Weekly Portfolio Summary

And so it begins.  The reigns of the US Presidency has been passed and we start under a new administration.  Many are happy, many are not - when you think about it in those terms, it's just another election and life moves forward.  The reality may or may not be so simple in the world of stocks.  We've already seen the influence a single tweet could have, so while it's more of the same, it's also a whole new world to react to.  In the words of one Dr. Dre it's time to "sit back, relax, and strap on your seat belt."  

Earnings season continues to dig in with the biggest of the financials completing their reports.  I've already provided my response to Citi's earnings report and many of the cohorts with it reported excellent results with numerous signs that the future is looking brighter.  How soon will that future come?  Frankly that depends out of what we see from the new administration and the world economy.  Can you make trades along the way?  You sure can - I sure thought about it and probably should've pulled the trigger to sell my profits at $60.50, but could I get back in for the long term rise I anticipate?  Maybe?  Probably, given that my theory seems to be playing out, but we're not there yet and you never know if or when things will turn and never look back.  I'm not a day trader and maybe the day I needed to make a move I was too busy with my real job or something, so I've played the safer route, losing some potential profits for longer term positions.

Industrial companies seem to be the next theme up with GE announcing their fourth quarter results on Friday and Honeywell planned for next week with United Technologies spattered in the middle of that.  Clearly, Honeywell is where my focus is at, but GE's disappointing earnings certainly put me on edge, as the last couple quarters didn't respond to outgoing CEO Dave Cote as desired.  I'm looking for the company to send Dave out with a bang by beating expectations of $1.74 earnings and $17.34 sales.  The company has already provided their guidance for 2017, so I don't really expect them to change that view already, but it sure would be nice if they raised that guidance or added some color that made us feel all warm and fuzzy about the first quarter.
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.

Pepsico (PEP, $103.24, +42.80%) - The epitome of a safety stock, this consumer packaged goods (CPG) company is in my portfolio not just for the safety it can provide when 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.  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. As the market sentiment has gotten more bullish, you can see how the stock, itself, has gotten more bearish.  Let's face it, the technicals aren't pretty, however, the price has recovered a little.  There is a downward trend in highs that goes back to July, the daily MACD has a bearish crossover taking place, while RSI and OBV both trend negatively as well.  The weekly charts show decreasing momentum, a MACD that can't do a bullish crossover and RSI and OBV are both trending negatively.  Finally, the multi-year charts show negative trends in OBV, RSI, and Money Flow, and the MACD can't make a bullish crossover happen.  While prices did recover this week, they now face resistance of the 50 day moving average.  I don't believe we'll see this upward trend continue and the stock will pull back once again.  Despite all of these horrible technical trends, I've upgraded the stock to a 1.  Primarily that is because the price is within a couple percent of where I would suggest starting to buy (below $100).  Don't be in a rush to pick up more of this stock.  Take your time as it is likely to be down and/or stagnant for a pretty significant period of time - maybe a year.  That said, this is a great stock to help diversify your portfolio and build over time into the weakness.  I estimate 2017 earnings of $5.16.  I'm lowering my multiple to 19 because of multiple contraction in this space, which gives a 2017 price target of $98.  Any selling done will be purely to lock in gains acquired.  PEP is 9.73% of my portfolio.

Citigroup (C, $56.11, +34.33%) - I've held this bank for a long time as a play off a turnaround which might be starting to happen.  Economic reports, which have been consistently strong enough to believe the Fed both can and will raise rates, which allows banks to make more money.  We now wait to see just how friendly the new administration will be towards banks.  The stock remains a value, given its price is below the TBV, but I think it's going to go lower before higher.  At this time we need to see regulations start to disappear and continue to see rate hikes for the banks to benefit.  I'm also a little concerned in an oversupply of stock, which hopefully can be remedied by a combination of permission to buy back more stock and larger dividend payments.  All of Citi's charts currently look bearish, though some indicators are starting to show the bearish run may be coming closer to an end.  I see the stock worthy of buying more shares in the lower-to-mid-50s (I've been targeting $54).  I still am very confident in Citi's long-term upward trajectory despite the bearish pattern we see right now.  I'm targeting a 2017 TBV of $68 and am keeping my multiple at 1x TBV due to their latest report and overall market sentiment.  Citigroup is 15.86% of my portfolio.

Cedar Fair (FUN, $63.95, +14.58%) - 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.  2016 resulted in record sales and there isn't anything, at this point, that has management believing the trend is changing.  They continue to expand their Christmas celebrations and also look to expand or improve on hotel experiences as much of their attendance comes from a wider radius.  This year, the company feels confident that they will continue to see growing EBITDA as they target to make $500M in EBITDA a year faster than originally targeted.  When looking into the technicals, I see signs of a pullback coming in the multi-year view.  A number of indicators are overbought, the MACD appears to be rolling over some, as is the RSI.  OBV is maintaining strength, though, so I'm not expecting major shifts.  There are similar indications in the weekly and daily charts.  I'd say that my downside risk is still in the $57 - $60 range ($60 is the 200 DMA whereas $57 provides 6% yield).  I estimate 2017 earnings of $3.57 and with a multiple of 18, the 2017 price target is $64.25.  I'll have to wait until earnings are released before I can make any adjustment to these targets.  Just another reason why I feel the upside is limited for now.  Cedar Fair is 16.57% of my portfolio.

