How I’m Investing in a Post Pandemic World – #2

First I’m going to focus on the ‘What’ I plan on investing in going forward in this post pandemic world. Then I will cover the ‘How and When’ to invest. I’m not sure how many posts this will take, so let’s get started.

First let me give you a little background. I am and have been a dividend growth investor for the past 10 years. My investment strategy has been to invest long-term, in high quality companies with competitive advantages; and a history of increasing their dividends every year at a price that was near or below fair value estimates. With the goal to build a growing stream of income that outpaces inflation to retire on, (which I have accomplished.) With my focus on income the only time I would sell is: 1) when a company cut its dividend, 2) it did not raise its dividend for two consecutive years, or 3) the business fundamentals of the company eroded and changed for the worse. Since I rarely sell capital appreciation is a secondary benefit to fall back on in case of an emergency, if I had to sell outside of my three sell rules.

For example, here are the 40 holdings that make up my dividend growth stock portfolio. AAPL, AMGN, AMT, APD, BIP, CSCO, EPD, FAST, GD, GILD, HD, HON, HSY, ICE, ITW, JNJ, KO, LOW, MCD, MDT, MO, MSFT, O, PEP, PFG, PRU, PSX, QCOM, ROP, RTX, SBUX, SNA, SXT, T, TXN, UNH, UNP, V, VZ, WEC.

Now this is NOT a recommendation to buy any of the above stocks. Most of these I bought years ago when they were below fair value, and some of these companies’ fundamentals have changed and I’m likely going to sell them when the economy fully recovers. 

Looking across my portfolio I have pretty good diversification not great but okay. The number of stocks in each of the 11 sectors is: 

4 – Consumer Staples
4 – Consumer Discretionary
2 – Energy
4 – Financials
5 – Healthcare
8 – Industrials
2 – Materials
2 – Real Estate
5 – Technology
2 – TeleComm
2 – Utilities

There are many advantages to active investing with individual stocks, such as, transparency, valuation, no expenses, regular dividend payments. However the disadvantage is the time required to manage them. Let’s face it, 40 companies is a lot to keep up-to-date on. Especially if/when there’s a major change to the economy like a pandemic, things can change really fast and the time and effort increases. Maybe beyond the time you have just to keep up. That said, as the economy recovers I’m planning to slowly trim my portfolio holdings down to 30 stocks while maintaining or possibly improving my diversification mix. I think that will be manageable within the time I’m willing and able to commit to active management. I believe it’s wise for every investor to regularly access their time commitment to manage their portfolio and adjust as needed. Your tip for today!

Okay well that’s all for today. But before I sign off I want you to think about (as an investor) where you fall on the spectrum of diversification on the right and concentration on the left? Typically investors are one or the other. For example, Warren Buffet is surprisingly a strong concentration investor who currently has 50% of his stock portfolio in one company Apple (AAPL). I know… things that make you go hmmm?

Filed in: Investment Principles