Monday, January 30, 2017

Earnings 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.

Back on Friday, Honeywell announced their fourth quarter and fiscal year results for 2016.  It was also the last conference call led by outgoing  CEO Dave Cote.  Cote, who has been at the helm for over 15 years, left on what I feel was relatively on a muted note in terms of results, but left under the usual jovial attitude with analysts.  Focusing on the company, fourth quarter earnings came in at $1.74 and sales were $10B.  This was generally in-line with expectations, though sales were slightly under expectations of $10.15B.  That said, the company was able to beat on organic growth, keeping it at down 1% instead of the anticipated down 2%.  Guidance stayed in line with the story provided back during the December outlook discussion.  Earnings are expected to be in the range of $6.85 - $7.10 which is a 6% to 10% increase from 2016 earnings of $6.60.  They also expect there to be organic sales growth of 1% to 3%, though from what they showcased, much of the growth is expected in the second half of the year.  All in all, though, the path appears to be set and things seem to be well on their way down the desired path.  

The transition to new CEO Darius Adamczyk appears to be well organized.  He'll be presenting with Dave in the next shareholder meeting in March and he spoke to a number of points in today's conference call.  This does help set me at some ease, as the changeover to a new CEO is typically a time to cut an run from a stock until you get a feel for the new CEO and what their plan is.  I find this transition going similarly to the transition we saw at Home Depot, which despite this being the second transition in my portfolio, is truly rare.  In fact, I get the feeling the plan we see in motion now, has a lot of Darius' fingerprints on it.  If I'm correct, the concerns that might go with the transition may be a moot point.  Other risks that still exist are political risk as well as the fact that they're an international company and things like a strong dollar can impact results.  The company has hedged against dollar valuation risk, but it won't cover everything.  Currently, they also appear to be generally safe from the political risk factor, but the truth is that anyone could come under fire at any time - especially when similar companies like Boeing and United Technologies have already been in the line of fire.  

Wrapping things up here, nothing earth shattering really came out of this conference call.  I feel a little more confident in the transition, but there are still some risks to keep an eye out for.  I leave my earnings target at the high end of provided estimates of $7.10 and a price target of $128.  I also leave the stock ranked at a 2.  If political risk or other factors create a market wide selloff, I believe the stock will be an opportunity to buy in the $111 to $115 range.

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, January 29, 2017

Weekly Portfolio Summary

The first week into the new administration and it hasn't been short on activity overall.  As was always pandered, various measures have been pursued, such as calling for a 20% border tax, trying to erect a wall along Mexico, and putting a freeze on immigration for people from "certain regions."  The protectionist position has started to create a little alarm in the business world because that can impact a company's ability to make money and that's all that matters in the world of stocks.  Outside of that, not much has been impactful, though it it worthy to note that the President has been showing a penchant to stick to his campaign promises.  This should indicate even more work to come around deregulation, lower taxes, and an opportunity to repatriate money at a significant tax reduction.  If these moves do take shape, they could be positive for stocks.  That said, you also have to painfully keep an eye on every move that's made because you never know quite how this one man can impact stocks.

No companies from my portfolio report this next week, but there will be a jobs number to keep track of.  I'm anticipating a relatively decent number, but not something earth shattering.  
  
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, $103.48, +43.13%) - 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. The bearish tilt towards the stock seems to have subsided for now, as more uncertainty has seeped in and interest rates have at least paused the ascent they were on.  Let's face it, though, the technicals aren't pretty - even if 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.  The stock price has surpassed the 50 DMA, however, it's heading back down and now we'll be testing its strength as a floor.  I don't expect it'll hold.  Despite all of these horrible technical trends, I have the stock ranked a 1, but I think this is the wrong time to buy.  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 9.78% of my portfolio.


Ionis Pharmaceuticals (IONS, $42.41, -18.52%) -  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 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, but the MACD for both needs to be watched as it's about to have a bearish crossover.  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 with no signs of improvement yet.  The most interesting piece is despite the short-term down trends, the OBV stays stubbornly flat/strong.  This is usually a contrarian indicator that I believe is beginning to show reason to get into the stock.  We're now below where I thought the floor was, so while I'm getting much more interested in buying, I'm also looking for something to give me enough conviction that the timing is right.  Regardless, I'm upgrading this stock to a 1, with anticipation that I'll be buying somewhere between here and $40.  If I can get it below that, I'm all for it and I believe the charts will help me find timing I'm comfortable with.  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 10.02% of my portfolio.

