Weekly Portfolio Summary

"The Lord giveth and the Lord taketh away."  That would be my theme on the week as the major story for my portfolio is the fact that all of my gains last week in NPS Pharmaceuticals was completely wiped out this week.  Additionally, I added to my position of Ensco PLC, however, I did it too soon and too aggressively.  Finally, the news from Home Depot continues to flow forward.  Around 56 million credit cards were impacted by their data breach, which they now say has been corrected.  While they announced this, they also felt comfortable enough with September sales to increase guidance yet again.  To me, this just proves that this stock will be nothing like Target was, even though the breach was larger.  Management's ability to protect, act swiftly, and provide the right kinds of assistance to those impacted will really help set the tone going forward.

On the week ahead, we're in a period of time that's generally empty.  None of my stocks has any scheduled events that could be potential news breakers and this is generally the theme for the entire market.  As such, I wouldn't be surprised to see the entire market pull back on a lack of news.  Other things I believe will be key to watch for are varying home-related reports (new homes numbers is out next week) as they'll likely be the beacon to housing and many retail stocks.  Interest rates on the 10-year treasury will also be something to watch.  Bank stocks have had a nice run as rates have climbed up, so if rates start pulling back, the opposite could happen.  This is also something that can have an impact on discretionary stocks.  Finally, I think the other thing to watch is commodities - especially oil.  The energy cohort has been getting hammered.  Is the beating over?  Are we going to bottom out?  Or is there more pain coming?  This can be one of the biggest themes to impact markets during the silence.

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:
Ensco PLC (ESV, 44.50) - Deep water driller that appears to continue to get hit on concerns of reducing revenues and a stronger dollar forcing the oil prices down.  In addition to this, I've also learned that supply is a concern as more new rigs are being put on the market.  The stock sells at around 8 times 2014 earnings, however, earnings expectations over the next couple years are on a slight downtrend.  From my ownership of Deere, we know how this can impact the stock.  The company shows signs of a turn around, though, as it's beaten expectations each of the last 2 quarters.  They also have one of the youngest fleets which gives them a technological edge.  With the supply issue now in front of me, this technological advantage is going to be key.  I have been too aggressive in my purchase of this stock and will have to wait awhile before I buy more.  Signs of a true bottom, maybe even a reversal will be key.  Balance sheet is strong and they have no sign of issues paying their healthy over six percent yield.  Given the growth in the markets the last two years, I wouldn't be surprised that next year might be more difficult to reap gains and the yield will be all the more important to me, so long as the stock doesn't continue plummeting.  Oil prices and fleet supply in the market will continue to be weighing factors to stock performance.  It will take a turn around in oil price as well as demand and/or time to see that Ensco's technology gives it a superior position in the market..  My target price is $58 on 2014 earnings of $5.85.  Ensco is 12.3% of my portfolio.


Twos:
Broadwind Energy (BWEN, 8.48) - The stock has been "flat" between $8 and $9.50 for the last 3 months.  Volume has also had a downward trend, even in September.  I believe lower oil prices have reduced interest in the wind industry.  Combine this with the uncertainty of what the US government will do about regulation proposals in the next few months and I guess maybe I should be glad things are only flat.  If the worst was to happen with legislation, I think this stock still has downside risk to at least $7.  If oil prices start to creep up and we get a decent bill passed, the stock will likely pop a couple bucks.  I'm getting a little concerned about my risk/reward potential here, but for now I'm staying the course.  If this gets below $8.40, you can consider buying some.  Current price target is $10.50.  BWEN is 6% of my portfolio


Home Depot (HD, 92.34) - The size of the risk is now declared at 56 million cards.  Corrective measures have been taken, the company's insurance should cover most of the cost risks associated with the breach.  To top this off, the company also raised guidance on the year, to $4.54, less than one month after their last guidance raise.  To me, this speaks volumes as they may be through only half of the third quarter and stated that September sales gave them confidence to raise the target.  I don't expect the bad news about the breach to stop anytime soon yet.  Those stories will likely hit the stock and create further buying opportunities.  Without a doubt in my mind, this company and stock has earned a chance to speak before you sell.  I've reiterated my earnings guidance for 2015 to $4.55 and have what I believe is a conservative estimate for 2016 of $5.23.  This latest raise gives me reason to believe not only will my target for 2015 be reached, but potentially surpassed by a penny or two.  I'm also expecting them to raise the dividend by at least 20% next February to $2.26, or more depending upon earnings.  All of these factors have me raising my price target price to $110 with an 18 month outlook.  HD is 12.1% of my portfolio.

