Weekly Portfolio Summary
This was a strong week for my portfolio, while the market was pretty flat overall. Underneath that flat market was a swirl of action as we've seen signs of various shifts in stock preference which appear correlated to the fact that the US Dollar has been weakening, oil is strengthening, and 10 year Treasuries are stabilizing. The weakening dollar has helped stocks like Honeywell and Pepsico gain some strength because money they're making overseas is going to start translating into more revenues here in the US than they did a quarter ago. While most retailers are getting hit, the home improvement area seems to be the only segment of retail still faring well. I'm guessing this is due to more interest in long-term investment over splurging with money while rates are relatively stable and before they go on the rise. Finally, biotech and tech (at least mine) appear to be bipolar for now, taking strong swings in both directions while not necessarily going anywhere over a longer period of time. This swinging back and forth for stocks and between stocks might be the theme we see for the summer of 2015.
For the week ahead, the big portfolio events are annual shareholders meetings for On Semi and Home Depot, and Home Depot will announce their first quarter earnings results. The shareholders meetings are likely to be no big deal. The earnings results could be huge as with the stock climbing as of late, it could be preparing for a wild swing in either direction. Analysts are estimating Home Depot will announce earnings of $1.15 on revenues of $20.82B. We should also be hearing feedback about the busy spring planting season, which would've started last quarter and has been continuing into this quarter as an indicator of how things are going. The stock was right around prices it had before the strong first quarter earnings. So if it doesn't run up too much before now and Tuesday, it would likely pop off of strong results and guidance. However, if they miss or guidance isn't very strong, the stock could easily go back to the $110 area it was just recently sitting at.
Notes:
Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.
Ones:
Cedar Fair (FUN, 58.19) - First quarter results weren't spectacular, however, the quarter only accounts for 5% of total revenues on the year, so it can't really be judged. While earnings missed, revenues did beat expectations as the company invests to keep and gain customers. The stock has been hit since the announcement while maintaining it's floor which was around my purchase price, partially buoyed by a 5.25% yield. I would buy more at or rather below those prices, but don't be in a rush. We could see the stock sitting here or diving for a little while, similar to what happened last year, but likely not near as drastic. The company has strong cash flow, a strong balance sheet for the industry, and a great yield. With gas prices down, people are more willing to spend when at the parks as well. Great long term stock that can help a portfolio in good and bad economic times. I need to do more research regarding EBITDA, though, as it's the key metric to compare it to its peers. I estimate the company to make $2.94 in earnings this year and have a 2015 price target of $64.50. Cedar Fair is 9% of my portfolio.
Twos:
Citigroup (C, 54.24) - I've said in the past that this may be a dead stock this year and for the most part, it's been just that as the stock is basically flat on the year. As long as bond yields continue to stay low, people won't see a lot of potential for the banking sector. Rates have been rising some, though and the stock has followed suit. This could turn into a stock that rises on the second half of the year providing increases in interest rates continue to be expected as we close out this year and look into next year. The company is now able to start delivering more cash back to investors in the form of buybacks and dividends. This should help provide a continued floor on the stock. I didn't see enough in the quarterly announcement to raise my tangible book value and price target of $59, and I see $50 has been holding as a strong floor for the stock. Citi is 13.4% of my portfolio.
For the week ahead, the big portfolio events are annual shareholders meetings for On Semi and Home Depot, and Home Depot will announce their first quarter earnings results. The shareholders meetings are likely to be no big deal. The earnings results could be huge as with the stock climbing as of late, it could be preparing for a wild swing in either direction. Analysts are estimating Home Depot will announce earnings of $1.15 on revenues of $20.82B. We should also be hearing feedback about the busy spring planting season, which would've started last quarter and has been continuing into this quarter as an indicator of how things are going. The stock was right around prices it had before the strong first quarter earnings. So if it doesn't run up too much before now and Tuesday, it would likely pop off of strong results and guidance. However, if they miss or guidance isn't very strong, the stock could easily go back to the $110 area it was just recently sitting at.
Notes:
Stock Ratings: 1 = buy at current stock prices, 2 = buy on a 5-10% dip in stock price, 3 = sell on a 5-10% increase in stock price, 4 = sell at current stock prices to raise cash. Ratings are based upon 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.
Cedar Fair (FUN, 58.19) - First quarter results weren't spectacular, however, the quarter only accounts for 5% of total revenues on the year, so it can't really be judged. While earnings missed, revenues did beat expectations as the company invests to keep and gain customers. The stock has been hit since the announcement while maintaining it's floor which was around my purchase price, partially buoyed by a 5.25% yield. I would buy more at or rather below those prices, but don't be in a rush. We could see the stock sitting here or diving for a little while, similar to what happened last year, but likely not near as drastic. The company has strong cash flow, a strong balance sheet for the industry, and a great yield. With gas prices down, people are more willing to spend when at the parks as well. Great long term stock that can help a portfolio in good and bad economic times. I need to do more research regarding EBITDA, though, as it's the key metric to compare it to its peers. I estimate the company to make $2.94 in earnings this year and have a 2015 price target of $64.50. Cedar Fair is 9% of my portfolio.
