Our U.S. Stock Portfolio Third Quarter Review. Up 5% More Than The S&P 500 In 2020

Our US stock portfolio consists of 15 index skims and 3 stock picks. With respect to those index skims, please have a read of Buying Dividend Growth Stocks Without Looking.

Note: Index skimming entails simply buying enough individual companies (constituents) from an index list of holdings.

To be clear, I didn’t look at the stocks (I did no further research or evaluation) but the Dividend Achievers Index (VIG) certainly did look. And it takes an incredible company to make it into that index and ETF. The criteria demands that a company have a history of increasing its dividend each year for 10 years or more; the index also applies proprietary dividend health screens.

I purchased 15 of the largest cap constituents in early 2015, and continue to hold all names. I did apply a large cap bias to the portfolio creation process.

The list of stocks has expanded to 17 companies thanks to United Technologies. The company merged with Raytheon (RTX) and that included the spin-off of Carrier Global (CARR) and Otis Worldwide (OTIS). We hold all 3 companies.

And when I write ‘we’ – the companies are held in my wife’s and my own investment portfolios. I self-direct our retirement accounts.

For the purpose of evaluating the performance of the stock portfolio, I will use portfoliovisualizer.com. United Technologies has been removed as the company continues as Raytheon. That means that United Technologies is not available for historical returns. I will remove the company from evaluation and run the numbers with the remaining 14 stocks.

The stocks in the US Portfolio

Here are the index skims.

3M (NYSE:MMM), PepsiCo (NASDAQ:PEP), CVS Health Corporation (NYSE:CVS), Walmart (NYSE:WMT), Johnson & Johnson (NYSE:JNJ), Qualcomm (NASDAQ:QCOM), United Technologies, Lowe’s (NYSE:LOW), Walgreens Boots Alliance (NASDAQ:WBA), Medtronic (NYSE:MDT), Nike (NYSE:NKE), Abbott Labs (NYSE:ABT), Colgate-Palmolive (NYSE:CL), Texas Instruments (NASDAQ:TXN) and Microsoft (NASDAQ:MSFT).

Once again, we’ll look at the United Technologies spin-offs in a separate section.

Here’s the performance of the 14 Dividend Achievers (Dale’s Dividend Achievers) vs. the benchmark index – the Vanguard VIG ETF.

The period is January of 2015 to end of September 2020.

For the above evaluation, we have an equal weight start with those stocks and we let them run, with no rebalancing.

We see that the greater outperformance is thanks to the recent performance through market volatility and during more trying months for the stock markets. And that is entirely the reason why I created this portfolio. I was not anticipating any market beat, I wanted a portfolio that might hold up ‘better than the market’ in a meaningful stock market correction.

Mission accomplished so far, on that count. And yet we also see outperformance to the tune of 3% annual.

Returns from 2018.

Troubles for the stock market began in 2018. As you may remember, we had a decent year in 2018 up until the Christmas Crash.

Here are the returns of the portfolio of Dale’s Dividend Achievers from 2018 to end of September 2020.

Year to date.

And here’s the third quarter report. This is year to date to end of September 2020.

The Dividend Achievers vs. the S&P 500

Here’s a comparison for 2020 including the S&P 500 (IVV).

We can see that the market (the S&P 500) has outperformed Vanguard’s Dividend ETF modestly in 2020.

When we go back to the beginning of 2018, we see a near draw between VIG and the IVV ETFs, but with that considerable outperformance of the 14 Dale’s Dividend Achievers.

But once again (and as per the greater theme of better risk-adjusted returns), the Vanguard VIG had lesser volatility and lesser drawdowns in the period.

And of course, I know you want to see Dale’s Dividend Achievers vs. the market from 2015.

The individual stocks and performance.

Here’s the performance of the 14 companies for 2020.

The portfolio is well-positioned for the pandemic period. It is dominated by technology, consumer staples, consumer discretionary and healthcare.

CVS and Walgreens (though in the right space) continue to be the dogs of the portfolio. That said, it is encouraging somewhat to have dogs that are making a lot of money and paying out very decent dividends.

My 3 US Stock Picks

And yes, the story gets even more encouraging. I have 3 US stock picks. Here’s the performance for 2020 to end of September.

Apple (AAPL) and BlackRock (BLK) are long-term growth picks.

Berkshire Hathaway (NYSE:BRK.A) (BRK.B) is more of a recession hedge and a value ‘play’. Obviously, Berkshire is not yet working out as that recession hedge. But we might be in the first inning of that recession (who knows?) and Mr. Buffett is certainly not buying the US stock market run and US economic recovery ‘thing’.

In June, I wrote Warren Buffett does not get his chance to be greedy.

I am more than happy to still hold Berkshire as that hedge.

We are certainly not out of the woods yet IMHO, and the virus has a long way to go to run its course. Economic realities are starting to settle in with layoffs and bankruptcies in many sectors such as airlines and tourism and movie theatres and restaurants – many are in serious trouble.

Follow the virus

We do have to follow the virus, and the consumer.

I do too much reading on the pandemic and viruses and coronaviruses, vaccines and more. It’s quite possible that it will take 2 to 5 years for the virus to run its course. At that point, it might become the common cold, just like 4 other coronaviruses.

Mr. Buffett might yet get his chance to be greedy.

Raytheon and United Technology spin-offs

OTIS and Carrier have had an incredible run from the spin-off in March. Raytheon is up modestly from the spin-off.

I added to Carrier in April. Carrier was the 6th best-performing stock in the S&P 500 for the third quarter, up an incredible 72%.

My TD Direct discount brokerage report shows that we are up over 64% for Carrier from the March debut.

Here’s the chart for Carrier from inception. Certainly, Mr. And Ms. Market did not know how to evaluate this one from the initial spin-off.

I am more than happy to hold this company.

And all told, the United Technologies group have performed well and would also have contributed slightly to the outperformance vs. VIG and IVV.

On the dividend front, we still have that perfect record for US and Canadian stocks.

I’ll be back soon on Seeking Alpha with a look at our Canadian portfolio and Canadian banks; it’s the cheapest they’ve been in 20 years.

We’ll see you in the comment section. How is your portfolio holding up? Is your portfolio built for the pandemic period?

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Disclosure: I am/we are long I AM/WE ARE LONG BNS, TD, RY, AAPL, BCE, TU, ENB, TRP, CVS, WBA, MSFT, MMM, CL, JNJ, QCOM, MDT, BRK.B, WMT, ABT, BLK, NKE, PEP, LOW, OTIS, CARR, RTX, BTC-USD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Author’s note: Thanks for reading. Please always know and invest within your risk tolerance level. Always know all tax implications and consequences.