Weekly Portfolio Review

Wrapping up another week on a rather strong note with my portfolio and in the overall markets.  The enthusiasm and optimism for the future continues to shine overall as broad market indexes continue to rise.  As we head into the holidays, trading volume is likely to get lower and the market will swing primarily to major news themes.  While there will be some earnings announcements, they won't involve stocks from my portfolio, so there is little to be concerned with in that respect.  

From now, until the new year I don't expect a lot of earth shattering news.  As such, this will be my last weekly summary of the year.  If certain stocks have something notable, I'll write up on that separately.  Instead, I'll be preparing my year-end reviews.  I'm also looking to create some new segments to my blog or features within these posts to help improve my overall trading disciplines.  I may make some posts in those regards to get a feel for them and if/how I want them to take shape.  So with that, I wish everyone Happy Holidays and Happy New Year.  May 2017 be kinder to us than this year has been in meaningful ways.

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 a combination of 12-18 month outlook on stock direction and market driven need for capital preservation or appreciation.  The ratings may not necessarily directly results in moves I make due to financial positioning and cost basis.

Citigroup (C, $59.75, +43.04%) - I've held this bank for a long time as a play of a turnaround and it appears the turn around might be, finally, starting to happen.  Since we received positive jobs reports a couple months ago and then the election results, Citi, and financials in general, have surged.  The keys to this change has been an election of an administration that's very vocal about removing regulations like Dodd/Frank which "hamper the ability to do business," as well as a Federal Reserve who has now done their second .25% rate hike and predict 3 more in 2017 (for the record, I expect 4).  Citi, which is now up 26.7% since the start of October on these factors, still has room to run as its current price is and has been much lower in value compared to their book (TBV).  That kind of movement usually results in a pullback as people take some profits.  This isn't a bad thing, though.  It's just a stock taking a breath before it moves again.  In this case, I am still looking for a pull back, but now I question it more than I did a couple weeks ago.  We may just see a pause instead of a selloff.  How the markets start 2017 may be the tell to which action takes place.  Technical indicators show a strong stock that's actually starting to roll over now.  Momentum is flattening, a number of indicators are oversold and the MACD might be trying to do a bearish crossover in the daily charts, while the RSI and OBV show gradual bearish declines.  That said, longer term trends are still well intact in the weekly charts with many indicators strong or over bought without other indicators like the MACD or RSI showing a turn.  I am targeting a TBV of $65 for 2016 and $67.50 for 2017.  I'm targeting a 2017 TBV of $67.50  I'm placing my 2017 price target at just above 1 times TBV to a value around $69, though I don't believe we see a new 52-week high this year.  Citigroup is 16.72% of my portfolio.

Cedar Fair (FUN, $63.65, +14.64%) - To try to play the strengthening US consumer while also protecting my portfolio with yield, I chose Cedar Fair on the theory that people are looking more for fun experiences to put their money as they feel more comfortable with an improving economy and lower gas prices.  The year has been positive as they've had record attendance and sales over their most critical third quarter.  They're expanding their Christmas theme parks again this year to try to capitalize on their properties as best they can, but the year is over for the most part.  The next year the company feels strongly that they will continue to see growing EBITDA as they target to make $500M in EBITDA a year faster than originally targeted.  The charts are indicating that the stock has a fair amount of strength right now, though there are some indicators flashing over bought in the daily charts.  The trends in the weekly RSI and OBV are positive and have room to run more.  The stock just hit new 52-week highs, which rarely shows signs of weakness, but it doesn't mean that a broad market selloff won't pull the stock back.  It does show signs, though, that if that pullback happens, you probably should buy in.  Despite Fed rate hikes, the stock is still growing, so key risks seem to be OK for now.  I estimate 2017 earnings of $3.57 and with a multiple of 18, the 2017 price target is $64.25.  I feel the stock will be a better buy closer to $57 where the stock will yield 6%.  Cedar Fair is 15.73% of my portfolio.

Home Depot (HD, $135.11, +117.48%) - I chose this stock as a play on the housing and retail industries, expecting positive results from people taking advantage of an improving economy and home prices to invest in home building and improvements.  While Home Depot's results have backed my expectations, the stock hasn't performed in suit. I had to downgrade the stock because it got to a point where I felt the price posed more risk than I cared for.  The price has surged on no news over the last couple weeks, though I have reason to believe the cause for that may actually be related to the extra $2B in buybacks that was announced for the fourth quarter.  The company is executing on its plan, taking share, and expect same store sales comps of 5%, which is pretty incredible for a company that isn't opening more stores.  Technical indicators have gotten stronger in both the daily and weekly charts, though the 50 DMA is still below the 200 DMA.  Momentum is growing and OBV is trending postively, though in a choppy fashion.  I have a feeling we'll see some chop around this $135 mark for the next few weeks.  If this happens, the chart will show a nice reverse head and shoulders which would allow it to break out in 2017.  Having stronger long-term technicals helps support the possibility of this.  I have a feeling the fourth quarter earnings call and 2017 guidance will be key.  At under $132, I think the stock needs to be picked up.  I estimate 2016 earnings of $6.34 and 2017 earnings of $7.10.  I estimate a multiple of 22, giving a 2017 price target of $156.  HD is 12.60% of my portfolio.