Twos:
Home Depot (HD, 113.35) - This is one of few domestic retail plays that have jumped some despite higher oil prices, higher gas prices, and higher interest rates. This stock still hasn't reached the highs it had after announcing strong first quarter results, though.. Earnings this week will be the key factor. I expect another good quarter, but if anything is amiss, the stock could drop back down to prices we saw recently. I still estimate fiscal year 2016 earnings of $5.20 and give the company a multiple of 30 as I expect us to see the multiple expand to meet the consistent growth we've been seeing. My calendar 2015 price target is lofty at $130. HD is 14% of my portfolio.
Honeywell (HON, 106.85) - A week ago this stock was coming off of a beating due to fears of being an international company. This week, it might as well be the star of the show as it has launched itself to new 52 week highs. The quarterly report was strong and now the dollar has been weakening, which should help revenues in the second quarter. The stock was range bound between $100 and $105, so $105 is could become the new technical floor for the stock. If not, that lower end of the range is managing to be a very reliable floor to buy off of, not withstanding any significant market news outside of the dredge we've been hearing all year so far. Guidance now sits at $6.00 - 6.15. My estimate on their 2015 stays at $6.12 with a multiple of 18 due to how consistently this company delivers. This resulted in my 2015 target of $110. HON is 19.8% of my portfolio.
Isis Pharmaceuticals (ISIS, 62.55) - Earnings results were solid, with revenues higher on more milestone payments than anticipated. Additionally their anticoagulant therapy struck a deal with Bayer, which could total around $175M in milestone payments over the next few years and mid-to-high 20% range of royalties if approved by the FDA for sale. The therapy will also be looking for a fast-track path for those in need without any other options. This has blockbuster potential, but isn't the only thing going for the company. With nearly 40 therapies in the pipeline, this solution continues to show strong promise for the company as it goes forward. It's a long-term speculation play and will have wild swings that should be traded around to be most efficient in profiting from it. I'm still struggling to valuate the price target for a company growing fast, but with no earnings. I wouldn't be surprised that the 52 week high for 2015 has already been set, but anything is possible in this space. From a technical perspective, a combination of the 20 and 50 day SMA seems to be putting a ceiling on the stock while the 200 day SMA maintains a strong floor. Medium term trends show some strength, but long term trends show us sliding into oversold areas soon. For now, I see the stock as range bound between those averages. Isis Pharmaceuticals is 3.9% of my portfolio.
On Semiconductor (ONNN, 12.61) - Contrary to the belief of many short sellers, On announced a strong first quarter last week with solid guidance looking into the second quarter. The company is making a real move in the auto and industrial spaces with their imaging sensors solutions in particular and I believe with the push to more automated machines coming on strong, the company has reason to feel upbeat. Company buybacks are proving to help put a floor into the stock, which I currently estimate to be around $12. I do feel like the stock will be range bound for a bit until something puts a charge into the overall market. I still estimate $0.86 earnings and raised the multiple to 15 (it might actually be the earnings side that should be increased, but here's how I'm working it for now). This provides a price target of around $13. We get near that, and I'll watch the stock closely and sell at least my trade position if I don't see it having the strength to break through. This could be a good stock to sell soon, and then pick up in a few months. On Semiconductor is 11.7% of my portfolio.
Pepsico (PEP, 98.22) - Pepsico has been performing similarly to Honeywell, though it's not near its 52 week highs yet. The fact that we see strength overseas and the US Dollar is dropping, for the time being, is allowing everyone to consider the full year guidance may end up being low now. As such, the price is starting to climb.. The dividend has been raised for the 53rd year, which helps keep the stock attractive against bond yields. Based on the news, I adjusted my guidance and targets to be more cautious. The earnings estimate was lowered to $4.44 and I provide a 22 multiple for a price target of $98. As I said, those estimates might be too low now, given the lower dollar value. As such, I'm not jumping to sell the stock right now, even though it's over my price target. While the stock seems to be taking a step outside its recent range, there's not enough evidence to see if we're going much higher, or if the stock is just going to retreat back towards the $94 floor its been holding. PEP is 12.1% of my portfolio.
Pepsico (PEP, 98.22) - Pepsico has been performing similarly to Honeywell, though it's not near its 52 week highs yet. The fact that we see strength overseas and the US Dollar is dropping, for the time being, is allowing everyone to consider the full year guidance may end up being low now. As such, the price is starting to climb.. The dividend has been raised for the 53rd year, which helps keep the stock attractive against bond yields. Based on the news, I adjusted my guidance and targets to be more cautious. The earnings estimate was lowered to $4.44 and I provide a 22 multiple for a price target of $98. As I said, those estimates might be too low now, given the lower dollar value. As such, I'm not jumping to sell the stock right now, even though it's over my price target. While the stock seems to be taking a step outside its recent range, there's not enough evidence to see if we're going much higher, or if the stock is just going to retreat back towards the $94 floor its been holding. PEP is 12.1% of my portfolio.
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