Twos:
Citigroup (C, $57.11, +36.72%) - 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 that won't stop it from having pullbacks as it has been having over the last couple weeks.  The descent has subsided for now, but I'm not convinced it's done yet..  At this time we need to see regulations start to disappear and continue to see rate hikes for the banks to benefit.  And after their last report, there is some concern around their NIM estimates, though they appear exceptionally conservative - predicting no more rate hikes this year.  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.  Citi's charts continue to look mostly bearish.  Long-term charts have many down trends in the usual indicators I call out, with exception to the OBV, that still has an upwards trend and could be building for a pop.  The MACD appears to be about to have a bearish crossover in both the long and mid-term charts.  RSI and OBV still have positive trends in the weekly charts and everything is bearish in the daily charts.  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 16.20% of my portfolio.

Cedar Fair (FUN, $63.09, +13.04%) - 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 16.40% of my portfolio.

Home Depot (HD, $138.33, +122.66%) - 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, but now appear to be starting to break out on some positive news from home builders and the fact that a mostly local company, like Home Depot, is virtually safe from the protectionist and anti-trade commentary we've been hearing from the new President.  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, the charts are showing a change in sentiment.  We see some supporting strength in the multi-year charts while in the weekly charts the MACD is very bullish and RSI and OBV appear positive since the start of the month.  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 just had a bullish crossover.  The OBV is showing a shallow, but bullish trend extending a number of months back.  $139 is the breakout level that it appears we're about to go through.  Just so long as the stock doesn't run too hard into the quarterly announcment.  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, and you may want to consider picking up stock now or on any pull backs.  HD is 13.08% of my portfolio.

Honeywell (HON, $118.42, +179.75%) - 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.  Fourth quarter earnings were announced on Friday, but I haven't had a chance to review the call yet.  My thoughts will be out soon.  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.  Additionally, the stock is now testing its 52 week highs and its ability to break it and maintain it might be a major event for the stock.  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 have set the multiple to 18, resulting in a 2017 price target of $128.  HON is 16.79% of my portfolio.

Threes:
On Semiconductor (ON, $13.88, +63.81%) - 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 - semiconductors in particular - have been exploding with results from consolidation in the industry as well as some great reports from early reporting companies.  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, though.  This hasn't been an impact on the stock surging higher as we hit $14 earlier in the week which are all time new highs.  In full disclosure, my downgrade of the stock has been premature.  I am not in a camp that this price surge will continue yet, though, so I can't upgrade it again.  Instead, I'm riding this rush looking for the right time to sell.  That time may not be until after their mid-February earnings report, as the charts are extremely bullish.  Daily charts show OBV and RSI trending positively, but the MACD is a bit choppy on a bullish trend line.  Momentum, turned their trends around, which just adds fuel to the fire.  The weekly charts are just as positive.  The OBV and RSI both are trending upwards and the MACD is still bullish, though weakly so.  Momentum here has regained strength from its lower levels as it appears the breather has created more strength.  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 9.84% 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, January 22, 2017

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.
  
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, $103.24, +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.

Twos:
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.

Threes:
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.

Saturday, January 21, 2017

Earnings Analysis: Citigroup (C)

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.

Back on Wednesday, Citigroup reported their fourt quarter and fiscal year 2016 earnings results.  The company earned $1.14 per share on $17B in revenues which I find to be about in line with the $1.12 earnings and $17.3B revenues expectations from the analyst community.  Throughout the year, Citigroup returned $11B to the shareholder in the forms of dividends and buybacks.  In regards to buybacks, Citi bought back 181M shares resulting in a 6% reduction in share count on the year.  All of this resulted in a Tangible Book Value of $64.57, which was a 7% increase year over year, however it was a decline of 0.2% sequentially from the third quarter.  

Diving a little deeper into the results also gives me a mixed feeling.  Annual revenues were down 8% from last year, though much of that was due to continued sales from the Citi Holdings portfolio, which, while making profits for the last 10 quarters, isn't part of their core and has had a history of providing large losses.  They also lost $267M in FX translation which is higher than anticipated due to the excessively weakened Peso in Mexico and overall strength of the US Dollar.  Citigroup has, by far, the largest international exposure and therefore will be impacted the most by the strong dollar.  This impact is, actually, a little bit of a concern to me as it could cause the bank to be seen as an underperformer.  That said, we are also starting to see strength from other parts of the world as well.  If this continues, it is likely to bode well for Citi. Strength from their trading and credit cards were both strong and positive looking.  The card's North American growth of 15% was buoyed by  
Finally is the elephant.  Net Interest Margin both for the quarter and the year were down both sequentially and year over year despite the fact that the Fed raised rates a quarter percent over a year ago.  They also raised it another quarter point, but that was half way through December, so I'm not going to count that much.  Something about this just didn't make sense and I'm still puzzled.  This is supposed to be where the banks are suppose to start making their money, yet their NIM went down on what was reported as "lower trading NIM, higher funding costs, and the higher mix of promotional rate in cards."  They also guided to a flat 2.86% NIM for 2017, although it's extremely important to note that management was likely being excessively conservative on their estimations, as they did not factor in any further rate hikes, while analysts expect two or three.  This does set them up nicely for an under promise and over deliver scenario at best, and hopefully in line expectations if things really do get worse.  

