Weekly Portfolio Summary

It's been awhile since I've done a weekly review of my portfolio.  Much of the time has been put into personal needs and reviewing the quarterly results that have been put out by each of the companies.  Now that I have gotten caught up on my entire portfolio, it's time to get back to this and get prepared to deliver for year-end.  Besides third quarter financial reporting, we've had quite a lot go on.  We've had numerous positive jobs reports, we've seen interest rates rise in anticipation of a Fed rate hike in December, and most notably has been the conclusion of the US election, resulting in a government that is geared specifically to be for the corporation, rather than for the labor constituents.  That said, President-elect Trump is a bit of an enigma and it's clear no one can fully understand just what to expect from him.  The one thing I can say we have now that we didn't have last time I wrote, it more clarity.  With elections out of the way, jobs reports and other macro economic information indicating strength, we finally have some increased clarity on the various risks we had been seeing for healthcare, retail, consumers, and financials.  

I see the week ahead to be driven by the reaction to an Italian referendum that is wrapping up as I write this, jockeying around the idea of the strength of the consumer and retail sales, how stocks should react to next week's Fed decision, tax loss selling/end of year buying, and whatever macro themes seem to make the someone yell from the tops of buildings.  In reality, there's not a lot going on that I see hugely influential or important.  

Finally, I want to note that in addition to the stocks highlighted below, I also own a very small amount of shares of a company by the name of AdvanSix.  This company is a spin off of the resins business from Honeywell that occurred mid-fall as a tax-free dividend.  Honeywell spun this off because it was more of a commodity inside the company rather than a high margin value.  As such, I see little point in holding it long-term or accumulating more shares of it in my portfolio.  I have a price target I'd like to sell my shares at and I will do that as the point it reached or I realize I'm not going to hit that point and sell as appropriate.


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 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.


Ones:
Home Depot (HD, $129.87, +109.05%) - 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.  As a result, I've upgraded the stock to a 1, believing there is limited down side risk, while the long term results look favorable with a dividend increase coming in January and earnings estimates that were raised after third quarter results.  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 are somewhat mixed between the daily and weekly charts, which might indicate more choppiness/ ahead.  The stock has dipped back below the 200 DMA in the daily and is hovering at it in the weekly charts.  I'm hoping this will hold and bounce off that mark, if it doesn't we could see the stock drop back down towards $125 - $127.  While that may not be ideal, it would help form the right shoulder of a reverse head and shoulders pattern - indicating something positive to come in the future, typically.  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 13.1% of my portfolio.

Pepsico (PEP, $100.60, +39.15%) - 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.  Currently the fact that the company is only sporting a yield of just under 3% and with the "certainty" of rising rates in December, the safety stocks which have been a leveraged as a "treasury replacement" while rates have been so low are starting to lose some favor.  The second concern getting raised recently is the potential for cities taxing sugary drinks.  Might it happen?  Sure.  Do I really see it taking much of their income away because of it?  Probably a little, but not a lot.  It's also important to remember that the company is growing most through its snacks business anyway.  As a result, they've likely pulled the stock back farther than is probably fair, given the mid single digit organic growth numbers. While I believe the stock has value, I believe the charts need to be noted.  Daily and weekly charts are really ugly right now.  Momentum, MACD, RSI, and OBV are all trending negatively and it doesn't appear to be slowing yet.  The stock is also moving almost in lock-step with the XLP sector ETF.  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 $101.  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 11.1% of my portfolio.

Twos:
Citigroup (C, $56.02, +34.11%) - 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 primary reasons for this surge are due to the anticipated increases in interest rates and since the election of the Trump administration with a republican congress, people are predicting troubling regulations like Dodd/Frank will be recinded.   Citi, in particular, was up over 20% since the start of October on these factors.  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 can see the stock pulling back to the lower $50s, despite the company's TBV of over $64.  Technical indicators show a strong stock that's pulling back.  The pullback is more visible in the daily than the weekly, which is a small sign that this isn't a negative turn and/or that the pullback is early in its stages.  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 14.6% of my portfolio.

Ionis Pharmaceuticals (IONS, $43.00, -17.38%) -  I chose this as my speculative stock to try to make significant gains in my portfolio.  As you can see, things haven't gone very well here, though I can say we're much better than we were a couple months ago.  Biotechs have been heavily out of favor due to a couple high-profile pricing concerns and political banter about getting costs under control.  The election removed most of those concerns.  Additionally, the company, itself, had concerns around the viability of its own technology when a couple tests resulted in a couple patients with problematic platelet levels.  Those concerns were much alleviated with announcements of cause findings in the recent earnings release and that added to seeing the stock rise back to where it was prior to the announcement of the platelet problems.  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.  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 believe we're at a time for profit taking and that prices are too high to buy more shares just yet.  In the charts, the 50 DMA has crossed the 200 in the daily charts, and the weekly just crossed over.  This is usually a positive sign, but we see the RSI and OBV in both charts starting to trend lower.  The MACD is strongly positive in the weekly chart and appears to be turning over in the daily chart.  I think this sets up for a short-term pullback or leveling off of prices as the stock catches its breath.  With healthcare out of favor through the year, we may see some tax selling into the final weeks of the year.  I feel the downside risk is in the $37 - $40 range.  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 9% of my portfolio.

Cedar Fair (FUN, $60.04, +8.14%) - 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 aren't really giving away any directional indication.  That said, we'll likely see interest rate pressure, similarly a we do with the CPG companies.  While they generally look positive, all of the key indicators seem to be relatively flat in both the daily and weekly charts.  This tends to indicate we're looking at relatively flat and choppy action, at least for a little while.  I estimate 2017 earnings of $3.57 and with a multiple of 18 (corrected from my last statements), 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 15.9% of my portfolio.

Honeywell (HON, $112.45, +165.64%) - 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 their set up well for reduced expenses and less promotional selling and that should help set things up well.  All things said, the stock is up over 9% on the year and that's nothing to sneeze at.  The weekly charts appear to be at a potential turning point, but in which direction I can't tell.  The 50 DMA seems about to cross to below the 200 DMA which would be bearish, but the MACD is about to cross over in a bullish trend.  Similarly, the RSI and OBV have differing trends as well.  The daily charts show a convergence of trends around the $111 price point.  The 50 DMA is below the 200 DMA and the price is below both, however, momentum and the RSI are trending positively while the MACD shows a chance of a change in direction while the OBV is generally flat.  We may be seeing impact in the stock's price from a rising dollar which could lead us a little lower.  In general, I am anticipating a positive change as we lead into 2017 because rates just aren't high enough to be such a negative impact.  I anticipate 2016 earnings of $6.68 and 2017 earnings of $7.28.  I think a fair multiple is 17 resulting in a 2017 price target of $124.  HON is 17.9% of my portfolio.


Threes:
On Semiconductor (ON, $11.12, +31.24%) - 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.  Since the third quarter announcement the stock had jumped nicely, but has dropped since on a downplayed tech sector as a whole.  With rising interest rates reducing the value of future growth and so much value in industrial sectors, there has been a rotation away from this area.  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 patters this stock has needs to be noted and reacted on.  While the stock is a value play, the technicals just aren't showing tons of favor at this time.  The stock is well above the 200 DMA, but all other indicators are trending negatively, though very gradually so, in the daily charts.  The weekly charts are similarly trending, though the OBV has a stronger downtrend than everything else.  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.  Unfortunately, I feel that's a price we won't see until after the summer swoon, which is why I downgraded the stock to a 3.  I think the stock has pulled back too far, too fast, but when the price recovers it feels smart to lighten up on the position.  ON is 9% 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.