Weekly Portfolio Summary

Took a week off on the summary.  Back to school now means back to action here too.  After what was felt to be a disappointing jobs report today, the market didn't really respond as expected.  It would seem Wall Street doesn't agree with the results and it's common that August is a relatively inaccurate month, I guess.  This isn't my knowledge, just some speak I've heard today.  All in all, even if one month is slower than expected, I don't think we see any signs of a slowdown in the economy - especially based upon the earnings reports of many of the companies I hold in this portfolio.  For this reason, I don't sense a need to panic right now.

As for my stocks, it was a little bit of a rough week.  Home Depot announced a potential security breach that could lead to millions of customers having some of their data lost to "bad guys" - whomever they may be.  I'll speak more to this on the stock's summary.  Additionally, NPS Pharmaceuticals took a $3 hit on a tweet talking about an offer for a private interview with the CEO around the FDA Advisory Committee (Adcomm) meeting that happens next week.  NPSP has the documentation back already and there was a comment regarding how this could have a large reaction from shareholders.  This fired up tons of negativity because most people are/were expecting a flawless pass-through.  Again I'll cover this a little more below.  Finally, ECB decisions to invoke their own form of QE and geopolitical turmoil also put some played their own version of havoc to the markets.  With Europe clearly suffering, American markets become the place to play.  Oddly the market hasn't completely reacted that way, though.  Bond yields actually went up instead of down and this is a little worrisome.  The jobs report helped pull things back down some, though, and we'll see how this progresses next week.  These actions are also causing strength in the US dollar.  There are both good and bad aspects to this.  As the dollar strengthens, you'll typically see commodities and metals drop.  American companies with international exposure also are hurt by a stronger dollar because they need to translate their sales outside of the country to dollars.  You get less from the translation, you make less as a whole.  That being said, a strong dollar also usually indicates strength for the US.  As such, the more your stock is US based, the less potential headwinds it faces, unless it relies on commodities to make money.

For the next week, the biggest thing I will be watching is the Adcomm meeting.  If something bad comes from this, NPSP is going to get hit HARD.  I don't think I stressed how bad that can be enough, but I did my best.  At the same time, if things are good, the stock could jump BIG.  This is the where biotech stocks like this becomes a craps shoot.  I've done my research, I believe in the company, but in the end, my profits rely on a 1 in 2 chance the FDA will continue to move things forward.  I foresee a $4 down and $6 dollar up risk reward factor at this point.  Other than that, Citigroup, Encana, and On Semi all have sector conferences that they will be involved in.  I don't expect much news to come out on these, but it's always something to watch.

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, 8.77) - The company announced strong second quarter results, however forward guidance was somewhat disappointing.  Recent orders placements have been made with more in discussion that could fill out the books for 2015.  Margins are improving and the company is now turning a profit.  The risk here is future growth and we lack a lot of future certainty right now with current revenue estimates being lowered and the PTC extension still in question.  The stock has sold off some as of late and it continues to put a base in with a price range of about $8.20 - $9.20.  If this gets below $8.40, you can consider buying some.  Current price target is $10.50.  BWEN is 6.1% of my portfolio


Home Depot (HD, 91.61) - The security breach potential has hit this stock, but it currently appears to have found a floor at $89 and has since bounced.  There is risk it could pull back to the $84 - $86 range, but I feel anything at $89 or below makes this stock a buy.  This company and stock has earned a chance to speak before you sell.  Results aren't in yet and management has reiterated their forecast for a stronger second half.  There have been comparisons about this turning down for some time like Target did, but this company and management team is so much better than what was at Target when their breach happened last year.  I've reiterate my earnings guidance for 2015 to $4.55 and have what I believe is a conservative estimate for 2016 of $5.23.  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% of my portfolio.

Honeywell (HON, 95.61) - 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.  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 18.7% of my portfolio.

NPS Pharmaceuticals (NPSP, 27.50) - NPS got hit based upon a couple tweets and subsequent speculation about how the comments might mean gravely bad things for FDA feedback that people expected to go smoothly.  As I said, the Adcomm and subsequent discussion in October are all craps shoots - total gambling.  You can win or lose big and it's just a bet on which way the FDA chooses to go.  I do feel disappointed on such a reaction based on pure guessing, but this is my speculation stock and I suppose it can also be said I'm just guessing things will go well.  This is a must-watch item because if it goes bad, you have to get out before you lose everything.  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 12.6% of my portfolio.

On Semiconductor (ONNN, 9.88) - After a summer in the doldrums, this stock is finally getting some life to it. Despite it's climbs over the last few weeks, it is still priced at a lower P/E value compared to its peers, despite the company performing better than many.  There's still potential here as the tech cycle that has a habit of rising between September and February appears to be up to its old tricks. 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 6.5% of my portfolio.

Pepsico (PEP, 91.75) -  Pepsi is in a somewhat precarious position.  It's likely to feel impact due to the political issues in Russia, however, it's yield is still around 2.9% to help people looking for yield protection.  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% of my portfolio and my price target is $102 for 2015 on an estimated $5.10 of earnings.

Threes:
Citigroup (C, 52.30) -   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's last quarter 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.  While growth in the economy does give better prospects for the future, the truth is that current geopolitical issues as well as what appears to be a European economy that is suffering, we're seeing more pressure on the 10-year treasure yield, and therefore Citi's margin rates as well.  Fortunately, we learned last time we had a European crisis that Citigroup has little risk sitting in Europe and should not suffer from any economic downtrend we see there in their profit streams.  All of 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, though I will say popularity appears to be rising now.  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.  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 10.2% of my portfolio.

Encana Corporation (ECA, 22.64) - 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.  Geopolitical issues are currently seen as a negative to the natural gas commodity because the US Dollar gains strength, we also got a report this week that inventories are higher than expected.  If this trend continues we 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 12.1% of my portfolio.