Weekly Portfolio Summary

Once again, I've been failing to keep up on my portfolio.  We're now entering into the end of the year and this will likely be the last summary I put out as we head into the Holiday season and I prepare my end of year documents that I've been doing.  Despite my inability to keep up with documenting things along the way, I have been staying on my stock research for the most part.  I did miss listening to an earnings call or two, but those that I missed were great quarters and need less attention, for the most part.  I do recognize I need to change these behaviors if I'm to keep doing this, though, as the homework and documentation is important to having a successful portfolio.

I would like to take a little time to note some key events that has happened since last I reported out.  First has been jobs reports.  We've had multiple positive jobs results or better than expected results despite things like the hurricanes and California fires impacting them.  Despite the jobs increases, we haven't seen a lot of wage inflation, meaning that we're still reducing the level of non-participants too.  It does seem to be reaching a level of maximum employment, though, and that is something to be aware of.  However, more jobs and increased consumer confidence (which has been happening) has also resulted in a surge from retail stocks.  People are out shopping again, and that's a good sign for the strength of the economy.  Second thing is that it's not just our economy that is seeing growth, you're seeing it world wide.  This is important because it's likely to be a strong factor into the ongoing story into 2018.  Everyone is worried about US stock valuations and fearing a crash, but it's mostly focused specifically on the US.  If you factor global growth, like we're starting to see, companies have an ability to grow much better than we realize and estimates may actually be too low.  Third is interest rates, which are little bit of a quandary.  The Fed continues to raise rates - as they just raised another quarter point this week and project three more next year.  Despite that, we're not seeing 10 or 30 year interest rates increase much so far.  Rising rates are great for banks, but there are concerns around an ability to lend.  Fourth is deregulation.  Good or bad, there has been a lot of it going on.  It feels very safe to say that the Government is going to do a lot less to step in the way of many business actions.  When looking at this through the prism of stocks, that's a good thing.  Companies can do more of whatever they want to make money.  The question is how will the customers respond?  Finally we can't pass by the tax bill, which looks like it will be approved next week.  Similarly as I've stated about deregulation, this tax bill can do great things for American businesses and stock holders.  We'll see a surge in buybacks and dividends from companies with massive amounts of cash overseas.  You may also see increased capital spend as a result of this.  That said, this will also only increase the divide between the highest and lowest earners and it concerns me what could come from that divide both socially, but eventually financially as well.  

Finally, I'd be remiss if I didn't mention that digital currency stuff.  Cryptocurrency has become a rage.  A rage I'll admit I didn't participate in, though the thought did cross my mind at one time.  I didn't feel like gambling, though, and that's essentially what this has been - a gamble that could've paid off excessively well, mind you.  Yep, I missed the train.  No way I could've predicted this would've happened.  But what this is, isn't safe either.  The move has gone almost literally straight up.  The good news is there's now a futures market to help find real price realization.  The bad news is I still don't see a lot of selling.  This is a bubble, no matter what all the fans want to say.  Can it go higher?  Yep.  But when the pop happens, if you think the price can go up a lot in a single day, just wait to see how much more violently it can go down.  To me, I still find it hard to find cryptocurrency to have value.  You don't see its use enough and with volatility like this, who would want to buy/sell things with this currency?  I don't think that people realize the fact that there are tons of different kinds of currency out there too.  The focus has been in one area in particular (or you could say the top 3), but there's more supply in different versions than people account for.  What is real here, though, is the technology.  And whenever you talk to someone about crypto, the technology is what they rave about.  However, technology is a commodity, folks.  C++ or an ability to create a report, or sell a good, or whatever the technology is for, is easily repeatable and is meant to be used all over the place over and over again in nuanced ways.  There isn't value in the technology.  There's value in the results of that technology.  Can a currency that rises from the ashes of blockchain technology have a value?  It sure can.  But so can all the other currencies that come from it.  This space is dangerous.  Only play with anything you're willing to lose, just like if you went to a casino.
  

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, $173.97, +13.75%) - 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.  They are also likely to benefit greatly from the new tax bill, as would shareholders.  We're already seeing the company invest in other small tech firms which could also result in new growth opportunities.  I'm only half filled on my desired position size, and have been hoping for a steeper market pullback, but haven't gotten it.  At this point, the stock holds strong at the $168 - $170 range.  The technicals show a stock that's taking things easy for now.  There are no indicators that show the stock might be about ready to roll over, but the longer term views of the stock also don't show that the stock is about to take off.  On the daily charts, however, you do see some indication that momentum is starting to pick up a little, the MACD is looking to do a bullish crossover and we see the first higher high in the chart since early November.  If the stock does continue this short-term reversal higher, I'm not sure it'll have enough power to reach new highs until after the first of the year.  While I'm certainly interested in filling out my position, it's clear that patience is needed.  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.  based on new information I've acquired over time here, I am increasing my 2018 earnings to $11.50 and, subsequently, the price target to $195.  For now, I think it's more appropriate to wait until $168 or lower to try and get the rest of my position.  AAPL is 5.7% of my portfolio.

