Sunday, January 5, 2020

DivGro's Best and Worst Performers in 2019

Now that 2019 is in the rearview mirror, I wanted to review the best and worst performers in my DivGro portfolio in 2019. Unlike 2018, when DivGro's performance was a mixed bag, 2019's performance has been stellar!

Of the 53 positions I've owned throughout the year, only four stocks are trading down for the year. On average, these stocks are up 24% for the year!

My worst performer was Walgreens Boots Alliance (WBA), down 13.7% since January 2019. On the other hand, my best performer (by far) was Apple (AAPL), whose stock price increased by 86.2% since January 2019.

Here is a chart showing the 2019 price performance of DivGro stocks I owned each and every day in 2019:


This truly is a stunning chart and I'm very thankful that DivGro benefitted from 2019's great stock market run-up. AAPL's performance, in particular, was stunning... and head and shoulders above the rest!

It is also informative to look at the annualized returns of these positions, including dividends:


Only Gilead Sciences (GILD) do not have a positive annualized return! The top performers are two Information Technology sector stocks, Microsoft (MSFT) and AAPL, followed by Air Products and Chemicals (APD), a Materials sector stock.

I have nine positions with triple-digit percentage returns:



Of these, Main Street Capital (MAIN) is the top dividend-paying stock and also the stock that I've held the longest in my DivGro portfolio. In fact, I've collected dividends equivalent to 77.5% of the capital I invested in MAIN and, following years of dividend increases, my MAIN position has a yield on cost (YoC) of 10.71%.

Ten Worst Performers


The following table presents DivGro's ten worst performing positions in 2019. These are all stocks I owned on 1 January 2019 and that I still own today:


 DivGro's Worst Performers of 2019 
 
Ticker
 Company
Sector
Total Return
WBA Walgreens Boots AllianceConsumer Staples-13.7%
PFE PfizerHealth Care-10.2%
MMM 3MIndustrials  -7.4%
ABBV AbbVieHealth Care  -4.0%
MO Altria   Consumer Staples   1.1%
XOM Exxon Mobil   Energy   2.3%
GILD Gilead Sciences    Health Care   3.9%
HRL Hormel Foods Consumer Staples   5.7%
VZ Verizon Communications   Communication Services   9.2%
NNN National Retail PropertiesReal Estate 10.5%

Let's briefly look at the three worst-performing stocks.

WBA rallied in November when rumors surfaced of a possible leveraged buyout, though financing the deal seems challenging. WBA is a Dividend Aristocrat with a Dividend Safety Score of 79 and a Quality Score of 19 out of 25.

I opened a position in WBA in December 2013 and added shares on several occasions. My YoC is 2.96%, whereas WBA yields 3.10%. My fair value estimate of WBA is $65 per share and the stock is trading about 9% below fair value. Given that my WBA position is larger-than-average at 1.92% of portfolio value, I'm not interested in adding shares at this time.

Pfizer (PFE) traded mostly sideways through July 2019 until the company announced that it would be shedding Upjohn, its off-patent branded and generic established medicines business. The market reacted negatively and the stock lost about 20% of its value, only recouping some of the losses through the rest of the year.

PFE is a high-quality stock with a quality score of 24 and, according to Simply Safe Dividends, PFE's dividend is Safe (with a dividend safety score of 75). But the dividend likely will be affected by the spin-off.

My PFE position is an above-average sized position at 1.27% of portfolio value, so I'm not interested in adding to my position, even though PFE is trading at a discount of about 7% to fair value. The YoC of my position is 4.10%, whereas PFE currently yields 3.90%. I'll hold onto my PFE shares through the spin-off, but I'll probably dispose of any new shares that get issued as a result.

Shares of 3M (MMM) slumped 28% in late April and May 2019 after the company announced disappointing earnings and cut guidance for a fifth consecutive quarter. Other headwinds include the as-yet unresolved trade dispute with China and a large acquisition that will challenge MMM's financials.

MMM has a quality score of 24 and a dividend safety score of 75, which is deemed to be Safe. With a yield of 3.23% at $178.45 per share, I think the stock offers good value for patient, long-term investors.

I own 100 MMM shares at a YoC of 3.21%. That's the equivalent of about 1.94% of total portfolio value and, therefore, a larger-than-average position. I'm not interested in adding to my position at this time.

Ten Best Performers


Now let's consider DivGros ten best performing positions in 2019:


    DivGro's Best Performers of 2019    
 
Ticker
 Company Sector
Total Return
AAPL Apple Information Technology86.2%
MSFT Information Technology Microsoft 55.3%
LMT Lockheed Martin                      Industrials48.7%
APD Air Products and Chemicals Materials46.8%
RTN Raytheon Industrials43.3%
V Visa Information Technology42.4%
ITW Illinois Tool Works Industrials41.8%
ROST Consumer Discretionary Ross Stores39.9%
NEE NextEra Energy Utilities39.3%
SWK Stanley Black & Decker Industrials38.4%

Let's also briefly look at the three best-performing stocks.

In May 2019, AAPL's share price fell about 18%, mainly due to concerns about declining iPhone shipments. These concerns now seem to have been overblown, especially as accelerating growth from the company's Services, Wearable, and iPad segment fueled record Q4 revenue.

AAPL's yield of 1.04% at $297.43 per share is quite small, so I'm looking at the company's growth prospects (and its attractive 5-year dividend growth rate of 10.8%) as the main reasons for owning the stock. Additionally, AAPL's quality score is 23 and its dividend is deemed Very Safe (with a dividend safety score of 99).

