Weekly Portfolio Summary
It's been a couple weeks since I've been able to churn out a weekly summary. Over those couple weeks we've had mass panic in the markets, followed by capitulation and a strong week following. During this entire time I didn't panic and sell, however, I didn't jump on some decent opportunities to buy either. Still have a lot to learn and improve on, I guess.
Looking into the week ahead, it's going to be a very busy week and I may struggle to keep up. I have 3 stocks which will announce this week - Braodwind Energy (BWEN), Ensco PLC (ESV), and On Semiconductor (ONNN). All of these announcements happen to be on Thursday, too. Just writing this list and knowing my stocks makes me realize I've made a big mistake in being way too heavy in energy or energy-related names and this is a reason for my portfolio under performance. I'll have to take time to make a plan to fix this.
Broadwind Energy is down just over 14% in the last quarter while the Russel 2000 is down only 3% over the same time. I think a lot of the downward pressure continues to focus on extended US legislation for government subsidies for alternative energy. However, the fact that oil has dropped over 20% in the last 3 months is also a major factor. Broadwind has tried to diversify itself from the tower business by also being a gearing business, however, the oil fields are their primary customer. You will have to focus on how they respond to the nature of business in these areas and any future forecasts. It's clear analysts are expecting business to slow. Lower oil prices also means that alternative energy is less cost-effective. While Broadwind has announced they now have a full backlog of work for 2015, we have to be careful of potential for people to cancel those contracts. Earnings estimates are at $0.08. Revenue estimates aren't available.
This will be my first quarterly report of owning Ensco PLC. Since I started buying the stock, it's been absolutely obliterated, dropping almost 17% with my cost basis. Many of the same reasons around oil prices I discussed with Broadwind apply here. Additionally, you have to continue to watch for fleet sizes as well as there are a lot of fears of oversupply. However, after competitor Diamond Offshore (DO) announced an upside surprise that also indicated that this oversupply might be more of a pie in the sky idea, it'll be interesting to see what Ensco has to say. It seems the stock has formed a bottom around the $36 - $37 range and a solid report and guidance could push the stock back up to $40. Earnings estimates are set at $1.63 and revenue estimates are at $1.2B. Ensco has been out performing estimates this year and it will need to continue that pattern to have any signs of showing strength and a turn around.
Finally, we look at On Semi. This stock has also been hammered, down over 12% over the last 3 months. It is worth noting that the stock has been recovering nicely since the panic bottom put in place last week. Fears for this stock are related to Ford announcing degraded estimates across the world along with the continued facing of recessionary economies in Europe. The need for technology that uses less energy isn't going away, though. This company has chips in a lot of the latest technology and helps manage many systems that are energy efficient. Last quarter the company posted strong results and a strong forecast. I have a feeling we'll see more of the same this quarter, considering strength we've heard from chip makers like Avnet and Intel along with global industrials like Honeywell, which paint pictures showing that demand has not slowed any so far. Earnings estimates are slated at $0.22 with revenues of $796M.
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.
Looking into the week ahead, it's going to be a very busy week and I may struggle to keep up. I have 3 stocks which will announce this week - Braodwind Energy (BWEN), Ensco PLC (ESV), and On Semiconductor (ONNN). All of these announcements happen to be on Thursday, too. Just writing this list and knowing my stocks makes me realize I've made a big mistake in being way too heavy in energy or energy-related names and this is a reason for my portfolio under performance. I'll have to take time to make a plan to fix this.
Broadwind Energy is down just over 14% in the last quarter while the Russel 2000 is down only 3% over the same time. I think a lot of the downward pressure continues to focus on extended US legislation for government subsidies for alternative energy. However, the fact that oil has dropped over 20% in the last 3 months is also a major factor. Broadwind has tried to diversify itself from the tower business by also being a gearing business, however, the oil fields are their primary customer. You will have to focus on how they respond to the nature of business in these areas and any future forecasts. It's clear analysts are expecting business to slow. Lower oil prices also means that alternative energy is less cost-effective. While Broadwind has announced they now have a full backlog of work for 2015, we have to be careful of potential for people to cancel those contracts. Earnings estimates are at $0.08. Revenue estimates aren't available.
