Stock Portfolio Update: Defensive Basket Outperforms
By: Christopher Mistal
August 09, 2018
NASDAQ just successfully extended its daily winning streak to eight consecutive days. DJIA, S&P 500 and Russell 2000 have not been as strong over the same period. On the surface NASDAQ’s strength is impressive, but it still has failed to eclipse its recent all-time closing high from July 25. And based upon the following Advance/Decline line chart, it could have some trouble doing so in the immediate future.
[Advance/Decline Line Chart]
Since reaching a peak in mid-July, Advance/Decline lines for NASDAQ and Russell 2000 have been trending lower with the occasional blip higher. This is confirmation that the rally is narrowing and fewer and fewer stocks are actually advancing. The divergence between NASDAQ and Russell 2000 compared to NYSE and S&P 500 is another area of concern as it could be an indication that investors and traders could be rotating to more defensive areas of the market.
Stock Portfolio Updates
Over the past three weeks since last update, S&P 500 climbed 1.5% through yesterday’s close. Russell 2000 slipped 0.3% over the same time period. Overall, the entire Stock Portfolio climbed 0.3% excluding any dividends or trading fees. Mid-caps performed the worst falling 0.2%. Large-caps were best adding 1.4% while Small-caps edged higher by 0.2%. Compared to the S&P 500, the overall portfolio’s performance lagged due to a still sizable cash position and three positions being stopped out.
June’s basket of Defensive Stocks is performing nicely. Of the 21 stocks selected eighteen are positive, one is negative and two were recently stopped out. Including the stopped positions, the basket’s average performance is 4.7% compared to a gain of 2.7% by S&P 500 over the same time period. TE Connectivity (TEL) is the worst laggard still held in the portfolio, off 4.3%. This is a modest improvement from last update’s 6.6% decline. Intel (INTC) and Western Digital (WDC) were both stopped out on July 27. INTC has recovered modestly, but WDC is even lower now.
Of the nineteen remaining defensive positions, five are up double digits. The best performing position is still McCormick & Company (MKC), up 14.5% so far as of yesterday’s close. Not far behind is Church & Dwight (CHD) up 12.5%. You may not immediately recognize this company, but chances are you have at least one of their products in your home at this moment and possible more. Some of its brands include: Arm & Hammer, Oxiclean, Nair, Orajel, First Response, Waterpik and Trojan.
Global Brass and Copper Holdings (BRSS) recent struggles with the decline in copper price came to an end when they reported Q2 earnings a week ago. Solid earnings results along with a 50% increase in their quarterly dividend and the announcement of a share buyback program was more than enough to end the recent retreat in share price. BRSS climbed 14.8% since last update as a result.
Thus far, the market has proven to be quite resilient, but it is still early August and midterm elections are still about three months away. Tariffs, the Fed or some yet unknown geopolitical issue could still spark a meaningful pullback during this historically unfavorable time period. 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 – August 8, 2018 Closes]