June 2014 Portfolio Outlook

May was a good month for Sizemore Capital’s portfolios.  I made modest portfolio adjustments in my Dividend Growth and Tactical ETF models, but otherwise I am content to let our basic strategies for 2014 play themselves out.  I expect to see dividend-focused equities continue their outperformance relative to the broader market, and I expect to see European and emerging-market equities outpace their U.S. rivals.

In May I made two portfolio moves in the Dividend Growth model.   I took profits in Martin Midstream (MMLP) and initiated a new position in Target Corp (TGT).

Target may seem like a curious portfolio addition. Its CEO recently resigned in disgrace due to fallout from last year’s credit card security breach. And Target’s expansion into Canada 14 months ago has proven to be an unmitigated disaster, generating roughly a billion dollars in losses so far.

In my view, these setbacks are temporary bumps in the road and provide us with an excellent buying opportunity in one of the most shareholder-friendly companies in the world. Target has raised its dividend every year since 1967—a run of 47 years, and counting—and it has also been a serial share repurchaser.  Since 2002, Target has reduced its shares outstanding from 1.3 billion to just 638 million as of its last reporting.  That’s a reduction of 44%.

Let’s return to Target’s dividend growth.  Target’s dividend has grown by 19% over the past year, which would be good news by itself.  But what is truly impressive is the consistency.  Target has grown its dividend by a compound annual rate of 20% for the past 10 years.  And going back 20 years, it’s a not-too-shabby 13%.

Target pays a respectable 2.9% current yield, and its payout is growing at a blistering pace—making Target an ideal holding for the dividend growth portfolio.

Overall, I have been very pleased with Dividend Growth’s performance this year.  Though June 4, Dividend Growth had delivered 10.9% year-to-date total returns after fees, compared to just 5.2% on the S&P 500.  [Disclaimer: Returns calculated and published by Covestor; past performance no guarantee of future results.]

In Tactical ETF, I slightly reduced our exposure to China by selling the DB X-Trackers China A-Shares Fund (ASHR) and initiated a new position in the Cambria Global Value ETF (GVAL), which is consistent with my view that European and emerging-market equities will outperform in the months ahead.  Additionally, I added to our existing positions in Turkey and Russia via the iShares MCSI Turkey (TUR) and Market Vectors Russia (RSX) ETFs.

Tactical ETF is enjoying a good year.  Though June 4, Tactical ETF had delivered 7.1% year-to-date total returns after fees, compared to just 5.2% on the S&P 500.  [Disclaimer: Returns calculated and published by Covestor; past performance no guarantee of future results.]

Until next month, good investing.

Charles Lewis Sizemore, CFA, is the editor of Macro Trend Investor and chief investment officer of the investment firm Sizemore Capital Management. Join Macro Trend Investor today and start profiting from the powerful megatrends that are cresting across the global economy—and get ahead of the next macro trend to build your wealth for years to come.  Just $1.00 grants you your all-access pass!

This article first appeared on Sizemore Insights as June 2014 Portfolio Outlook

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