2023-07-03 07:28:20 ET
Summary
- I update holdings and portfolio strategy for my Roth IRA portfolio, comprised of 60% CEFs (income positions) and 40% individual stocks (swing trades).
- My portfolio will generate $59.8k in tax-free distributions for the coming year, and I've closed 47 winning trades YTD (median gain 16.5%, median 8.9 months in the trade).
- I summarize sector performance and some sources used for stock selection and expected market price targets.
Ever since the weather broke this spring here in the Mid-Atlantic, I've spent a lot of my retirement time doing landscaping. I enjoy it, have been doing it for years, and it's something that most people in our group would rather leave to others like me to do. Managing my family's retirement investments is kind of like working the grounds: I enjoy the challenge and others are too busy to do it themselves.
Summary of the Portfolio History
This article is an update on my main retirement portfolio, as it's been quite some time since I last detailed that, and readers of my trading blog have requested an update. I started tracking my "Green's" portfolio (originally Green Dot Portfolio), which had a cost basis of about $75k, in fall 2017 here on Seeking Alpha. It's a dynamic portfolio in a Roth IRA, comprised of high-yield income investments (mostly Closed-end funds, or CEFs) and utilizing swing/position trading of individual stocks. In my articles over the years, I've shared how the portfolio is managed, and I've presented my holdings and trading results. Fast forward to now, mid-2023, and the portfolio is more than an order of magnitude larger. This has resulted from adding investments, primarily from rollovers from my tax-deferred retirement plan funds and continued annual Roth contributions, as well as income earned from distributions and trade profits, and unrealized gains.
Like working the landscape, my portfolio is improving through some dedicated effort. As a frame of reference, in 2021 the portfolio generated a total tax-free profit of $71.6k ($22k in distributions and $49.6k in trade profits), and in 2022 the portfolio generated a total tax-free profit of $103.7k ($46.8k in distributions and $56.9k in trade profits). The income portion of the portfolio has had an average annual distribution yield of about 8%, and the trading portion has averaged an annual gain on cost of about 20%. The win/loss relationship for my stock trades was 125/6 in 2021 and 142/5 in 2022. I rarely have losing trades because I typically am never forced to sell a stock.
Of course, the portfolio typically carries an unrealized loss over cost when markets are selling off, such as in 2022, and to the extent that I pay attention to that it seems to be in line with or better than the performance of the S&P 500. Those who have been readers over time know that I really don't pay much attention to unrealized losses. That's because I buy mostly known stocks (focusing on the S&P 500) when they are on sale, and they sometimes continue to decline until they find a bottom. So I am continuously "working" under-performers and then selling when they rotate to profits. As I detailed in my articles, I use some technical indicators (a real fan of charts) and also follow sector rotations.
So to be clear, the primary objective of my Roth portfolio is tax-free income (from distributions and through trading), as I have described my "pay me now" preference before . I am fortunate so far in retirement to not need to withdraw money from my portfolio, and hope to continue to let it grow, but my sleep well concept is knowing I will have a large and sustainable income stream.
Asset Allocation
My portfolio is comprised primarily of income investments (CEFs, REITs, and income stocks) and other individual stocks, as well as cash. For simplicity, I'll separate my funds from all other stocks and, on that basis, my portfolio currently includes 61 CEFs (59.3%), 117 individual stocks including 1 preferred (39.2%), and a cash reserve (1.5%). So I have a different "60/40" portfolio.
I often get a reaction that the portfolio is too large, too difficult to manage, and so on. I manage 10 retirement accounts (and advise others) and do plenty of landscaping and other stuff, so the time requirement is reasonable. But without some attention, my portfolio garden could become "weedy" with a loss of function.
Portfolio size is not the result of an attempt at "diversification" as many think of it. When I wrote monthly updates on the portfolio, it was obvious that the portfolio was always diversified but that the sector composition changed continuously. The portfolio is very large because this is my primary means to manage risk. I hold mostly moderate-sized positions so that I never have to worry about any one, two, or three stocks or funds being in the red. Regarding position sizing, based on cost of investment, the mean CEF is about $9.8k and the mean stock is about $3.4k, for a portfolio mean of $5.6k.
