After spiking last Wednesday, the major indexes have, predictably, pulled back over the past week. As my colleagues and I have all written multiple times in recent weeks, stock market bottoms are rarely an event; they’re a process. The market is likely to try to shake out weak hands a few more times before starting a sustained new uptrend. That’s why our portfolio is still in a defensive stance. Most of our holdings (including all our more aggressive investments) are rated Hold, and my latest addition to the portfolio was a very conservative consumer staples stock (which is hitting new highs as the market stumbles.)
Elsewhere, interest-rate sensitive investments like REITs and utilities are doing well. Financial stocks have also resisted most of the downward pressure, and healthcare stocks have surged following the election. However, oil prices have now dropped over 20%, dragging down energy and materials stocks. And tech stocks remain weak, adding fuel to the argument that they’re starting a longer-term period of weakness—finally.
I have no rating changes today, but read on for brief updates on all our holdings.
HIGH YIELD TIER
HOLD – AllianceBernstein (AB 30 – yield 9.6%) – AB continues to bounce around between its 200-day and 50-day moving averages, and briefly popped above the shorter-term line last week. The asset manager reported third-quarter earnings that beat estimates by a good margin last month. Revenue rose 9.7%, to $727.14 million, well more than expected. And adjusted EPS of $0.69 beat estimates by 11%. AB has solid support from its 200-day here, and the stock’s yield has risen to nearly 10% following the company’s latest 69-cent dividend (AB pays variable dividends). I’ll keep it on Hold for high-yield investors.
Next ex-div date: February 1, 2019 est.
HOLD – Community Health Trust (CHCT 29 – yield 5.5%) – REITs have advanced nicely over the past two weeks, and CHCT has advanced on each of the last six trading days (despite reporting earnings that didn’t quite meet expectations last week.) The stock is now above its 50-day and has good support from its 200-day line, currently at 28.
Next ex-dividend date: November 15, 2018
HOLD – General Motors (GM 36 – yield 4.2%) – GM has been building a tight base at 36 since gapping up on great volume two weeks ago. The Trump Administration is expected to hold off on new auto tariffs for a while, and GM recently announced that it will begin allowing non-GM cars in its Maven ridesharing fleet in mid-2019. GM’s revenues rose nearly twice as much as expected in the latest quarter, and the stock is looking healthier than it has in months. Hold.
Next ex-div date: est. December 6, 2018
HOLD – ONEOK (OKE 61 – yield 5.2%) – Energy stocks are struggling due to the steep slide in oil prices, but ONEOK is in the natural gas business, so the stock has been holding up okay. It is still below its 200-day moving average, though, after breaking through the support level following a mixed earnings report. I’ll keep it on Hold for now.
Next ex-div date: February 2019
HOLD – STAG Industrial (STAG 26 – yield 5.4%) – STAG is looking solid, consolidating just above its 200-day line. The warehouse REIT’s third-quarter results met estimates, and STAG looks decent. High-yield investors can Hold.
Next ex-div date: November 29, 2018 est.
DIVIDEND GROWTH TIER
HOLD – American Express (AXP 108 – yield 1.3%) – Financials pulled back a bit over the past few days, but AXP remains strong. The stock climbed above its 50-day line during last week’s market advance, and has held most of the gains. Dan Loeb’s Third Point fund disclosed a significant stake in the credit card company last week, but it didn’t make much of a difference. Hold.
Next ex-div date: January 4, 2019 est.
HOLD – BB&T Corp (BBT 51 – yield 2.9%) – BBT has come back to life. The stock bottomed October 29, crossed its 50-day line last week, and remains North of the moving average. A rally in financials helped, as did reports that regional banks may soon be getting some regulatory relief. BB&T’s latest earnings report was solid, and the bank should benefit from higher interest rates this quarter. Hold.
Next ex-div date: February 2019
HOLD – Broadridge Financial Solutions (BR 105 – yield 1.8%) – We’re still holding BR because the stock has held its ground following last week’s big post-earnings drop. Broadridge reported first-quarter earnings that beat estimates by a solid margin, and management said they’re on track to meet their 2019 guidance, but the stock dropped 12% immediately following the report. We still have a 43% profit, and I’m going to keep BR on Hold for now.
Next ex-div date: December 13, 2018
BUY – CME Group (CME 187 – yield 1.5%) – After a three-week-long post-earnings rally, CME finally pulled back a bit yesterday. Market volatility is good for the financial exchange operator and the stock had a nice consolidation from March to August. I’ll keep CME on Buy. The company pays a large special dividend at the end of each year, which can more than double its normal yield.
Next ex-div date: December 7, 2018
HOLD – CSX Corp. (CSX 70 – yield 1.3%) – CSX is looking healthier. After bouncing off its 200-day moving average a week and a half ago, CSX rebounded just to its 50-day line last week. The stock is now pulling back slightly but now looks likely to trade sideways for a while, thus avoiding a fall to new lows. The company already reported earnings earlier this month, and although the stock’s reaction was negative, the results were excellent. Hold.
