Yesterday for subscribers to my JubakAM.com site I posted Step #8 in my Special Report: 8 Steps to Protect Your Portfolio from the Global Debt Bomb. I recommended selling Deere (DE), Caterpillar (CAT), and BHP Group (BHP) out of portfolios ahead of rising yields in the bond market. (In the case of Deere, I said I would keep my position in my long-term portfolio but sell the position in my 12-18 month portfolio.)
Here’s what I posted in my Special Report:
Step #8: Sells for getting ahead of a deeper downturn. I’d be the first to admit that the sell recommendations in Step 7 have a “locking-the-barn-door-after-the-horses-have-escaped” feel. I think Ford and General Motors are likely to drop another 10% or so in this downturn, which is worth avoiding, but these stocks are already down substantially recently. As of October 27, shares of Ford were down 19.61% in the last month and shares of General Motors were down 15.86%. If stocks are going to continue to fall for a while, as I think they are, it should would be nice to sell whatever you want to sell before they’re tumbled 15% or 20%. Of course, finding stocks that are likely to tumble is an order of magnitude more difficult than finding stocks that have already dropped but are likely to drop more. My Global Debt Bomb scenario does suggest some place to look. Higher interest rates and greater economic uncertainty aren’t good for companies that sell big ticket items, even if they’re not selling to individual consumers but instead of farmers and construction companies. I’d look to lighten up on Deere (DE) here and Caterpillar (CAT), for example. What does lighten up mean here? for me it mens holding onto long-term positions–for example, I own Deere in my long-term 50 Stocks Portfolio–but selling positions that I added to portfolios with shorter time horizons to “double-up” on these stocks while the winds were blowing in their favor. So I’ll be selling my positions in Deere and Caterpillar in my 12-18 month Jubak Picks Portfolio tomorrow, October 31. I have a 4.43% loss on Deere since I initiated that position on May 5, 2021 and a 14.33% gain on Caterpillar since I initiated that position on February 22, 2021. I’d take a similar approach to shores of commodity producers. High rates and slower growth won’t be good for these stocks, either. But I’d like to hold only long term positions, such as Southern Copper (SCCO) in my long-term 50 Stocks Portfolio and Albemarle (ALB) in that same portfolio–especially if the stock has been hammered this year and the long-term growth story remains intact as is the case with Albemarle. I would, however like to sell positions in stocks that aren’t central long-term stories. The need for commodity producers to raise capital to expand isn’t a plus in a rising yield market. So tomorrow I’m selling my position in BHP Group (BHP) in my Dividend Portfolio. That position is down 6.67% as of October 30 from initiation on December 1, 2022. Technology stocks should be getting a close look for sell candidates. But that sector is a complex story on its own. I’ll take a look at sell candidates in the sector after Apple (AAPL) reports this week. I’ll make those sell recommendations Step #9 in this Special Report for subscribers to JubakAM.com