I explicitly try to take advantage of known names in sectors that are under-performing the S&P 500, so if Utilities and Financials are selling off, then I will load up on them. When the sectors rotate to out-performing, I'll sell many of them and move on to the other weaker sectors and stocks. I've described how I use this "continuum of performance" concept within and among sectors in more detail in previous articles. With a larger investment, risk management results in a large and indirectly diverse portfolio because position sizing is my primary risk management tool .
Income, or Paying Me Now With CEFs
I won't defend why I use CEFs here, as I've done that before. I get that many people think that they are all losers and I just say, "to each his own." I buy CEFs mostly when on sale (discount to NAV) and I'm getting growing total returns as a group of assets. As I've shown before, from 2010-2020 the CEF CSQ (which out-performed the S&P 500) paid about 28% of its total return in distributions, compared to about 8% for the SPY. Readers know that I hold a less-popular view that markets have been pumped by huge amounts of public debt, are increasingly volatile (too much noise), and are distorted by increasing use of derivatives and inexperienced traders. It's a complex and un-predictable game.
So I am generally not a fan of buy-and-hold, especially given that in just the past 5 years we've had 3 major selloffs (4Q 2018 correction, 2020 COVID recession, and the 2022 bear market). I prefer to navigate the shorter-term ups and downs of market prices and get paid along the way. Even with rebounding markets through this first half of 2023, the S&P 500 (using the ETF, SPY ) is still down -7.6% from its high 18 months ago. The 5 year weekly chart below for the SPY shows the 2020 COVID recession and the strong bull market recovery. For 2022 the market retraced 50% of the COVID uptrend, as shown by the Fibonacci sequence. In 2023, the resistance trendline for the bear market channel finally failed. Shorter-term, the recent uptrend is rather steep, is getting overbought, and is taking place on mediocre volumes, which keeps me cautious.
Price chart for the S&P 500 (SPY) (author)
CEF Portfolio
My income portfolio currently consists of nearly 39,300 shares across 61 CEFs for 59.3% of the total portfolio by cost. The allocation across CEFs by cost varies considerably, from <$1k to nearly $40k. The largest 10 CEFs comprise 39.8% of total CEF investment (and 23.6% of total portfolio cost), and the top 20 comprise 63.6% of CEF cost. For all CEFs, the median number of shares is 577 (the mean is 646), with a range of from <50 to >3,100 shares.
For much of the past year, many CEFs have traded at greater than average discounts to Net Asset Value, which presented an opportune time to add shares. The 5 largest CEF adds to my portfolio over the past 6 months were: UTG (250 shares), BDJ (823 shares), UTF (286 shares), RQI (532 shares), and USA (721 shares), for a total investment for these 5 at $31k.
Currently, the 10 largest CEFs in my portfolio by cost are:
- Reaves Utility Income ( UTG )
- BlackRock Science and Technology Trust ( BST )
- BlackRock Enhanced Equity Dividend ( BDJ )
- DoubleLine Income Solutions Fund ( DSL)
- Cohen & Steers Quality Income Realty ( RQI )
- Tekla Healthcare Investors ( HQH )
- Liberty All-Star Equity ( USA )
- Royce Value Trust ( RVT )
- BlackRock Health Sciences Term Trust ( BMEZ )
- Cohen & Steers Infrastructure Fund ( UTF )
The ticker symbols for the next largest 15 CEFs in my portfolio by cost are: DLY , HTD , PDO , BIGZ , EMD , GDV , EOS , LDP , BSTZ , BIT , RMT , CSQ , ECAT , HYT , and STEW .
The Reaves Utility Income Fund is my largest CEF and largest portfolio holding, but even then is only 3.97% (not including cash) of my portfolio. Although I traded a small position in this name before 2020, my current position was opened in late July 2020. I added over time as price came in, with a low buy last October at $25.05. The chart below is a 15 year monthly chart generated from my TD Ameritrade 'thinkorswim' platform. The red horizontal line is my low cost, and the gold horizontal line is my average unit cost (now $31.11), which is -11.86% below the last close at $27.42. On a relative basis, the current price is at the lower end of the trading range over the past 10 years. UTG typically trades close to its NAV, for which the 52-week value is higher at $29.06. So I continue to find this of interest, especially below the $27 level.
