Stock Portfolio Update: New Longs Struggle While Defense Continues to Shine
By: Christopher Mistal
December 13, 2018
Over the last four weeks since last update, S&P 500 declined 1.9% through yesterday’s close. Russell 2000 was 3.1% lower over the same time period. Overall, the entire Stock Portfolio slipped 0.2% excluding any dividends or trading fees. Mid-caps were hit the hardest, down 2.7%. Small-caps were second worst off 1.4%. Our Large-cap portfolio, with the largest concentration of defensive stocks, gained 6.7%. Compared to the S&P 500, the overall portfolio outperformed due to gains made by defensive positions added in June.
Recent market volatility has proven to be a challenge for our November Stock Basket. Of the original 20 stocks, eight have been stopped out. Lumentum Holdings (LITE) was the first to go in early November. Since then, Tillys (TLYS), Granite Construction (GVA), Kemet Corp (KEM), Range Resources (RRC), Unit Corp (UNT), HollyFrontier (HFC) and TJX Cos Inc (TJX) also closed below their respective stop losses and have been closed out of the portfolio. RRC and HFC were likely pressured lower by the decline in crude oil price. TLYS actually reported better than expected earnings, but revenues were apparently less than analyst estimates which was all the reason needed for shares to drop 29% in just four trading sessions.
Of the remaining positions from November’s basket, large-cap positions have been holding up the best. CDW Corp (CDW) had a modest 1% gain at yesterday’s close but surrendered it today. BRO, EPD, EXPE, EXPD and PAA are down single-digit since being added to the portfolio. Mid- and small-cap positions that still remain are slightly weaker with most off double-digits. Should the market find its footing in mid-December, like it has in many past Decembers, then these losses could quickly be recovered.
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 other positions. Of the original 21 stocks selected thirteen are still held and all are positive with an average gain of 19.9%.Including the stopped and closed positions, the basket’s average performance is 10.2% compared to a loss of 4.7% by S&P 500 over the same time period excluding any dividends or fees.
The best performing defensive position is still McCormick & Company (MKC), up 46.2% as of yesterday’s close. Second best is Church & Dwight (CHD) up 36.4% at yesterday’s close. Mondelez (MDLZ) and Southern Co (SO) are the only two defensive stocks that are not yet up double-digits.
Per last update’s advice, Altria Group (MO), Sysco (SYY) and Conagra (CAG) were all closed out of the portfolio using their respective average prices on November 16. All three are lower now than then so those sales could be considered timely.
All positions in the portfolio are on Hold. Should market volatility subside around mid-December we will consider unwinding remaining defensive positions and entering new long positions. Please see portfolio table below for Current Advice and Stop Losses.
[Almanac Investor Stock Portfolio – December 12, 2018 Closes]