Weekly Portfolio Summary

As we enter the final quarter of the calendar year, we prepare for third quarter earnings reports season.  Pepsico announced their results earlier this week and you can see my thoughts on that here.  The portfolio continues to perform well, but you'll notice a few things have changed since last time as well  First, I sold the remaining investment I've put into ON semiconductor.  As such, I've inserted a new icon into my blog to identify stocks where I'm playing with the house's money, which you'll see noted just before we talk about my rankings.  You'll continue to see me do some research an post on the stock, but my homework will not necessarily be as deep as it has been in the past.  .

Since I was no longer invested in a tech stock, I wanted to find the right opportunity to get reinvested there and happened to come across the stock of Apple at just the right time, seeing it drop significantly from new highs after people started worrying about iPhone 8 and iPhone X sales (the latter which won't start for a couple months).  

This past week we got the latest job numbers in which the US posted a loss of 33,000 jobs, mostly due to the impacts of hurricanes Harvey and Irma.  At the same time, salaries increased by 0.5%, which is a strong indication that we're seeing wage competition creep in and the labor force is reaching its peak capacities.  All signs that the economy is humming and it has put a charge in the stock market and the financials, while we've seen bonds sell off (yields get higher) and the value of the dollar increase.  While the dollar has its impacts, this is generally great for the market overall.  The market, itself, has gotten a bit hot and complacent, in my opinion.  It doesn't really sell down at times it should and we've seen a little too much winning.  That's not to say we can't see more nor does it say I think the long term view is negative - quite the opposite, actually.  But it's always healthy to take a pause and see a minor correction.  As such, I'm feeling much more cautious and am more likely to be looking for the right opportunities to raise cash (above what I still have sitting outside of this account that I have planned on bringing in).

This next week, earnings continue to take off.  For my portfolio, in particular, Citigroup will report their results Wednesday morning.  Analysts now expect earnings of $1.31 off of revenues of $17.8B.  I want to note that this has increased compared to just a few weeks ago where estimates were $1.29 and revenues of $17.78B.  People are starting to expect more and this stock has had a serious run into the quarter.  If results and commentary aren't perfect, we could be taking a hit for a few points for sure (maybe down to $68?).  This ties right into my sense of caution.

So the guide for the next week is to focus on caution.  Taking profits isn't bad, but when I'm not dealing with large sums of money/value, it can sometimes be justified.  Additionally, this isn't what you'd exactly call a trader's market.  Swings don't seem to be violent nor do they last very long to get in and out at the right times.  If you believe the long-term value is still there, it might be best to take the hit.  If you feel you can get in and out safely and/or are ok if you don't get back in at a lower price, it might be wise to find the right spot to take profits with winners.  Have a great week!  I'll post my analysis on Citi as soon as I can.
  

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.

Playing with the
House's Money

Ones:
Apple (AAPL, $155.30, +1.54%) - Having removed my invested money from the tech sector (See more with ON below), I wanted to invest in another tech stock with a high growth factor.  While I'm not an enthused user of their products, I decided I had the right opportunity to invest in the company that everyone else blindly follows and profit from it.  While it would've been wonderful to do that years ago, that is neither here nor there.  At this point, the stock is a leading customer goods company, more so than a tech name, as it has the cash, dividend, and stable cash flow to protect it from its technical brethren.  That said, the stock can still wildly swing like a tech stock too.  And that wild swinging is what gave me the opportunity to get in after reporting strong numbers, but getting a lot of flack for the release of its next lines of products, as is usually the case.  I anticipate future earnings results will be strong as they have been, given the recurring revenue streams and the addicted user base they have.  I'm only half filled on my desired position size, so I'd be happy to see a market wide sell off take the stock down a bit more.  The technicals show a bit of a mixed bag as well.  Weekly and long-term trends show a stock that looks a little toppy right now and that it could pull back a bit more - significantly so in the long-term charts.  The daily charts show some signs of flattening off from the recent pullbacks and trying to turn around.  At this time, the 50 DMA is a ceiling of resistance around the $158 mark and that trend line is flattening to rolling over as well.  Don't be surprised to see the stock pull back to the low $140s, as that's certainly possible at this point.  For now, I give the stock a multiple of 17.  This is likely lower than it should be for a consumer goods stock, but its tech nature will hold it down too.  I anticipate 2018 earnings of $9.90 and have my price target set at $168.  AAPL is 5.6% of my portfolio.

