Top 5 Positions as of 19 October 2018

We didn’t by or sell anything since we last published the list of the five biggest positions in the Optarix US Portfolio. However, since 26 September there have been a couple of changes in the list. As of 19 October, the five biggest positions and their gains were as follows:

1. Emerson Electric (EMR) +27.87%
2. Vanguard Total Stock Market (VTI) +28.44%
3. Apple (AAPL) +74.48%
4. Johnson & Johnson (JNJ), +19.77%
5. Aflac (AFL) +20.72%

Emerson Electric (EMR) remained our largest position. Stanley, Black and Decker (SWK) dropped out. Instead Johnson & Johnson (JNJ) entered in fourth. Apple moved up from fifth to third position. 

In particular in the last two weeks there were quite a few market drops for 2% or even 3% in a single day. Occasionally, there was a day with a slight uptick but overall it has become clear in our opinion that market participants have become much more cautious in light of the current challenges. 

For one the interest rates keep rising in the US for the time being. As of writing the yield on 10-year government bonds has increased to 3.195%, which is up from 2.339% at the end of September 2017. The interest rate for 3-months treasury bills increased from 1.04% to 2.27% in the same time frame. Looking at our portfolio the dividend yield changed from 1.99% to 2.20% in the same time frame. Given this data we believe that there is not much upside at the moment in the markets until it becomes clearer by when the US Federal Reserve will change from tightening to neutral. 

Rising interest rates are poison for the stock market. In addition to that we also have the increasing trade tensions but also political uncertainties. For example, the Jamal Kashoggi case is threatening the relationships between the US and Saudi-Arabia. The United States are considering recreating from nuclear arms agreements with Russia. The trade war with China as well as the military issues in the South China sea don’t really help either. The outcome of the midterms, which looked like a homerun for the Democrats, is no longer certain either. These just some of the factors that we believe negatively influence the market participants at the moment. 

What does this mean for the long-term investor? We believe it is more important than ever to spread the risk across a large number of positions. And it is critical to invest only in high-quality companies such as dividend aristocrats. As an investor it’s important to minimize emotions as much as you can when observing the daily ups and downs of the market. Long-term we are confident that shares still represent a very good option to participate in the long-term growth of an economy. If the market falls, then what it really means is that you can buy the same quality shares at lower and hopefully more reasonable prices again. Rising profits could also help to get valuations back to a more reasonable level. 

Happy Investing! 

Disclaimer: We own share in all the companies mentioned. We have no plans to initiate or change any position in any of the stocks mentioned in this post in the next 48 hours. This post is not financial advice. You are responsible for due diligence before making financial decisions. Always consult with your financial advisor.