Friday, March 14, 2014

Weekly Portfolio Summary

Unless you've been living under a rock this week, there have been two key themes impacting the markets.  The first is the ongoing tensions between Crimea and Russia, and the second is information indicating that China is much weaker than anticipated.  Couple these kinds of highly visible situations to a market that is continually called to be at its peak and you create fear.  In the world of the markets, it seems fear is good for only one thing - driving stock prices down.  Especially when such a major financial calamity is only a few years in our rear view mirror.  The Great Recession has impacted people who invest or might consider investing so strongly that I'm willing to guess it's only rivaled by the Great Depression.  The American people as a whole have littler tolerance for risk, so if things get scary, they run to safety.  People do what they need to do to be comfortable, and though I can't say I intend to follow in suit, it's also important to recognize what the masses wish to do so you can account for it in your plans.  The Crimean event is giving lift to natural gas and nat gas stocks while China is crushing various commodities like oil, metals, and grains, which then takes related industrial and international stocks.  

The only major event I see for next week is the vote on the Crimean referendum which happens on Sunday.  This event actually has the ability to set the tone for next week's market action at a minimum, so it'll be key to know what happens and how it impacts your holdings.  I won't go into deep detail, but if the results create more tension and unrest, I could project what might go up or down, but I don't see these events as long-term hits against the stock market or sectors.  I think this week has pulled back enough that you may start considering buying more, if you have the cash to do it.  If you don't, you just sit tight and ride this out (and learn to sell things before you find yourself in these situations again - it's always important to hold cash).

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.  China and Crimean events have people running to treasuries for safety and this puts pressure on the banks to profit more.  Buying below 50 is good, but I think below 47 is even better.  Citi is 9.5% of my portfolio.

Home Depot (HD) - Home Depot recently reported numbers that beat expectations despite lower traffic and lower than expected guidance.  This management team is known for conservatism, though, and I expect them to raise guidance through the year.  A strong jobs number for February will result in mixed results in the housing market.  More people have jobs and are likely to buy/repair homes, but at the same time interest rates are on the rise. This stock has pulled back recently near the price it was at when it announced the quarter.  At the same time, interest rates have been falling.  I think if this gets below 79, you could dip your toes into this stock.  HD is 10.7% of my portfolio.

Twos:
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.  Commodity prices are on the rise - particularly corn and that is pushing this stock higher as well.  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, however, history states you have to watch it closely as it approaches $95 as that seems to be a relative ceiling it's struggled to break through.  This isn't moving as slowly as I thought.  DE is 11.7% 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.  Events of the world won't really impact earnings for this company, but it will hit the stock price.  HON is 18.6% of my portfolio.

NPS Pharmaceuticals (NPSP) - Currently impacted as a part of the entire biotech cohort, but it has stabilized more recently compared to other high-flyers.  I believe this stock may have found a stability point around $30.  You need to keep tight reigns on this right now because with no catalyst on the near-term horizon, this one can make large moves in any direction based upon how big investors want to move the sector.  NPSP is 15.5% of my portfolio.

Pepsico (PEP) - I admittedly struggle some with this stock.  It recently posted in-line earnings and revenues, earnings growth is in the high single digits, they dramatically increased return to shareholders through dividends and buybacks.  Stock movements since then appear directly related to activist investor actions - either by the actions themselves or investor reactions to it.  I have great faith in the ability and consistency of the Pepsico management team and am sticking with the stock.  It has room for short-term growth as people will add it's shares as a safety stock while things remain uncertain.  PEP is 8.2% of my portfolio

Threes:
Broadwind Energy (BWEN) - Broadwind announced its fourth quarter results and 2014 guidance.  Results were lower than expected, primarily off of one-time charges and guidance seemed in line.  Watching this stock will be interesting.  It could get hit hard if sector indexes are beaten down or it can hold it's own as a pure American play.  Either way the economic and political events won't drive this company's stock price, but I believe the extension of government subsidies that is due for discussion in the last part of the year will be key.  BWEN is 2.1% of my portfolio

Encana Corporation (ECA) - Encana recently reported a beat on earnings and revenues for the fourth quarter.  Additionally a combination of both weather and the Crimean events have lifted both natural gas prices as well as natural gas stocks.  The outlying question is how long will this run last?  I will need to see sustainability in both gas prices and the results from management to maintain my conviction.  What happens to the stock price when political tensions are eased will be key.  It's now at my $20 price target and needs close watching.  This is a stock that has me feeling I need to sell into strength to meet my goals.  ECA is 11.2% of my portfolio.