Reduce TROW, OTIS

Two signals today, one for TROW and one for OTIS.

Reduce: T. Rowe Price Group Inc.

Based on our trading systems, we reduced our holdings in T. Rowe Price Group Inc. (TROW) at an average price per share of USD 122.46. With unit costs of USD 74.47 this represents a gain of 64.44%.

We started this position in 2016. TROW is a dividend aristocrat and therefore belongs to a group of companies that - as a group - are a great base investment.

Reduce: Otis Worldwide Corporation

Our trading system created a sell signal for Otis Worldwidw Corporation (OTIS) at USD 57.41. We reduced our position accordingly. With average unit costs of USD 45.35 this means a gain of 26.59%. This is a great result as we started this position only at the beginning of April 2020 when OTIS was spun off from Raytheon Technologies (RTX).

As with TROW, OTIS is a sound base investment as they count as dividend aristocrat, too. The dividend history of RTX (formerly United Technologies, UTX) is considered for determining that status.

A Busy Day: EMR, XOM, OTIS, LEG, AMCR, VGT, AOS, BEN

Triggered by the positive numbers from the US job market, the US stock markets are up today. The S&P 500 gained 2.62%. The US job market reported 2.5 million new jobs in May, the most jobs added in a single month since 1948. The unemployment rate dropped from 14.7% in April to 13.3% in May. Analysts expected an unemployment rate of up to 18%.

Our systems tend to create more signals when there are larger market moves (up or down) compared to when things remain mostly unchanged. Today was no difference with 8 signals, one buy and 7 sell signals.

Here is the rundown.

Reduce: Emerson Electric

We started our position of Emerson Electric (EMR) in 2016. Since March we reduced our holding slightly at various price point.

Today we sold at an average price of USD 67.17 per share. With unit costs at USD 57.08 this reprsents a gain of 17.68%. Not earth shattering but still a good result.

Reduce: Exxon Mobil

Oil companies have been unders pressure for along time. Exxon Mobil (XOM) is no different. We've held this position since 2018. We increased our position in 2019. Just a few days after the lowpoint at end of March we added even more shares at an average price of USD 37.05.

While the overall position still carries an unrealized loss, our systems have created a couple sell signals in April at USD 39.97 and USD 43.47. Today's sell was at an average price of USD 52.72. Compared to the low point in March this is a gain of 42.29%.

Basically with this holding the play was buying when nobody liked the stock, then slowly sell the shares acquired at the low point as the stock price increases again. Without closing this position our systems help realizing a gain by seizing the opportunity to get additional shares at a steep discount.

XOM is not out the woods yet. The company has postponed the increase of their quarterly dividend, which should have happend in the current quarter. To keep their status as dividend aristocrat they will have to increase their dividend that is payable in the fourth calendar quarter of 2020, and if that increase is just a fraction of a cent.

There are indications that business for oil companies will improve again over the next few months. As the economies around the world start to come out of the coronavirus hibernation, demand for oil is likely to increase again. The oil price has recovered from its ridiculous low of minus USD 40 (!). Output of existing wells is being reduced, e.g. the number of oil rigs in the US is dropping.

As business improves again, the stock prices of oil companies should continue to increase as well. Today XOM advanced by 8.11% and Chevron (CVX) was up by 4.71%. Obviously this is just a single day, so is not indicative by any stretch of imagination. On the other hand, XOM is up by over 40% since its low point in March 2020.

Reduce: Otis Worldwide Corporation

Our position started when Otis Worldwide Corporation (OTIS) was spun off from what is now called Raytheon Technologies (RTX), formerly United Technologies (UTX). We increased our position since then several times. Today was the first time our systems produced a sell signal.

We reduced our position at an average price of USD 58.14. With average unit costs of USD 46.0305 this represents a gain of 26.31%. This is a very good results for two months.

Reduce: Leggett & Platt Inc

And yet another sell signal for Leggett & Platt (LEG). Just a day ago there was a sell signal at USD 35.57 (see our post).

This time the sell signal for LEG was at USD 37.04. With average unit costs of USD 28.52 this represents a gain of 29.87%. This is a very good result.

Reduce: Amcor Plc

Amcor Plc (AMCR) increased in price further, so our systems determined that it is time to reduce again. The previous sell signal was generated only two days ago (see our post).

This time we reduced our position at an average price of USD 10.87. With unit costs of USD 7.40 this is a gain of 46.89%. A very good result, given we started this position in March 2020 only.