All in all, I wish all the more right now that I followed my gut and sold my gains to buy them back later.  I foresee the stock getting down to around $54 before it starts seeing decent support again.  The banks ran too hot and expectations were too high in the short term.  I expect them to trade more in line with the 10 year Treasury again for awhile.  Further rate hikes from the Fed along with actions from the new administration regarding regulations and taxation are the catalysts everyone is looking for.  I also believe Citi will fare well in the next CCAR and be able to increase their return to investors, which could help the price increase.  Based on the results and the conservative guidance from management, I feel I should act accordingly for now.  I'm going to anticipate 5%-5.5% growth in the TBV for 2017, resulting in a TBV target of $68.  With the company still selling at a discount to TBV, I'll maintain a 1x multiple and set my 2017 price target at $68 as well.  

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, January 15, 2017

Weekly Portfolio Summary

Another week completed, as the overall averages don't move a lot and my portfolio does even less.  Earnings kicked off at the end of the week with major banks JP Morgan, Bank of America, and Wells Fargo reporting.  All reported decent headline results and provided relatively good guidance.  Wells being hurt more due to the cross-selling scandals it was involved in more than anything.  No major economic news came out, though there were some small business numbers that got pundits talking - and this isn't a reading that's ever usually talked about.  The President-Elect made a speech as did the outgoing President and there continues to be more talk around efforts of the repeal and replace of the Affordable Care Act.  As focus continues around healthcare, you see the related stocks continue to be under some pressure, but outside of that, things are relatively calm.

For the week ahead, Citigroup reports their fourth quarter and 2016 financial results.  Given the high performance we've seen from JP Morgan and Bank of America this last week, things are looking positive for where Citi can go long term, but as we saw on Friday, a beat and raise of expectations may not make the share price jump much because most of this good news is already priced in.  Earnings of $1.12 are expected off of revenues of $17.3B.

Last we have the inauguration of the new President on Friday.  While I don't consider the inauguration, itself, to be a big deal, there's potential either his speech or simply the fact that he can begin to act on his 100 day plan which could impact the markets late this week or as we kick off next week.  Let's face it, we're at a stage where anything out of Washington can move the markets again.  Not only is that the case, but this particular elect is so unpredictable, news from Washington is likely to cause even larger spikes of volatility.  It's the new normal, I believe, so we might as well get adjusted and be ready to trade a little more frequently to be appropriate to the times.
  
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, $101.55, +40.46%) - 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.  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 are disgusting.  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 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.  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 9.48% of my portfolio.

Twos:
Citigroup (C, $59.63, +42.75%) - 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.  Next week a new, "business friendly" administration takes the helm and recent competitor's earnings announcements signal continued strength in the sector.  In the long-term, I thing the stock still has room to run, given its current price is still lower than their book value (TBV).  Based on other announcements, I don't expect huge upside to the stock on a positive announcement because much of it is already priced in.  At this time we need to see regulations start to disappear and continue to see rate hikes for the banks to benefit.  I'm expecting more of a chop for a little while until a new base is built for another surge.  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.  When I look at the charts, the indicators in the daily charts show signs that the stock is starting to roll over.  Many of the multi-year indicators are well into overbought territory, so all of this action makes sense.  OBV in the muilti-year charts are flat, so there doesn't appear to be major change in long-term sentiment.  The weekly charts show similar signals while the daily charts are more negative, with a number of indicators starting to approach oversold territories.  I'm starting to believe that the 50 day moving average will be the floor in the $58 - $60 range.  Should I be wrong and the stock pulls back further, say through a post-inauguration correction, I see the stock worthy of buying more shares in the mid-50s.  I still am very confident in Citi's long-term trajectory, just not the short-term reactions.  I'm targeting a 2017 TBV of $67.50 and placing my 2017 price target at just above 1 times TBV to a value around $69.  Citigroup is 16.70% of my portfolio.

