Weekly Portfolio Summary

Despite what was a bit of a roller coaster ride for my portfolio, it ended flat to up slightly.  This was about in line with the S&P 500.  Major drivers to the market over the week were a combination of earnings reports, which were strong for stocks I held, and all of the negative news between a passenger jet being shot down over Ukraine and heated battles between Israel and Hammas escalating through the course of the week.  The latter continues and could end up putting a damper in the market when we open on Monday.  Overall, though, I expect to see continued volatility driven by the market trying to determine fair value when taking into consideration of risks of international actions coupled with results from earnings reports as we enter one of the busiest weeks, generally speaking.  As for my portfolio, I only have two companies reporting - Pepsico on Wednesday, and Encana on Thursday.

Pepsico will be announcing their second quarter earnings results on Wednesday.  Analyst expectations are at $1.23 per share on $16.8B of revenues.  This is decelerated earnings on flat revenues from a year ago.  The stock is priced in line with the non-alcoholic beverages sector, but at 19 times 2014 earnings on 6% earnings growth feels a little rich, combined with a dividend yield that is only about 50 basis points better than the 10-year treasury yield.  That being said, the company has a few things going for it right now too.  First, they have an activist investor nipping at their heels, demanding they bring out value.  For now, that's being done by sizable dividend increases and share repurchase plans.  The latter may be a reason for where the stock is priced now.  Secondly, fears that the market, in general, is over priced, combined with a new slew of geopolitical issues could put even more pressure on the 10-year yield as well as make the consumer goods sector be a desired safe-haven for a market pullback.  I'm wary about the stock, even though I have great faith in the management team and company's future prospects.  I just have a feeling that the stock price may pull back even if they meet the estimates.

On Thursday, Encana reports their second quarter results.  Since last quarter, the stock is actually down 7.5% after going up to new 52-week highs.  Much of this is driven by the drop in natural gas prices we've seen since mid-June.  Despite that, Earnings estimates for the quarter is only $0.25 on revenues of $1.6B.  I acutally expect a higher number for earnings, but it is a cyclically weaker quarter for the company.  Revenues tends to be where I am less confident they'll beat.  What will be key to hear is what the future guidance is and how much they've already locked in at the higher prices we had just a few months ago.  Earnings estimates for the year is at $1.62.  Over the course of the quarter, they've continued to execute on their plans to get more oily by selling off some of their properties as well as buying property in the Eagleford Shale formation.  It will be important for the new management team to continue to show strengthening progress and consistent delivery.  If they can show that, the stock has pulled back enough to warrant a decent pop on a strong conference call.
     

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:


Twos:
Broadwind Energy (BWEN, 8.48) - The stock has pulled back somewhat significantly over the last few weeks on lower than normal volume.  What I believe we're seeing here is the doubt of the future earnings of the company and it came faster and harder than I have expected as we've already pulled back about 25% from the stocks highs.  The fact that the Russel 2000 has been pulling back isn't helping matters, as I'm sure ETFs will only add selling pressure.  Technicals are showing the signs of a bottom with a positive crossover in the MACD, momentum improvement, and Williams R% coming off of oversold territory.  Second quarter results will be shared on July 31.  With stock price and technicals, I'm about ready to upgrade the stock, but want to hear the call first..  Continued efforts to get the PTC extension in place before the end of the year may be a key forward looking item.  My price target is conservatively set to $10 due to uncertainty of where the stock is going as well as how strong the wind business will continue to be going into next year.  This may be a good stock to add a portion before, and then again after the call if it pulls back.  BWEN is 3.2% of my portfolio


Deere & Company (DE, 87.63) - How do I describe this stock?  Difficult is the word that comes most to mind.  Maybe another description is it's the Zen stock of the market - for every ying, it has a yang.  It's so balanced with good and bad that the stock has been range bound for well over a year.  When it comes to valuation, the stock is obscenely cheaper than its peers.  The down side, though is that their earnings and revenures are now decelerating from where they were just a year ago.  Despite earnings and revenue decreases, the company continues to beat earnings estimates due to increasing gross margins.  Finally, the price of corn is dropping hard in the last couple months.  Truth is, It's a little surprising the stock has held as well as it has considering corn price declines.  Its 2.7% yield and cheap value are likely reasons people are sticking this out as they wait for the economy to boom.  The stock is much more attractive to buy in the mid-lower $80s.  DE is 11.7% of my portfolio.

Home Depot (HD, 80.08) - Stock took a hit this week due to a bad report from Lumber Liquidators.  This has caused people to start claiming that the housing and remodeling movement is slowing down.  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. The stock has been suffering due to a retail sector that has been suffering.  Need to watch housing data as well as reports from other housing related stocks as they come up over the next few weeks.  If the story is intact, we're fine.  If the story is changing, I need to change and get out with the winnings I have. Target price is $86.  HD is 10.7% of my portfolio.

