Stock Portfolio Update: New Longs Added & Defensive Names Still Performing
By: Christopher Mistal
November 15, 2018
Of the six combinations of political alignment possible for the White House, the House of Representatives and the Senate, the best combination for DJIA from 1949 through the end of 2017 has been a Democrat in the White House and Congress controlled by the Republic Party with average annual gains of 16.1%. Second best was a Republican in the White House with a Republican Congress at 15.6%. Both of these results compare favorably with the average performance in all years of 8.6%.
[DJIA Historical Average Returns with Republican President]
Over the same time period, the worst combination for DJIA performance was a Republican President and full Democratic control of Congress with an annual average gain of just 4.9%. Under a Republican President and a split Congress, which is the current situation, DJIA has averaged gains of 6.7%. This is neither the best nor the worst historically and considering the age of the current bull market perhaps quite acceptable for the next two years.
Stock Portfolio Updates
Over the last two weeks since last update, S&P 500 slipped 0.4% through yesterday’s close. Russell 2000 was 0.6% lower over the same time period. Overall, the entire Stock Portfolio slipped 1.1% excluding any dividends or trading fees. Mid-caps were hit the hardest, down 4.0%. Small-caps were second worst dipping 0.5%. Our Large-cap portfolio, with the largest concentration of defensive stocks, gained 0.2%. Compared to the S&P 500, the overall portfolio lagged due to the recent pullback and the addition of all of last week’s new stocks.
All twenty new ideas in our November Stock Basket were added to the portfolio on November 9. Buy limits for the new positions were not far above or below current prices at the time as a multi-day streak of market declines did not appear highly possible. However, that is exactly what transpired and all 20 new stocks are currently in the red. 
Lumentum Holdings (LITE) is the worst performer of the basket and was stopped out on November 12. The catalyst for the steep single-day decline was an announcement from management that it was cutting its guidance after a large and substantial customer requested its order be reduced. The cut in second-quarter 2019 guidance for revenue and earnings was quite large at nearly 20%. Margins were also guided lower. In light of this recent development, we will pass on LITE.
Of the remaining 19 new stock trade ideas in last week’s basket, all can be considered at current levels up to their respective buy limits. 
June’s basket of Defensive Stocks continues to perform well. Gains in the Large-cap section of the portfolio came nearly entirely from defensive positions and were sufficient to offset the mild declines recorded by the addition of new positions. Of the original 21 stocks selected fifteen are still held. Fourteen are positive with an average gain of 14.1%, one is negative (Conagra (CAG)) and five were stopped out. Including the stopped positions, the basket’s average performance is 7.9% compared to a loss of 2.9% by S&P 500 over the same time period excluding any dividends.
The best performing defensive position is still McCormick & Company (MKC), up 39.4% as of yesterday’s close. Second best is Church & Dwight (CHD) up 31.7% at yesterday’s close. AQN, NJR, OGS, ABT, AEE, CMS, EXC and UGI are up double-digit.
There are three positions in the Large-cap section that are going to be closed out. Sell Altria Group (MO), Sysco (SYY) and Conagra (CAG). All three have declined over the last two weeks and appear to be shaky ground. For tracking purposes all three will be closed out using their respective average prices in Friday, November 16.
All remaining defensive positions and longer-term holdings are on Hold. Please see portfolio table below for Current Advice, Stop Losses and Buy Limits where applicable.
[Almanac Investor Stock Portfolio – November 14, 2018 Closes]