Cedar Fair (FUN, $63.35, +13.50%) - 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 16.26% of my portfolio.

Home Depot (HD, $135.04, +117.37%) - 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 a combination of not easy and not good.  I see both potential head and shoulders patterns as well as inversed head and shoulders, I see short down trends I see double or triple tops and all kinds of stuff.  Everything from multi-year views to daily and weekly charts have some daunting downward trends, but also show some opportunities like an uptrend in an OBV or a positive MACD.  So they're just not a lot of help right now.  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.  HD is 12.60% of my portfolio.

Honeywell (HON, $118.07, +178.92%) - 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.  Earnings are a couple weeks away and that combined with overall market sentiment may be the catalysts for how the stock acts.  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 16.53% of my portfolio.

Ionis Pharmaceuticals (IONS, $48.09, -7.60%) -  I chose this as my speculative stock to try to make significant gains in my portfolio.  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 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.  I've been worshiping the alter of it being a time for a pullback, but whatever pullbacks we've gotten have been exceptionally brief and small as these aforementioned news releases have kept coming and the stock does more of a stall than a pullback.  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 11.22% of my portfolio.

Threes:
On Semiconductor (ON, $13.47, +58.97%) - 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.  However, I'm not convinced that this stock will be a leader.  The consolidation that has been going on in the Semis should be just an added boost.  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 extremely bullish.  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) all were trending down, but have started to reverse, likely related to lower holiday season volumes.  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,t he 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 9.43% 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, January 8, 2017

Weekly Portfolio Summary

Greetings and happy 2017!  May anyone who reads this find a year of health, happiness, freedom, and prosperity.  Now that I got that all out of the way, let's start digging into the real business I go through here.  Namely my portfolio.  The week has been a bit of up and down while the market tries to figure out where it's trying to go.  Many people expected a selloff at the beginning of the year due to tax loss selling, but if that has been happening, there's been plenty of buying strength to help sop it up.  The big bad event being watched is the Dow Jones Industrial Average and it's trek to a value of 20,000.  It fell thirty-seven cents short today, but I don't find it to be a huge milestone other than the fact that it's a nice big round number.  

As has been the usual, President-Elect Trump has been making news via his Twitter posts.  In all cases, related to business news, they were posts about large companies or conglomerates sending jobs off to Mexico or somewhere else and trying to promote a huge border tax for items made outside of the US and shipped to us for sale.  The auto group, in particular, was targeted.  That said, that same group came out with results much stronger than expected, while retail stores Macy's and Kohl's pre-reported poor numbers for their holiday shopping results.  I can't help that this represents underlying signs of people willing, or maybe purposefully going out to purchases big-ticket itemst that require loans before rates start climbing too much.  So they spend the big money there, and spend less on retail.  That's not to take away from the fact that Amazon still is likely a big winner as well, but if we continue to see/hear poor numbers from retail, I don't think it's all going to Amaon.  I haven't heard anyone else throw this theory out yet, so maybe I'm simply off my rocker. 

Speaking of news, Ionis Pharma is back at pumping out the news.  Friday morning, they announced a partnership with Novartis on two cardiovascular therapies.  Then after the close of trading that very same day, Ionis released a preannouncement that they expect to significantly outperform guidance provided for 2016.  With this news, they're expecting to have operating profit in the low to mid 20 million range while they maintain a cash balance around $650M.  I discuss these items further in my most recent stock analysis.

