A few months have passed since introduction of the SF portfolio in November 2018. In that time market volatility went a bit crazy serving us some appealing investment opportunities. In the following I will go through all the transactions, covering my buys and sells during this period.
Before going into details, I would like to say a few words about the major change in my portfolio. In December 2018, I decided to exit all my index funds and focus entirely on individual stocks. The main reason for that adjustment lies in my overall goal: building a reliable passive income. I came to the realization that investing into dividend growth stocks is the best strategy to achieve it. Consequently I sold my ETFs and shifted the capital towards some high-quality dividend stocks.
On December 11, I have purchased 50 shares of Bank of America (BAC) for a total investment of €1,074.54 ($1,220.57)
Despite all the doomsday talk about banks and the threat of a recession, I was looking for an attractive candidate from the financial sector. BAC did meet my criteria. In retrospect, I couldn’t be more happier with this purchase. The banking giant showed true earnings power by reporting a solid result for Q4 2018. As a consequence, the share price appreciated by 20% starting from the date of the acquisition. Taking into account the good numbers for 2018, I do expect BAC to continue raising its dividend.
On December 20, I have purchased 12 shares of Altria Group Inc. (MO) for a total investment of €537.24 ($612.45)
MO’s share price continued to drop due to concerns about the declining cigarette market. Furthermore Altia’s investment in Juul (MO paid about $12.8 bil. for a 35% stake in the e-cigarette maker) was viewed rather critical by the market. However in my eyes, MO trying to diversify its earnings might be a smart decision going forward.
On December 21, I have purchased 3 shares of Allianz SE (ALV) for a total investment of €523.74 ($597.06)
Munich-based Allianz Group is a leading financial services enterprise that offers insurance and asset-management services. I am a big fan of insurance companies in general and of ALV in particular. Their third quarter numbers were pretty good. These included revenue increase of 8% and operating profit growth of 20%. Convincing enough for me to add to my existing position.
On December 21, I have purchased 4 shares of General Dynamics Corp (GD) for a total investment of €554.54 ($629.90)
General Dynamics is a Verginia-based manufacturer of submarines, armored vehicles, information technology systems, and business jets. GD is one of my favourite stocks from the aerospace and defense sector. It is well-diversified, has very little debt and owns a fantastic A+ S&P credit rating. Since GDs valuation has suffered due to overall market weakness, I have decided to reduce my cost basis by buying more shares.
On December 21, I have purchased 18 shares of JPMorgan Chase & Co (JPM) for a total investment of €1,556.54 ($1,768.18)
When doing the research for BAC, I emphasized the reasoning why I like big US banks. They do a great job growing deposits and earnings, reducing costs and returning value to shareholders through stock repurchases and dividend increases. And since the banking sector was underperforming the global index in 2018, the valuation has arrived at a very attractive level. Hence I believe JPM, as one of the largest financial institutions in the US, should be able to do well in the future.
On December 21, I have purchased 22 shares of AbbVie Inc (ABBV) for a total investment of €1,682.72 ($1,911.40)
ABBV is a real dividend growth monster! The healthcare giant has increased its payout by 10.9% for Q1 2018 and by 35.2% for the following Q2 2018. Last but not least, ABBV has raised its quarterly dividend for Q1 2019 by another 11.5%. How outstanding is that? Finally I was happy to see the share price dropping and decided to pull the buy trigger here.
On January 11, I have purchased 23 shares of Dominion Energy (D) for a total investment of €1,408.28 ($1,612.48)
Dominion Energy was my first purchase in 2019 and simultaneously my first holding from the utility sector. For sure, D is a prime example of a boring investment. I don’t expect rapid earnings growth here. However I do count with a stable and reliable performance over the long haul. Especially in volatile market environment, D has proven to be a great defensive investment.
SF portfolio snapshot
In the following you can see how my portfolio looks today (based on market value). Keep in mind, however, that this update is just a snapshot in time.
As of January 26, 2019, I’m invested in 29 companies.
The SF Portfolio has a total value of €46,933 ($53,504) and is expected to generate €1,786 ($2,036) in pre-tax forward annual income.
My TOP 3 largest positions are:
- Johnson & Johnson (MO): 6.15% (Healthcare)
- Allianz SE (ALV): 6.10% (Financials)
- Altria Inc. (MO): 5.43% (Consumer Staples)
Compared to the previous update, ALV is a new position in the TOP 3 ranking. More or less, this change is due to the purchase of ALV in December 2018 and also due to general capital reallocation. JNJs share decreased from 8.30% to 6.15%. MO moved from the second to the third place, as the share price continued to decline in the past month.
The sector allocation of the SF portfolio looks as follows (based on market value):
This is how the sector allocation looks like compared to the S&P 500:
Keep in mind, it’s not my goal to clone the allocation of the index. Nevertheless it’s good to have a reference point and see where the portfolio is heading compared to a wide index such as S&P 500.
As you can see, there are two major and one minor divergences to the index. First of all, the technology sector is still heavily underrepresented. Currently I’m invested in TXN, IBM and AVGO. Although it’s not my target to have an exposure as high as the S&P 500, the next purchase might be a company from the technology sector. In this regard, I do like AAPL (around $150), TXN (around $90) and SAP (around €80).
The second major deviation relates to the consumer defensive sector. For that matter, my portfolio has a much higher exposure than the S&P 500. However I don’t worry about it. I like the defensive nature of my holdings such as PEP, KO, UL or SBUX. These are some high-quality names that will do well no matter of the economic cycle. Nonetheless I have a full position here, with no plans to extend it.
Last but not least, the healthcare sector still shows a minor deviation compared to the index. At the moment I’m invested in JNJ and ABBV. Both of them are best in class businesses. While JNJ appears to be fairly valued, ABBV looks very appealing at the current price level. Since the share price dropped more than 6% on last friday, I’m considering buying more shares of this fast growing dividend stock.
All in all I’ve been very active reallocating funds lately. And there is no reason to wait on the side line. Benefiting from the market weakness in December, I’ve decided to re-invest the vast amount of available capital. It’s quite astonishing that we wait for good prices but are reluctant to buy, however, when these prices finally arrive. This reluctance is just another attempt to time the market, which is a poor strategy for a long-term investor. In this respect a very famous Chinese proverb always crosses my mind. It goes like this:
The best time to plant a tree was 20 years ago. The second best time is now.