UTG 15 yr. price chart (author)
From an income perspective, UTG is attractive, paying 8.32% at current cost. Since opening the position in mid-2020, I've collected nearly $3,400 in distributions, equal to 71% of my current unrealized loss on the position. But what I like is that this is a good sector play, and for 2023 the Utilities sector has been the 3rd worst performing among the standard 11 S&P 500 components, down -3.78% compared to a gain of 15.91% so far for the S&P. This is the 6 month ranking of sector performance v. the S&P 500:
Sector Performance vs. S&P 500 (TD Ameritrade)
I expect that Utilities will eventually out-perform and if so would see a gain of $10+ per share to reach previous highs. With 1,275 shares now, my current unrealized loss would easily flip to a very good unrealized gain on cost, in addition to the distributions. I would likely take some profits off the table then. Also, as I've described previously, I swing trade component stocks in the sector and UTG, and so have captured price gains far in excess of the index's and UTG's yield. In 2022 I closed trades in SBR , CEG , EXC , ED , LNT , SRE , and ATO all for +30% not including dividends. Reliable income from CEFs while on sale, and swing trades to play the price volatility of individual stocks, are how my portfolio garden continues to grow.
With my large CEF mix, I'm not concerned about concentration risk, although I like the REITs, Energy, and the Healthcare sectors in addition to Utilities. I continue to add to these as long as I can lower my unit cost, which is my main management tactic for opened positions. If the discount opened further, my top choice for adding to CEFs at this time would be the Calamos Strategic Total Return Fund ( CSQ ), which I consider best-in-class for CEFs. It has an asset mix (stocks, preferreds, bonds and convertibles), increasing covered distributions since the Great Recession, decent super-sector and sector breadth, some geographic coverage among developed nations (74% U.S.), and solid performance with annualized total 3, 5, and 10 year returns on price of 14.60%, 11.76%, and 13.00%, respectively, according to data as of 6/30/23 from CEFConnect . The graphic below is the distribution history for CSQ, which is currently trading at a discount of -0.81% and paying an income-only distribution of 8.34%. But my current unit cost for CSQ is $14.18 compared to the June close at $14.75, so I need to wait before adding.
Distributions for CSQ (CEF Connect.com)
Using the TD Ameritrade "Income Estimator" tool, the estimated distributions for my 61 CEFs for the coming 12 months is $45,343, with an average annual distribution yield of 8.57%, as presented in the graphic below.
Estimated annual income from CEFs (author using TDAmeritrade tool)
CEF income is 75.8% of the total estimated portfolio income of $59,820 for the next 12 months. The overall portfolio yield is 7.31%. From using this tool, I've found that income is usually higher than the estimates, due to compounding and some special distributions.
estimated income for total portfolio (author, from TD Ameritrade Income Estimator tool)
By the end of June, I have actually collected >$27.8k in distributions of all types, of which $21.1k was from CEFs. Overall, I consider that CEFs are the "income engine" of my retirement portfolio, all tax-free in my Roth. Unless the market is at new highs, I DRIP the distributions, allowing for accelerated compounding.
I've held a good number of CEFs for 5-7 years now and some of these are the larger positions. As some of these sold off heavily in 2022, I'm still down on cost but have collected distributions over those years. Also, during the 2022 bear market I opened positions in a good handful of CEFs that were on sale, and so some of those are currently my most profitable. The 10 most profitable CEFs in the portfolio, up by an average of 8.5% on cost, are: NBXG , AIO , GAB , IFN , FFA , STEW , ETY , ETO , EOI , and RNP . The 10 least profitable on cost (unrealized losses) are: BIGZ , BSTZ , DSL , NPCT , EMD , HQH , PDO , PDI , BMEZ , and BST . These all are down a lot from highs for various reasons, including tech concentrations, leverage and interest rate sensitivity, fund launch near markets highs in late 2021, investor sentiment, etc. Even when CEFs are down in price, those prices are mostly discounts to the higher portfolio values of the funds (the NAVs), and I expect that prices will recover in time as investor sentiment re-aligns with fund value.
Overall, as of 6/30/2023, the unrealized gain/loss for my 61 CEFs is -11.8% on cost (not including distributions). Nineteen (31.1%) are profitable, 16 (26.2%) are down <10%, 13 (21.3%) are down 10-15%, and 13 (21.3%) are down >15%. Across the set, 34 (55.7%) of the CEFs are either profitable or have distribution yields greater than the unrealized loss. Like stocks, I buy and add to many of my CEFs when they are under-performing, so I expect that some will take some time to regain their footing. On whole, few are meeting payouts with "destructive" Return Of Capital [ROC]. On the other hand, some CEFs such as BDJ, DSL, PDO and PDI, and RQI and RNP paid "specials" this past December or January.
