Weekly Portfolio Summary

It was a week where I crushed the performance of the S&P 500, however, I'm still way behind on a YTD basis.  I sold almost half of my position of Encana, stating it's had a big run, Oil and Gas commodities are under pressure due to both a stronger dollar (short-term impact) and a couple reports coming out with higher than expected reserves.  With the proceeds, I shifted to a deep water driller in Ensco PLC.  While the same risks/impacts are in place, we see more safety to the downside here as the stock barely moved down despite comments out of both Seadrill and Transocean talking about headwinds their companies are facing.  The balance sheet is strong, they're mostly completed on life cycling their rigs, as it's the second youngest fleet in the industry, and the stock has an over 6% yield while trading around 8 times 2014 estimates.  The worst seems to be priced in and while I can't say I see the stock launching under current circumstances, it's not badly positioned and pays you to wait.

Additionally, NPS Pharmaceuticals had their highly anticipated ADCOM (Advisory Commission) meeting this week, which resulted in a vote of eight to five in favor of approval of their Natpara drug.  This is a positive step forward after all the chaos last week about what the review documents stated.  After those were released, the stock jumped 25%.  The stock was halted during the ADCOM so we won't see results of the vote until Monday.  Though the vote was eight to five, I don't feel safe.  Yes, Thomson Reuters reports that 100% of orphan drugs were approved after a positive ADCOM result, however, there were a lot of concerns - even from the yes votes - regarding dosage amounts and if there were really enough tests.  This leaves me a little uneasy and I wouldn't be surprised to see some turbulence in the stock.

For next week, there are not any major events.  Honeywell will present at another conference, and we'll start seeing the reactions to NPSP for the reasons described above.  The media will be focused on two things this next week.  First is the Fed meeting that happens Tuesday and Wednesday and the results of that meeting - particularly comments on raising rates and the impact on the Treasuries.  The second thing will be the IPO of Alibaba.  This is the equivalent of the Chinese Amazon site and its expectations are huge.  I expect a lot of selling in big gainers, to which NPSP can fall victim to, so people can raise cash to buy Alibaba.  The stock is already overextended, meaning there's more demand than stock available and that will only make the IPO more wild.  By Thursday, all of the cash raising will be complete.  After that we will get a better sense of reality.

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, 46.25) - Deep water driller that appears to continue to get hit on concerns of reducing revenues and a stronger dollar forcing the oil prices down.  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.  Balance sheet is strong and they have no sign of issues paying their healthy over six percent yield.  While oil prices suffer, I expect this stock will as well, but once things show a sign of turning, this stock has plenty of room to run.  My target price is $58 on 2014 earnings of $5.85.  Ensco is 6% of my portfolio.


Twos:
Broadwind Energy (BWEN, 8.69) - 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% of my portfolio


Home Depot (HD, 88.84) - The security breach has been confirmed and it's taking a toll on the stock.  That being said, the stock also continues to hover near $89.  I still see downside to the stock, but I get the feeling there's not a lot of down side left.  I still think 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 11.4% of my portfolio.

Honeywell (HON, 94.50) - 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 18.3% of my portfolio.

NPS Pharmaceuticals (NPSP, 32.70) - As stated, we had the ADCOM vote this week and it proved to be a positive result.  I do have some concerns that came from the vote, but at the same time orphan drugs such as Natpara have been approved by the FDA 9 times it's been presented with a positive vote from the ADCOM.  Don't be surprised if you see selling pressure next week.  25% jump is nothing to sneeze at and profits are likely to be taken with the Alibaba IPO coming on Friday.  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 14.7% of my portfolio.

On Semiconductor (ONNN, 9.64) - The big news in the last week that hit this stock was the downgrade by the analyst at Baird.  The downgrade 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.  The has jumped a bit over the last month or so, leaving profits to be captured, again, as we head into the Alibaba IPO.  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 6.2% of my portfolio.

Pepsico (PEP, 90.87) -  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 8.8% of my portfolio and my price target is $102 for 2015 on an estimated $5.10 of earnings.

Threes:
Citigroup (C, 52.38) -   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 10.1% of my portfolio.

Encana Corporation (ECA, 22.45) - 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 5.8% of my portfolio.

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