Honeywell (HON, 96.50) - Honeywell had some of the best earnings among their peers.  After a fallout with industrial stocks, this one has been on a nice comeback since hitting ninety dollars and change.  The biggest headwind appears to be that this is an international company.  A stronger US dollar makes it much more difficult to beat earnings on a Dollar basis.  I get a feeling we might be seeing only a pause in selling at this point.  I have too much stock to buy more and my basis is way too low.  I still believe this is a stock worth moving forward with and if you weren't holding any, I'd buy some as we hit around $90 or below.  My 2015 target is $110.  HON is 19% of my portfolio.

NPS Pharmaceuticals (NPSP, 27.13) - While I expected selling pressure this week after the ADCOM vote, I surely didn't expect this.  There are a lot of concerns that the October 25 FDA decision is going to get delayed.  History states that's extremely rare, but if it does happen, this stock could drop into the lower 20s.  On the flip side, if everything moves forward there's a lot of room for upside on the table.  Long term target remains at $40, but it won't get there until the fourth quarter at the earliest and more likely not until 2015 instead.  NPSP is 12.5% of my portfolio.

On Semiconductor (ONNN, 9.78) - Recently an analyst downgraded this stock but it appears to be recovering from that news.  It was from a buy to a hold and I believe it was prudent as the stock approaches their target price of $10.  Add to this the fact that an insider sold some shares and people got a bit skittish.  Now that the Alibaba IPO is out of the way, we'll get to see how the tech market responds.  I don't think any of this is news that should really changes the thesis on the stock and it will climb some more yet.  I've learned a lot while managing this stock, however, it's a very small portion of my portfolio and I'm looking to reduce my count in holdings.  That leaves this stock prone to me selling out despite what I believe the stock might do.  My price target remains at 11.50.  On Semiconductor is 6.4% of my portfolio.

Pepsico (PEP, 93.79) -  I don't expect much more from this stock until it announces third quarter results later in October.  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.  For now, I have a feeling Pepsico will just build a base around the $90 point as it has been the last few weeks.  PEP is 9.2% of my portfolio and my price target is $102 for 2015 on an estimated $5.10 of earnings.

Threes:
Citigroup (C, 53.48) - Until they announce earnings in mid-October, Citi's stock movement will be influenced mostly by the 10-year treasury yield.  Over the last few weeks, it's been on the rise, but I suspect that after the Fed's meeting this week, rates will start to decline some more.  New homes numbers this week will only help confirm/deny what the Fed said about weakness in the economy and I believe this can be a major factor to yield direction.  On top of that, the stock has risen some on their involvement of bringing the Alibaba IPO public.  My price target for Citi remains at  $55, which is still under the tangible book value as of the end of the second quarter.  This being said, I'm becoming more bullish on the stock and believe I'm starting to see growth potential - especially as it's now breaking through the $53 technical resistance it's had for so long.  I'm hoping to hear more in the third quarter that can help me prepare a better picture of what 2015 will look like.  I'm much more in favor of holding Citigroup as it has a strong floor around $47.  It's also been dead money, though, as it stays in this tight $47-53 range so I'm keeping the rating of a three for now.  Trade around your core position, if anything, here.  Citi is 10.5% of my portfolio.

Encana Corporation (ECA, 21.77) - 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.  The stock has climbed over 28% year-to-date and 32% over the last year.  You add this to continued trends of increased supply and decreasing Nat Gas prices, you will need a winter much like last year to have any chances of really getting this stock to push higher..  Because results are so mixed and I don't have any patterns I can model differently than I've just stated, 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.  I could also sell out for another stock with more yield protection and upside potential.  ECA is 5.7% of my portfolio.