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Watchlist - Birthday Buys for 2023
Each year I make Birthday Buys as a way to slowly diversify. With about half a year to go, I decided to update my Watchlist on Commonstock to reflect the companies I am tracking for this upcoming January.
I have a long Watchlist in each portfolio that I rank using the same Scorecard methodology as my active portfolios. This helps me make educated decisions on which positions to add. I use a combination of the Scorecard score, portfolio sector/industry weighting, and existing underperforming holdings in specific sectors/industries.
Below is my current Watchlist and a breakdown on each:
I have exposure to all of my target sectors, so future additions are to continually improve portfolio and add great companies.
$DMLP - This is the highest ranked company in my Watchlist at a 5/6. It has outperformed the S&P over the past 3 years, has a P/E under 25, Dividend Yield in the top 5% of my current portfolio, and I am underweight in Industrials. One concern is that the current dividend is more than 100% of their FCF. I need to do more research on this company in the next few months to understand it better.
$PENN - I have tracked $PENN for a long time. I am a huge fan of Barstool, which introduced me to the company. Additionally, with the expansion of legalized gaming in the US, I think there is a long runway for this company. $PENN has had a sharp sell off and is at a much more palatable valuation. My current "Sin Stocks" are $CRON and $BUD, which have been less than underwhelming. Therefore, I am looking to add a stronger position to this sector. $PENN scores a 4.5/5 on my Scorecard - has outperformed the market over the past 3 years, but has underperformed recently. Has positive FCF, but no dividend. Has a P/E less than 25, and is an underweight industry in my portfolio.
$COST - $COST is a strong, defensive play. I currently hold $TGT in the Retail sector of my portfolio. $COST currently has a higher ranking in my Scorecard than $TGT with a 3.5 vs 3. This would be an opportunity to incrementally improve. $COST has outperformed the S&P over the past 3 years, has a dividend payout less than 50% of FCF, and is a company and business I believe in.
I am continuing to build a balanced portfolio and initiate positions in unrepresented sectors - Consumer Discretionary, Defense, Financials, Healthcare, Sin Stocks and Utilities.
$AMGN - Highest ranked Healthcare company in my Watchlist with a 5.5/6. $AMGN has outperformed the market, has a dividend payout less than 50% of FCF, dividend yield in the top 5% of my current portfolio, and has a P/E under 25. The only thing holding $AMGN back from a perfect score is I have only given it a Medium conviction rating. I will continue to research this company and potentially bump my conviction to High prior to January.
$LMT - Highest ranked Defense company in my Watchlist with a 5.5/6. $LMT has a dividend payout less than 50% of FCF, has a dividend yield in the top 5% of my current portfolio, has a P/E less than 25, and I have High conviction in this company. The only thing preventing $LMT from a 6/6 is underperforming the market in the last year.
$AFL - Tied for highest ranked Financials company with a 5/6. $AFL has a dividend to FCF ratio of less than 50%, has a dividend yield in the top 5% of my existing portfolio, and has a P/E less than 25. I will need to continue to research and compare to the other Financials companies in the watchlist to differentiate the companies further.
$ALL - Tied for highest ranked Financials company with a 5/6. $ALL has a dividend to FCF ratio of less than 50%, has a dividend yield in the top 5% of my existing portfolio, and has a P/E less than 25. I will need to continue to research and compare to the other Financials companies in the watchlist to differentiate the companies further.
$OZK - Tied for highest ranked Financials company with a 5/6. $OZK has a dividend to FCF ratio of less than 50%, has a dividend yield in the top 5% of my existing portfolio, and has a P/E less than 25. I will need to continue to research and compare to the other Financials companies in the watchlist to differentiate the companies further.
$WM - Highest ranked Utilities company in my Watchlist with a 5/6. $WM has outperformed the market, has a dividend to FCF less than 50%, has a dividend yield in the top 5% of my portfolio. P/E is currently a little high at 34.
If I were to make a gut decision right now, I would be adding $PENN in my Taxable account and $AMGN in my Roth IRA.
Would love to hear from anybody who currently holds any of these companies or has read/written any research on them.
Other alternatives in these industries are welcome as well!
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Where would I be able to read more about your scorecard process? I have been trying to develop one myself to make sure that I really know what I'm buying and am sticking to my strategies (and not, as I call it, buying the new shiny object in front of me).
As for the specific companies, I am a huge $PENN bull for the reasons you laid out, and my background is in the waste industry. While you can't go wrong with $WM, I'd encourage you to look at $WCN as well, as they are some of the best operators in the space, and have a little more room for growth, as they are not treated as one of the big dogs, despite their size. I personally have made my bet with $GFL, but I'm comfortable with less dividend right now and more volatility, because I think they will be able to keep making acquisitions to get to the size of the other big 3 over the next few years.
Investors like to promote their great picks and show off their wins. Let's be honest, not every pick is a home run and we all have some losers.
Losers have come into the forefront of my mind recently. There are 3 things that have brought losers to mind:
- Recent market events have people seeing red
- The MLB season has started and I will be reminded every day for the next 6+ months that my Pittsburgh Pirates are the worst team in baseball
- I have been reading Fooled by Randomness by Nassim Nicholas Taleb
My top losers are (maybe unlucky, maybe not):
- $CHWY - down 55.54% since purchase
- $CRON - down 46.05% since purchase
- $COIN - down 33.61% since purchase
Oh no! These are terrible returns (losses)! What ever will we do? When do I sell? Should I double down?
First, I have detailed in previous Guardrail posts, I have developed a framework to help control the emotions around loss. I set a minimum holding period of 3 years for each new position so there is a measurable amount of time to evaluate the holding. As we know, the market is volatile and periods of bear markets can quickly turn to bull markets and vice versa (see $CMA, $XLE, $VDE, $SBUX).
Second, I have built into my Scorecard to value price appreciation over cheap/discounted stocks. This is an idea I have borrowed from David Gardner and Rule Breaker Investing - "Rule No. 1, let your winners run high. That's No. 1. I hope you know No. 2. No. 2, add up, don't double down." Therefore, I do not need to keep building and adding to losing positions. This is a way to mitigate loss by not continually adding to beaten down and "cheap" stocks.
Finally, I like to look at the big picture and all of my holdings. The three positions above only account for 1.5% of my Taxable Portfolio. To counter act these "Losers" I have multiple Multi-Baggers (maybe luck, maybe not):
- $AAPL - up 182.40% since purchase
- $VDE - up 177.46% since purchase
- $CARR - up 166.95% since purchase
- $CMA - up 157.77% since purchase
These 4 Multi-Baggers make up 21.1% of my portfolio. Even though it is easy to look at those terrible losses, zoom out and look at the bigger picture. Your winners will most likely far outweigh your losers! Just like the stock market, zoom out and you will see that the trend is up and to the right.
Volatility is the price of admission in this game, and we need to build the mindset to be able to handle these ups and downs. Understand that some events and picks (winners and losers) are random and will work themself out.
One thing that is not random and will not see multi-bag gains is the Pirates win total...
Happy Baseball, Happy Sunday and Happy Investing!
Portfolio Bracketology - $AAPL is the Champ!
Portfolio Bracketology has concluded and you have chosen $AAPL as your champ! $AAPL beat $VTI 21 - 16 in the final poll results (combined between Twitter and Commonstock poll).
Below is the final bracket:
The bracket was made up of all 55 of my active holdings - as verified here on @commonstock. Seeding was based on total return since initial acquisition date through 2/28/22. Final rankings are based on poll results - ranked in each round by initial seeding.
Here are final rankings of all 55 holdings based off the results of the bracket (Initial in Parentheses):
- $AAPL (3)
- $VTI (8)
- $O (21)
- $HD (42)
- $VDE (4)
- $BAM (11)
- $LOW (32)
- $TGT (47)
- $XLE (5)
- $ABBV (9)
- $SCHD (16)
- $KO (19)
- $VWO (20)
- $PFE (26)
- $SCHB (27)
- $PEP (31)
- $CMA (1)
- $CARR (2)
- $DD (6)
- $FUN (7)
- $RTX (10)
- $SCHF (15)
- $VEA (17)
- $MCD (24)
- $VNQ (28)
- $LEG (29)
- $SBUX (30)
- $HAS (40)
- $UL (43)
- $DIS (51)
- $COIN (52)
- $CTRE (53)
- $RVT (12)
- $VIG (13)
- $IEMG (14)
- $IEUR (18)
- $HASI (22)
- $PG (23)
- $CNA (25)
- $BUD (33)
- $CL (34)
- $HE (35)
- $TIPX (36)
- $VTEB (37)
- $PPL (38)
- $HSY (39)
- $CSX (41)
- $NSC (44)
- $LQD (45)
- $KMB (46)
- $BLV (48)
- $EMB (49)
- $T (50)
- $CRON (54)
- $CHWY (55)
Are there any surprises? Anything that stands out to you?