This will be my first quarterly report of owning Ensco PLC. Since I started buying the stock, it's been absolutely obliterated, dropping almost 17% with my cost basis. Many of the same reasons around oil prices I discussed with Broadwind apply here. Additionally, you have to continue to watch for fleet sizes as well as there are a lot of fears of oversupply. However, after competitor Diamond Offshore (DO) announced an upside surprise that also indicated that this oversupply might be more of a pie in the sky idea, it'll be interesting to see what Ensco has to say. It seems the stock has formed a bottom around the $36 - $37 range and a solid report and guidance could push the stock back up to $40. Earnings estimates are set at $1.63 and revenue estimates are at $1.2B. Ensco has been out performing estimates this year and it will need to continue that pattern to have any signs of showing strength and a turn around.
Finally, we look at On Semi. This stock has also been hammered, down over 12% over the last 3 months. It is worth noting that the stock has been recovering nicely since the panic bottom put in place last week. Fears for this stock are related to Ford announcing degraded estimates across the world along with the continued facing of recessionary economies in Europe. The need for technology that uses less energy isn't going away, though. This company has chips in a lot of the latest technology and helps manage many systems that are energy efficient. Last quarter the company posted strong results and a strong forecast. I have a feeling we'll see more of the same this quarter, considering strength we've heard from chip makers like Avnet and Intel along with global industrials like Honeywell, which paint pictures showing that demand has not slowed any so far. Earnings estimates are slated at $0.22 with revenues of $796M.
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, 38.88) - I've suffered the pain, hopefully I'm going to get to see some gain over upcoming months. It appears that the bottom for the deep water drillers may be in. A typically lower performing competitor announced numbers that show potential for this sector and Thursday's earnings from Ensco should hopefully solidify the story. The concerns remain until we hear more in the call - Glut of oil supply, US dollar getting stronger, over supply of fleets. Every metric you look at says the stock is over sold and it does seem to have set a bottom with oil prices. While there's still a chance that this stock could go down, it's really starting to feel like we're run out of sellers. I bought way too much too early, but I'm not all in. I'm seeing downside risk of $8, but that risk is starting to abade. My target price is $58 on 2014 earnings of $5.85. Ensco is 11.2% of my portfolio.
Ensco PLC (ESV, 38.88) - I've suffered the pain, hopefully I'm going to get to see some gain over upcoming months. It appears that the bottom for the deep water drillers may be in. A typically lower performing competitor announced numbers that show potential for this sector and Thursday's earnings from Ensco should hopefully solidify the story. The concerns remain until we hear more in the call - Glut of oil supply, US dollar getting stronger, over supply of fleets. Every metric you look at says the stock is over sold and it does seem to have set a bottom with oil prices. While there's still a chance that this stock could go down, it's really starting to feel like we're run out of sellers. I bought way too much too early, but I'm not all in. I'm seeing downside risk of $8, but that risk is starting to abade. My target price is $58 on 2014 earnings of $5.85. Ensco is 11.2% of my portfolio.
Twos:
Broadwind Energy (BWEN, 7.82) - The stock crashed through the $8 floor I had been counting on for support with no news to call out why. Thursday, we should know more as to whether there was good reason for the move or not. I believe the impact is a direct correlation to the fall in oil and natural gas prices. As fossil fuels become cheaper, alternative energies become less of a necessity and lose their advantage regarding cost to produce benefits. This along with an awaiting PTC bill that has to get through a lame duck congress in the fall give people worry that this stock and the company can maintain performance. I have not done well with this stock at all, but am also looking for more details. It's becoming too hard to own this stock and I might decide to just take my losses and run. Current price target is $10.50. BWEN is 5.7% of my portfolio
Broadwind Energy (BWEN, 7.82) - The stock crashed through the $8 floor I had been counting on for support with no news to call out why. Thursday, we should know more as to whether there was good reason for the move or not. I believe the impact is a direct correlation to the fall in oil and natural gas prices. As fossil fuels become cheaper, alternative energies become less of a necessity and lose their advantage regarding cost to produce benefits. This along with an awaiting PTC bill that has to get through a lame duck congress in the fall give people worry that this stock and the company can maintain performance. I have not done well with this stock at all, but am also looking for more details. It's becoming too hard to own this stock and I might decide to just take my losses and run. Current price target is $10.50. BWEN is 5.7% of my portfolio
Citigroup (C, 51.80) - When it came to money center banks, Citigroup posted one of the best third quarters out of all of the banks. They were able to beat estimates despite the complications of the market with 10 year treasury rates getting as low as 1.8% last week. These pressures as well as some of the global economic pressures will continue for a little while, but I'm feeling safe that the stock's down side potential doesn't go below $47. This doesn't mean I think it's about to take off for big gains yet either. It does appear as though it has potential for 2015, though, and I will hold the stock just for that. It has maintained a $47-53 range to allow you to trade around, if you desire. Currently, I estimate 2014 earnings to be at $4.84 and have a price target of $55. My early 2015 predictions put EPS at $5.08. Based on my predicted Tangible Book Value growth of the company for 2015 ($61.55), I have a price target of $61 - meaning I believe Citi can have a year that will allow it to get to a 1x TBV value like most money center banks currently are at. Citi is 10.7% of my portfolio.
Home Depot (HD, 94.99) - As a US and retail company, this is the one stock I have that really plays into what works in the current market. The risk becomes if consumers start spending a lot lest and/or the economy starts to falter. Management provides confidence by increasing their 2015 estimates, but I still expect to hear some bad news about the breach along the way. 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 13% of my portfolio.
Home Depot (HD, 94.99) - As a US and retail company, this is the one stock I have that really plays into what works in the current market. The risk becomes if consumers start spending a lot lest and/or the economy starts to falter. Management provides confidence by increasing their 2015 estimates, but I still expect to hear some bad news about the breach along the way. 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 13% of my portfolio.
Honeywell (HON, 94.70) - After announcing an extremely strong third quarter earnings report, Honeywell stock has started taking off again, and justly so. Honeywell beat estimates and raised guidance yet again. Additionally, they started giving a picture into 2015 and it was just as strong as the performance we saw this year. This stock is a core holding for me and every quarter I'm reminded why. US dollar conversion will provide some negative impact in the future, but the company has also protected themselves against it, the slowing economies of Europe and China are showing no signs of impact to the Honeywell businesses and aerospace is starting to get some forward momentum as well. I'm trying to find risks to be wary of, but I can't. Management admits they stay conservative on forward guidance and it's been prudent of them to do so as it limits that down side risk. Like them, I want to play conservative here. I'm predicting 2014 EPS of $5.50 and a $100 price target. My 2015 target is $110 with a current estimate of $6.05 earnings. We'll learn more about 2015 guidance from the company in December. HON is 19.5% of my portfolio.
NPS Pharmaceuticals (NPSP, 26.93) - Yesterday was supposed to be the big FDA decision on NPS' Natpara drug. Unfortunately, the people who were concerned had a right to be. It was announced that the decision was to be delayed until January 24 to allow time for a major amendment. Basically this means that the drug is likely to have a major restriction on it, which potentially reduces the TAM (Total Addressable Market). As an orphan drug, I still expect it to be approved, but now earnings are getting pushed out, reduced, and costs for additional tests/monitoring are likely to increase costs. Third quarter earnings are slated for November 5 and I expect it to feel a little like a witch hunt. Based on the implied restrictions and lowered confidence I have in the company to deliver as advertised, I'm lowering my 2015 price target to $32. I'm also expecting to see this stock suffer another strong pull back during the next 3 months - potentially back down into the low 20s we saw a couple weeks ago. NPSP is 12.9% of my portfolio.
On Semiconductor (ONNN, 7.95) - There has been a fair amount of pressure in the tech sector of late - especially semiconductors. However, they have started bouncing back since last week's panic sell. I believe future demand when there's usually so much dependency on international markets is a factor. Key results on where this stock is heading will come from this week's third quarter announcements. 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. This stock has been difficult to own, but I went through another learning opportunity where I didn't make the right moves at the right time. As such, the price has come to a point where the stock can be upgraded and I expect a move higher. On Semiconductor is 5.5% of my portfolio.
Pepsico (PEP, 94.60) - After announcing another solid quarter and key competitor Coca Cola stinking up the joint, Pepsi looks to be in a rather strong position. Despite challenging macro economics across the globe, the company guided for 8% EPS growth and respectable organic growth for a CPG company. Input costs are going down, but there is usually a delay before you see it on the balance sheet. This is truly becoming the golden child of the CPG industry and I expect the stock will be treated similarly. My 2015 EPS estimates are at $4.90, but maintain the 20 times earnings multiple. This puts my price target at $98. Pepsi is 9.7% of my portfolio.
Threes:
Encana Corporation (ECA, 18.35) - Encana continues to get battered because oil and natural gas prices continue to fall. This is why I sold some of my position and has me wishing I sold more. 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. They don't announce third quarter results until November 12. I've planned on selling this to buy Ensco and am looking for the right price to sell the remainder of my shares and take my losses. The problem is I've already waited way too long. ECA is 5% of my portfolio.
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