Honeywell (HON, $116.38, +174.93%) - The chosen pick to play industrial growth in a growing US economy, Honeywell's stock has not performed as well as expected they year.  The company has had a lot of growth in a number of its businesses, however, it's aerospace division has been hurting things pretty significantly.  The primary areas in that division are the private jets and helicopters, though some of the defense spending has also been a problem.  Recently there have been layoffs in the division to help account for the under performance and keep margins in check.  I feel another factor has been the announcement of CEO Dave Cote stepping down in March next year.  Dave has been an exceptional leader since he took the helm of the company over 10 years ago, resulting in a company with spectacular performance and consistency.  I believe he's handing the reins over to a CEO capable of continuing the vision he has set, but that is what's going to be watched closely in 2017.  The company states that promotions for their aero business is going to start descending in 2017.  This will help improve margins and reduce expenses, plus they believe it's helped grease the gears for further sales..  All things said, the stock is up almost 13% on the year and that's nothing to sneeze at.  The weekly charts turned bullish with the 50 DMA bouncing off of the 200 DMA and the MACD bouncing in a positive fashion as well.  On Friday, the company provided their 2017 guidance (read my take here), which was rather conservative, but noted things like a stronger dollar making it harder for earnings to increase.  That said, Industrial conglomerates like Honeywell are measured on organic growth and that is anticipated to expand from (1%)-(2%) to up 1% - 3%.  I anticipate 2016 earnings of $6.53 and am adjusting my 2017 target down to $7.10 - anticipating that the company is currently being particularly cautious.  I also think industrials are going to be able to fetch a stronger multiple if the economies of the world really do start firing on growth.  Thus, I've raised the multiple to 18, resulting in a 2017 price target of $128.  HON is 16.28% of my portfolio.

Ionis Pharmaceuticals (IONS, $49.30, -5.28%) -  I chose this as my speculative stock to try to make significant gains in my portfolio.  I can safely say this hasn't gone as planned at any stage and it's probably a matter of sheer luck that I'm doing this well.  Biotechs have been heavily out of favor due to a couple high-profile pricing concerns and political banter about getting costs under control.  While the group, as a whole, still isn't out of the woods, Ionis is currently faring to be in a much better position.  The company has 3 therapies that are looking to go into production with their partner companies in 2017 which should result in royalties that allow the company to be profitable in 2018.  This helps create a strong potential for the company and the stock for what I believe will be a fruitful 2017 for patient investors.  Like Citigroup, the stock has moved a large amount in a short period of time.  I've been worshiping the alter of it being a time for a pullback, but whatever pullbacks we've gotten have been exceptionally brief.  The charts all seem to be flashing a strong bullish trend with the RSI and OBV in full support.  The MACD is strongly positive in the weekly chart and appears to have recovered in the daily chart.  The stock is no longer down on the year and set up for a strong future.  I'm estimating a 2017 earnings target of a $0.50 loss for next year, primarily due to ramp-up costs early on.  My price target for 2017 is about $58.  Ionis is 11.5% of my portfolio.

Pepsico (PEP, $105.87, +46.44%) - The epitome of a safety stock, this consumer packaged goods (CPG) company is in my portfolio not just for the safety it can provide if the stock market takes a dive, but also because the company has been performing extremely well on its promises.  It's currently one of the best CPG companies in terms of organic growth after third quarter results.  Now that rates were raised a quarter point and there is documented expectations of 3 more hikes, we might see some rotational pressure on this name as people move money to cyclical growers, but that doesn't mean we have to do the same.  Yes, the stock may not grow as fast, but there's growth in this company and it's well led.  I think it's still a great stock for a core holding in a portfolio.  Watch out for headline news regarding taxation on sugary drinks, but counter that against the fact that management is expecting mid single digit organic growth numbers. Apparently I'm not the only one that finds value in this stock as over the last couple weeks the charts have changed dramatically towards the positive.  RSI and OBV have shot up, driving a positive MACD and the stock bounced off its 200 DMA in the daily charts.  The weekly charts aren't all positive yet, but they're heading in the right direction as the RSI and OBV are trending positive and the MACD appears prepared to have a bullish crossover in the next 2 weeks as well.  I'm clearly well over my cost basis, so I'm not looking to get in at this time, but people not with a holding should be looking to slowly start a position anywhere under $103.  I estimate 2016 earnings of $4.78 and 2017 earnings of $5.16.  I'm going to go with a multiple of 21 which gives a 2017 price target of $108.  PEP is 9.88% of my portfolio.

On Semiconductor (ON, $12.84, +51.53%) - On Semi was a stock I chose long ago as a play into the tech industry.  It's a leader in power saving for various technical devices.  Recently it completed the acquisition of Fairchild Semiconductor, which is meant to help expand their reach, capabilities and market share.  On's continued growth in the phone, auto, and industrial sectors make this a under valued stock that has more in relation to some of the currently favorable sectors than believed.  With the increased synergies, they should be able to increase their value even more.  That said, the cyclical patterns this stock has needs to be noted and reacted on.  The stock did have a nice breakout and is sitting above its former ceiling of resistance, this gives it some room to run further.  Daily charts show OBV and RSI trending positively with the MACD also in the middle of a nice bullish ascent.  I'm slightly worried about seeing momentum start to turn over along with down ticks in the RSI and OBV, but this could be a short-term correction.  The weekly charts are less pronounced bullishly, however, it has a strong uptrend in RSI and OBV with positive momentum and strong volume.  I'm still on a selling lookout because this stock is not typically a long-term hold, but since we've broken out, I'm being patient in my selling plans.  2016 earnings expectations are $0.85 and my estimate is $1.05 for 2017.  I feel a fair multiple for the stock is a 13, putting the price target around $13.50 for 2017.  This target is starting to become more viable, but I'm not certain for a long-term hold.  The key event point right now is going to be fourth quarter earnings late January or early February, but other announcements might be a lead into that angle prior.  ON is 8.98% of my portfolio.

Nothing on this site should be taken as advice, research, or an invitation to buy or sell any securities.  All views expressed are solely of my own and I am not a professional money manager.  Please consult with your financial adviser before taking any action in your own portfolio.