.5% since being added to the portfolio a little over one month ago in mid-June. The best performing position is McCormick & Company (MKC), up 10.9% so far as of yesterday’s close. This “boring” old company in the spice and flavor market reported better than expected quarterly results on June 28 that triggered the rally in its shares.
Copper’s rout caught up with Southern Copper (SCCO) resulting in the third oldest holding in the portfolio being stopped out. SCCO had more than doubled while being held in the portfolio so after closing out the remaining half position a total gain of 97.5% was realized excluding any dividends or trading fees. Global Brass and Copper Holdings (BRSS) has also retreated with copper, but has held up better because of its use of recycled materials and the value-added nature of their products.
Historically speaking, the best part of July for the market has passed and we are now officially in the Worst Four/Six Months of the year. In an average year, trading volumes generally dry up and the market meanders until sometime in late Q3 or early Q4. In midterm years, the tendency has been to drift lower under the pressure of unfavorable policy initiatives and political uncertainty surrounding Election Day. Cash and defensive positions held in the portfolio can provide some level of protection during this period. All positions in the portfolio are currently on Hold. Please see portfolio table below for updated stop loss suggestions.
[Almanac Investor Stock Portfolio – July 18, 2018 Closes]
Disclosure Note: At press time, officers of the Hirsch Organization, or accounts they control held positions in ABT, AQN, BUSE, INTC,KLAC, LRCX, MKC, MO, ORBK, TEL, WDC. They did not hold any positions in the other stocks mentioned in this Alert, but may buy or sell at any time.