Next ex-div date: November 29, 2018
HOLD – Dunkin’ Brands (DNKN 72 – yield 1.9%) – DNKN looks decent, the stock is chopping around right around its 50-day line, and is still well above its 200-day. The company’s earnings were well-received; adjusted EPS rose 69% and revenue beat estimates nicely. Dunkin’s new menu strategy, which is simpler and more beverage-focused, contributed to improved profitability and will continue to be rolled out nationwide. Management also increased its full-year guidance, prompting a raft of upward analyst revisions; analysts are now expecting full-year sales growth of 55% and EPS growth of 17%. I’ll keep DNKN on Hold for now, but the stock will likely be one of my first upgrades back to Buy once the market starts looking healthier.
Next ex-div date: November 23, 2018
SAFE INCOME TIER
BUY – Invesco BulletShares 2019 Corporate Bond ETF (BSCJ 21 – yield 1.4%)
BUY – Invesco BulletShares 2020 High Yield Corporate Bond ETF (BSJK 24 – yield 4.9%)
BUY – Invesco BulletShares 2021 Corporate Bond ETF (BSCL 21 – yield 2.4%)
BUY – Invesco BulletShares 2022 High Yield Bond ETF (BSJM 24 – yield 5.4%)
The two high-yield funds in our bond ladder, BSJK and BSJM, both pulled back fairly sharply last month due to a broader decline in the high-yield market. The stock market selloff, an Italian budget standoff and concerns about global economic growth were all cited as contributors to the selloff. However, the decline was much less severe than the losses in equity markets. I’ll keep all four bond funds on Buy; their defined-maturity features limit losses as long as they’re held until expiration (at which point Invesco disburses the net asset value, or NAV, of the ETF back to investors).
Next ex-div dates: December 3, 2018 est.
BUY – Consolidated Edison (ED 79 – yield 3.6%) – ED is doing very well—better than its utility sector peers. Nine analysts have raised their 2018 estimates over the past month, which may have contributed to the stock’s rally over the past week. ED is now above both its 50- and 200-day lines, and at its highest point since mid-September. Long-term investors can nibble here for safe income; ED has increased its dividend every year for 43 years.
Next ex-div date: February 2019
HOLD – Ecolab (ECL 158 – yield 1.0%) – ECL’s rally continued last week, before the stock finally leveled out over the past two days. The stock is now above both its 50- and 200-day moving averages. Hold.
Next ex-div date: est. December 17, 2018
BUY – Hormel Foods (HRL 45 – yield 1.7%) – Hormel has hit new 52-week closing highs on each of the past three days. The stock is a little extended above its 50-day line, down at 41, but can still be bought on pullbacks. Hormel will report fourth-quarter and full-year earnings November 20, before the market opens. For the quarter, analysts are expecting Hormel to report 3.0% revenue growth and 19.5% EPS growth. For the full year, analysts are expecting 4.7% revenue growth and 19.1% EPS growth.
Next ex-div date: January 2019
BUY – Invesco Preferred ETF (PGX 14 – yield 6.0%) – After a quick interest rate-related pullback early last month, PGX has been trading sideways for the past few weeks, and remains a decent store of value until the market improves. PGX is an ETF that holds preferred shares (a type of debt) and pays monthly distributions. The fund has low overall volatility and usually trades between 14 and 16. Note that PGX offers no capital appreciation potential, instead, but it’s a good source of regular income. Buy under 15.
Next ex-div date: est. December 14, 2018 est.
BUY – McCormick & Co (MKC 148 – yield 1.4%) – Like Hormel, MKC had a good week, and is near 52-week highs. I wrote last week that I think consumer staples stocks might be in the early stages of a long-term period of outperformance. Long-term investors can continue to Buy on pullbacks.
Next ex-div date: December 28, 2018 est.
HOLD – UnitedHealth Group (UNH 269 – yield 1.3%) – Last week I wrote that UNH had switched from an uptrend to a sideways trend, and the stock quickly proved me wrong by gapping up through its 50-day line to close at a new 52-week high. The healthcare company is a reliable long-term safe income investment, and the stock has strong support from its 200-day moving average. Hold.
Next ex-div date: December 6, 2018 est.
BUY – Xcel Energy (XEL 51 – yield 2.8%) – XEL closed at its highest level since last December yesterday. The stock will be added to the Nasdaq 100 index later this month. In addition, eight analysts have revised their earnings estimates for XEL upward over the past month. The utility is now expected to report 7% EPS growth this year and 5% growth next year. Long-term safe income investors can buy on pullbacks.
Next ex-div date: est. December 13, 2018
Prices as of November 13, 2018
