June 2021 – Spring Cleaning my Desired Portfolio

It’s that time of the year again where many of us have a strong urge to organize things and to clean our things. Hence, we’ve cleaned our house quite rigidly already and the garden is also nearly done.

It’s funny when you think about it, because it’s really something that we homo-sapiens seem to do after the winter.

I guess the increased sunlight and the waking up of nature is just giving us that extra bit of energy to clean and declutter.

Well guess what?

I’ve got exactly this same urge to clean and declutter my portfolio and my allocation strategy to ensure it’s fully focused on my goals.

Just like I have an urge to run through all the numbers related to my personal finances at the end of December of each year.

And you know, there happened really a lot since my last spring cleaning in May 2020. We all know it was an extra-ordinary year and that can be witnessed in the changes I made.

I’m actually not sure if you are surprised by this, because many people think that Dividend Growth Investors are by design buy and hold investors.

I consider this partly true, because I rather consider myself a buy and intend to hold investor.

Cartoon of the Day: Buy & Hold

This is because sometimes good companies just go bad.

As an example, General Electric was one of the most exemplary dividend growth stocks in the late nineties. Look at where it is now?

That’s why I am of the opinion that everyone should actively monitor their (desired) holdings.

When to sell or when to make changes is really something personal. In general I aim to do my homework when something fundamental changes.

Having said that, many of the changes that I’m highlighting today are also due to having better insights or just changing preferences compared to a year ago.

But I also always took my willingness to be exposed to a certain sector as a very important decision factor. Hence, more often than not my sector allocation strategy has been driving the moves between certain tier levels than

Last but not least, in some cases it has nothing to do with the particular company itself, but rather about finding better opportunities elsewhere.

So without further ado, let’s look at some of the changes that I’ve made in my desired portfolio.


Changes in my desired portfolio

The changes look actually quite more than what really happened. One change can simply trigger multiple other changes.

Note: tickers followed by a * means that I didn’t or don’t have a position yet. Hence, they are much more easier to change for me, because it doesn’t trigger any sale.

TickerNameOld PositionNew PositionRationale
EPA:BNDanone SATier-1Tier-2An 8% useless Dividend Cut.
AMS:ADAhold DelhaizeTier-2Tier-1Replacing Danone as a Tier-1 position
SBUX*StarbucksTier-1Tier-4Lot’s of financial engineering. Doesn’t fit as anchor in my portfolio. Though, great brand and product offering, hence why keeping it as Tier-4
EPA:ORL’Oreal SATier-2How could I not have had this one in my desired portfolio in the first place?
PG*Procter & GambleTier-2removedAlready enough allocation to consumer staples with Unilever, Ahold Delhaize, Danone and others.
INTC*Intel CorpTier-2removedThey have lost mojo in the chip industry. If anything, I’d prefer AMD, Nvidia or Broadcom going forward
AMS:WKL*Wolters KluwerTier-3Tier-2More convinced after my analysis.
LON:DGE*Diageo PlcTier-3removedWe did an analysis in the Dividend Talk podcast. It made me realize that I don’t need it in my portfolio.
BME:ENGEnagas SATier-3Tier-4Downsizing exposure to energy sector.
BMYBristol Myers SquibbTier-4Reasons explained in video.
CSCO*Cisco SystemsTier-4removedI prefer nowadays better positioned IT stocks in my portfolio
UPS*UPSTier-4removedI looked several times into it and I don’t like their financials (i.e. pension obligations)
EPA:FP*Total SATier-4removedDownsizing my exposure to Energy sector
TAT&TTier-4removedUpcoming dividend cut. Reasons explained here.
ETR:ALV*Allianz SETier-3I learned more about the insurance industry and I want to increase my exposure to it
AFLAflacTier-3I learned more about the insurance industry and I want to increase my exposure to it
LON:CSNChesnara PlcTier-4Reasons explained here.
DLRDigital Realty TrustTier-4Willing to increase my portfolio exposure to the REIT sector. This is a bet on Data Center growth.
LON:BATSBritish American TobaccoTier-4removed and soldMy wife doesn’t agree to owning tobacco companies.

These changes are now reflected and updated in my allocation strategy. What you will notice now is that there are few new slots open after these changes.