In addition to CEFs, many of the individual stocks in my portfolio pay dividends. I have one preferred stock, a Brookfield Property Preferred ( BPYPM ), which I include in my Financials sector data.
Closed Stock Positions
For the first half of 2023, I closed 47 winning stock trades and 2 option premium trades.
The option trades were small and resulted in a net loss of less than $125. On 2/9/23 I sold to close Puts for SLV with a strike of 19.0 and expiration on June 16, for a net gain of about $175 (+53.7%) for 16 days in the trade. On June 16, my UNG Calls with a strike of 12.0 expired worthless for a net loss of just under $300. The UNG trade was actually profitable within 2 weeks, but I failed to close the trade. I described these in more detail in my trading blog .
The 47 stock trades resulted in a net gain, not including dividends, of >$14,300, for a total gain on cost of +14.7%. The median gain was +16.48% for a median time in trade of 8.9 months (+22.22% annualized). The cluster of trade gains in the 10-30% range and held from 5-15 months is shown in the plot below. The trade for JPM (highest profit) was removed to make the rest of the data more readable.
chart of gain and time relationship for closed trades (author)
The variation in position sizes somewhat masks the number of high gain trades realized for a short hold time. Twelve of the trades were for a profit (not including dividends) of >20% with a time in the trade averaging only 4.8 months. In the table below, selected data is presented for the 47 stock trades, including ticker symbol and name, average unit cost, share sell price, % gain, trade close date, and months in the trade. The list is long and other details such as technical chart set-ups, sector, ratings, and my reason for the trades are often provided in the trading blog, both for opening and closing of the trades. This table displays the stocks alphabetically.
Symbol | Description | Unit Cost ($) | Sell Price ($) | % Gain | Close Date | Mo. Held |
ADBE | ADOBE INC | 373.83 | 465.80 | 24.60 | 6/12/2023 | 14.7 |
AKAM | AKAMAI TECH INC | 77.09 | 87.10 | 12.99 | 5/17/2023 | 3.0 |
ALGN | ALIGN TECH INC | 314.89 | 340.99 | 8.29 | 2/2/2023 | 9.4 |
AMZN | AMAZON COM INC | 86.07 | 115.35 | 34.02 | 5/17/2023 | 6.6 |
ATO | ATMOS ENERGY CORP | 87.27 | 119.00 | 36.36 | 2/1/2023 | 24.7 |
AWK | AMERICAN WATER WORKS CO INC | 138.01 | 160.75 | 16.48 | 1/9/2023 | 8.0 |
CE | CELANESE CORP | 104.30 | 118.50 | 13.61 | 1/9/2023 | 6.6 |
CHD | CHURCH & DWIGHT INC | 71.77 | 90.65 | 26.30 | 4/12/2023 | 6.4 |
COF | CAPITAL ONE FINANCIAL CORP | 95.00 | 123.00 | 29.47 | 2/2/2023 | 4.4 |
CP | CP RAILWAY | 69.57 | 80.20 | 15.27 | 1/23/2023 | 18.5 |
CRM | SALESFORCE INC | 183.90 | 186.00 | 1.14 | 3/1/2023 | 13.7 |
CTLT | CATALENT INC | 45.85 | 57.00 | 24.30 | 2/2/2023 | 3.1 |
CTSH | COGNIZANT TECH SOLUTIONS CO | 53.76 | 66.25 | 23.23 | 1/12/2023 | 3.3 |
DOV | DOVER CORP | 127.84 | 151.72 | 18.67 | 1/31/2023 | 8.9 |
DOW | DOW INC | 48.03 | 55.50 | 15.55 | 1/9/2023 | 6.4 |
EQIX | EQUINIX INC | 654.38 | 715.38 | 9.32 | 1/12/2023 | 22.6 |
EXAS | EXACT SCIENCES CORP | 64.41 | 70.00 | 8.68 | 2/3/2023 | 20.7 |
FBIN | FORTUNE BRANDS INNOVATIONS | 54.97 | 62.40 | 13.52 | 1/9/2023 | 8.7 |
