Weekly Portfolio Summary

The short trading week presented little in regards to news to change any of the stories I have in place.  As a result, you'll notice not much below has changed.  While the overall news flow hasn't changed my overall perceptions, it's not to say that a few of my stocks weren't volatile.  On Semi was hit with a downgrade that crushed the stock, sending it down over 5% on Wednesday and then received a buy reiteration and $16 price target on Thursday.  Isis Pharma is getting more and more turbulent, as are biotechs overall right now.  On Friday, we received a somewhat surprisingly low jobs number report.  I say somewhat because there had been a number of other reports that came out recently indicating that things might have weakened, at least temporarily, when considering the rougher than normal weather and strength in the US Dollar.  Since the market was closed, we haven't seen how investors will react to these numbers yet.

Which takes me into next week.  While it's again quiet for my portfolio, it won't be an exactly quiet week.  Monday's reaction may give us clues to the market's short-term direction.  With so many fears of earnings being weak, it's entirely possible we seen a correction here of 5-10%, which would allow things to take a breather and reset itself.  Who knows, though.  A bad jobs number could also indicate it will be longer until the Fed raises interest rates and everyone will party in the streets, sending the indexes higher.  The other big news is that earnings season starts on Wednesday, when Alcoaa announces their second quarter results.  While I don't have this company in my portfolio, I do have interest in the potential to adding it in around these prices.  Additionally, it's a great barometer to what's going on in both the aviation and auto industries - which my portfolio does have some reliance on.  Understanding what they're saying may help provide direction for my stocks.  After having sold off over 16% year to date, a better than expected quarter would likely send the stock higher.

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, 51.86) - Now that CCAR is out of the way and Citigroup has successfully positioned themselves to increase the dividend and buyback plans, the stock is positioned for favorable stock price appreciation when the market allows for it.  It's the cheapest of the money center banks and CEO Mike Corbat is showing his ability to be a strong leader.  Treasury yields will still be the primary factor and an overall market correction would likely weigh on this stock just like any other, but those should present buying opportunities.  The stock has pulled back quite a bit recently and is nearing thresholds where I begin wanting to buy the stock.  Given current circumstances, my tangible book value and price target for the stock sits at $59 for the current year.  Citi is 13.1% of my portfolio.

Home Depot (HD, 114.54) - After yet another strong earnings announcement, guidance provided feels conservative from the growth trends for the last 5 years.  While home formations stay flat and access to loans continues to struggle, we learn that much of the business the company sees is due to remodeling.  Considering the strength of the market, it will leave you wondering as to how strong things can really get - but also asking how long will this remodel surge last.  In the end, the consumer continues to be a strong driving force and will be the primary driver between the home improvement retail theme.  The stock recently suffered a fairly strong pullback, likely on the various "disappointing data points" we've seen released from the US government lately.  We had a strong run that got a little ahead of itself, but I remain confident nothing has changed in my theories.  I have estimated fiscal year 2016 earnings of $5.20 and give the company a multiple of 30 as I expect us to see the multiple expand to meet the consistent growth we've been seeing.  My calendar 2015 price target is $130. HD is 14.5% of my portfolio.

Honeywell (HON, 103.51) - I believe the company's focus on energy efficiency and safety will help them continue to surge forward. Additionally the airplane cycle is a few years from the end of it's strength and the company is releasing new pieces of technology that hasn't been considered as potential earnings. 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. Since February, the stock seems to be pretty range bound between $100 and $105.  I expect this to continue at least up to first quarter earnings (planned for April 17).  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 19.7% of my portfolio.

Isis Pharmaceuticals (ISIS, 61.63) - This stock is a pure long-term speculative play.  As such the stock price will swing wildly and I expect to either hold through it or work to trade around a core position with the movements of the markets to the best of my ability (once that core position is built).  With 38 drugs currently in the pipeline and a goal of up to 10 more to be put into the pipeline in 2015, there's a lot of opportunity for wins and the potential home run.  Risks are primarily competition to solve the same issues as well as getting drugs to market, rising interest rates that cause a dramatic rotation out of healthcare and into something else, or an investment community that lost its appetite in this space.  Last week I watched the stock pull back dramatically - going below my cost basis, before since recovering a little.  It appears as though the pullback may be done, but I'm not yet convinced and am playing things cautiously.  I might buy a little more if I become convinced this pullback is done and it hasn't jumped too much from here.  I have no price target at this time.  Isis is 3.9% of my portfolio.

Pepsico (PEP, 95.69) - 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.  For now, this stock is likely to trade inversely aligned to the US Dollar, until the next big theme takes hold.  This could create buying opportunities.  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 12.1% of my portfolio.

On Semiconductor (ONNN, 11.70) - New risks have introduced themselves into this stock.  Primarily, the stock price appreciated too much without significant changes in earnings or margins.  While the stock has been and continues to be under valued compared to its growth, multiples don't typically expand over night.  Add in risks caused by insider selling and announcements that other companies in the industry may be running into inventory issues and you need to become a little more cautious.  I maintain an $0.86 earnings estimate and my $15 long-term price target until I get facts from earnings or other reliable sources to change my model.  This means I still believe that the stock could eventually reach a 17.5 times earnings multiple.  However, until we hear earnings information again, I don't feel confident that the stock can climb over 14.5 times earnings without significant upbeat news in the space.  As such, I've downgraded the stock to a 3 due to the current risks, stating that I'm more likely to sell on price appreciation than increase my position on any further price depreciation.  On Semiconductor is 11.1% of my portfolio.