Tuesday, December 20, 2016

Stock Analysis: Ionis Pharmaceuticals (IONS)

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 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.

Yesterday, we heard a slew of news come from Ionis Pharmaceuticals, so I thought it might be worth taking a moment to look at the information and determine if it has an effect on the stock's performance or my thesis.  There were 3 major press events today.  First, this morning they announced the results from their COMPASS phase 3 study for Volanesorsen.  Then after the closing bell they announced the advancement into the pre-clinical phase of an unnamed cardiovascular disease treatment.  Finally, CEO Stanley Crooke appeared on CNBC's "Mad Money" to talk about his company and their announcements.  

First up is the Volanesorsen details.  It was good to see positive results come form this phase 3 study.  The focus for the drug is on key triglyceride diseases familial chylomicronemia syndrome (FCS) and familial partial lipodystrophy (FPL), both rare metabolic disorders.  Decreases in triglyceride levels was significant, with over 70% reductions on a mg/dcl basis.  This is only test 1 of a 4 part test, though and we have more to learn with some of the larger tests still in progress.  Positive news is encouraging, though, as no one with the rare diseases stopped the therapy due to complications.  Volanesorsen is preparing for distribution through Ionis' wholly owned subsidiary Akcea Theraputics, meaning they will fully reap the benefits of sales, but they also have to put up the money to get it to market.  

The second announcement was in relation to a new drug in the pipeline with AztraZeneca, focused on unnamed metabolic diseases.  Ionis was awarded $25M for reaching this particular milestone with another $300M potential of earnings for reached milestones and low double-digit royalty opportunities.  This is the first time using the antisense 2.5 chemistry with their LICA technology.  To me, the best part of this news at this stage is that the company continues to add more "shots on goal," or rather they add more potential therapies to their pipeline.  This is one of the reasons why I liked this stock as a speculative source because they have so many opportunities to have home runs that could allow me to reap huge profits.  While this particular announcment doesn't result in quick gains, it helps keep my thesis and reasoning intact.

Finally there's the appearance on Mad Money.  While a lot of the interview was a discussion on the recent announcements, there was some talk about the Spinraza drug to deal with Spinal Muscular Atrophy, which is partnered with Biogen.  According to Crooke, it sounds like we could see this drug getting through the FDA soon.  As excited as he seemed, that could mean somewhere in the January/February time frame.  When you consider analysts see this as a potential $2B franchise, according to low-end analyst guidance and then take 10% as the lowest possible double-digit percentage they can get from profit sharing, you might be looking at some decent earnings above expectations quickly next year.  In addition to this encouraging news, Dr. Crooke also took a little time to talk about their diabetes drug that is in their pipeline, IONIS-GCGRrx which is currently in phase two.  Again, gauging his enthusiasm in the discussion, it would seem that results are going well in this study as well and he mentioned there's a chance that the unblinding of the Phase 2 efforts could happen yet this year - meaning potentially another milestone payment and more progress in yet another therapy.

In short, it's hard to say Ionis had anything but a good news day.  It seems things are beginning to align for the company and 2017 has the potential to become a blowout year.  That said, don't get over enthused either.  We don't have a grip on what pricing implications may or may not be, the stock has had an incredible run since the end of October, and it's in a sector that's not as heavily favored right now.  The stock peaked around $70 earlier in 2015.  That price isn't out of the question in my mind as there seems to be even more going for it now than there was for them then.  That said, in a less favorable market to the industry, it will also take more to get it back up there too.  I'm not changing my estimates or targets just yet, but I think the news is setting me up to make adjustments.  Not to say the stock can't fall - it easily could get back into the low $40s at this time.  At the same time, there's a lot to look forward to here, too.

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.

Sunday, December 18, 2016

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.

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:
Twos:
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.

Threes:
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.

Stock Analysis: Honeywell (HON)

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 12-18 month outlook on stock direction and not necessarily related to moves I make due to financial positioning.

On Friday, Honeywell shared their 2017 forecast with the investing community.  The truth of the matter is that the results felt mixed.  In fact, initial headlines of the press release was strongly negative.  The company has reiterated their fourth quarter results for 10% earnings growth and a target of $1.74 for the quarter ($6.53 for the year).  While this was within the range, it was at the low end of the range, which is somewhat disappointing.  Additionally, they lowered sales and earnings expectations for 2017.  Reported sales will be down 1%-2% primarily due to divestitures after gains from acquisitions.  Earnings are guided down to a range of $6.85 - $7.10.  The analyst average expectation was $7.08.  

On the earnings, there's a few things to consider.  First, the company is gauging against a strong dollar, which will lower the value of overseas sales.  Second, they're expecting oil prices to stay where they're at or be lower.  Third, there are no tax benefits assumed.  Finally, they're cautious about China, given some of the political rhetoric currently taking place and the fact that the Chinese customer is relatively difficult to gauge.  Essentially the estimates are placed conservatively.  This is normal, as the company tries to reset expectations, particularly since global growth is rather anemic, despite the surge we're seeing in the US.  On top of that, they're preparing for CEO Dave Cote to step down and for Darius Adamczyk to take over.  It's to be expected that during the transition they may temper enthusiasm to better set him up for success.  

Here's the catch, though.  When you look at these industrial conglomerates (including the likes of GE and United Technologies, for example), investors don't measure the company on earnings - at least not purely.  Instead, they're graded on organic sales - or rather new sales created by new/advanced products.  In 2016 all industrial conglomerates struggled here.  Honeywell, in particular, is looking for a 1%-2% organic sales decline for the year.  However, when you look at the organic sales projection for 2017, management is expecting growth of 1%-3%.  That's roughly a 2%+ improvement from this year and not something to overlook.  In addition, what if all of the political rhetoric about lowering business taxes comes true?  Or if the company can manage to repatriate their $8B of cash overseas, at a lower or no tax rate, to be put towards stock buybacks or other investments?  What if oil prices rise - something that's a little more possible with all the OPEC and non OPEC countries agreeing on to cut production to raise prices.  

Essentially, it starts looking more like the company is preparing us for the worst and while it's all possible, I'm not so sure it's likely we're in a worst case scenario environment.  As such, I'm taking the company's guidance and adjusting my 2017 earnings expectations to $7.10.  This may be a little aggressive, as it's above analyst expectations, but I'm going to run with it for now.  Also, given overall economic conditions of the US, I anticipate that the industrial sector may fetch a higher multiple next year so I'm going to raise my multiple estimate for Honeywell to 18.  This places the 2017 price target to $128.  That's about a 10% price increase from where we closed at on December 16.  Given Honeywell's track record over the last 5 years, I don't think that's an unreasonable expectation with what is known today.

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.

Sunday, December 11, 2016

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.

Sunday, December 4, 2016

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.