Weekly Portfolio Summary

The last week was generally quiet, though there were numerous mixed results for earnings. Overall, the market decided to progress higher, which sounds great and isn't exactly bad, however, we have to be careful how much it continues to move without new information supporting that move.  At current levels, the market is just starting to inch into overvalued territory, based on current earnings information.  We know jobs are getting stronger, we know Europe is showing signs of bottoming, but until that translates into increased revenues, I'd much rather see the market pause or pull back 5%.  By no means does this mean I believe it's time to hide in cash - unless something turns bad.  

For the week ahead, there isn't really a lot going on in regards to my portfolio.  We will begin to hear more from other retail companies, and with that we'll likely hear more information on the US vs. European consumers.  This may have an impact on the domestic vs. international company trades.  Additionally, Waste Management announces on Tuesday and their story could shed more light on residential construction, which usually plays well for Home Depot.  Finally, EOG Resources will announce their earnings on Wednesday.  They are a key for on-shore drilling in the US and what they say could impact oil prices.  Since Ensco's stock is linked to those prices, it's something worth watching to understand whether we are now in a recovery period in oil prices or if we're going down more.  Over the last 1-2 weeks, I've heard varying comments about oil going down into the 20s or up into the 60s and 70s.  This could help figure out who is right.

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.


Citigroup (C, 51.20) - The bank will continue to be bound by the trajectory of the 10-year US Treasury until another catalyst makes the bank more appealing.  The next catalyst I see is likely to be the results of the CCAR which should come out sometime in March or April.  I expect this to be a company and sector that will start growing/improving as interest rates and GDP in the US continues to grow.  Additionally, we're seeing signs of economy improvement in other parts of the world, which would also improve revenues.  While the rest of the world is by no means in an up trend, it does provide solace that known risks are priced in at this time.  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.  While the technical indicators I've been watching appear to have indicated a change in the stock's behavior, I believe I'll find a better price to pick up some more shares.  Citi is 9.5% of my portfolio.

Home Depot (HD, 111.89) - Retail stocks have run hard over the last 6 months and Home Depot has been one of the leaders of the space.  While strong results from both Stanly Black & Decker, Masco, and Whirlpool are encouraging, 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 13.8% of my portfolio.

Honeywell (HON, 104.38) - I believe the company's focus on energy efficiency and safety will help them continue to surge forward.  Additionally the air plane cycle is a few years from the end of it's strength.  The stock will sell off for various reasons, but as long as these themes and the company's performance stays intact, those are buying opportunities.  Honeywell 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 19.4% of my portfolio.

Isis Pharmaceuticals (ISIS, 63.86) - I figured this stock was going to crash to create large buying opportunities and over the last week, at least, I've been proven wrong.  Long term, I think this stock has a lot of upwards potential with a number of drugs in their pipeline.  Short term, I'm looking to build my position, though.  I continue to look for buying opportunities, but I may have been too cautious.  One thing to note that I missed earlier, this stock should be measured against the Biotech index (IBB) to understand how the stock may perform as well.  The result of the upward move in the last week appears to be in line with the IBB bouncing off its 50 day moving average.  Patience will be key here.  Interest rates are rising, somewhat rapidly even, and history says there becomes a point where these types stocks get sold due to higher rates.  I don't think that's a reason to sell, more like a buying opportunity (unless you've been in for awhile and have gains to lock in).  No upward price target at this time, more likely to have that after we hear earnings at the end of the month.  Isis is 4% of my portfolio.

On Semiconductor (ONNN, 11.945) - A superb fourth quarter earnings announcement yielded both strong results and strong projections in the auto and wireless/phone businesses it serves.  While the company still expects seasonal patterns, demand is strong and inventory is down.  Add into that 2 acquisitions made last year that are already producing earnings and design wins despite full integration being expected this year and a buyback worth about 22.5% of the company's current market cap over the next 4 years and I see lots of reasons this stock could go higher.  Keep an eye out for technical trends to see if they reappear.  Also watch out for bear raids, as the stock has little short pressure.  I'm currently estimating earnings of $0.86 for 2015.  Given the current 13.4 multiple it has and an estimated $0.50 per share impact from share repurchases in 2015 and I have a $12 price target, which might prove to be a little conservative.  On Semiconductor is 11.1% of my portfolio.

Pepsico (PEP, 99.13) -  Pepsico has announced earnings which leaves them as one of the top consumer & packaged goods companies out there today, doing even better than the surprise numbers that competitor, Coca Cola put up.  Biggest encouragement has been the sudden turn to increased revenues in the North American Beverages division.  These increased revenues were on lower volumes, indicating a new-found ability to increase prices successfully.  There are still foreign exchange risks, particularly in Venezuela, but Russian consumers continue to hold on due to the need for primary products of milk and juice.  2015 guidance was for EPS growth of 7% off of 2014 earnings of $4.63, putting my earnings estimates at $4.95.  Due to success and favorable yield, I'm giving Pepsico a multiple of 22, but note that this is a little rich and something to watch carefully.  Given my multiple and earnings estimate, I have a $110 price target.  PEP is 9.2% of my portfolio.

Ensco PLC (ESV, 30.03) - 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 & rig 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 the bottom to oil and oil-related stocks, which I believe is now forming.  While I feel there is value in this stock, I don't expect it to make sudden, large gains.  I feel the stock has shown strong support for a bottom around $27.50 and with the current volatility there shouldn't be a problem finding buying opportunities under $30.  Just keep in mind earnings is on February 26.  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.  Ensco is 7.8% of my portfolio.