Looking ahead into 2020, I am making some allocation moves for the conservative portfolio that should better reflect the expected changes to the economy including interest rates and trade and to mitigate the risk of high valuations.
- I like what I am seeing in the restructuring at ABB with new management and the sale of its power grids and solar inverter businesses. The shares are up sharply but are still reasonably valued with a 3.3% yield and solid balance sheet. The allocation moves up from 7% to 10%.
- With trade tensions easing and the possibility that China will purchase more agricultural products next year, I am moving Deere up one percentage point to 9%.
- While the drought in new drilling investments by the major energy companies is not over, I believe it has hit bottom and new oil and gas production projects should begin to rise slowly in 2020. Therefore, I am more bullish on Schlumberger, Ltd. for the upcoming months ahead and SLB, with a 5.1% yield, gets a two-point increase of the pie to 8%.
- The WisdomTree International Equity Fund has gained nearly 13% over the past 52-weeks. The picture for global stocks remains positive and the fund’s payout of 3.5% sweetens the pie. DWM gets a one percent boost to 11%.
To make room for these upgrades . . .
- . . . I am taking down Danaher Corp. from 10% to 8%. While the future remains bright for the medical technology company, the shares have run up in price by nearly 50% over the past year and much of the good news is now priced in.
- Oracle Corp. is continuing its transition from server-based software licenses to cloud computing and it may take a while for Wall Street to appreciate the progress. Last quarter’s results were mixed, and guidance was nothing to write home about. The high-quality shares remain a sound long-term holding, but ORCL moves down two percentage points to 9% of the pie while the shift to the cloud continues.
- While United Parcel Service should continue to reap benefits from online retailing and a stronger global economy, the shares will probably move sideways as headwinds from competition and the share’s higher valuation may keep a lid on further stock price appreciation. The shares have gained some 21% over the past year. While UPS maintains a hefty 10% of the allocation, it moves down from 12%.
The other conservative holding’s allocations remain unchanged for now.