Weekly Portfolio Summary
Another painful week is behind me. The portfolio under performed the S&P 500 primarily due to my holdings of NPS Pharma and Citigroup. NPSP continues to be the victim of a biotech sell off and Citigroup has suffered a major setback as the Fed declined their capital distribution plans. For the week ahead, there will be some various government reports that can easily swing the market in any direction in the short-term, however the key factor to my timeline and stocks will be Friday's non-farm jobs report. This report will have to show the right amount of strength to convince markets that the economy is improving and that interest rates can increase. However, it cannot be so strong that rates start to jump. There's a lot of negativity in the market, so it feels like it wouldn't take much for things to start pulling back.
Citigroup (C) - This stock has been a real pain as of late. Earnings weren't strong, now the Fed beat them down on their capital plans so there are no buybacks or dividends in the next year either. Citi is now the worst house in an improving neighborhood. Economy seems to be getting better, yet interest rates remain around 2.7%. The only strength I see from this company in the next few months is if the sector improves. I now find myself questioning CEO Michael Corbat and his team. I'd have downgraded this to a 3 if it wasn't for the fact that I don't see much more downside to the stock under current conditions. However, my price target isn't very high here. Expect this stock to do a lot of nothing for the next year. Don't touch this stock unless it goes below $47. Citi is 9.6% 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. Commodity prices are on the rise - particularly corn and that is pushing this stock higher as well. The stock's downside has increased as we approach $90, but still 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 12.1% of my portfolio.
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.
Home Depot (HD) - This company still has long term prospects. It's earnings have been accelerating and the economy continues to show signs of strength. It does bother me some that this is currently priced at 18 times it's guided 2014 earnings (I'm actually expecting them to earn $4.50 instead of the 4.32 they've guided). Great management team that knows how to take the competition on.. 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. Target price is $86. HD is 10.7% of my portfolio.
NPS Pharmaceuticals (NPSP) - Currently impacted as a part of the entire biotech cohort, It was crushed this week and is in an area I think you can start buying. There's still 10-15% downside risk, I believe, however, technicals are showing numerous signs that the stock is over sold and reaching various points of historical support. I don't necessarily expect a big bounce, but this could be a point where things hover and rest before rising again. I believe this stock may have found a stability point between %25 and $30 and has shown technical support around $27. As much as I've had this stock right, I've also gotten it wrong. I should've sold some a long time ago. I dug my heels in too much and focused too much on technicals rather than Supply/Demand and the stock/company relationship. That being said, I feel the worst of the sell off is now past us. My price target remains at $40 for now.. NPSP is 13.5% of my portfolio.
Broadwind Energy (BWEN) - I have decided to upgrade this stock and take a chance on it. With international turmoil continuing to be a theme, a pure American play will be helpful with an economy that's strengthening. Considering I wasn't entirely impressed with the last conference call, the stock has performed well, pulling back just a little before charging ahead again this week. 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 international 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. I'm setting a $13 target price on it right now. BWEN is 2.5% 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. Expect this company to continue to be a strong performer as the economy improves. Stock has already pulled back a bit and if we get positive reports this week, I don't think we'll see much more down side to this. My target is $100. HON is 18.5% 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 8.5% 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 11.9% of my portfolio.