It is time to be more defensive as the market seems to look elsewhere
The market has spoken today, at least that is the way I interpreted the downward move in the S&P500. The Non Farm Pay Roll number for the month of June in the US showed another 467,000 jobs destruction, which is a bout 150,000 more than economists expected. It sends a strong message to the market; the recovery is going to be longer than expected. Only the healthcare sector and the US government were hiring in June, all the other sectors continued to lay off more people.
My portfolio’s performance has suffered since the mid-June, losing something like 4% to the Nikkei225. I am still outperforming the index by more than 6% percent but I prefer to turn more defensive and be ready for a strong sector rotation in the coming weeks. I had decided to be really aggressive from the beginning of the year and it definitely paid off. It is now important for me not to be too greedy and look for safer stocks.
You will find below a chart with the different stocks I have in my portfolio as off today. I also added the weight of each stock and the expected weight of each stock after I make my moves at the end of Friday July 3rd market day.
| Ticker | NAME | SECTEUR | portfolio weight on July 2 | new weight | real change in weight |
| 6857 JP | Advantest | Technology | 4,41% | 4,41% | |
| 2802 JP | Ajinomoto | Food | 0,00% | 2,00% | 2,00% |
| 2502 JP | Asahi Breweries | Food | 3,74% | 3,74% | |
| 5201 JP | Asahi Glass | Glass & Ceramics | 5,35% | 5,35% | |
| 8332 JP | Bank Of Yokohama | Banks | 2,50% | 0,00% | -2,50% |
| 6674 JP | GS Yuasa | Technology | 6,41% | 5,00% | -1,41% |
| 6305 JP | Hitachi Construction Machinery | Machinery | 5,46% | 2,00% | -3,46% |
| 5631 JP | Japan Steel Works | Steel | 4,17% | 4,17% | |
| 2914 JP | Japan Tobacco | Food | 2,52% | 4,00% | 1,48% |
| 9433 JP | KDDI | Telecom | 0,00% | 2,50% | 2,50% |
| 6301 JP | Komatsu | Machinery | 7,05% | 3,00% | -4,05% |
| 8002 JP | Marubeni Corp | Trading | 4,22% | 1,80% | -2,42% |
| 4183 JP | Mitsui Chemical | Chemicals | 4,19% | 0,00% | -4,19% |
| 6503 JP | Mitsubishi Heavy Industries | Heavy Machinery | 0,00% | 4,00% | 4,00% |
| 8306 JP | Mitsubishi UFJ | Banks | 5,66% | 5,66% | |
| 8031 JP | Mitsui & Co | Trading | 4,51% | 2,00% | -2,51% |
| 9104 JP | Mitsui OSK Lines | Maritime Transport | 4,62% | 3,00% | -1,62% |
| 6701 JP | NEC Corp | Technology | 5,26% | 4,00% | -1,26% |
| 8604 JP | Nomura Holding | Financial Services | 5,49% | 5,49% | |
| 9437 JP | NTT Docomo | Telecom | 3,38% | 3,38% | |
| 3382 JP | Seven & I Holding | Retail | 3,56% | 5,00% | 1,44% |
| 4063 JP | Shin Etsu Chemical | Technology | 3,15% | 3,15% | |
| 9984 JP | Softbank | Telecom | 4,32% | 5,03% | 0,71% |
| 6762 JP | TDK Corp | Technology | 3,14% | 5,00% | 1,86% |
| 9501 JP | Tokyo Electric Power | Utilities | 0,00% | 4,00% | 4,00% |
| 8035 JP | Tokyo Electron | Technology | 2,58% | 4,00% | 1,42% |
| 9531 JP | Tokyo Gas | Utilities | 0,00% | 4,00% | 4,00% |
| 6502 JP | Toshiba Corp | Technology | 4,32% | 4,32% |
I decided to take some profit on the energy and machinery related stocks like Marubeni, Mitsui & Co or Komatsu. On the other hand I continue to like telecommunication stocks even though they trailed the market during the March to June rebound. I decided to add few utilities stocks. They generally provide a good dividend and Tokyo Electric Power should become more attractive as its biggest nuclear plant is about to re-start. I am still very much into nuclear play and I have decided to add Mitsubishi Heavy Industry to my portfolio. I believe the company has strong partnership with companies like Siemens and GE and should enjoy very strong orders in the coming months and years as the US and few European countries will most likely decide to invest in nuclear energy.
I believe there is more downside than upside as the 10,000 level on the Nikkei seems to be an important resistance. It is true that there is no more threat of systemic risk now that government have stepped up but it would be very surprising to have a V-shape recovery of the economy when unemployment everywhere in the developed countries is at a decade or even decades high. Sometimes it is best for a trader and an investor to let the market go for some time if one does not have a strong opinion of the market.
Have a good 4th of July weekend.