Honeywell (HON, 96.82) - Honeywell continues to execute superbly.  They just announced another quarter that beat expectations and raised the low end of their guidance.  The stock trades at a little better than 17 times 2014 estimated earnings, which seems a little low for a company that has been so consistent.  The stock is reaching prices where you want to trade around your core position to account for the potential price swings you may get.  My target is $100.  HON is 19.3% of my portfolio.

NPS Pharmaceuticals (NPSP, 29.07) - The stock was hit hard over the last week until it was announce that Shire Pharmaceuticals was being bought by another company.  Originally, Shire was rumored to be attempting to buy NPS.  Typically, you would expect this to bring the stock price down, but it popped strong on ideas that this company is a good buy-out prospect.  The company continues to sell product, but last quarter was a little disappointing.  We'll have to see what happens in the next quarter and watch as their application for their new drug goes through the FDA in the third quarter.  On the technical front, the 40 week simple moving averaged crossed the 20 week.  This is a bad sign.  The next conference call is 2 weeks out, so I won't downgrade the stock until I have a chance to hear more.  However, from a pure technical position, it looks like I should be getting some of my money out on any strength I see.  $40 has been and continues to be my price target, but I am not convinced we'll see that price in 2014.  Maybe 2015 instead.  NPSP is 13.6% of my portfolio.

On Semiconductor (ONNN, 9.34) - 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.  In addition to this, they just announced the purchase of another imaging company - clearly planning to get a stronghold in the use of cameras for Autos with this purchase.  I think this stock is currently providing room for a 10-15% pop while downside is likely in the 5% range.  That being said, it has risen rather significantly since it was beat up, and therefore I only recommend buying on a pullback.  The semiconductor index, as shown by the SOX, is showing a breakout to new highs, but On has been getting left behind.  This is a bit concerning.  This stock has been difficult and should I decide to raise cash, this will likely be one of the first places I go to get it, despite my feeling that this stock is going higher.  My price target remains at 11.50.  On Semiconductor is 6.21 of my portfolio.

Threes:
Citigroup (C, 49.56) -   Citigroup kicked off what turned out to be a fantastic week for large banks.  All posting better than expected numbers despite relatively flat Net Interest Margins.  The most impressive piece from Citi was their ability to turn a profit in Citi Holdings - the stuff they want to get rid of.  All this being said, these were significantly lower expectations that were beat.  While growth in the economy does give better prospects in the future, the truth is that current issues are putting more risk on the 10-year treasure yield, and therefore those margin rates as well.  No new information was shared regarding CCAR findings other than they're preparing for the end of the year.  As such, I still see little for catalysts to launch the stock, yet I don't see much downside risk either.  Due to the increased book value announced on the quarter, I have to raise the target for Citi to $55, but I still expect it'll be some time before it gets there.  That raise also isn't enough to upgrade the stock.  Trade around your core position, if anything, here.  Citi is 9.9% of my portfolio.

Encana Corporation (ECA, 21.63) - Encana's stock price has been suffering for reasons similar to Deere.  Oil and Natural gas prices have been falling hard and fast since mid-June.  I have a loss on this stock and what it's gone up the last few months has been a nice recovery on that loss, however, I may have overstayed my welcome.  The 2nd quarter conference call is on July 24 and it can't come soon enough.  I'm expecting a solid beat on expectations and appropriate hedging to have been placed to help lock prices for at least this year if not half of next year as well.  This should help pop the stock and only the future forecast can help determine if that will be the spot to get out, or whether this will charge further ahead.  I'm lowering my price target to $24 on pricing concerns.  ECA is 11.7% of my portfolio.

Pepsico (PEP, 90.09) -  Pepsi is one of the few stocks I have owned which can say are beating the S&P 500 year to date and I'm kind of surprised of this.  The company and the leadership is of high quality, but I expected this one to be hurt more by raising interest rates that never came to fruition.  The company has created more shareholder value by raising the dividend from 57 to 65.5 cents per quarter as well as increasing their buyback plans.  Organic growth is on the rise again, but 7% growth isn't a lot in an environment with an improving economy.  Input costs are going down and I expect this and the stock's yield to be a tailwind into the second half of the year, but I anticipate a point where this stock becomes less favorable and replaced for industrial stocks with more growth potential.  PEP is 9% of my portfolio and my price target is raised to $90.  Because the stock is near my price target and due to anticipated headwinds and sector rotation in the future, I have put this stock in the threes - despite my liking the company and management.