Weekly Portfolio Summary
When I planned for this week, I somehow managed to miss the all-important jobs number, which came out today. And wow was it a doozy - well above any estimates out there. However, that didn't seem to matter to the markets as they popped early and then gave up the ghost and then some the rest of the day. Certainly I'm sure some of this had to do with how many people stopped looking for jobs, but more so this seemed tied to Russia and what was happening to the US treasuries as they again went lower too. As for the rest of the week, it was pretty flat overall, but a bit of a roller coaster ride through it again. Both Broadwind Energy and On Semiconductor reported not great, but respectable numbers as expected. One stock responded well, the other, more hideously than I could've imagined.
For the next week, the big drivers to my stocks is going to be earnings announcements from some high-growth biotech companies, including my very own NPSP. NPSP has their annual shareholder meeting on Tuesday, then the Q1 conference call on Thursday. Seems a little backwards to me, but oh well. I suspect some light into the last quarter and their year ahead in the shareholder meeting while the real details to the last quarter will be on Thursday. I believe this could make or break this stock. If the numbers from this company and others in its sector are strong enough, a floor could be put in the stock price and they will flatten or start rising (though hopefully slowly this time). If the market doesn't like the numbers, these stocks could be looking at another big pummeling. Be prepared to react. Thursday's Nat Gas Inventories report will likely drive Encana's price on Thursday and may affect it until it reports the week following. Finally, keep an eye on the 10 year treasury yields and what's going on with the Russia/Ukraine situation. Some people are thinking that things will get decided this weekend. I'm more on the opinion that we don't know what will happen with that situation until we reach and pass May 25 - when elections are held.
On Semiconductor (ONNN, 8.88) - ONNN beat on Q1 earnings, but missed on revenues. Forward looking guidance seemed positive and the second quarter revenue estimates are near the lower end of guidance right now. The stock got crushed, and I believe, unjustly so. I think this stock is currently providing room for a 10-15% pop while downside is likely in the 5% range. Biggest risk right now is the semiconductor sector falling out of favor, or the whole market suffering due to political hostilities with Russia. So far it's been fairly stable, as indicated by the SOX semiconductor index. My price target remains at 11.50, though the stock seems more likely to pull back for awhile before it ever gets there. On Semiconductor is 5.9% of my portfolio.
Twos:
Deere & Company (DE, 92.92) - Deere beat on earnings and revenues last quarter. The stock was on the rise, but has taken pause as of late - struggling to reach and break through the $95 ceiling I've identified in the past. Commodity prices - particularly corn - have been taking a hit and that is likely affecting the stock's price. There is still more upside potential, with my price target of $100 or more if priced fairly with industry/peers, however, history states now is the time to watch it closely as it fights the aforementioned historical ceiling. This is an low value industrial stock - which should fare well in a growing economy. DE is 12.4% of my portfolio.
For the next week, the big drivers to my stocks is going to be earnings announcements from some high-growth biotech companies, including my very own NPSP. NPSP has their annual shareholder meeting on Tuesday, then the Q1 conference call on Thursday. Seems a little backwards to me, but oh well. I suspect some light into the last quarter and their year ahead in the shareholder meeting while the real details to the last quarter will be on Thursday. I believe this could make or break this stock. If the numbers from this company and others in its sector are strong enough, a floor could be put in the stock price and they will flatten or start rising (though hopefully slowly this time). If the market doesn't like the numbers, these stocks could be looking at another big pummeling. Be prepared to react. Thursday's Nat Gas Inventories report will likely drive Encana's price on Thursday and may affect it until it reports the week following. Finally, keep an eye on the 10 year treasury yields and what's going on with the Russia/Ukraine situation. Some people are thinking that things will get decided this weekend. I'm more on the opinion that we don't know what will happen with that situation until we reach and pass May 25 - when elections are held.
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, 47.73) - First quarter earnings were a huge surprise to just about everyone. In the end, it's looking like Citigroup will post one of the best quarters out of all of the banks. That will help put a floor into the stock at the $47 range, however, it doesn't have a lot of growth potential in the near-term either. The fact that the company isn't going to return more cash to shareholders this year will keep a lot of buyers at bay, I think. It will also keep the stock at a premium price compare to it's book value. Management now has a very serious job to show they can fix the problems that exist and turn this into a positive story. Additionally, people have been flooding to the treasuries - driving interest rates down - recently, which is both counter intuitive to growth of the economy and negative to future growth potential. The company has oodles of cash, but it won't be until the processes are fixed that we'll really see this thing start to move. I'm thinking this is a better story towards the end of the year. Interest rates will have to start rising to give earnings a boost as well. Under current circumstances, I give C a $51 target. Citi is 9.5% of my portfolio.
