ELV - Compounders And Dividends: February 2023 Watch List Update

Summary

• Three companies have been removed from my watchlist and added to the active portfolio.
• I added four new companies to my watchlist.
• I list the companies I'm most closely following over the next few months.

While I have typically done my watchlist article bi-monthly, it appears to be one of my more popular article topics. Given that, and the speed at which my watchlist can change, I'm going to publish these a bit more often (so instead of 6 updates a year, I may shoot for around 8-9).

The best place to start to understand my watchlist in general is my " Building A Watchlist " article followed by my January 2023 Update . As a reminder, here is how I'm finding companies to add to my watchlist:

1. Articles here on Seeking Alpha from authors/stocks I follow (can come from their own portfolio updates, articles they write on certain companies, or articles about companies mentioned in articles about companies I own)

2. Listening to investors on podcasts (Yet Another Value Pod, Acquired, AMM Dividend Growth, Business Breakdowns, Dividend Cafe, Invest Like the Best, Masters in Business, Odd Lots, and Chit Chat Money are the ones currently in my feed)

3. General business sources, including the WSJ, Financial Times, and Barron's

4. Talking with friends

5. Following 13Fs

6. Listening to my wife/buy what you know

Just because a company is on my watchlist doesn't mean I like the current price or I'd purchase it today. A company being on my watchlist means one of two things: I love the business and I want to own it one day or this is a very intriguing company and due diligence is needed. I don't separate the two distinctions below, but I can if that's something readers are interested in.

For reasons somewhat out of my control, my portfolio underwent another change in early February. I'll discuss that more in my February update, but the quick takeaway is that I gained more responsibility at work which has me touching the REIT sector. I was not asked to sell my REIT shares, but to avoid any potential ethical/compliance issue, I went ahead and divested all of my REITs. It was the correct decision, and thankfully I had an idea that may happen at the end of 2022, I just didn't realize it would happen 2 months later. The dry powder unlocked let me move a few companies that were on my watchlist to my active portfolio and add more to some existing positions (all of which will be detailed in my early March portfolio update).

On to the removals and additions to my watchlist.

Watchlist Removals

• Carrier Global ( CARR ) (called up to the big leagues)

• Northrop Grumman ( NOC ) (called up to the big leagues)

• Otis Worldwide ( OTIS ) (called up to the big leagues)

My watchlist underwent significant pruning at the end of 2023 and I removed all of the companies I did not believe to be of the highest quality. With the low hanging fruit gone, the only removals we see in this update are the companies that "graduated" to my active portfolio. CARR, NOC, and OTIS are three high quality, shareholder friendly companies. I'm excited to be partnered with them long-term. I'll discuss these three more in my February 2023 portfolio update,

Watchlist Additions

• Broadridge Financial ( BR )

• Heico ( HEI )

• SJW Group ( SJW )

• Watsco ( WSO )

From various sources, I have gotten interested in these four companies and have decided to add them to the watchlist. While the order presented is alphabetical, it's also ranked according to my interest in the companies.

BR is an early aughts spin-off from ADP, one of my favorite companies. A leader in investor communications, BR has large structural advantages and is positioned well for future growth. Any time a proxy contest is being run, BR is cashing in. BR is a company I've long been interested in, but for some reason it wasn't on my watchlist.

HEI came of interest from my research in TDG. Both companies supply niche products to the airline industry, a fantastic business. HEI is culturally similar to TDG and it's a company I'd love to add to the portfolio. HEI and TDG always appear to be expensive (and for good reasons, they are long term compounders) so I'll likely only add when there is a significant downturn in the company (although that would likely mean a broad market downturn which would make several of my current holdings attractive) or I may add via dividend reinvestments.

SJW is a high quality water utility. My only current utility holding is [[NEE]], and the only other utility on my watchlist is [[CEG]]. All three are low-yielding fast growth utilities, and the three would give me an interesting exposure to renewable-nuclear-water.

WSO is a company one of my favorite writers on Seeking Alpha ( Heavy Moat Investments ) has written about a number of times . While I decided to go with CARR for my first purchase in the space, I would love to buy WSO at some point in the future.

Watchlist

Below is my watchlist of stocks, grouped by my five buckets:

The top companies I'm watchlist closest with anticipation of possibly adding to my portfolio over the next few months are (in no particular order):

• Stryker Corporation
• Constellation Energy
• UnitedHealth Group
• Thermo Fisher, Inc.
• Fair Isaac Corporation
• Berkshire Hathaway
• McKesson Corporation

This group has changed, and will change, in most iterations. These are the companies, at the moment of writing, that I'm most interested in. A bad earnings report or another opportunity could bump a company up or off my list.

Conclusion

Are there some high quality companies I'm missing from my watchlist? Let me know in the comments section. For my most current portfolio, check out my January 2023 Portfolio Update .

For further details see: