Weekly Portfolio Summary

A difficult week has passed, as averages and my portfolio suffered.  Key factors were related to heavily mixed earnings results, the behavior of oil and 10-year US Treasuries, as well as the economist-types throwing fits regarding the Fed speaking about patience before raising rates as they were expected to do (wooooh, no, not that!).

The Fed, was a non-news event, and typically is.  While there's a chance of a short-term move, I can't say I've seen a lot of long-term impact from them for awhile.  Watch them, understand impacts if messages change, and then react to that - not the news itself.  I also learned last year that you shouldn't predict rates, so I'm trying not to.  I'd rather react to rate changes than be worried about trying to beat them to it.  Oil has been an on-going event for some time now, so nothing is all too new there.  Earnings reports, though not directly impacting my portfolio, did impact it indirectly.  A lot of international companies continue to call out the strong Dollar as a reason for impact on earnings.  While it's going to happen and clearly is having an impact, there are companies that are doing well.  Most of these companies are domestic, the others, have exceptional management teams that are capable of delivering even in those markets.  If/as those stocks come down, those, along with strong domestic companies, are the ones you're likely going to want to hold onto for at least the next six months.

In the upcoming week, there are two major events that will have an impact directly to my portfolio, with another indirect impact worthy of noting.  To the latter, there will be a number of oil and oil-related earnings reports next week two key ones being Exxon and Anadarko.  National Oilwell Varko will also report next week, and as a driller, it'll be interesting to hear what they think of business conditions.  All of this will be a factor to how Ensco will act.  On Friday, we'll also get the January jobs report.  Unlike the Fed, this is something to pay close attention to!  Last month we received strong results, so hopefully those will continue.  If they don't, we could see some of the negative technical signs (there's a head and shoulders formation in the S&P 500, for example) may take hold and we'll see a bit of a market-wide pullback.  If things are strong, this could be a matter of the market making a base and taking off.  Ignore these results at your peril, but I don't feel it's really something worth making a gamble on prior to the report.

Finally on Thursday, On Semiconductor will announce their fourth quarter and 2014 fiscal year results.  Earnings are estimated to come in at $0.16 for the quarter with revenues of $856.11M.  I'm essentially falling in line with estimates, but have concerns about if or how foreign exchange rates may impact the company.  Countering that impact, though, are the strong auto sales numbers we've been seeing along with huge auto numbers coming out of Harmon/Kardon this week.  While On doesn't serve Harmon products, I feel there's a chance that the strength of the autos could also be seen in all of the parking, cameras, and power management components that On sells to auto makers.  This could be what makes the stock surge past its $10.60 ceiling, however, if it doesn't have a good quarter, it may be time to get out.

On a quick side-note, I've come across a discovery that will have me selling my NPSP stock before the deal closes to maximize my profits.  Sale hasn't been completed yet, but likely will be soon.

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:

Citigroup (C, 46.95) - Citi finds itself stressed under the pressure of the ever decreasing 10-year US Treasury.  This key treasury for banks is now very close to its all time lows.  As such, you just can't expect banks like Citi to be able to make as much money as you did when rates were at 2.4%.  It has filed for it's capital allocations for this year and it (CCAR) won't be decided/announced until spring.  That's the next catalyst I see unless something dramatically changes interest rate trends.  Given current circumstances, my tangible book value and price target for the stock sit at $59.  Since the stock moved down so much, I feel there is still plenty of value in this stock.  As such, I'm ready to buy more of this stock soon, but am awaiting more technical support to say a bottom is in (Williams% R and Slow Stochastics appear to be those indicators).  Citi is 9.2% of my portfolio.


Home Depot (HD, 104.42) - Retail stocks have run hard over the last 6 months and Home Depot has been one of the leaders of the space.  There are a number of factors playing into this stock that need to be watched.  First, the price has run dramatically and poses some risk.  To counter that, though, interest rates have dramatically fallen - posing for another period of incredible home-buying opportunities.  Home Depot is also in the sweet spot of being both domestic and a beneficiary of consumer spending strength.  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.  I'm also expecting them to raise the dividend by at least 20% in February to $2.26, or more, depending upon earnings.  The stock is trading around 23 times fiscal year 2015 earnings and currently is growing earnings at about 21%.  Valuation may look a little high, but the PEG ratio is at about 1,which is rather cheap compared to the industry average of 1.4.  My calendar 2015 price target is $110.  HD is 13.7% of my portfolio.

Honeywell (HON, 97.76) - After a strong earnings report we saw Honeywell take off.  However, since then it's pulled back almost 6%.  This appears to be related to foreign exchange impacts and I believe it's just a matter of the good being thrown out with the bad, since Honeywell clearly announced their measures to prevent currency risk.  They reiterated their conservative 2015 guidance, keeping it completely in line from December's announcement.  This management team has been incredible and I expect them to be the same in the next year.  If the stock manages to pull back to around $95, it should be worth buying.  They provided earnings guidance of $5.95 - $6.15.  My estimate on their 2015 has been $6.12 with a multiple of 18 due to how consistently this company delivers.  This resulted in my 2015 target of $110.  HON is 19.2% of my portfolio.

NPS Pharmaceuticals (NPSP, 45.86) - This company has been purchased by Shire PLC for a price of $46 per share.  While I could sell at a slight discount, I'd rather not.  Therefore, this stock is in my portfolio and will stay basically flat until the deal closes, officially, later this quarter.  Their drug, Natpara, passed the FDA evaluation over this weekend with labeling stating that there has been evidence of bone cancer found in tests with rats as well as patient tracking to catch concerns as early as possible.  These were expected results.  While what this announcement means this wee will be interesting, I really expect no changes to the stock.  If it does jump for some reason, then I may sell out early.  NPSP is 12% of my portfolio.

On Semiconductor (ONNN, 10.01) - A few earnings announcements from the tech sector have led to mixed results.  There is more competition in memory segments, but other semiconductor companies like Cypress Semi fared quite well.  On Semi reports next week and I think their strong position in the automotive sector will be a big benefit to them.  However, it is a more international company and is now at risk of impact due to "currency headwinds."  The stock I picked up for trade was meant to be held until around March at the latest.  The action recently and new risks facing the company has increased my unease, but not enough to sell out yet.  The price Target is at $11.  While we want to see continued growth advancements, the stock tends to sell off over the spring/summer and then can be revisited early fall.  While this shouldn't be an absolute dictator on your holding, it's something to pay attention to.  On Semiconductor is 9.8% of my portfolio.

Pepsico (PEP, 93.78) -  With the activist investor noise, hopefully, out of the way, we can focus strictly on how the company is performing again.  Fourth quarter earnings will be announced in 2 weeks and the key factors to watch will be the forward guidance and the currency impact the company is facing.  Lower input costs should help margins and profits, however, there are worries about the impacts of currency conversion combined with risks of lower profits out of their Russian businesses as things heat up over in Ukraine.  Technical factors I've been watching rolled over this week after the strong drop.  Right now, the stock appears to have a fairly strong floor at $92.50.  Based on prices and the floor I currently see, I've upgraded the stock to a 2.  The only things keeping me from saying I'm willing to buy the stock at these levels is the combination of the looming earnings report and I really don't want to violate my base - which is much lower.  PEP is 9.2% of my portfolio and my price target is $102 for 2015 on an estimated $5.10 of earnings.

Threes:
Ensco PLC (ESV, 28.04) - Ensco likely has a long year in front of it.  As oil continues to work to find its bottom and as oil drops, this stock is typically impacted as well.  There are still a lot of worries around the need for the company to cut it's over 10% dividend and this weighs on the price as well.  Production cuts appear to be accelerating and the news from all of the earnings calls in the next couple weeks have the potential of really shaping if/when the bottom is in place.  I am starting to assess my timeline for this stock, and whether it's worth holding onto the stock while it works to find its footing.  I've done this with Citigroup, with some success, however, some failure as well.  I may determine it would be better to take my losses here and use the money for something more applicable to the current market.  I currently believe both my target price of $52 on 2014 earnings of $6.54 (personal estimate) is high.  At this point, I don't have much other information to go with.  I'll readjust as I get information better suited for my estimates.  Due to those factors, I think it's best I downgrade the stock for now (yes, this is a late downgrade and may change in short order).  I'm not necessarily looking to sell the stock if it goes up a little, but I am considering it, as I stated.  Ensco is 7.7% of my portfolio.