AAPL is my largest position at 3.23% of portfolio value. The position has a YoC of 2.95%. I think a fair valuation is $270 per share, so AAPL is trading at a premium price of about 10%. I'm not looking to add more shares at this time.

Microsoft is by far DivGro's best-performing position with total returns of 256% (62% annualized)! I bought 80 shares in August 2013 at $31.76 per share and later added another 20 shares at $106.14 per share. My average cost basis is $46.63 and the position's average YoC is 4.37% (MSFT currently yields 1.29% at $158.62 per share).

The stock has a perfect quality score of 25 and its dividend is deemed Very Safe dividend by Simply Safe Dividends (with a dividend safety score of 99). Additionally, I like MSFT's 5-year dividend growth rate of 12.1%.

My position in MSFT is larger-than-average at 1.72% of portfolio value. The stock is trading about 4% above my fair value estimate of $153 per share. I'm not looking to increase my position at this time.

Rounding out the top three is Lockheed Martin (LMT), a Dividend Contender with 17 consecutive years of dividend growth. Shares currently yield 2.27%. The company is benefiting from expanded global military spending and U.S. modernization efforts. The stock is trading near its all-time high of $417.17 per share.

LMT has a quality score of 24 and a dividend safety score of 84 (Very Safe). Its 5-year dividend growth rate of 11.4% is quite attractive.

I own a relatively small position of 14 shares (about 0.63% of total portfolio value), so I'm interested in adding shares. Unfortunately, the stock is trading about 5% above my fair value estimate of $395. Nevertheless, I'm considering adding some shares given the escalating conflict in the Middle East. Additionally, Defense stocks typically do well in an election year.

Concluding Remarks


Of the stocks I owned throughout 2019, only four failed to close out the year at higher share prices.

I looked at the three worst-performing stocks, noting reasons and headwinds that would explain their poor performance. I don't see serious reasons that would convince me to close out these positions.

I also looked at the three best-performing stocks. Only LMT is a below-average size position and, given its growth prospects, I think paying a small premium to buy more shares is appropriate.

Thanks for reading! If you liked this article and would like to read similar articles in future,
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—•—•—
I wish you a healthy, happy, and prosperous 2020! 

14 comments :

  1. Thank you for very interesting analyze. I always read your articles with great interest, over a couple of years you have bin an inspiration for me. Now I only wish to be able to conclude the investingjourney I have started.

    ReplyDelete
    Replies
    1. Thanks for commenting, Northernlightsinvestment! I'm happy that my articles are inspirational... I've found similar inspiration in the writings of other bloggers, so it is good to be able to "pay back" to this community. As for your investing journey, just keep at it for the long term and you won't have regrets!

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  2. Hi Ferdi, nice write-up. I had a similar post a few days ago. My best stocks were below your best, but my worst was RDS/XOM with about a 5-8% total return. Best of luck next year!

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    Replies
    1. Thanks for commenting, ADD -- sounds like you had a great year with no down stocks (on total returns). I didn't account for dividends here, but I'm sure WBA would not have come out positive for the year if I did. All the best for 2020!

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  3. Olá Divgro.
    Sou brasileiro, acabei de conhecer o seu blog e li dezenas de artigos.
    Fascinante!
    A comunidade de blogs brasileiros de finanças está crescendo também, e costumamos acompanhar tudo que acontece por aqui nas terras do Tio Trump. Também tenho AAPL e sempre trás boas surpresas.
    Parabéns e obrigado pelo blog.
    Feliz 2020.
    Stark.

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    Replies
    1. "Hello Divgro.
      I'm Brazilian, I just got to know your blog and read dozens of articles.
      Fascinating!
      The Brazilian finance blogging community is growing as well, and we usually follow everything that happens here on Uncle Trump's land. I also have AAPL and always bring good surprises.
      Congratulations and thanks for the blog.
      Happy 2020
      Stark"

      Thanks so much for your comment! I really appreciate that you're reading my blog in Brazil! You're right, AAPL seems to be finding ways to surprise investors all the time! I'm a happy stock holder and hope the company continues to go from strength to strength. Take care and happy investing, Stark!

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    2. Not the only one from Brazil. Here's another one ! Shout out to all Brazilians out here. AA40 featured your blog on a post on his great blog down here.

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    3. Thanks for commenting! I remember AA40 -- hope all is going well in Brazil for you DG investors! Take care and happy new year!

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  4. Thanks Ferdi for another portfolio update! Congrats on your successful year of investing and raking in those dividends! The option premium you generate from selling covered calls and cash-secured puts is especially motivating for me. Keep up the great work!

    JC

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    Replies
    1. Hi, JC -- good to hear from you! I've been fortunate with my options trading, which in a year that I did not make monthly fixed contributions has been quite helpful. I'm hoping to have a repeat performance in 2020, but I'm anticipating it to be harder with increased volatility in the markets. We'll see how it goes. Thanks for comment and all the best in 2020!

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  5. Funny, I own all your worst performers and only LMT from your best performers.

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    Replies
    1. Sorry to hear that, Anonymous -- but the "worst" performers mostly did pretty well... not llike 2018, which was a tough year all around!

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  6. I have MSFT,AAPL AND V from your best performers AND except WBA,XOM,PFE,I own all the wost performers. As others have mentioned it amazes me everytime i read your reports.

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    Replies
    1. Thanks, desidividend -- I appreciate your comment and sharing what you own. Pretty’s good for you, especially since you don't own WBA and PFE (the worst performers)!

      Delete

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