Add: Vanguard Information Tech ETF

Another buy signal for Vanguard Information Tech ETF (VGT). We've previously provided more details about the rationale for having this position in our US portfolio (see out post).

Today we increased our position with at an average price of USD 269.65.

Reduce: A.O. Smith Corp

For A.O. Smith Corp (AOS) our systems created a sell signal. We have held this position since July 2019 and added more shortly after.

Today we reduced the position at an average price of USD 52.03. With unit costs of USD 46.34 this represents a gain of 12.28%.

Reduce: Franklin Resources

We started this position in 2016. Performance in terms of stock price was disappointing so far. However, the company continued to increase their dividend each year. Dividend yield is currently at about 4.67%.

In April 2020 our system created a couple of buy signals. We increased our holdings accordingly. Our algorithms took the opportunity to buy near the bottom.

With today's sell signal we reduced our position at an average price of USD 22.68. With average unit costs of USD 16.46 we realized a gain of 37.79%. A quite satisfactory result for just 1.5 months.

Summary

It was a comparably busy day for us. However, we are confident that today's transactions were the right thing to do based on the signals generated by our system.

All of the stocks mentioned in this posts are long-term positions in our portfolio, i.e. a minimum period of 10 years. However, based on recommendations of our algorithms we may choose to increase or decrease any of the positions in the future.

Comparing our portfolio, which is managed by our software, with the S&P 500 index shows that our portfolio is up by 0.20% year-to-date while the S&P 500 index is down -1.14%. In other words, year-to-date our portfolio outperformed the index by 1.34%.

Disclaimer

Past results have no bearing for future results. Keep in mind that we do not accept any responsibility for your investment decisions. Do your own research and due diligence and consult with your financial advisor before making decisions. Any investment vehicle mentioned on this site is used for illustration purposes only and does not constitute investment advice.

Reducing CARR; Increasing XLK

Rebalancing

As part of the continuous rebalancing of our US portfolio, today we reduced our position in Carrier Global Corporation. The position was started early on 03 April 2020 when Ratheon and United Technologies (UTX) merged into Ratheon Technologies (RTX) and at the same time spun off Carrier Global Corporation (CARR) and Otis Worldwide Corporation (OTIS). Since this spin-off we added more shares in CARR. Today we sold some CARR shares at USD 18.51. With unit costs at about USD 14.46 this represents a gain of about +28%. An excellent yield for a holding period of about 7 weeks.

With the proceeds we increased our position in SPDR Select Selector Fund - Technology (XLK), which we had started on 15 May 2020. The reason we added XLK to the portfolio was the observation that over the last few years growth stocks and in particular technology stocks outperformed value stocks. Dividend Aristocrats are a very solid base investment and represent value stocks.

We picked the technology sector as by and large the age of internet, cloud, Artificial Intelligence (AI), big data and [insert your favorite technology buzz word here] has barely started. Previous technical revolutions such as the industrial revolution or the Age of Steam had what Carlota Perez calls an "Installation Phase" followed by the turning point. We agree with Perez in that we have most likely have reached that turning point for the Age of Information and Telecommunications. We believe that for the next few decades technology companies should be well positioned to benefit from what we think is a long-term trend. Companies such as Amazon, Google or Microsoft are just the beginning. There are many more to follow.

To spread out the risk and only gradually add technology stocks we decided to utilize an Exchange Trade Fund (ETF) to start this position. At some point we may decide to add more direct investments in technology companies to our portfolio. As of writing we already have positions in Apple (AAPL), Microsoft (MSFT), Atlassian (TEAM), Nvidia (NVDA), Texas Instruments (TXN) and similar more.

Do not assume, though, that we are moving away from dividend aristocrats. Instead we believe that those still represent a very sold core investment. Therefore we continue to own shares in all 66 dividend aristocrats. We simply are "spicing up" the portfolio with some investments in the technology sector where we believe we have a sufficient understanding of the long-term opportunities of the company in terms of benefitting from the Age of Information and Telecommunications.

By mixing in some technology stocks to the dividend aristocrats we expect the performance of our overall portfolio to be between dividend aristocrats alone and the S&P 500. In other words, we expect our specific portfolio structure to perform better than the dividend aristocrats alone.

References

For more information about the work of Carlota Perez in particular her book "Technological Revolutions and Financial Capital" see her web site at http://www.carlotaperez.org/

We do not receive any benefits from any of the source listed in references.