FDX | FEDEX CORP | 168.17 | 191.75 | 14.02 | 1/9/2023 | 3.8 |
GIL | GILDAN ACTIVEWEAR INC CL A | 26.75 | 30.75 | 14.95 | 1/12/2023 | 2.1 |
GNRC | GENERAC HOLDINGS INC | 92.57 | 115.80 | 25.10 | 1/18/2023 | 1.4 |
GOOGL | ALPHABET INC-CL A | 93.38 | 120.75 | 29.31 | 5/17/2023 | 8.1 |
IFF | INTL FLAVORS & FRAGRANCES I | 98.12 | 112.00 | 14.14 | 1/9/2023 | 3.8 |
JPM | JP MORGAN CHASE & CO | 86.49 | 138.50 | 60.13 | 1/9/2023 | 32.0 |
KTCC | KEY TRONIC CORP | 6.11 | 6.49 | 6.28 | 2/2/2023 | 17.5 |
LYB | LYONDELLBASELL INDUSTRIES N | 80.59 | 97.50 | 20.99 | 2/1/2023 | 6.9 |
MA | MASTERCARD INC -A- | 317.37 | 372.99 | 17.53 | 1/9/2023 | 14.2 |
MAS | MASCO CORP | 48.92 | 55.55 | 13.56 | 2/2/2023 | 9.9 |
MBC | MASTERBRAND INC | 7.67 | 9.05 | 18.01 | 1/26/2023 | 9.3 |
MFC | MANULIFE FINL CORP | 15.69 | 19.85 | 26.53 | 1/26/2023 | 4.0 |
MSFT | MICROSOFT CORP | 226.88 | 303.67 | 33.85 | 4/27/2023 | 7.2 |
MU | MICRON TECHNOLOGY INC | 59.87 | 65.10 | 8.74 | 5/17/2023 | 14.2 |
NFLX | NETFLIX INC | 324.35 | 342.49 | 5.59 | 1/20/2023 | 12.0 |
NOW | SERVICENOW INC | 434.71 | 477.99 | 9.96 | 2/1/2023 | 9.4 |
PNR | PENTAIR PLC | 50.82 | 55.50 | 9.21 | 2/1/2023 | 9.9 |
PPG | PPG INDS INC | 118.53 | 134.50 | 13.47 | 3/1/2023 | 12.0 |
QCOM | QUALCOMM INC | 108.09 | 139.50 | 29.06 | 2/2/2023 | 4.0 |
ROP | ROPER TECHNOLOGIES INC | 377.32 | 446.49 | 18.33 | 1/9/2023 | 7.0 |
SNY | SANOFI-AVENTIS | 43.58 | 52.02 | 19.37 | 3/23/2023 | 27.2 |
STE | STERIS PLC | 165.90 | 203.95 | 22.93 | 1/10/2023 | 1.8 |
T | AT&T INC | 19.30 | 19.50 | 1.01 | 1/12/2023 | 27.6 |
TER | TERADYNE INC | 93.26 | 106.80 | 14.51 | 2/1/2023 | 12.2 |
TREX | TREX CO INC | 56.48 | 60.60 | 7.29 | 6/23/2023 | 14.8 |
V | VISA INC | 200.81 | 223.00 | 11.05 | 1/12/2023 | 14.5 |
WDC | WESTERN DIGITAL CORP | 34.50 | 41.25 | 19.56 | 1/23/2023 | 4.3 |
WPC | WP CAREY INC | 67.03 | 82.90 | 23.68 | 1/11/2023 | 26.8 |
XEL | XCEL ENERGY INC | 61.05 | 71.95 | 17.85 | 1/9/2023 | 3.1 |
In previous articles I describe my general style for trading, including my use of sector rotations and focus on S&P 500 index components. I also describe my "incremental" approach for opening trades and building the positions by lowering my average unit cost. I rarely enter a trade and sell without adding multiple times to the position.
Overall, my trading performance for the first half of 2023 is lagging what I achieved in 2021 and 2022. The main reason is that I held some larger positions (e.g., T ) that were getting long in the tooth and I decided to exit when they became profitable and free up the cash for other opportunities. Also, once it became clearer that the October low was likely the bottom of the 2022 bear market, I decided to hold stocks a bit longer before exiting the trades.
Current Portfolio
My non-CEF portfolio currently includes 117 individual stocks. As I have indicated previously, my portfolio changes nearly every week, so a detailed listing here is not as meaningful as perhaps following my trading blog. My holdings change largely due to the macro market direction of prices and the sector rotations relative to the performance of the S&P 500. While not an expert, I find the structure of market price moves using Elliott Wave theory both interesting and broadly predictive.