Earnings season is getting under way now though we no longer have Alcoa kicking things off.  No on on my portfolio will be reporting next week, but JP Morgan, Wells Fargo, and Bank of America all will report next week.  These reports could determine the trajectory of all bank stocks for the next few weeks.  Since November, shares of Citigroup are up around 21%.  That's a big, quick move and I've considered taking out some profits to protect for a downside fall, but I haven't decided to do so yet.  I have only a couple days to pull the trigger if I'm going to do it, but if I sell, it's only to protect profits.  I would buy shares right back when the price drops some as I see long-term trajectory is higher.  The final thing to keep an eye on will be the JP Morgan Pharmaceutical conference that will be taking place next week.  Ionis Pharma will be at the event, likely to pair up with Biogen to promote their new drug, Spinraza, which was just approved to go to market.  They will also present at the conference on Monday at noon CST.  The results from that will be something to keep an eye on, but given the announcments they just made, I don't expect any fruther new developments. 
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:
None.
Twos:
Citigroup (C, $60.55, +44.96%) - 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.  Add onto this news a Presidential election that has resulted in believe that the economy can grow and companies can do even better due to less regulation and you have a stock that has surged over 25% since October.  In the long-term, I thing the stock still has room to run, given its current price is still lower than their book value (TBV).  However, a move like we've seen usually results in a pause or 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.  When I look at the charts, the indicators in the daily charts show signs that the stock is starting to roll over.  While momentum has maintained its strength, the MACD has had a bearish crossover and we're starting to see declining trends in the RSI and OBV, despite a stock that has still gone up.  The weekly charts still have strength to them, but the MACD is weakening just a little, the RSI is near over bought territory, and the OBV has started to decline a little too.  Even the XLF, which tracks all financial stocks show similar patterns, so if there is a decline, it'll be an industry-wide event, not something specific to Citigroup at this time.  I'm much more fearful of a pullback right now than I typically am.  As such, I'm considering pulling out my current profits in anticipation of a pullback I can get back into later.  I still am very confident in Citi's long-term trajectory, just not the short-term reactions.  I'm targeting a 2017 TBV of $67.50 and placing my 2017 price target at just above 1 times TBV to a value around $69.  Citigroup is 16.90% of my portfolio.

Cedar Fair (FUN, $64.37, +15.93%) - 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.  The charts are creating a little caution in me at this time as many of the daily indicators just pulled back.  It's possible they're turning back around right now, but it's also a possibility that things are just bouncing.  To help decide, I look at the longer-term weekly trends and see that momentum appears to be fizzling a little and the positive gain in the MACD appears to be pulling back some.  In all cases, the RSI and OBV are still positive, but flattening some.  Despite Fed rate hikes, the stock is still growing, so key risks seem to be OK for now, but the risk/reward is getting tough.  Right now, we're already above my 2017 price target and my downside risk is 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 15.87% of my portfolio.

Home Depot (HD, $133.53, +114.94%) - 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.  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 a combination of not easy and not good.  I see both potential head and shoulders patterns as well as inversed head and shoulders, I see short down trends I see double or triple tops and all kinds of stuff.  Everything from multi-year views to daily and weekly charts have some daunting downward trends, but also show some opportunities like an uptrend in an OBV or a positive MACD.  So they're just not a lot of help right now.  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.  HD is 12.42% of my portfolio.

Honeywell (HON, $118.53, +180.01%) - 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.  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 are 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.  Taking a look at the charts, we see that the stock has taken quite the charge since the "disappointment" in October.  The stock is up over 12% since that time.  All chart indicators in the weekly trends appear to be giving very bullish at this time, whereas the daily charts are just starting to show signs of breaking out.  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 16.54% of my portfolio.

Ionis Pharmaceuticals (IONS, $47.83, -8.10%) -  I chose this as my speculative stock to try to make significant gains in my portfolio.  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 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.  I've been worshiping the alter of it being a time for a pullback, but whatever pullbacks we've gotten have been exceptionally brief as these aforementioned news releases have kept coming.  The latest pipeline discussion resulted in one drug getting cancelled and being re-investigated via newer technologies.  When looking to the charts for timing and direction, the daily charts are showing that the stock is a bit extended and needs to take a pause.  The MACD has turned bearish as has the RSI, while the OBV holds flat to slightly up.  The weekly and multi-year charts look a lot stronger at this point, though, indicating that as the stock pulls back some, there likely will be strength to create a floor.  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 11.12% of my portfolio.

Threes:
Pepsico (PEP, $104.56, +44.62%) - 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 interest 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.  That doesn't mean we have to do the same, though.  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 for the long term, despite the shorter term "risk."  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.  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 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.  Right now, I think the maximum upside is $105, according to the charts and I see the downside going to $100, though it could go lower yet.  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.  While I like the stock long-term, I'm lowering my rank of the stock given the current risk/reward.  Any selling done will be purely to lock in gains acquired.  PEP is 9.73% of my portfolio.

On Semiconductor (ON, $13.01, +53.54%) - 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.  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, but the MACD has just shown a bearish crossover.  I'm also a little concerned with decreasing momentum over the last three months and the slightly descending trend of the RSI and OBV in the daily charts.  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.  Currently I estimate the risk/reward as fifty cents up and a buck down.  As such, I'm looking to potentially sell some shares - particularly if I feel the market is making a correction and I want to protect my gains.  Otherwise I'd like to wait and see what the earnings release brings me in February.  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 9.08% 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.