Friday, July 3, 2015

Added Real Estate Sector To My Watch List

I maintain a dynamic watch list of dividend growth stocks and update it monthly when David Fish updates the CCC stocks. My watch list contains a subset of the CCC stocks, which I obtain by applying a series of filters to the CCC stocks. Included in the watch list are all my DivGro holdings, some of which are not in the CCC list.

My watch list is organized by sector based on the GICS sector names. GICS is a 4-tiered, hierarchical classification system. It consists of 10 sectors, 24 industry groups, 67 industries, and 156 sub-industries. Each company is assigned a single GICS classification at the sub-industry level according to its principal business activity.

In November 2014, S&P Dow Jones Indices and MSCI Inc announced that a new Real Estate sector will be created, elevating its position from under the Financials Sector and increasing the number of GICS sectors to 11. The change is being considered for implementation on 31 August 2016. The Real Estate Investment Trusts (REITs) industry will be renamed to Equity REITs and will exclude Mortgage REITs, which will remain in the Financials sector.

I've decided to add the new Real Estate sector to my watch list now rather than wait until August next year. Doing so reduces the Financials sector to one that no longer dominates, but it still contains the most dividend growth stocks of all the sectors.

Updated Filters


Along with the addition of the new Real Estate sector, I've tweaked the series of filters I use to reduce the number of CCC stocks:
  1. Market Cap at least $500 million MORE DEMANDING
  2. No stocks that are being acquired, or over-the-counter (OTC) or pink sheet stocks
  3. Dividend Yield at least 2% for Challengers, 1.5% for Contenders, and 1.0% for Champions
  4. Chowder Rule at least 9% (6% for Telecommunication Services and Utilities) MORE DEMANDING
  5. Yield for MLPs at least 5.5%, or at least 3.5% for REITs UPDATED

New Targets


Below is a table presenting the new sector targets, assuming a portfolio containing 50 stocks. Currently, DivGro contains 46 different stocks. While 50 is not a firm target, I think a portfolio of about 50 stocks provides more than enough diversification.

SectorCount%HoldingsActionTarget
Consumer Discretionary43 12.29 6 no action 6
Consumer Staples26 7.43 3 add  1 4
Energy42 12.00 7 remove  1 6
Financials69 19.71 8 add  1 9
Health Care8 2.29 2 no action 2
Industrials50 14.29 6 add  1 7
Information Technology23 6.57 4 remove  1 3
Materials23 6.57 2 add  1 3
Real Estate21 6.00 3 no action 3
Telecommunication Services7 2.00 2 no action 2
Utilities38 10.86 3 add  2 5
TOTALS:350 100.00 4650

I'll continue to update my watch list and sector targets every month when the CCC list is updated.

2 comments :

  1. Hi FerdiS, Happy July 4th. Your watch list is one of my favorite pages on your site and the best organized I have seen. It is good they are finally breaking Reits out, but I suspect a lot of us (I know I did) had already broken them internally so as to keep an eye on % to total, etc. Thanks for breaking them out on your site. I have 2 of your 3, O & OHI. OHI is one of my top 2 for this Friday's buy, but a week is along time so things can change. Have a good long weekend.

    ReplyDelete
    Replies
    1. Thanks, Mike A -- Happy 4th to you, too! And thanks for your kind words. I decided to separate the REITs exactly for that reason. Also, as mentioned earlier, I'm working on new selection criteria for REITs (I know, I'm a little slow on this...) and its convenient to have them separated out. My other REIT, DLR, has done really well for me, with annualized total returns of 32%. O and OHI are recent additions to DivGro.

      Take care!
      FerdiS

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