Monday, December 30, 2013

Year End Look at the Portfolio - Part 1

As an excellent year in the stock market comes to a close, it's time to look at the portfolio and consider my strategy for 2014.  In the next several postings, I'll be looking at valuation for my current holdings, size of each, performance review vs. benchmarks, review my rules for the portfolio, and put together an action plan for early 2014.  I'll also take a look at my watch lists for stocks I may want to add or swap into the portfolio.

In part 1 here, I ran an analysis of current PE vs. past six year normal PE as initial screen of the holdings.  This first chart shows holdings that are still undervalued, and if not oversized already, I may add to some or all of these holdings:

The names highlighted with the green boxes look very attractive.  The others are less attractive, but not so overvalued that I'd consider trimming... yet.

From this list, I still like the technology names highlighted, VMI and DE.

In addition the stocks above, I'll list my REIT and MLP type stocks below, separately showing historical and current P/FFO vs. PE, a better measure for cash flow investments like these:

KMI (and KMP for taxable accounts) still looks like a great investment.

On the other side of the coin are the holdings that are looking more expensive.  They are shown here, with red highlighting showing those that are particularly overvalued:

In particular, I'll look carefully at the size of ADM, MO, WAG, DOV, GD, and JNJ and trim these names down to smaller % of the portfolio, or sell them completely.  I need to review my rules and think about each for the long term.  I'm unlikely to sell without a suitable replacement for each, but am mindful that I have several candidates in for investment within the portfolio.

That's all for Part 1.