Weekly Portfolio Summary

As expected, we didn't see anything significant to move stocks.  That said, they did move as the "Trump Rally," as media outlets continue to dub it, continues to move stocks higher overall with financials, industrials, and retail leading the way while healthcare, staples, and utilities tend to lag the market.  It's safe to say there is a new energy in the market since the election.  A form of euphoria, if you will, though I don't think that's the right word because euphoria tends to happen near tops and I don't think we're close to one on a longer term basis.  I am anticipating a correction to come, but probably not until after the holidays.  The move has been strong and swift and that usually requires some form of breather along the way.  

All said, the stock market seems to has a sudden sense of hope and positivity which hasn't existed since before the financial crisis.  The Dow Transports have surged into all time highs, which usually bodes well (for those who follow Dow Theory).  People, generally, are looking for a lot more expansion and strong earnings growth as noted in an article by someone I trust here.  People are looking for a strong future, but if it doesn't materialize (in form of stronger earnings and/or positive & upgraded outlooks), that's when we could hit a wall for a little while.  

Looking at the week ahead the key factor is going to be the decision remarks from the Fed.  At this point, it seems that a hike is baked in, so the question will be how many more hikes to expect in the near future and are they properly priced in.  It will also be interesting to see how the market responds to the hike and any indication of future hikes.  Right now, it feels like the market is saying "bring on the hikes - we couldn't care less about them," however, if more than 4 hikes become predicted, the market may suddenly go into "fear of recession or excessive slow down" mode and that where we start to see a market correction and lowered earnings expectations.  In my mind, the Fed has been very calculated in its moves and way too many people believe they are way behind the curve on stemming inflation.  If that's true, there isn't much they'll say that will stop the market.  If those people are wrong, they still may be doing just the right activities to keep inflation in the sweet spot of 2%-3%.  Yes, there are a variety of things (some I have no clue of even) which could make the market drop significantly, but right now the odds feel (that's a key word - no facts to back it up), feel unfavorable.  Maybe that means I'm caught up in the euphoria myself.  Only time will tell.

Finally, last week I mentioned a minor holding of AdvanSix Corporation - a Honeywell tax-free dividend spin off for what was their resins and chemicals operations.  As I stated last week, I was looking for a selling price of that holding, which I hit this week.  I sold the position at $20.55, but after fees, it resulted in no real gains.(thus my reasoning for not mentioning it as a holding below).

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:
Pepsico (PEP, $103.57, +43.26%) - 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 $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.

Twos:
Citigroup (C, $60.04, +43.73%) - 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 continuing to surge, despite my feeling that it's going to pause.  Any weakness I saw in the daily charts last week has since turned around.  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 17.19% of my portfolio.

Cedar Fair (FUN, $62.24, +12.10%) - 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.  Formerly flat charts and indicators are starting to get more positive strength, as primarily seen in the RSI and OBV in both the weekly and daily charts.  The MACD is showing signs of a bullish breakout as well.  How the stock responds to this week's Fed speak will likely help set the table for the remainder of the year.  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 15.74% of my portfolio.

Home Depot (HD, $133.39, +114.71%) - 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 bounced back above the 200 DMA, showing signs of a floor.  We see some strength in momentum and the MACD, while other indicators get near an oversold mark.  The OBV and RSI hasn't shown a lot of strength to support big growth, meaning we might be chopping around these ranges for a bit yet.  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 12.73% of my portfolio.

Honeywell (HON, $116.23, +174.57%) - 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 almost 13% 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.  This with a strong spike in momentum appears to show a price direction turn taking plase.  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 16.64% of my portfolio.

Ionis Pharmaceuticals (IONS, $45.57, -12.45%) -  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.  Longer-term trends look positive, though.  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 10.87% of my portfolio.

Threes:
On Semiconductor (ON, $12.22, +44.22%) - 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 are mixed.  The stock is well above the 200 DMA, but all other longer-term charts and indicators are trending negatively, though very gradually so.  In the daily charts, we're seeing more of a sign of a breakout happening with momentum on the rise, the MACD crossing over positively, and the RSI and OBV getting stronger.  I'd feel better if I saw stronger long-term trends - particularly more strength in the RSI and OBV.  I'll be honest, I'm looking to unload some shares, but I'm a little fearful that I'm missing that strong breakout I've waited years for.  So I'm suffering from a little bit of a fear of missing out.  $12.45 seems to be a very strong ceiling to the stock this year.  Being only 23 cents off from that is something particular to watch.  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 8.75% 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.