What are your overall thoughts on Portfolio Bracketology?
I had tons of fun putting this together and getting insight into people's perspective and thoughts on these companies holdings!
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That seems rad to me! I’ve never thought of putting your holdings head to head in a bracketed to-the-death tournament before! How do you determine the lineup to begin with?
Dividend Stock #6 🚭 $MO
Hello fellow investors
this is post #6 out of #50, where I introduce you to all the dividend stocks in my portfolio
Today we speak about a sin stock - Altria $MO
Why it is called a sin stock? Cause it operates in the industry of:
In fact, Altria's most famous product is Marlboro Cigarettes, which I suppose we are all familiar with.
⚠️ A small disclaimer:
I do not smoke, I consider smoking a very bad habit, and deep inside I hope for a society where smoking is not contemplated. But, a good investment is always a good investment, right? 😂
Altria is a very famous company in the dividend investor world; few stocks had a better performance than Altria, and many got rich thanks to it. $MO pays increasing dividends from 52 years, remarkable.
OK, let's address the elephant in the room 🐘
Is tobacco a dying industry? What's the logic to invest in an industry like that? People are stopping smoking everywhere
That's all true. In the western world especially, there is a healthy way of thinking, and smoke is not cool like it was in 1960. So old smokers are dying, young people are not smoking much, and every year is becoming worse and worse (or technically, better and better if we see from the health point of view).
Even with such a terrible outlook, Altria is increasing revenue year over year, with a stellar profit - how can be?
Cause even if smoking rates are slowly going down, cost savings and price increases are able to keep the revenue up. Anyway, the problem is still there; where this company will be in the next 20 years?
There is a limit to how much you can play with numbers. if your customers are fading away, soon your revenue will too.
For such a reason in the last years, Altria is trying hard to diversity in new/complementary markets.
$MO invested heavily in Alcohol (ABInBev $BUD), Vaping (JUUL Labs), and Cannabis (Cronos $CRON) but with mixed results.
$CRON is still a startup; while revenues are growing they are still losing money, and we are talking about a $1.3B company.. it's a minor investment.
$BUD is a mature company, providing Altria some annual additional cash flow; nothing to say here.
JUUL is the disaster 🤯
Cost to Altria $12.5B, the company is still facing FDA restrictions and bans, losing market share continuously. I believe that entering the vaping world was important, but the price paid was completely out of logic.
But anyway, let's say that the vaping system is helping to offset the combustible smoking decline
So, no nice outlook? For me, the biggest "hope" is represented by IQOS. If you are not familiar, IQOS is a heated tobacco cigarette, raising popularity almost everywhere apart from the US, where it's facing a patent infringement ban 🤦
Anyway, heating tobacco is able to be marketed as "reduced-risk" cause they demonstrate that without combustion, there is a reduction of harmful and potentially harmful chemicals (FDA words)
So going back to Altria stock, is this a good investment? I believe that Altria will be able to navigate the next years pushing on these smoking alternatives they created. I will be more than happy to see a deeper diversification.
At the moment, $MO represents 0.92% of my dividend portfolio, and I have no plan to increase my position anytime soon.
Do you like such posts?
Give it an upvote, and follow me for more.
Earnings this week
📞Which calls are you most excited about?
Monday, August 2nd
$ZI ZoomInfo Technologies
Tuesday, August 3rd
$APRN Blue Apron
$BHG Bright Health Group
$CWH Camping World
$CRSR Corsair Gaming
Wednesday, August 4th
$WYNN Wynn Resorts
Thursday, August 5th
$HEAR Turtle Beach
$MNST Monster Beverage
$CWK Cushman & Wakefield
$SPCE Virgin Galactic
Friday, August 6th
$TWST Twist Biosciences
$CRON Cronos Group
Sources: Business Insider, Google Finance, Yahoo Finance
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