Weekly Portfolio Summary

It was a good news, bad news kind of week.  Good news: both companies reporting this week provided strong quarters with raised guidance.  Pepsico beat estimates along with the guidance upgrade, whereas Encana missed the earnings estimates.  The bad news?  My portfolio was down on the week despite the good news.   

Looking forward into the next week, I have two more earnings reports coming.  Both occur on Thursday as a speculation bonanza comes forth.  Braodwind Energy announces in the morning, with earnings estimates slated at $0.09 and revenues at $63.03 Million.  The company just announced contract deals which closed for tower orders for 2015, putting them at 66% filled for the year with more on the way.  CEO announced that he was confident in the continued growth of the company, so this will be the time to help make it count.

Removed comments regarding NPS Pharmaceuticals reporting this week.  This was an incorrect statement.  They will not announce until August 6.
The actual second company to report this week is ON Semiconductor.  They report on Thursday afternoon and are expected to post earnings of $0.19 and revenues of $753 Million.  Key things to watch for here will be margins and inventory levels.  The Xlilinx quarter really hit this stock hard due to the sales relationship they have (Xlilinx is a customer of ON), so the stock may have some disappointment already priced in.  I'm also concerned about reports saying the automotive sector is starting to slow - which is a significant industry of sales for the company.  As such, if the company beats expectations, the stock should pop strong.


The final thing that can't be forgotten is the July Jobs report that will come out on Friday.  If the number is strong, interest rates are likely to climb, which should be good for banks and industrials.  If not, those same stocks are likely to get hit.

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, 8.89) - 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.  I've already added a portion before the call.  If it pulls back more after a good call, I would likely buy more.  BWEN is 6.3% of my portfolio


Deere & Company (DE, 86.17) - 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.  I was surprised the stock was holding as well as it was and now what I've expected has come true.  Its 2.8% 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 11.5% of my portfolio.

Home Depot (HD, 81.03) - Despite some reports that housing is slowing, I believe 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 picked up some despite a struggling retail sector.  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 10.8% of my portfolio.

Honeywell (HON, 95.76) - Honeywell continues to execute superbly.  After a beat and raise second quarter, the stock has tumbled back to about the price it was at before the quarter.  If it falls much further, this stock becomes a one..  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 2015 target is $110.  HON is 19.1% of my portfolio.

NPS Pharmaceuticals (NPSP, 29.22) - The stock is on a wild roller coaster ride lately.  Goes up a bit, then comes crashing down only to do it all over again.  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, 8.66) - This stock was crushed this week on an extremely poor quarter reported by Xlinx Semiconductor.  I am aware that the two do business together, so there's certainly a chance this weeks report will not go well for On either.  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.  We are seeing the semiconductor space to be a very mixed bag so far.  Intel being one of the best performers.  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 5.8% of my portfolio.

Pepsico (PEP, 91.55) -  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 9.1% of my portfolio and my price target is $102 for 2015 on an estimated $5.10 of earnings.

Threes:
Citigroup (C, 50.03) -   Citigroup is starting to look like it has more long-term potential.  It's getting blessed by a well respected hedge fund manager in Leon Cooperman, it's one of very few banks still priced below book level and has more upside potential as we start focusing on what can happen in 2015 instead of just 2014.  The most impressive piece from Citi was their ability to turn a profit in Citi Holdings - the stuff they want to get rid of - and it's expected that this trend may continue.  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.  This makes the stock likely to be somewhat stagnant for a little while yet, while others start catching on to the possibilities in front of us.  Due to the increased book value announced on the quarter, I have to raise the target for Citi to $55, which is still under the tangible book value as of the end of the second quarter.  I'm hoping to hear more in the third quarter that can help me prepare a better picture of what 2015 will look like.  Until I find out more, I see myself more likely to sell on an increase than buy on a drop, so I'm keeping the rating of a three for now.  Trade around your core position, if anything, here.  Citi is 10% of my portfolio.

Encana Corporation (ECA, 22.03) - Encana is showing strength and a leadership that is able to under promise and over deliver in terms of their strategy.  Unfortunately, they aren't quite showing the same with their top and bottom lines yet, but they're close.  I'm gaining confidence in the leadership after this quarter, but now commodity prices prove to be a headwind to the stock's performance.  Because results are so mixed and I don't have any patterns I can model differently than I have, I maintain my $1.50 earnings estimates for 2014 and have a price target of $25 - just under 17 times earnings.  If commodities stabilize and the stock has pulled back a bit, I might be more interested in upgrading/buying..  ECA is 12% of my portfolio.


Popular posts from this blog

Stock Analysis: Honeywell (HON)

Weekly Portfolio Summary

Earnings Analysis: Honeywell (HON)