Plug & Play Stock Portfolio Models Q3 2020

Summary

  • Read “Using The Plug & Play Portfolio Models” before you do any buying or selling.
  • Determine the appropriate cash level for the type of investor you are and where you think we are in the financial cycle.
  • Plug & Play Portfolio Models: Sustainable Growth, Retirement Growth & Income and Retirement Income Options.
  • All Buy Zones updated.
Plug and Play Stocks

My “Plug & Play Portfolio Models” present investment ideas from our “Very Short Lists” that are near buy zones as of the first week of the new quarter.

These are NOT model portfolios to be jumped into right now! There is no such thing. Anybody who offers a “buy all of these now” model portfolio is telling you to walk through a field where a herd of bulls were recently relieving themselves.

The “Plug & Play Portfolio Models” should be monitored weekly and used to build or rebuild your asset allocation for the intermediate and long term. Read the Using The Plug & Play Portfolio Models before making any trades.

In looking for any stock, I am always looking for something that much of the market does not appreciate. The secret to investing well is to place value where the market does not now, but will soon. 

Current Cash Level Starting Points

With the Coronavirus, uncertain economy, bankruptcies, supply chain disruptions, high unemployment, low aggregate demand, high stock valuations, high bond valuations (low spreads and yields) and coming elections, I am recommending the most cautious edge of your risk tolerance ranges. That means, your cash level should be at the high-end for your long-term strategic investment posture.

Here are the current cash level recommendations for investors. You can tweak as you see fit. It is your money. I will tend to be more conservative, i.e. cash heavy, as that has worked for me over the years. You can carry less cash if you can sleep at night doing so.

Investor CategoryDefensiveCautiously OptimisticPedal To The Metal
Cash %755015

Examples:

If you are a cautiously optimistic investor using an ETF portfolio, then you would have 50% of your investable assets in your ETF model of choice and 50% in cash awaiting better opportunities.

If you are cautiously optimistic and splitting your investments between an ETF portfolio and a stock portfolio, then you would have 50% in cash, 25% in ETFs holdings as seen and 25% stocks.

Sustainable Growth

  • The primary goal of the Sustainable Growth portfolio model is maximum long-term total return.
  • The primary focus is on growth that “buy and holders” could own for years.

In general, depending on ETF exposure to a particular stock, 2-4% in a single stock is the general rule of thumb, achieved by incrementally scaling in.

Company StockSymbolBuy Zone
Alibaba(BABA)209-134
Calix(CALX)14-8
Crispr Therapeutics(CRSP)74-42
Dynavax(DVAX)7-4
Electronic Arts(EA)114-91
Ford(F)10-4
Invitae(NVTA)18-10
Itron(ITRI)55-46
Landstar(LSTR)92-83
Micron(MU)36-30
OnTrak(OTRK)33-18
PTC Inc(PTC)68-58
Pulte (PHM)31-19
Roku(ROKU)124-99
Solaredge(SEDG)126-91
Square(SQ)108-65
Sunpower(SPWR)9-5
Sunrun(RUN)24-14
Travelcenters of America(TA)13-8.50
Twitter(TWTR)34-28
Ulta (ULTA)198-167
Workday(WDAY)145-99
Zendesk (ZEN)84-59

Top 10 Growth Stocks To Buy Right Now

  • Calix (CALX) is ready to tear higher on 5G business, see note re Verizon (VZ) and CenturyLink (CTL) business. 
  • Crispr (CRSP) is getting a lot of attention from Cathy Wood and the Millennial chasers. Could rally hard, then correct, then rally again.
  • Dynavax (DVAX) probably not a better time to be a vaccine company.
  • Electronic Arts (EA) anyone sitting at home playing video games right now?
  • Ford (F) you know my absolute favorite car company after CES. I think it’s a $100 stock by 2026.
  • Itron (ITRI) I discovered when it bought my holding Silver Spring networks. I can’t see them not doing well over time as world moves to sensors and sustainability.
  • Micron (MU) I’ve been on for years and can’t let go. Memory chips for everyone.
  • PTC (PTC) because the machine learning revolution is here (big theme at CES) and these guys are massive leaders in the space. Keep buying it.
  • Square (SQ) could be the future of small business and money. We’ll see. My daughter’s salon uses it and kills it with the software and apps But, a lot of noise about it, I can see it running to a double pretty quick.
  • TravelCenters Of America (TA) so long-time readers know I’ve been following these guys a few years now. I found them because I thought about buying a truck stop. I think a big future as supply chains move, we have more trucking traffic and EVs start charging on road trips while grabbing a burger and drink.
  • Twitter (TWTR) I just can’t think that they don’t find a way to monetize all those users on that platform. Dorsey is such a better guy than Zuck. This might be a little from the heart.

Yeah, that’s 11, but I couldn’t help putting Tweeter on there. I’m sure you’re asking why none of the clean energy plays. A little expensive and I own (PBW) so not feeling compelled without a pullback, but I will hit those hard if we get a pullback.

Here is a brief introduction webinar: 

Retirement Life Growth & Income

  • The primary goal of the Retirement Growth & Income portfolio model is long-term total return that meets the S&P 500, but with 20-30% less volatility and risk.
  • The primary focus is on dividend growth and lower volatility dividend payers. We try to find stocks that offer both qualities that “buy and holders” could own for years. 