Home Depot (HD, 79.40) - This company still has long term prospects. It's earnings have been accelerating and the economy continues to show signs of strength. It has pulled back to 16 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. Target price is $86. HD is 10.6% of my portfolio.
Broadwind Energy (BWEN, 13.33) - Though I missed my $11.50 target, I did buy a very small position going into the earnings report. With international turmoil continuing to be a theme, a pure American play will be helpful with an economy that's strengthening. The company shows signs of accelerated growth in earnings, revenue, and profit margins right now, but has risks residing in its gearing segment's turn-around abilities as well as the pending PTC legislation that is expected to be voted on after November elections. This stock should be good as long as the turn-around and growth stories stay intact. I'm a $15 target price on it right now. BWEN is 5.1% of my portfolio
Encana Corporation (ECA, 22.94) - Encana 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. These prices approached $5 over the quarter and have spent much of its time in the mid-$4 range. This has provided an opportunity for the company to hedge much of 2014's supplies at levels unseen in the last few years and it is appearing that the prices are likely to stay above $4 with the tighter supplies in the market (compared to the $3.75 prices they guided at). I feel I've seen the needed sustainability in gas prices and am waiting to see the same results from management to maintain my conviction. They continue to focus on the Nat Gas liquids, which provide good returns while Nat gas prices work to increase and the glut is decreased. Encana should be having a strong quarter, given the higher than expected prices and this should translate into a stronger year, providing they locked much of the year's production prices in. If so, it's reasonable to believe that they can post earnings of $1.25 this year. That would be a 13% increase in earnings from 2013. The company is trading around 18 times those forward earnings estimates. With a PEG ratio of 1.3 and potential that these earnings increases are accelerating right now, I think things are reasonably priced.. The earnings release in May is likely going to be important for this stock. Analyst average is currently at $.41 earnings for the first quarter. That's a 29% year over year increase and may be tough to beat, but the company could still be on pace for $1.25 earnings if it doesn't reach the expectations. Price target is set at $25. ECA is 12.5% of my portfolio.
Honeywell (HON, 92.37) - Another solid quarter posted by this Industrial conglomerate. Margins continue to improve, they've raised the lower end of their guidance and almost every division appears to be properly aligned to the current economic state of the world. The analyst community could be starting to get ahead of the company, though, as their fiscal year earnings estimates are right at the top of the guidance range. If anything goes wrong, this stock could get hit pretty hard and that would be your best buying opportunity. The stock trades near 17 times earnings which P/E is at about 17 times earnings which is below its peers while its growth rate appears to be ahead of their peers. This, too, should provide a little protection.. My target is $100. HON is 18.4% of my portfolio.
Honeywell (HON, 92.37) - Another solid quarter posted by this Industrial conglomerate. Margins continue to improve, they've raised the lower end of their guidance and almost every division appears to be properly aligned to the current economic state of the world. The analyst community could be starting to get ahead of the company, though, as their fiscal year earnings estimates are right at the top of the guidance range. If anything goes wrong, this stock could get hit pretty hard and that would be your best buying opportunity. The stock trades near 17 times earnings which P/E is at about 17 times earnings which is below its peers while its growth rate appears to be ahead of their peers. This, too, should provide a little protection.. My target is $100. HON is 18.4% of my portfolio.
Pepsico (PEP, 85.52) - Pepsi has provided an earning announcement that might be enough to at least subdue the activist pressure on the company. The company beat on both top and bottom line numbers and showed signs that they have started to get some control in the weakening beverages section. I consider this stock to be something worth buying if it pulls back 5-10%. It has growth prospects, is returning a lot of cash to shareholders, and the yield on the treasury will make a stock like this a nice dividend alternative for a little while yet. P/E ratios are a little rich, but in line with the industry despite what appears to be improving growth PEP is 8.5% of my portfolio and my price target is raised to $90.
Unranked:
NPS Pharmaceuticals (NPSP, 27.55) - I've gotten this stock completely wrong since I started doing these summaries. The stock was yet again obliterated this week. I haven't bought on this constant pullback, but I haven't sold either (shame on me for being greedy). This stock is clearly a part of the big growth winners being sold to rotate into something else. The question now is how much more will they sell off and what happens after they're done selling? The stock broke below my $25 range - what I expected to be the absolute bottom for this stock. It jumped to $24 six months ago after a good earnings report on how sales of Gattex have grown faster than anticipated and have been received well by patients. At this point, anything is possible so I don't want to call another bad bottom. Buy/Sell at your own risk. I need to understand more before I take any actions on this. NPSP is 12.8% of my portfolio.
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