By: Dividend Sensei
Click here to read up on the intro to this portfolio, the theory behind it, and its methodology.
This past week was what one might expect in the week leading up to Christmas, mainly a low volume Santa Claus rally that left little in the way for new potential additions to our value focused portfolio. That being said some earnings misses did make for attractive opportunistic market overreactions in the form of ACN, MKTX, HAS, and previous holding IEP.
In the coming week I don’t expect to see a significant change, since the promise of lower tax rates in 2017 might cause asset managers to hold off selling until the new year. On the other hand tax loss harvesting might create some good opportunities to buy on dips.
What is interesting to note is that some of the additions in recent weeks, especially those that resulted in opportunistic, overreaction buys, have rallied strongly and achieved significant short-term gains. Just goes to show the bi-polar and volatile nature of the market, and why such volatility is a value focused investor’s best friend.
Portfolio Holdings: 149 (137 last week)
Yield: 3.51% (S&P yield 1.99%)
PE: 16.59 (14% below S&P 500)
FCF Margin: 18.72% (rich in free cash flow is rich in dividends)
Return on Assets: 7.56% (15% above S&P 500 average)
Return on Equity: 48.98% (130% above S&P 500 average)
Market Cap: $16.9 billion (78% below S&P 500 average)
Projected 5 Year EPS growth: 8.87% (3% above S&P 500 average)
Projected Annual Total Return: 12.4% (36% above the market’s historic CAGR since 1871)
Consumer Cyclical: 13.36%
Consumer Defensive: 11.47%
Basic Materials: 1.71%
Lockheed Martin (LMT): 2.30%
Icahn Enterprises (IEP): 1.46%
Kimco Realty (KIM): 0.46%
NextEra Energy Partners (NEP): 0.47%
Portfolio Annualized Total Return: 5.36%
S&P 500: 3.96%
Outperformance (Alpha): 1.4% (35%)
NVIDIA (NVDA): 20.41%
Energy Transfer Equity (ETE): 19.16%
VF Corp (VFC): -8.15%
Again, remember that the point of this portfolio is to prove that method matters a lot more than most people realize. Sure all the companies the portfolio adds are personally screened by me, and most come from my master list of America’s best dividend growth stocks, but notice how, despite the vast number of holdings we are not just beating the market, but padding our lead over time.
Granted so far the DVDGI is only kicking market butt during a rally, but I’m confident that a year from now we’ll be approaching the theoretical 3.3% alpha that this portfolio should be able to sustain over the long-term.