Aggressive · Stocks to Consider and Updates

Allocation Update – Aggressive Portfolio

Continuing with re-allocations of the three buttonwoodproject portfolios, today I am updating the aggressive candidate list. Increases to the allocation model include . . .

  • . . . the iShares MSCI Emerging Markets Fund that tracks an index that includes about one-thousand companies that are based in emerging economic markets. Although well diversified, it is overweight in Asian companies that comprise nearly 72% of the total assets including China (32%), South Korea (12%), Taiwan (12%) and India (8%). While the ETF appreciated a respectable 15% over the past year and provided for an additional 2.1% dividend yield, I believe 2020 will prove to be another positive year for the companies included in the index, especially if trade tension ease. Thus, I am increasing the share of the pie from 9% to 11%.
  • I am also bumping up Jabil, Inc., which has had a nice run in 2019 with a gain of 72%. Nonetheless, I believe that there is more good news to come for the electronics contractor as it takes advantage of new business opportunities in health care, 5G and cloud computing. Estimated earnings of $3.62 are in view for the full fiscal year ending in August 2020 compared to $2.98 in fiscal 2019. While a hefty 22% of business still comes from Apple, the company is aiming for no single product to comprise more than 4% of operating income in a given year. JBL moves up a notch to 10%.

To make room for the two increases,

  • I am taking down JPMorgan Chase from 8% to 7% on valuation concerns as the shares have increased over 42% over the past 52 weeks, and appreciation from these levels, while still positive, should moderate.
  • I am also trimming the pie on International Paper from 8% to 6% on slower momentum in some of its key markets. Longer term, IP has room to grow, but for now the shares are less appealing than they were earlier in the year. The shares have recovered of late (up over 16% in the past year) and the 4.4% dividend yield should continue to mitigate some of headwinds I foresee for the stock over the next six months.

 

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