Portfolio Rebalance: 3 Sales, 10 New Buys, Updated Tracker Tool

We don’t do it often, but we did on Friday. We’ve rebalanced our portfolio to bring the allocations back on target. And in the process, we’ve sold 3 positions and added 10 new ones. Again, we don’t do it often, and the 10 new buys are securities we’ve written about recently. This report details the rebalance, and we share our updated real-time Portfolio Tracker tool, including new “risk-monitoring” and several new real-time watchlists for REITs, BDCs, Energy Stocks, and more big dividend opportunities.

To get right to it…

The 3 Stocks We Sold:

Tekla Healthcare Opportunities Fund (THQ): We sold our shares of this healthcare Closed-End Fund for several reasons, including the fact that is has had a healthy run of delivering big income in the years that we’ve owned it. However, we already have significant exposure to the healthcare sector (via other investments, including the Tekla World Healthcare Fund (THW)—which we continue to own). We also sold it to make room for a new individual healthcare stock purchase (as we will describe later in this report).

ABB Ltd (ABB): This is a healthy dividend-paying industrial automation and manufacturing company that we sold for a variety of reasons. First, it’s had a healthy run since we’ve owned it (particularly in recent months), and we wanted to make room for a new more attractive dividend opportunity (Cyrus One (CONE)—which we will detail later in this report).

Tsakos Energy Navigation (TNP): This may be a controversial sell because we still consider the shares quite attractive, especially after the recent sell-off. However, we sold it to make room in our aggregate portfolio for another shipping industry stock (which we will cover in more detail later in this report). And the shipping stock we added is a Preferred stock with a much higher dividend yield and a very attractive buying price.

Note: We also removed MMD and NAD from our Income Equity portfolio because these tax-exempt municipal bond CEFs are inconsistent with the investment strategies of many tax-exempt Individual Retirement Account (IRA) readers (because the tax-exempt benefits are nullified to readers investing via their IRAs). We continue to consider MMD and NAD to be attractive investments for high-income non-IRA investors).

The 10 Stocks We Bought:

And here are our 10 New Purchases.

GasLog Preferred Series A (GLOG-A), Yield: 8.7%: We added shares of this liquid LNG maritime shipping company because of it’s attractive high yield and discounted price. We’ve written about this one in detail in recent weeks, and the recent steep sell off has given us the motivation to purchase shares considering our views of the business.

Triple Point Venture Growth (TPVG), Yield: 10.5%: We added shares of this attractive big-dividend business development company (BDC) focused on growth stage investments because of it’s attractive business model and price. It’s a compelling way to get exposure to growth companies while still achieving the big income payments that income-focused investors want. We’ve written about this one in detail recently, and finally pulled the trigger.

Vermilion Energy (VET): We wrote about this big monthly dividend paying Energy exploration company back in late October, and finally added shares as the price has declined. The very high yield gives us pause, but considering the value of the business, we’re confident VET will keep paying attractive dividends going forward.

Ventas (VTR), Yield: 5.5%: We warned of operator troubles for this healthcare REIT last summer, and sure enough the shares subsequently declined sharply. We wrote about Ventas again recently, and we don’t believe this business will simply disappear because of demographics. The significantly lower price has compelled us to pick up shares as value play.

CyrusOne (CONE), Yield: 3.3%: Simply put, we like this healthy dividend growth stock for two reasons. One, the demand for data centers will grow and this company’s dividend payments will also keep growing. Two, we suspect one of the bigger data center REITs will eventually purchase CONE at a big premium to its current price (and that would be a good thing for shareholders that like big share price increases).

Pfizer (PFE), Yield: 4.1%: This is a compelling dividend growth stock trading at an attractive price. As we noted earlier, we sold shares of one of our Tekla Healthcare CEFs and replaced it with Pfizer for the dividend and price appreciation growth. Plus the decline after last week’s earnings announcement provides an additional margin of safety.

Dow Inc (DOW), Yield: 6.1%: As we recently wrote in detail about, this materials/chemicals company was recreated when Dow and DuPont split into separate companies. Dow currently offers the highest dividend yield among the 30 Dow Jones stocks, and it trades at an attractive valuation. This year’s price decline makes it hard to pass up for income-focused value investors.

Exxon Mobil (XOM), Yield: 5.6%: Big safe yield, on sale. That’s how we feel about Exxon Mobil. Sure energy prices have negatively impacted the company in recent years, but the company remains highly stable, healthy and profitable. And the price decline is simply unwarranted at this point. Buy.

Alibaba Group Holdings (BABA): Emerging market equities have underperformed and are due for a big rebound, and this Chinese internet business juggernaut is one way to play it. It trades in the US as an ADR and pays zero dividend. This is a pure growth stock, and it has a lot of upside.

Adobe (ADBE): Adobe is to the creative world what Microsoft is to the PC world, and both are mission critical, especially as they grow right into the cloud world. Adobe offers digital media tools to create, publish, promote, and monetize digital content. Its flagship product is Creative Cloud, a subscription service that allows customer to download and access the latest versions of its creative products. And Adobe’s photo shop is another popular one. Adobe eliminated its dividend a while back because it has so many incredible growth opportunities to invest in. This is a powerful long-term growth stock.

Rebalance:

In addition to the new buys and sells, we also rebalanced our existing portfolio holdings for risk management purposes. Specifically, we brought them back to target levels as price performance has caused their weights to deviate. We do not rebalance often because we generally like to let our winners run and we have patience for our laggards (so long as we still believe in the business). Further, frequent rebalancing can lead to costly trading mistakes, bad decisions (fear and greed), plus trading has hidden costs. Specifically, even though most brokerage firms have eliminated per trade commissions, there are still “hidden” costs such as bid-ask spreads and simply bad/unfair execution prices (i.e. the big execution firms are still skimming and front-running your trades, usually by very small amounts, no matter what Schwab, Fideltiy and TD Ameritrade try to tell you). Bottom line here, we don’t do it often, but felt Friday was a good opportunity to rebalance.

Portfolio Tracker Tools and Watchlists:

We continue to work hard to update and improve our portfolio tracker tool, and you can access the latest iteration using the link below. It shows all of our current holdings and weights. Plus we added new tabs including risk management, performance, and watchlists for BDCs, REITs, Energy Stocks and more. Here is the tool (and thanks for your patience as we continue to work to get this right).

Important Takeaway:

As if you don’t already know (and just in case you’ve forgotten)… Your investments belong to you. It’s your portfolio and your money. Don’t let anyone distract you from your goals. Be opportunistic, but be disciplined, and stick to your plan.