In general, depending on ETF exposure to a particular stock, 2-4% in a single stock is the general rule of thumb, achieved by incrementally scaling in.

CompanySymbolBuy Zone $
3M Co(MMM)138-125
Analog Devices(ADI102-79
AT&T(T)32-28
Broadcom (AVGO)259-183
Brookfield Renewable(BEP42-36
CenturyLink(CTL)12-8
Cisco Systems, Inc.(CSCO)
Illinois Tool Works(ITW)
Kinder Morgan Inc(KMI)
Home Depot Inc(HD)
Lam Research Corporation(LRCX)
Lockheed Martin Corporation(LMT)
Merck & Co.(MRK)
Newmont Mining(NEM)
Nutrien Ltd(NTR)
Northrop Grumman Corporation(NOC)
Qualcomm(QCOM)
Raytheon Technologies(RTX58-43
Starbucks Corporation(SBUX)
Store Capital Corp(STOR)
Taiwan Semi(TSM)59-44
Walt Disney Co(DIS)

Top 10 Dividend Stocks To Buy Right Now

  • 3M (MMM) they make the masks that make the whole world fog their glasses. 
  • Analog Devices (ADI) semiconductors rule the world. 
  • AT&T (T) my favorite dividend stock for the yield, the fiber and someday Warner will be worth something again, either through sales or sale. 
  • Illinois Tool Works (ITW) is benefiting from multiple tailwinds including machine learning pushing margins and supply chains moving away from China. Big industrial winner. 
  • Kinder Morgan (KMI) has the biggest natural gas pipeline network in America, is the biggest CO2 transporter, is getting into carbon capture and is a backdoor play on hydrogen with limited exposure to oil and liquids. I give interviews on this one so buy it.
  • Home Depot (HD) everybody in the world is building a home office and a deck.
  • Nutrien (NTR) a favorite since it was Potash Corp. I can’t help but think this is a backdoor play on climate change on top of a cartel led industry.
  • Qualcomm (QCOM) semiconductors rule the world. Wait did I say that already?
  • Store Capital (STOR) has great land that’s easy to transition if need be. Great financials and quality tenants. And, Buffett owns some. If REITs come back, this will be one of them.
  • Taiwan Semi (TSM) umm, you know.
  • Disney (DIS) is going to be huge in streaming and someday the parks will open up again.

Again with 11, I can’t help it. I think everything on that list is probably buyable right now. I’ve called Lockheed one of the best companies in America and it’s not on the list. Heck, buy Lockheed Martin (LMT) too.

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Retirement Income Options

  • The primary goal of the Retirement Income Options portfolio model is long-term total return that beats the S&P 500 by at least the rate of inflation annually, and with a 4% beat target, but with 20-30% less risk.
  • The primary focus are on dividend growth, option premium and capital appreciation from assigned stocks. 

Retirement Income Options uses stocks from the Sustainable Growth, as well as, Retirement Growth & Income. From the 40 stocks above, you will generally want to pick at least 20, and as many as 30 stocks for your RIO portfolio. You can overweight growth or overweight dividends. You will have to decide what you are most comfortable with. I typically own 10-15 of each, i.e. about equal proportions. 

As those stocks are assigned to us, we can let those stocks rise in price before writing covered calls to generate more premium. The dividend growth stocks provide a blend of income and growth.

Option Cycle

Make sure to visit the MoSI Options Selling chat at least twice per week if you are using an option selling strategy.

Stocks are rank ordered by Maximum % allocation grouping.

Note On Top QQQ Stocks

I have excluded Apple (AAPL)Microsoft (MSFT)Amazon (AMZN) and Alphabet (GOOG) from portfolios because they are such big holdings in Invesco QQQ (QQQ).

If you are not holding QQQ or just want to add an additional small position in those companies, by all means, own these stocks individually too. Each is worthy, from the right entry prices, of a combined (ETF exposure plus stock holding) double position in your portfolio, that is, up to 8%. 

QQQ holds around 10% in the four stocks I mentioned above. If QQQ is 20% of your portfolio, then you already have about 2% exposure to each of these 4 big stocks. 

Typically, my positions in these four stocks are position trades. That is, I buy on major corrections and then hold for an entire market cycle that often lasts years.

Be Aware Of ETF Top Holdings

Be aware of the top holdings in your ETFs. The top few holdings in any fund can give you significant exposure to a stock. Also, be aware that because many ETFs are market cap weighted, that you can have significant exposure to a stock due to it being held in multiple ETFs, Apple is a common example.

Position Sizes

I am defining position sizes with a name and by a percentage. Know these for when I write and just use the terminology. Here are the definitions:

Mini1/2%
Starter1%
Half Position2%
Full Position4%
Double Position8%

Remember to consider your ETF exposure to a company when buying stocks. Just eyeballing the top holdings of your biggest ETF holdings is usually good enough to give you an idea of where you stand. If you have access to an “x-ray” feature via your brokerage, take a look at it once in a while to see where you stand. 

It is rare that a stock is worthy of a double position. Be cautious on allowing that to happen if you are concerned about single stock risk. 

Set Or Follow Alerts

In the Investment Resources menu bar on the right hand side of the main page, you will see “Alerts.” Set alerts for the ETFs and stocks you are most interested in.

You can also follow my alerts for all of the quarterly Plug & Play ETFs and stocks.

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