As an example, I currently have only 9 out of 10 Tier-1 stocks identified. I have not made up my mind yet which stock can replace Starbucks as a company which I would prefer to buy with an intention to hold forever.

But hey, I’m not in a hurry. Hence I let the Tier-2 companies fight it out among each other and I will then chose one of the winners 😉

Some more explanation about Starbucks

One of the big decisions I made was to downgrade Starbucks significantly in my desired portfolio. Doing this was not easy, but I just can’t have all this financial engineering as an anchor of my portfolio.

Don’t get me wrong, I think it’s an iconic and brilliant business. But their continuous financial engineering just keeps on going on. It went even that far that it nowadays has a shareholder deficit instead of a shareholder equity.

In other words, their debt on the right side of the balance sheet is much bigger than their entire amount of assets on the left side of their balance sheet.

Hence, such a company needs to be more carefully monitored in my portfolio. These are uncharted waters that I simply don’t feel comfortable with as a Tier-1 or Tier-2 company.

Let’s see what time will tell us, but for now I feel much more comfortable with it being a small position in my portfolio.

New Sector Allocations

SectorOld allocation %New Allocation %Change
Consumer Discretionary9%4%Decreased
Consumer Staples20%23%Increased
Energy6%5%Decreased
Financials7%12%Increased
Healthcare20%21%Increased
Industrials8%7%Decreased
Information Technology15%12%Decreased
Materials6%6%
REITs5%8%Increased
Utilities4%2%Decreased
Telecommunication Serivces0%0%

As you can see, my thoughts about certain sectors also keep changing as I continue myself to develop as an investor.

As an example, I really came to appreciate the power of insurance companies to continue growing dividends during good and bad times. Hence, this is why I heavily increased my desire to be exposed to the financial sector.

At the same time I have continued my lowered willingness to be exposed to the Energy sector. I feel that I have enough of it right now and I don’t see the opportunities of earnings growth compared to other sectors.

At least not when we talk about the typical dividend paying companies in the Oil & Gas industry.

Having said that, some changes are really marginal and without intend. Examples are the consumer staples, healthcare and industrials.

In the end it’s just all one big puzzle by finding the right companies in the right sector and having them classified in the exact tier level.

But what matters is that I really want consumer staples, healthcare and information technology to make up more than half of my portfolio.

Those are the 3 sectors I have always had the most conviction in and now the Insurance industry as part of the financial sector has joined that club.

Final Thoughts

I know that there are several readers that very closely follow every step and change I make to my portfolio.

While I would strongly like to encourage you to not copy my behavior without having done your own homework, I would also like to be fully transparent in the changes I make.

Often these changes are discussed in for instance the Dividend Talk podcast, but sometimes they have not been mentioned anywhere.

I neither want to write a post about every little thing I do, because that would be in my opinion not be the best usage of my precious time.

Hence, if you follow me very closely, then you might sometimes get disappointed and that’s by no way my intention. It’s simply a balancing act between time and value.

I assume everyone will understand that 😉


Regarding my thoughts about this clean-up: it always feels great when the windows are open and the house looks nice and tidy.

Let’s see for how long I can keep this feeling. I’m sure some events will happen over the next months which makes me change my thoughts and conviction about a certain position.

Time will tell, but for now I have this feeling that I want to keep my house as clean as possible for as long as possible 💪

Yours Truly

European Dividend Growth Investor




Disclaimer

I’m not a certified financial planner/advisor nor a certified financial analyst nor an economist nor a CPA nor an accountant nor a lawyer. I’m not a finance professional through formal education. I’m a person who believes and takes pride in a sense of freedom, satisfaction, fulfillment and empowerment that I get from being financially competent and being conscious managing my personal money. The contents on this blog are for informational and entertainment purposes only and does not constitute financial, accounting, or legal advice. I can’t promise that the information shared on my blog is appropriate for you or anyone else. By reading this blog, you agree to hold me harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information provided on this blog.

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European DGI

It's my desire to retire early via Dividend Growth Investing as a passive income stream. This is not easy and especially when living in Europe. That's why I started this blog and share my journey: to give you a European perspective.
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