iShares MCI Eurozone ETF (EZU, $43.23, +4.61%) - Things like tax reform and rising rates have kept the US dollar stronger for the time being, keeping a lid on this Euro Zone ETF.  Since I'm not fully positioned, I'm OK with this.  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. Chart trends are somewhat negative in all views.  Trend lines are gradually going down the price has dipped below the 20 DMA support line, and the MACD is bearish.  However, there are some minor signs of a potential bottoming out process to begin, too.  Key prices to watch are the $43, $42.75, and $42.50 areas.  If we break through all of those, we could get as low as approximately $40.50, which would be great for filling my position, but not terribly likely.  This is something I'll watch closely as I'd like to get my last position set as I go into or very early into 2018, but I don't want that to make me rush into mistaken moves.  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% of my portfolio.

Twos:

Citigroup (C, $74.77, +83.91%) - The long awaited turn around continues to progress.  Third quarter results showed revenue growth in all key areas except Fixed Income Trading, which was up against a strong Brexit volatility induced compare from a year ago.  Share repurchases are going strong and are helping provide a floor of support when the stock gets hit.  Fed rate hikes and strengthening economies also continue to be a factor - with worldwide growth providing Citi with an extra shot in the arm that other institutional banks don't have as much of.  The stock continues to be under valued compared to its peers while the company provides plans for plenty of dividend increases and share buybacks in its future. As we get into the new year and start seeing the banks report, we may run into a pull back as people will be complaining about losses being taken or other short-term concerns that are actually positives as you watch the banks begin to lend more. The charts aren't showing any kinds of significant signs at this point.  Everything seems choppy, and not giving any strong direction up or down.  I have a feeling this may continue to be the case through the holidays as it just chops around its current prices and that can only help set the stock up for a move, which will likely be higher.  I have estimated a 2018 TBV of $74.  My price target is now $81.50 and I'm maintain my 2 rating due to valuation, though I believe the stock is worthy of purchase below $70 for those who need to pick shares up.  Citigroup is 12.1% of my portfolio after having trimmed a small position (see trade notice here).

Cedar Fair (FUN, $68.20, +20.18%) - 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.  Weather such as rain and hurricanes prevented the company from hitting their 500M EBITDA a year earlier than expected, however, they continue to successfully manage to grow the business as we continue to see increased spend per customer and an increase of visitors each quarter.  This year, the holiday events should help provide additional income not typically seen in the fourth quarter.  As for next year, they'll be showcasing around 4 new rides in their parks which are expected to only increase the desire to visit.  With a strong consumer, healthy economy, and a continued desire to focus on experiences, I believe the stock continues to have solid growth despite interest rate headwinds, which are likely to be faced at some point.  The technical view of the stock is relatively positive.  The stock has clearly turned around from the doldrums it was in six weeks ago.  The RSI and OBV are flat to positive, the MACD has had bullish crossovers or is about to have one in all views (short, medium, and long terms).  The stock also closed over the 200 day moving average, which should help put a floor in place again, should the stock need to pause for a little bit.  At this point, I think the stock can reach $70 before it actually needs to take any kind of break from its run up.  I am going to adjust my multiple to 21 to be more considerate to a more positive environment, but reiterate my 2018 earnings target of $3.48.  This leaves my 2018 price target at $73 and would put the dividend at 4.75% at current distribution rates.  At this point, I think the stock will find it harder to maintain support unless they show advanced growth.  Cedar Fair is 13.3% of my portfolio.

Home Depot (HD, $182.58, +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 you start getting a lot more business than was previously anticipated.  Management recently held their 2018 forecast and reaffirmed solid results for 2017, which include earnings growth of around 14% and same store sales growth around 6.3%.  They have increased their investment to keep themselves at the forefront of the home improvement retail space and opened up an authorization for buying back $15B of shares over the next 2 years, or about 6% of outstanding shares, assuming an average buy price of $190.  The company also sets their dividend at 50% of prior year EPS (55% this year), so expect a significant increase there as we get into next year.  All in all, you simply need to follow this management team.  They set such clear expectations and are very transparent in what they deliver.  The technicals are screaming that the stock is too hot.  That's not to say that I expect a big selloff.  In fact I don't expect that at all.  While the indicators are saying we're at or near overbought territories every way you look at it, it's also shown signs that it has support - particularly in the OBV.  So we're most likely to see this stock just chop around the $180 mark.  The stock is simply too far above the 50 and 200 DMAs and needs a little time for things to catch up some.  I'm going to guess it stays like this over the next 2 weeks while we go through the low volume of the holidays.  I've raised my 2018 earnings estimate to $8.24, a 12% increase from 2017 estimated targets or $7.36.  This leaves a price target of $162 (room up to 178 with the higher multiple).  I'm giving the retail giant a multiple of 23 for the solid management and earnings growth which has consistently been in the 12 % - 15% the last few years (including buyback impacts).  This puts my 2018 price target at $189.50.  HD is 11.9% of my portfolio.