iShares MCI Eurozone ETF (EZU, $43.18, +4.49%) - This week, ECB meeting notes about how to unwind QE and a strong jobs report pushed the US Dollar higher and put just a little pressure on the European index.  I still see the stock as a great way to play the European economic recovery.  This fund is also has little to no UK exposure, which protects us from Brexit impacts while also being unhedged for currency changes, as there is an expectation that the Euro has been too weak in comparison to the dollar.  I need to admittedly call out that I have made this pick through the guidance of others and will react relatively accordingly to that guidance.  I have my position roughly two-thirds filled now and would like to get more if the price comes below my cost basis - which just hasn't been happening.  Chart trends are showing some signs of exhaustion, meaning we might see a  pullback.  For now, things have been relatively flat, but key indicators are in or near overbought territories.  I anticipate a short-term pullback that may allow me to fill my position over coming weeks.  Since this is an index fund, I won't place an earnings or price target.  Only note that my goal is to capitalize from growth outside the US, while trends seem to tell me that large gains may be harder to come by in upcoming years for the S&P 500.  The EZU is 7.8% of my portfolio.

Cedar Fair (FUN, $62.92, +11.34%) - As a growth-yield play, I'm focused on the experiential theme that theme parks like this bring.  People want pictures of them doing things, not just owning things.  They are ready to part with money in exchange for memories, and a theme park is a great play on that.  This week weather provided pressure on the stock as a second hurricane bears down toward the US.  With Irma, the path is most likely to come up the length of Florida and then up the east coast, likely impacting at least 2 parks with more bad weather.  The bad weather theme has had its impacts, as revenues and attendance through Labor Day was announced yesterday, with revenues down less than 1% from a  year ago.  CEO Matt Ouimet said they were pleased with results, however 2017 EBITDA is now expected in the $480M - $490M range.  Goals of reaching $500M or more in EBITDA has been moved back to the original 2018 timeline.  The stock sold off on Thursday due to that announcement and the stock price is back around where it was after its quarterly announcement, which is about in line with my expectations.  This stock will sit in travel and leisure indexes and ETFs, though, so be prepared for more potential selloffs depending on the damage left behind from Hurricane Irma.  The stock has shifted from seeking direction to now trying to find a bottom as it's hit a new lower low in the short term trends.  I feel the stock is starting to become oversold and there are indicators saying the same.  My guess is that the stock will start to bottom around the $60 - $62 range.  And as it bottoms, I don't expect a quick shot up for recovery as we're now closing out the busy season and there isn't a lot of new news coming to get excited for.  I reiterate earnings estimates at $3.07 for 2017 and $3.48 for 2018.  This sets my 2018 price target at $68.40 with a multiple of 19.5. I've also upgraded the stock to a one, as the stock's price starts to get into the area where I expect that we'll see the stock bottom out at.  Cedar Fair is 13.3% of my portfolio.

Twos:

Citigroup (C, $75.64, +81.08%) - The long awaited turn around continues to progress.  With increased views of a December rate hike combined with stronger worldwide economies, based on Q2 earnings reports, banks are getting all kinds of love.  Citigroup is finally priced above its forecasted TBV and we need to start thinking about revising guidelines and targets.  However, with the third quarter earnings results to happen next Thursday, I'll wait to see those before I make changes.  Looking at the charts, it's easy to see that the stock has been breaking out as of late.  All indicators are positive and we see strong surges in the MACD.  However, the RSI is reaching riskier levels as it approaches an overbought level.  It's possible the stock can sit in this for a little while, but without a pause or pullback, the stock can likely only go so high.  While banks are still pretty darn cheap, Citi in particular, the overall market has been getting bullish enough to bring me caution.  It's a tough call on locking in some profits and getting back in at better prices vs. understanding the long-term trend I see and sitting back and letting it play out.  Have no doubts, I still see this stock going much higher at this point.  With interest rates likely to rise and economic performance getting stronger, this is a bank's time to shine.  This makes playing trader in the stock harder to do as it becomes less likely you'll be able to get in at the prices you want, should you take some profits.  I'm targeting a 2018 TBV of $74.  We might be at a point where the stock is starting to get priced at a premium to TBV.  While its peers are already priced well above TBV, Citi has a long way to go and is a major reason why I believe this is the best bank to hold.  My price target is still at $74, but I am expecting to be revising those targets after their earnings call this week.  Citigroup is 16.5% of my portfolio.

