Updated on 10/07/22
**Originally Published on July 25, 2022 (updated quarterly)**
My Portfolio Performance – My Master Stock List – My Stock Picks – My Sector Allocations – Q&A
IMPORTANT NOTICE
I make no assurances or promises about the future short or long-term performance of any companies on this Master Stock List. It’s the responsibility of each investor to only purchase stocks after their own independent verification of the facts, consultation with professional advisers if need be, and with a willingness to accept full responsibility for the consequences of your own investment decisions. Your circumstances, goals, risk tolerance, and time frames are likely different from mine.
I’m not an investment professional and these stocks have risk that you need to consider before buying them. As I do with this entire blog, I’m showing you what I’ve done or plan to do in preparation for retirement. Look for ideas from this list and then make your own decisions based on your unique situation.
Vanguard Taxable Account
My individual stocks are purchased through my Vanguard Taxable Account. Nearly all of the stocks are chosen from my Master Stock List, which is the foundation of my approach. If you don’t have a Master Stock List of your own then create it immediately. The list is the basis for which companies will eventually end up in your stock portfolio. This list, my approach to buying stocks, selecting sectors, and more is what drives the rate of return I see in my Vanguard Taxable Account.
I track my performance to make sure I’m picking the right quality stocks, at the right time, at the best value. History will be my judge and the short history (3.5 years) has been positive as compared to the S&P 500. The biggest difference between my Taxable Vanguard Brokerage Account and the S&P 500 Index is the S&P 500 Index is 100% stocks. My account is a mix of stocks, bonds, and cash with occasional buys and sells all with the goal of optimizing returns. In other words, I’m not 100% stocks 100% of the time. I suppose I could use a balanced index as my comparison but we’ll keep it simple.
My Vanguard account is an important part of my “bucket system” but I’ve got assets for my Buckets 1 & 2 outside stocks, bonds, and cash too. Crowdfunding Real Estate, U.S. Government I-Bonds, and a tax-deferred corporate bond from my work (a non-qualified 401k) that will payout when I retire.
Rates of Return – My Taxable Vanguard Brokerage Account
As of 9/30/22 (Updated Quarterly)
- My 1-year Returns = +8.9%
- S&P 500 1-Year = –15.47%
- My 3-Year Returns = +8.5%
- S&P 500 3-Year Returns = +8.16%
- My 5-Year Returns = +9.4%
- S&P 500 5-Year Returns = 8.99%
Most of my Vanguard taxable account is dividend stocks but is also contains cash, bonds, and 1 non-dividend stock too (Alphabet). Though my sells are minimal, they do occur from time to time. One of billionaire investor Ray Dalio’s principles is to take profits when the thesis has played out or there is a good chance the profits could be lost. I’ve recently done that with Aflac and CVS Healthcare, which were two of my excellent gains from purchases made 3-4 years ago.
It turned out to be a good move because CVS is down over 20% since my sale and analysts predict further losses. Seriously, the goal is to beat the S&P 500 so my stock, cash, and bond ratio with occasional buys/sells are my advantage of beating the market. Plus, beating the market with reduced risk …. 2022 has produced challenges but I’m happy with the results.
My Master Stock List – As of June 30, 2022 (updated quarterly)
With thousands of stocks available to purchase, the only logical way to approach the market is to have a group of sectors and stocks identified at all times. Once you know which stocks fit your goals and objectives, knowing the price you pay is important. And that price can change each year. Why? Because earnings help determine what the price of the stock will be. If earnings are executive to be strong then the price compared to those earnings could be high. If the price doesn’t reflect the earnings then the stock could be undervalued or fairly priced.
- Identify Your Companies – Build your master stock list.
- Know Your Price – You should know what price your are willing to pay for each company because a stock could drop 10% but you need it to drop 20% to buy it.
- Know Your Maximums – Identify the maximum percentage you are willing to hold of each company in your portfolio. You should be willing to own more of a high quality stock like Coca-Cola versus a lower quality stock like AT&T.
Either way, know what stocks you want and what price you are willing to pay. Initially, your stocks will change as you get better at matching your goals to certain companies. E
I keep my Master Stock List updated on a regular basis. I would be lost without the focus that this list provides. I truly believe you need to know what types of companies and sectors will dominate your portfolio. I’m focused on industry leaders even though I know the leaders of today might not be the leaders of tomorrow.
The there are many characteristics I’m looking for when adding stocks to my Master Stock List. Though not all inclusive, basic items like:
- 50%+ gross margins
- “A” credit rating or better
- Decades of long-term dividend growth
- Earnings consistency regardless of economic conditions
- Significant brand quality
- Low beta or volatility (my 5 level-one stocks average half the volatility of the entire market)
And here are some other very basic things to consider that must be present when adding potential stocks to the list:
- No dividend cuts in the past twenty years – This shows they went through the Dot.com, Great Financial Recession, and COVID-19 recessions without having their dividends cut. That is strength! I’m ok with freezing them if they are done for the right reasons but cuts are hard to swallow and show weakness in the business model. This is especially true if you are looking 25+ years to hold a stock.