Honeywell (HON, $154.25, +264.39%) - 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.  If we're seeing true global economic expansion, chances are industrials like this one are only going to grow faster, which needs to be kept in consideration as we see the multiples starting to feel kind of stretched.  This is another company that recently had a call to showcase their goals for FY 18 and it seems to me that the company yet again under promised what they'll deliver.  Their target EPS for the year is $7.55 - $7.80, after it divests its Turbo and and Home technologies.  But also not factored into the targets is the impact of tax reform, which I think has the potential to boost EPS by another thirty cents next year.  When I look at the charts, you do see a stock that's a bit hot.  It's near its 52 week highs, the RSI is at overbought levels (as are other indicators), and momentum has pulled back slightly.  But the thing is, medium and long term MACDs are bullish, the OBV is bullish in all time views, and while you see some things getting hot or correcting, they're not making massive movements.  More like gradual pullbacks and pauses instead.  The daily MACD and RSI are in negative patterns, but they're gradual and show no indications that sentiment on the stock is turning.  This is yet another stock that probably meanders for the next few weeks and then takes its cue from the overall market as we start the new year.  I am increasing my 2018 earnings expectations to $7.90, including the entities to be spun off by the end of next year and conservatively factoring in tax benefits.  I reiterate my multiple of 21, placing my 2018 price target to $166, though I think a multiple of 22 is also fair (meaning a price target of $174 is also reasonable).  HON is 15.0% of my portfolio.

Ionis Pharmaceuticals (IONS, $52.43, +3.69%) -  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 stalled and churned for the most part.  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, but it's that waiting that seems to be the state for both the the company and the stock.  There is a lot of pressure on the stock technically, as we see the RSI and OBV on bearish trends while the MACD is also bearish.  This stock has been taking a lot of lumps for the last few months and it has been trending toward becoming oversold in some cases, though were're still pretty far off of that too.  The good news is that the 200 DMA has been a very strong floor for the stock for the last thirteen months or so.  I do have just a little concern over the fact that the 200 DMA is starting to flatten, though.  We need some positive results early in 2018 on upcoming phase 3 results to help drive the stock higher, or it may be dead for awhile.  If we do get positive news, expect the stock to jump very significantly as there are a lot of short positions in the stock right now (over 9% as of 11/30).  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 11.9% of my portfolio.

On Semiconductor (ON, $19.90, +120.97%) - 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 got a little too hot when it got over $22 and it subsequently pulled back to its support level around $19.  Since then, the stock has slowly worked at restarting its ascent from that level.  Most of the charts show that the stock is turning around, however, the MACD continues to be bearish, albeit only slightly.  The daily MACD, in particular is showing signs that it could go bullish this week if there's enough strength.  What happens at that crossover point will be one thing to watch, the second will be when the stock nears the 50 DMA, which is currently about $20.50.  If we can break through that, there's more gains in front of us, but if not, we could be seeing the stock forming a double top in that $20 area and that will be worth watching out for as it coincides with a period of time (first 3 months of the year, usually) where the stock has had a habit of making major corrections.  Keeping an eye/ear out for increased supply/stock/etc. will be important to these levels as well.   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 that at times like this it is normal to see multiple expansion (17-20 can be within reason).  Currently, we're priced at 15.3 times those earnings.  I maintain my 2 rating, for now as I continue to watch the overall sector and the technicals.  If we do break through the 50 DMA, we may be OK until fourth quarter earnings, which will likely be around February 14.  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 5.1% of my portfolio.

Pepsico (PEP, $119.22, +64.90%) - 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.  Instead it got a mixed quarter and after some time thinking about things, the stock has started to climb again.  A lot of this rise has come since Pepsico announced that they're moving from the NYSE to the Nasdaq exchange.  I'm not sure I see any reason how or why that move would change the price of the stock in all honesty.  I still have great faith in the management of the company as they seem to know exactly what went wrong in the previous 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 got another rate hike in December and anticipate three more next year.  While the charts are strong, the move from $110 to almost $120 has been quite rapid, so don't be surprised to see things stall out or pull back soon.  A pullback to about $115 would almost be desired about right now.  That said, we are also potentially set up for a golden cross (50 DMA crossing over the 200 DMA) here soon as well, so that will likely be a key point to watch.  If it crosses, we have a strong base of support.  If it stalls out, we're looking at a strong ceiling and need to watch for risk.  I estimate 2018 earnings of $5.75.  Given the strength of this name in the sector as well as the global economic situation, I am increasing my multiple to 21, which puts my 2018 price target now at $120.  PEP is 7.7% 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.