Home Depot (HD, $165.85, +166.96%) - Looking at experience from a different lens, I continue to believe people are looking to build/fix/improve their households as they spend more time congregating there.  Add onto that 2 major hurricanes that have made landfall on the continental US this year and another category one hurricane on the way, and you start getting a lot more business than was previously anticipated.  The stock continues to reach new 52-week highs as it has broken past its technical barriers.  While the news currently is positive, don't be lulled into sleep on the Amazon side of things.  While I believe that Home Depot is already well positioned to take on any push Amazon might have into the home improvement space, I don't believe the analysts feel the same way.  This week the stock of Costco got slammed because of all the worried questions analysts asked, just like they did to both Costco and Home Depot last quarter.  I am anticipating something potentially similar as we get prepared for the third quarter earnings results in early November.  Overall market indicators show plenty of strength.  The RSI, in particular is a little bit of a worry as it starts approaching overbought territory on all timeline views.  The daily RSI turned over a little on Friday, but with another hurricane on the way, I anticipate it can go higher again.  If the stock continues to run higher into the quarter like this, we'll need more than perfect results from a company that has had numerous stores shut down due to these storms.  The stock will likely sell off. I maintain a multiple of 20, while keeping in mind 22 is still possible in the short term.  My 2018 earnings estimates are at $8.10, though this could increase when you start taking all of the damage from the 2 hurricanes into consideration.  This leaves a price target of $162 (room up to 178 with the higher multiple).  Given the current stock price, I've become significantly more cautious and considering taking some profits.  I'm thinking $170 might be possible prior to that.  HD is 12.0% of my portfolio.

Honeywell (HON, $143.62, +239.28%) - 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.  With the market's outperformance as of late, HON has been reaching new 52-week highs, the most recent being Thursday.  If we're seeing true global economic expansion, chances are industrials like this one are only going to grow faster.  The technicals are strong, maybe a little too strong as the price is starting to stretch a bit far off of the 50 DMA.  As an ongoing theme, I'm also concerned with how high the RSI is.  We've seen the stock pull back near these levels before and with the stock running pretty well into their quarterly report coming up in a couple weeks, I'm concerned the quarter won't be perfect and people will take profits.  Like Citigroup, I see the longer term trend staying intact for Honeywell, the question is how hard the correction will be and when.  I have a 2018 earnings target of $7.80.  This leaves my 2018 price target at $140 with my 18 multiple.  I will leave these numbers as they are until we hear the next report.  If we don't see an acceleration in revenue, this stock might be a bit too rich at these levels.  HON is 15.6% of my portfolio.

Ionis Pharmaceuticals (IONS, $55.55, +9.86%) -  I chose this as my speculative stock to try to make significant gains in my portfolio.  After getting beat up on positive news from a competing drug for Nusinersen, the stock has started to recover again.  Positive news on positive outcomes from earlier treatment of SPINRAZA, from Biogen, also added some pop to the stock this week.  Their subsidiary, Akcea, has submitted Volanesorsen to the FDA for approval, but a date hasn't been set yet to my knowledge.  The pipeline provides a number of shots on goal as we await new phase 1 and 2 results to be getting shared in upcoming weeks.  The stock is performing decently on a long term and short term trend.  The stock has been staying above its 200 day moving average despite the volatility and seems poised to head towards the $60 area by the end of the year.  The technical that bothers me most right now is the OBV, throughout the course of this year, that has slowly been trending downwards while the price has gone up.  That's not usually a good pairing and presents risk.  The RSI has been more flat with a more recent up trend over the last couple months..  I'm estimating 2018 earnings of around $0.10.  My price target for 2018 is at $68, given no drug approvals or denials at this time.  I feel like this stock is a buy if it drops back into the mid-forties, but I expect the ascent from here to be slow.  Ionis is 14.1% of my portfolio.