Market Pattern and Performance
In my recent blog entries, I've mentioned the current Elliott Wave pattern developed and tracked at PUG Stock Market Analysis. Without being a subscriber, I look to the periodic free S&P 500 long-term pattern analyses, the most recent of which was from March 31:
PUG SMA S&P 500 analysis (PUG Stock Market Analysis)
The chart is fairly detailed and the portion shown here focuses on the recent and near-term pattern labeling. A closer review on the source site is recommended for those interested, as space here is limited. The site's author has the following chart label which I think nicely summarizes the pattern trend:
Primary 2 (P2) of Cycle 3 (C3) bottom at 3492 on Oct 13th, 2022. Major [1] of Primary 3 (P3) of Cycle 3 (C3) of Super Cycle V (SC-V) is headed for the 4836 area.
If this market prediction is correct, it means that the 2022 bear market is over and that a new 5-wave Major-level bull market (as part of a larger Primary-level uptrend) is unfolding, with a Major 1 price target at SPX 4836.
Tempering this good outlook, the markets are still clearly in a recovery mode after the declines in 2022, and there is broader weakness than the indexes might imply due to the cap weighting of stocks such as the "magnificent 7." Looking at the more-recent 3-month phase of this uptrend from the perspective of the Market Monitoring Tool from TD Ameritrade, 8 of the 11 S&P 500 sectors have under-performed the overall index, with Utilities and Energy continuing to serve up real losses.
S&P 500 3-month Sector Performance (TD Ameritrade Market Monitor tool)
Some Stock Ideas Sources
In addition to following sector rotations, I get stock ideas from other sources. One is the 6 periodic model portfolios provided by CFRA's weekly The Outlook , among the free analyst reports available through my TD Ameritrade brokerage. I currently hold 3 stocks in the High Quality Capital Appreciation Model Portfolio and 3 in the Total Return Model Portfolio. I've held other stocks from these and traded them in the past few years. Another free source is the list of 25 High-quality Dividend stocks maintained at Bollinger's Simply Safe Dividends. I also occasionally get some stock ideas from the free articles at The Contrarian Outlook , even though most of the articles focus on CEFs. This year I also took a trial subscription to a Utility industry research newsletter service, which has growth and income portfolios. In the past I've used the 'Dividend Investing' service from AAII , and I've subscribed to swing trading services through InTheMoneyStocks.com . Finally, I check out many articles by analysts here at Seeking Alpha whenever I am looking at a stock as a trade candidate. In addition to these, because I am not a financial analyst, I rely on ratings of fundamentals from free reports (through TD Ameritrade) prepared by CFRA and New Constructs. I often mention the ratings of these 2 sources in my blog when I open a trade position.
Looking back to my detailed portfolio update in September 2021, I held 140 individual stocks with a very different sector allocation than now (even though I didn't include REITs then). Here was that allocation:
Portfolio sector allocation, Sept.. 2021 (author)
And this is the allocation as of June 2023:
portfolio sector allocation, June 2023 (author)
The following sub-sections highlight the individual stocks in my portfolio, by sector. Due to the size of the portfolio, I will not consistently list full names but use the ticker symbols with links to Seeking Alpha's data pages.
Real Estate
My portfolio currently holds 19 real estate stocks (mostly REITs) including some that I have held for a few years. The 5 largest holdings by cost are: EPR , UHT , OHI , LTC , and NHI . As a group, they are down -20.9% on cost, with a few real laggards including DBRG , ONL , and MPW . But 6 are net positive on cost, including PLD , RITM , HIW , DLR , O , and NNN . Five in this portfolio are listed as safe high-yield dividend stocks by Bollinger's Simply Safe Dividends list as of June 15: CCI , DOC, NNN, O, and HIW (borderline safe). PLD is a component of the CFRA Total Return Model Portfolio. Excluding Digital Bridge, which is speculative at this point, the group has a mean dividend yield of 7.19%. Other names not mentioned are GOOD and HR .
