Saturday, March 1, 2014

Weekly Portfolio Summary

Next week's biggest key is to prepare for and react properly to the US Jobs number that comes out Friday morning.  I feel this will be very difficult to do.  It's possible many big money firms are already placing their bets - selling some winners ahead, and probably buying other stocks they believe to benefit.  However, the real question is not what the jobs number will be compared to estimates, but rather how will the market react to them?  !0 year treasuries are already down over 12% on the year - indicating that there's still strong interest in the safe treasury market and doubt on the economy's strength.  So if the jobs number comes in below expectations, will this be a "Bad news is good news" market, where stocks jump because the Fed continues their bond buyback program - keeping treasury rates low - or do they sell off because the S&P 500 was up almost 30% last year and is about flat on the year after dropping almost 6% earlier in the year?  Being able to predict those dynamics are clearly beyond my capabilities right now.  So I prepare to react to the market and make my moves as best I can determine at the time.

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:
Citigroup (C) - Citi had a disappointing earnings report for the fourth quarter compared to their peers, interest rates are down, and now there's a case of fraud in their Mexican division and the SEC is probing price manipulation in the bond markets.  The last was reported after the bell yesterday, so we'll have to see how the market plays that.  Despite the fraud report, Citigroup's stock actually managed to go higher yesterday.  This typically is an indicator that bad news is well priced in.  With the stock price well below book value, the $48 price range seems to be a good place to start buying.  If the jobs report sends this lower, it become possibly the best time to buy the stock for the year, if you believe the economy will only get better from here.  Citi is 9.7% of my portfolio.

Twos:
Broadwind Energy (BWEN) - This is an industrial company that has been expanding from a pure wind play to diversify into a wind + service + gearing/welding company.  This reduces the overall wild swings of the wind business and seems to help stabilize the company's balance sheet.  Stock has performed well in the last year and appears to be putting in a nice base to build further.  This is a stock I've failed miserably on, both in my judgments and actions to date.  I haven't seen an earnings report in some time and am awaiting this before I even consider moving on this speculation stock.  BWEN is 2% of my portfolio

Deere & Company (DE) - Deere beat on earnings and revenues a few weeks ago and as is typical, the stock has done nothing since - staying about flat since the Feb 14 announcement.  Corn prices appear to be stabilizing and attempting to go higher, but recent numbers out of China my have something to say there.  As we approach spring in the US, the weather may be a player in movement going forward.  This stock has limited down side to about $80 with much more upside potential taking it to $100 or more if priced fairly with industry/peers.  Expect this to be a slow mover, though.  DE is 11.4% of my portfolio.

Home Depot (HD) - Home Depot led what was a resurgence in retail stocks this week.  After reporting a beat on earnings, despite lower revenues and traffic, it was determined that this stock may have been sold off too much for what the company can still deliver.  Guidance was lower than expected, but this management team is known for being conservative.  Since then, the stock has gone up over 5%.  This one gets really tricky.  It's run nicely and the Jobs number can really play havoc on this one.  It's probably best to play this one straight up on company earnings for now.  So if it pulls back, look to buy more.  HD is 10.9% of my portfolio.

Honeywell (HON) - This is a stock I can't say enough about.  Great management who deliver again and again, as they did when they announced fourth quarter results a few weeks back.  Guidance was a little lower than expected, but this team is known for conservative estimates which they increase or beat through the year.  The stock is actually flat since the earnings announcement, however, this is one of those stocks you might want to trade around with the jobs number.  If the stock rises going into the report, perhaps consider trimming some gains and see if the stock pulls back a few points to buy back in again.  This stock will be impacted by the overall trend of the S&P 500 and predictions on GDP growth for the year, despite the fact that they have performed well over the last 5 years, even in tough times.  HON is 18.9% of my portfolio.

NPS Pharmaceuticals (NPSP) - This speculative stock has been a high flyer yet again this year, up over 15% on the year - even after the 10% pullback it's had in the last 3 days.  All actions are on no new news, so I am guessing that because of the gains, people are selling the stock to raise cash going into this week.  The jobs report will have nothing to do with the price to earnings ratio of the company, but with no catalyst on the near-term horizon, this one might go down some more before it starts ascending again.  NPSP is 16.3% of my portfolio.

Pepsico (PEP) - I admittedly struggle some with this stock.  It posted in-line earnings and revenues last week, earnings growth is in the high single digits, they dramatically increased return to shareholders through dividends and buybacks and the stock got hammered for a day or two because they announced that they have no intention of breaking the company up as per suggested by activist investor Nelson Peltz.  A couple days later, Pelts stepped up his activism to try to find ways to get Pepsico to break the company up and the stock price starts to jump, now back close to the price the stock was at before earnings.  Pepsico has a great management team and it's hard to believe they didn't do all of the right actions to fully review the potential shareholder value of doing a spin-off, but the market doesn't seem to react the same way.  Or is this a matter of Peltz buying stock to increase his position and/or Pepsico taking advantage of the depressed prices to buy back shares?  Either way, it seems the short-term bottom is in for Pepsi.  I believe this stock has the chance to go higher, but you need to be careful as to how the market responds to all these actions.  If we get some down days on the S&P 500 due to the jobs report, this might be a good one to buy.  PEP is 8% of my portfolio

Threes:
Encana Corporation (ECA) - Encana recently reported a beat on earnings and revenues for the fourth quarter.  Additionally the northern portion of the US has been suffering one of the coldest winters in 30+ years, which has created a spike in natural gas prices.  All of these events has pushed the stock up around $19, but I don't know how long this can be sustained.  As spring starts to set in, I am guessing nat gas prices will decline and so will Encana's stock price.  Though I see positive movement in the company, I don't feel I see enough to make this worth of an upgrade yet.  Given the overall market uncertainty at this time, this becomes a good candidate to shrink position in.  ECA is 10.4% of my portfolio.

On Semiconductor (ONNN) - On semi reported a strong fourth quarter in the middle of February and the stock got a nice pop of over 10% from those results.  As this stock nears both my price target as well as spring, I start to get more skeptical of the stock's ability to continue to perform over the next 6 months.  Tech has had a good run in the last year, the jobs report risks downgrades in GDP expectations and it's not uncommon for people to sell out of tech stocks over the summer months due to weaker seasons cyclically.  All of these items have me on watch to make a sale here.  If we get a bad jobs report and the market considers that bad news, I think it's time to take some off the table here.  ONNN is 6.2% of my portfilo.