On Semiconductor (ON, $19.23, +113.53%) - On Semi continues its leadership in power saving and automation for various technical devices.  The acquisition of Fairchild Semiconductor, which completed late in 2016, was meant to help expand their reach, capabilities and market share.  With the increased synergies that are now coming to fruition, they should be able to increase their value and it just so happens to coincide with a time when semiconductors and memory modules are hot, with continued reports of strong demand, and continued sales in end products.  The push for automation in vehicles and industrial uses has a runway to keep things moving forward and these spaces align with On's corporate strategy.  The stock continues to be hot, reaching new 52-week highs and the semiconductor sector is getting to be a little bit of a worry of getting too hot.  The charts look flat-out explosive, as the price has surged over the last few weeks.  Again, the RSI looks to be pushing its limits despite the MACD only getting stronger in the weekly and long-term views.  The daily charts show the RSI and the momentum starting to roll over - at least temporarily.  If this continues, the stock probably goes down to around $17 again.  It's hard not to get cautious in the stock, but at the same time there's a lot of strength in the business.  I see some potential that we're near a top, but this stock typically will do a double top if that  is the case.  Additionally, I see potential for this stock to get itself to around $23 before it might be way too hot and have a serious correction.  The key will be when the industry starts increasing supply.  I maintain 2018 earnings of $1.30 and I still believe the right multiple for the stock is 13 times earnings due to the volatile nature of the stock.  As such, that gives us a  price target of $17, but recognize we can see some multiple expansion before we're at significant risk.  Currently, we're priced almost at 15 times those earnings.  I maintain my 2 rating, for now, as I'm awaiting third quarter earnings reports.  But its important to note I'm much more cautious on this name and don't want to give up the nice gains I've achieved.  While I may be playing with the house's money, I could easily give much of it up and not see it recover for many years, when dealing with a tech name like this.  ON is 5.5% of my portfolio.

Pepsico (PEP, $115.04, +59.12%) - Picked to help diversify my portfolio, but sized smaller due to the fact that the CPG sector - food in particular - isn't performing as well as the market.  The stock pulled back in anticipation of a disappointing quarter.  It got a mixed quarter instead, pulled back hard before rallying intraday on Wednesday.  It's been relatively flat since.  I still have great faith in the management of the company as they seem to know exactly what went wrong in the quarter and what levers to pull to correct it.  The company will no longer reach its desired 3% organic growth rate, though.  Despite all of this, the company is still expanding margins and growing EPS better than expected, which speaks volumes to their discipline with cost control.  Besides simple execution, the company also faces market headwinds, as the economic expansions has people clamoring for better growth returns.  This is what has forced me to temper the multiple people are willing to pay, as we expect another rate hike in December.  The charts for the stock aren't in the greatest of condition either.  Long term and weekly views has the stock firmly in a down trend.  The stock has broken below the 200 DMA, and all other major indicators are pointing down.  In the daily charts, we see some potential signs of bottoming, as the MACD appears to be trying to turn towards a positive crossover and the RSI is reaching oversold territories.  I don't know if this will be enough for a long-term turn around, though, and see that the stock could still fall down near the $104 area before getting stronger support.  This would put the stock a little over a 3% yield again, which would be helpful.  I think it's also important to note that historically the stock is worth buying when it dives below the 200 DMA.  The question is only at what point.  I think the same $104 mark could be a good starting point.  I estimate 2018 earnings of $5.75.  My previously stated 20 multiple gives a $115 price target.  PEP is 8.0% 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.