Financials
This group is comprised of 20 stocks, including several held for some time now and others entered recently in the wake of the "banking crisis." The current unrealized loss on cost is -22.6% but, like the REITs, there are some real winners emerging. The largest Financials positions by cost are: WU , MKTX , GPS , PYPL , and BXMT , the first 4 of which continue to lag. In addition, OTCQB:FNMA continues to be a speculative position. On the good side, 9 stocks are positive on cost, including SCHW , MAIN , TFC , TD , BAM , KEY , LADR , BNS , and BN . Stocks like Schwab were so beaten down that I think they have some great upside potential, up to 100%+ to just get back to the pre-crisis highs. I'll likely hold these and wait for those potentially-sizeable gains. SCHW is in the CFRA High Quality Capital Appreciation Model Portfolio. The mean dividend yield for this group is 5.96% with 18 paying dividends. Others not mentioned are HASI , FIS , PFC , and CSWC . I've learned that Financials are a bull market bellwether sector and I'm very willing to buy when this sector sells off and take profits on rebounds. I did this for a good number of Financials after the 2020 COVID recession.
Health Care
There are 15 Health Care stocks in the portfolio, with a unrealized loss at -21.2%, thanks especially to an over-sized position in Novavax ( NVAX ), which I traded in 2021 for a 95.6% profit. The 5 largest positions are for NVAX, BAX , TFX , PRGO , and MDT . Medtronic is in the CFRA Total Return Model Portfolio. The 5 largest laggards are currently NVAX, BAX, TFX, GEHC (acquired as a spinoff), and RARE . Five stocks are currently profitable on cost: BDX , GSK , ABT , XRAY , and AMGN . While I wait for greater profits to materialize, this group pays dividends at an average of 2.64%. The group also includes BIO , VTRS , and PFE . As is sometimes the case, stocks in the portfolio can move to good gains but I don't always sell them or my price target is still overhead. Bio-Rad Laboratories is one example: while my average unit cost is $433.24, the stock climbed to $505.28 in early March, a 16.6% gain, but I didn't sell. It recently has bounced around above $350, near my low-cost buys. I continue holding for a stronger rebound as this was >$800 in late 2021.
Consumer Discretionary
For some reason I typically am not a fan of this sector, but there are some good companies here. I hold 8 including Leggett & Platt ( LEG ) and Whirlpool ( WHR ), which are in Bollinger's Simply Safe Dividends high yield list. As a group these are down -14.21% on cost. The largest are LEG, HD , PENN , MHK , and WHR. Four are currently profitable including The Home Depot, Whirlpool, Ford ( F ), and Vera Bradley ( VRA ). The other stock in this group is Johnson Outdoors ( JOUT ).
Utilities
As reflected by my CEF holdings, Utilities are one of my favorite sectors due to their reliable distributions. Even though I sold some of my holdings in recent years due to the nice profits, I still hold 17 Utility stocks. Among them are some newer buys, based on a trial subscription to the Utility industry research service. The 5 largest positions are D , NRG , WEC , ES , and AEP . Only Dominion is a major laggard. Overall, the group is down -0.8%, but 13 are profitable on cost, led by Southern ( SO ), Evergy ( EVRG ), and NRG Energy. Others in the group include BKH , UGI , NEE , LNT , DTE , BEP , and OGE . In addition to D, there are small unrealized losses for XEL , ES, and WTRG . The average dividend yield for this group is 4.02%. UGI is among Bollinger's Simply Safe Dividends picks, and 12 of the 17 are in the Utility research service portfolio.
Information Technology
I sold some of my profitable IT stocks recently, so my portfolio now only includes 6 names. By cost the largest are UPLD , IPGP , INTC , DOCU , GLW , and TXN . The group is down -19.4%, with UPLD and DOCU the big laggards, while TXN and IPGP are profitable. Only half pay dividends, with an average of 2.52%.
Materials
I currently hold 6 stocks in the Materials sector. By cost, the position rank is SMG , IP , BALL , SEE , WRK , and MOS (a recent acquisition). The first 3 have been in the portfolio some time and bring the group's unrealized loss to -24.6%. Sealed Air and Westrock are down an average of -3.82%, while Mosaic is up 2.43%. The dividend yield averages 3.28% for the group, and IP is on the Simply Safe Dividends list. Ball is in the CFRA High Quality Capital Appreciation Model Portfolio.
