Stock Portfolio Updates: Cash & Defense Payoff as Worst Months Selloff Accelerates
By: Christopher Mistal
October 11, 2018
Today was the sixth consecutive day that the S&P 500 has declined. Over this six-trading-day span S&P 500 has declined 6.7%. Russell 2000 has also declined for six straight days. DJIA and NASDAQ logged modest gains on Monday to avoid the losing streak. The last time S&P 500 declined six or more days was in late October/early-November of 2016.  Since 1950, S&P 500 has suffered 118 daily losing streaks of six or more days. Sixty-seven of those streaks ended at six days. The average loss during those past streaks was 3.8%. The average gain the day that the losing streak ended was 0.83%. The smallest, streak-ending single day gain was 0.02% in February 1958 and the best was 4.01 in February 2009.
[30 Days Before and After 6-Day S&P 500 Losing Streak]
In the above chart the average performance 30 trading days before and the 30 trading days after the last 67 S&P 500 losing streaks lasting exactly six days has been plotted. The losing streak is easily identified. Historically, losses incurred during the decline took longer than 30 trading days to recoup. There is also a 56.8% chance, based upon history that S&P 500’s daily losing streak ends at six as 67 of the last 118 did.
Stock Portfolio Updates
Over the last three weeks since last update, S&P 500 dropped 4.2% through yesterday’s close. Russell 2000 shed 7.5% over the same time period. Overall, the entire Stock Portfolio slipped 0.8% excluding any dividends or trading fees. All three sections of the portfolio declined. Small-caps declined the least, just 0.1%. Mid-caps were lower by 0.7% while Large-caps declined 3.5%. Compared to the S&P 500, the overall portfolio outperformed due to a still sizable cash position and strength from a limited number of positions from June’s Defensive Basket.
June’s basket of Defensive Stocks is performing reasonable well. Of the original 21 stocks selected sixteen are still held. Fifteen are positive with an average gain of 10.8%, one is negative and five were stopped out. Including the stopped positions, the basket’s average performance is 4.4% compared to a gain of 0.1% by S&P 500 over the same time period excluding any dividends. 
After struggling much of its time in the portfolio, Kla-Tencor Corp (KLAC) plunged below its stop loss yesterday and was closed out of the portfolio at $94.30, its average trading price earlier today. Genpact Ltd (G) also closed below its stop loss on October10 and was closed out of the portfolio today. CBRE Group (CBRE) and TE Connect-LTD (TEL) were also stopped out earlier in the month. KLAC, G and TEL are all technology related and likely got wrapped up in the broad selloff currently underway. CBRE is in the Real Estate sector where housing sales have been slumping.
Of the remaining defensive positions, eight are up double digits. The best performing position is still McCormick & Company (MKC), now up 26.8% as of yesterday’s close. Second best is One Gas (OGS) up 19.2%. NJR, MO, AEE, CHD, CMS and UGI are also enjoying double-digit gains.   
During last month’s update, while the market was still climbing, we elected to maintain a defensive posture in the portfolio. At this juncture that decision has been confirmed. Several of the weaker positions in the portfolio have been stopped out, but other strong positions have held up or even climbed modestly so far during the current pullback. Continue to maintain a defensive position and heed stop losses until the all clear is sounded. All positions in the portfolio are on Hold
Please see portfolio table below for updated stop loss suggestions.
[Almanac Investor Stock Portfolio – October 10, 2018 Closes]