- No extreme debt burdens – Debt must be paid back, both people and companies sometimes forget that point. When rates were low, companies were piling on the debt. Rates are now rising and it’s going to punish weak companies. In my opinion, just avoid them because it’s not worth the risk.
- Profits – This might sound stupid but profits matter, especially when dividends are needing to be paid. Example: I went to a stock screener and it showed ~7,300 U.S. stocks. When I screened for those stocks that had a positive net profit margin it only showed 2,172. So, over 5,000 of those companies were not making money. Yikes!
- Business models that cannot become obsolete – This is critical for a 25+ year buy and hold, dividend reinvestment strategy. Technology changes constantly, and its for this reason you will never see a large portion of my holdings in technology stocks. But this can be important with financial and many other types too. It’s why I like stocks that have repeatable, basic need products that can evolve with consumer demands.
I update my list on a regular basis. Stocks are moving up and down between Levels 1-3 (though usually only between 2-3) and I add/delete the list too. It’s a constant work in progress until you finally get to the point (and I’m there) where you pretty much know what your portfolio will look like.
Honestly, the core of the portfolio will likely look much like mine. You’ll have Coke, Pepsi, Johnson & Johnson, Procter & Gamble, and many of my other stocks too. These are the finest companies in the world so it would almost be foolish to not include them at some point.
My Dividend (mostly) Stocks – As of October 7, 2022 (updated quarterly)
Most of these companies should need no introduction. Ben & Jerry’s and Dove (Unilever), Pampers, Tide, and Gillette (Procter & Gamble), Sprite and Smartwater (Coca-Cola), Doritos and Quaker Oats (PepsiCo), Gerber and Lean Cuisine (Nestle) and many others. The brands that are owned by these companies are worth billions. Nearly all of them pay me a dividend and I will likely hold them for years (decades?).
There are 5 stocks that are the core of my stock portfolio. These will be my largest holdings in retirement (though they aren’t yet). These 5 are of the highest quality:
- Coca-Cola
- Johnson & Johnson
- Nestle
- PepsiCo
- Procter & Gamble
Most of the time I’ll be reinvesting dividends until I need cash to live in retirement.
My Sectors – As of September 30, 2022 (updated quarterly)
I’ll admit, when I first set out to create a portfolio, my goal wasn’t to focus on Consumer Defensive (Staples) or Healthcare. But research and my goals made those two sectors the focal point. My upside will likely be limited but I’m hoping my downside won’t be as harsh either. I’ll still add a little juice (technology, med/small caps, etc…) to my portfolio but the majority will be SWAN (sleep well at night) stocks.
Regardless of your age, there is no doubt that you’ll want a portfolio of stocks that will be around in 50 years or more. It’s hard to say that about technology stocks but you can say that about Pepsi, Coke, Johnson & Johnson, Procter & Gamble, Nestle, and more. I’m not saying to have sectors other than Consumer Defensive and Healthcare but don’t have 100% of your portfolio in technology either. If you do, it will fall and fall hard. That’s not what I’m looking for.
So Many Questions
This guide is a compilation of articles I’ve written on building a portfolio of stocks, especially dividend paying stocks. The answers to some of the questions are a combination of research and my opinion. These are questions I asked and needed to answer, so I answered them in the form of an article.
One thing to remember is that even the greatest stocks have their moments of greatest and not being so great. As the years pass, the economic cycles might favor Consumer Defensive for a few years and then suddenly they go out of favor.
Coca-Cola is a great example. Warren Buffett took heat from many because Coca-Cola, likely his greatest investment ever, had a share price that was flat for 16 years. During this time, the long-term holders only collected the dividend. What they fail to mention is the great run it had 10-years prior. But while Coca-Cola was not impressive, other high quality stocks shined. For example, PepsiCo and Johnson & Johnson more than tripled during that same timeframe that Coca-Cola was flat.
As I asked myself questions, I’ll try to answer them and post them here:
- How do you decide which stock to buy? (March 6, 2021)
- Should you buy an index fund or individual stocks? (December 2, 2019)
- How many stocks do you need in a portfolio? (June 12, 2021)
- Which stock sectors do you buy? (March 29, 2020)
- Which sectors can be dangerous? (December 17, 2019)
- Are dividend paying stocks good to buy? (September 23, 2019)
- Should you reinvest your dividends? (December 8, 2019)
- What price should I pay for stocks? (December 30, 2019)
- Are most stocks winners or losers? (July 28, 2019)
- How do I build sustainable wealth in stocks? (July 21, 2019)
- Should I buy quality or value stocks? (March 1, 2020)
- What’s the best way to buy high quality stocks? (June 26, 2022)
- Do I need to buy international stocks? (July 7, 2019)
- What’s the best way to handle a volatile stock market? (August 18, 2019)
- Is choosing the right stock easy? (February 7, 2021)
- What are my Top 5 core stocks? (July 4, 2022)
- What’s my favorite sectors for retirement? (June 17, 2022)
- What are some things to consider when constructing a stock portfolio? (August 14, 2022)
This section will always evolve. As new information becomes available and as my thinking evolves we’ll keep this article updated … consider this a “living article.”
Stay tuned for future updates!
Thanks for reading!
Mr. TLR