Communication Services
There are 6 stocks from this sector in my portfolio. By cost they are VZ , CHTR , WBD , CMCSA , TGNA , and BCE . They are down -15.6% on cost, led by WBD and VZ. BCE and Comcast are profitable. Verizon, Comcast, and TGNA are in the Utility service portfolios, and Comcast is in CFRA's High Quality Capital Appreciation and Total Return Model portfolios. The 4 that pay dividends have an average yield of 4.67%.
Industrials
I am usually a fan of the Industrials sector, but I only have 7 stocks from that group now. By cost, the largest are MMM , SWK , NSC , GE , UNP , G , and CSX . GE, Stanley, and 3M lag considerably, for a group average of -20.6%; however, CSX is up >25%, and UNP, NSC, and G are also profitable.
Energy
The Energy sector is also one of my favorites for income. I hold 7 stocks now and by cost they rank as follows: SWN , EPD , PBA , TRP , ENB , DVN , and RRC . As a group they are down by -14.5% due entirely to an oversized position in Southwestern. The other 6 are profitable for an average gain of 11.16%. EPD, PBA, and ENB are on the Simply Safe Dividends high yield list, and 3 in the group are also in the Utilities research service portfolio. The 7 stocks here average a yield of 6.39%. I've traded Pembina previously and sold a good number of other names in this sector after it sold off in 2020 and rebounded the following year.
Consumer Staples
Consumer Staples is another sector for which I previously held more stocks. There are only 5 here now and by cost the largest are CLX , TSN , WBA . NHTC , and HRL . NHTC and WBA are the biggest laggards, bringing the group down by -17.6% on cost. Of the 5, HRL is currently profitable. The average dividend yield is 6.18% but the yield varies widely across these few names.
More About Performance
As many investors and traders learn, unrealized losses can accrue easily in down markets if one does not want to sell for losses. As I have noted before, as most of my portfolio stocks are components of the S&P 500 and/or are in model portfolios from quality organizations such as CFRA, I do not lose sleep over these paper losses. Using the sector rotation approach, my stock hunting ground is by definition the under-performers. I am willing to wait for the turn-arounds, which come far more frequently than not, as my trading record over the past 3 years demonstrates. I am still earning high income overall, and buying low and potentially selling higher brings in 2-3 times the profit of even my high yield investments.
But the mix of income and swing trading is important for a longer-term growing portfolio. I'll always prefer to do this in lieu of just holding stocks without taking profits. I once read here that one analyst takes profits when his stocks have an unrealized gain of >300%, and I am sure that the price charts of most stocks would show that if one waits that long for that level of gain that there would be a significant opportunity cost due to price action volatility over the time. That is, most stocks are going to go up and down before they just rocket to a 300% gain, and you just wait while these gains come and go. That's the value of studying price charts.
In my view, holding large realized gains is more than a feel good thing, and the investor never really benefits from those gains until the stock is sold (even if partially). As I've demonstrated with my portfolio and articles over the years, I've traded some names two or three times and gained far more than if I had just held onto the stocks. The key factor in the success of this is flexibility for "trading what's in front of you" without concern for timing, and the vehicle for that is eliminating tax considerations (short term capital gains rates) by investing in a Roth IRA . Without tax and time limitations, I don't have to use options or hold outsized positions to even do that, and I don't incur the risk of trading on margin. The Roth is the best thing done for the average investor, in my view. A Roth IRA frees me from being locked into buy-and-hold investing because of taxes.
As I've written before, for me the most important question for an investor to answer is, "How am I going to get paid and when?" I want to get paid along the way from investments that have a track record of paying well. I also try to buy low and sell high, increasing my returns, and I want to be able to do that regardless of time in the trade.
Final Thoughts
This update on my Green's portfolio is long overdue. My Roth IRA retirement portfolio is generating an increasing amount of reliable, forever tax-free income from high-yield CEFs and swing trades. While performance is lagging the pace from the past 2 years following the nasty bear market in 2022, prospects for the new bull market are improving.
Managing my portfolio is similar to tending to my landscaping, which I spend far more time doing. You don't get good results by just sticking plants in the ground and walking away. With monitoring and corrective action as needed (fertilizing, watering, thinning, pruning, weeding and mulching), a landscape grows well, with increasing aesthetics and function.
I hope that readers have perhaps found some useful ideas from my portfolio update and musings about managing it for growing income. As always, please do your own DD, and if interested follow my trades at my free blog for Followers.
Best to all for your investing/trading!
=Green=
For further details see:
Green's Portfolio: 2023 Mid-Year Review