Home Depot (HD, $135.60, +118.27%) - 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.  Since then, we've been in more of a chop with the price oscillating in the $131 - $137 range.  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.  I have a feeling the fourth quarter earnings call and 2017 guidance will be key, but they're quite a while away yet.  In the mean time, I'm trying to get something out of the charts and it's not very easy.  Overall, trends are starting to look more positive as we see price patterns now filling out an inverse head and shoulders, the 50 DMA crossed above the 200 DMA, and the MACD has become increasingly bullish in longer term views, while the daily view is about to have a bullish crossover.  All that said, there are also some bearish indicators like a long-term down trend in momentum  and OBV.  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.  I think this is a great company and operator, but at this specific point in time, the stock feels to be in no man's land and we may need to start considering what it means if growth happens at a slower rate with interest rates rising.  HD is 12.78% of my portfolio.

Honeywell (HON, $117.82, +178.33%) - I continue to believe that this company is best of breed in the industrial conglomerate sector.  It does a great job of spreading itself across short, medium, and long-term cycles, has a significant play into the aerospace cycle (commercial airplanes being a primary focus), and they have a management team with a track record of excellent execution..  Oddly enough, the aerospace division has been an area of concern lately with private jets, helicopters, and defense spending lagging expectations.  Recently there have been layoffs in the division to help account for the under performance and keep margins in check and the promotional costs are now on a down trend in 2017.  Previous spend was anticipated to help build a customer and repair base that will result in better earnings down the line.  I feel another factor has been the announcement of CEO Dave Cote stepping down in March.  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.  Taking a look at the charts, we see that the stock has taken quite the charge since the "disappointment" in October.  The stock continues to move up gently and pretty much all indicators from multi-year to daily support this move.  I have noted in all of these charts that some of the indicators are starting to stretch into overbought territory, so we are reaching a point where we may start seeing some chop or a pullback.  Oddly enough, the long-term charts look a little more like the stock is ready to break out while the daily charts are indicating a small pullback may be eminent.  Maybe the stock pulls back to $115 before charging to $120?  Pure speculation on my part, though.  I anticipate 2017 earnings of $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 16.66% of my portfolio.

Ionis Pharmaceuticals (IONS, $46.97, -9.76%) -  I chose this as my speculative stock to try to make significant gains in my portfolio.  Unfortunately, the biotechs have fallen 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 received approval of its Spinraza drug just before Christmas and Volanasorsen phase 3 data will be released during this quarter.  In addition, they've just inked some partnership deals with Novartis and announced that their results for 2016 will significantly out perform their guidance.  Like Citigroup, the stock has moved a large amount in a short period of time and has since been slowly pulling back as investors both take profits and get a little more cautious, given the occasional banter we hear from the new administration.  Technical analysis shows relative strength for the stock in the multi-year and weekly charts.  That said, there were also indicators that were overbought on those charts that are just starting to come under those overbought readings.  The daily chart is a bit more negative.  RSI has been on a downward trend since mid-November, and the MACD has been bearish since about Christmas time.  Despite those things, there are a couple other indicators that are hovering just above over sold readings and the stocks positive momentum and OBV are relatively strong/flat.  At this point, it seems like the floor might be in the $45 - $47 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 11.07% of my portfolio.

On Semiconductor (ON, $13.40, +58.14%) - 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.  It completed the acquisition of Fairchild Semiconductor during the third quarter, which is meant to help expand their reach, capabilities and market share.  With the increased synergies, they should be able to increase their value.  The tech sector should be a market leader if the economy really is going to start expanding, as everyone says and the fact that there has been a fair amount of consolidation in the semiconductor sector should help with positive pushes.  We've recently heard very positive results from semiconductor equipment makers, which gives some potential for strong beats on the fourth quarter.  The high amount of debt the company has puts their balance sheet in some jeopardy, so this isn't exactly a best in breed stock.  The stock did have a nice breakout and is sitting above its former ceiling of resistance, giving it more room to run.  In full disclosure, the charts are looking quite bullish, but there is a small amount of caution added to it.  Daily charts show OBV and RSI trending positively, but the MACD is a bit choppy on a bullish trend line.  Momentum, RSI, and the Money Flow Index (MFI) have longer-term down trends which haven't been broken and I find bringing me some caution.  However, the weekly charts show a slightly different story.  The OBV and RSI both are trending upwards and the MACD is still bullish, though weakly so.  Momentum here has only been trending down since a little before mid-December.  Additionally the multi-year view shows similar strength in the indicators like the weekly charts.  There are a few indicators in overbought territory, so we may see the stock start to pause from its ascent, but these indicators can stay overbought for awhile too.  At this time, the stock is at my 2017 price estimate, though my estimate may actually be too cautious, given the overall environment.  I will maintain my ranking of a 3 for now because I don't have enough information to adjust my price targets except for what the analysts think.  My 2017 earnings estimate is $1.05.  I feel a fair multiple for the stock is a 13, putting the price target around $13.50 for 2017.  I see that consensus for 2017 it at $1.15, so there might be something about the Fairchild deal I'm missing.  If that's the case, that can move the upside target to $15.  I also want to be cautious of the cyclical patterns that typically happen in this stock as we typically see the stock drop come spring time.  ON is 9.47% 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.