Our (almost) end-of-year portfolio:
Taxable accounts:
61% individual equities, 39% cash/CDs less estimated tuition obligations
Retirement accounts:
73% equities (91% individual equities, 9% funds), 8% real estate and REITs, 15% TIAA Guaranteed Annuity, 4% cash/ITM covered calls.
Utilities (10%): DUK, ED, ES, NEE, PEG, WEC (roughly equal weighted)
Consumer Staples (16%): WMT, NSRGY, PG, PEP, UL, KMB, MKC, CHD, HRL, DEO
Health Care (20%): JNJ, CVS, UNH, BDX, AMGN, SYK, MRK, MDT, ABT
Consumer Disc. (8%): NKE, LOW, MCD, AMZN
Communications (6%): GOOG, FB
Industrial (11%): RTX, UNP, MMM, LMT, HON
Tech (15%): AAPL, MSFT, CSCO, TXN, INTC
Financials (7%): ADP, BRK.B, V, JPM
Real Estate (8%): TIAA Real Estate Acct (40%), DLR, WPC, O, SPG
Positions eliminated this year: T, D, WTRG, HD, PFE, SO, SYY, GWW, VWO
Positions added this year: ABT, AMZN, CHD, ED, ES, FB, LMT, LOW, MKC, MCD, PEG, V, WMT
Commentary:
- Exited T on March 23, on quality downgrades. Took a small capital loss that was offset by dividends received. Glad to be free of that dog, I'll let others gamble on a rebound as they struggle to find a form for the company that can grow. Added FB in this sector.
- Replaced D, SO, and WTRG with ED, ES, and PEG. Largely driven by quality metrics in this, as I'm not looking for much growth from this sector. (Obviously my new selections won't show much of that, though a couple of my other utility holdings might.)
- Swapped HD for LOW. The two businesses are very similar, and at this time I believe the valuation/growth favors LOW.
- Swapped PFE for ABT to shift the balance a little from pharma to devices. Both businesses have benefited from COVID demand so it is somewhat a neutral move in that regard.
- Swapped SYY for MCD, based on quality/outlook. SYY is weaker than before the pandemic, and I did not feel that was adequately reflected in the price discount.
- Swapped GWW for LMT on valuation and yield. GWW was never really in my wheelhouse, but it was too good a bargain to pass up when I bought it.
- Added smaller positions in AMZN, CHD, MKC, V. I want these quality companies in my portfolio, and as the market was topping this year it gave me the opportunity to initiate positions without sacrificing too much value.
- Added WMT this week on strength and value.
Concerns, such as they are:
- AAPL is 5.1% of the portfolio, more than I am comfortable with given the valuation and yield. Struggling to sell any given the capital gains tax the sale would incur at this point.
- NKE is 3.6% of the portfolio, working to trim it through options (thus far I've covered the options profitably on dips but eventually the shares will be called away)
- Sooner or later I want to swap back from LOW to HD, or more likely split the position between the two.
- CVS and UNH are now both top-12 positions. Love both companies, but that is too much exposure in that industry.
Metrics as calculated by SSD:
- 1.96% yield
- 0.74 Beta
- 94% likely safe, 4% borderline (SPG, JPM), 2% unrated (VXUS)
- 6.5% 5-year dividend growth
- Projected income comfortably exceeds our target for April 2022.
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