Weekly Portfolio Summary

New year and it's time to get going on new weekly updates and a new batch of quarterly earnings reports.  Now that I've got the past year's review behind me, now it's time to start listening to fourth quarter and 2017 yearly earnings results.  We start on Tuesday when Citigroup announces their fourth quarter results.  Today, JP Morgan and Wells Fargo both reported.  There were significant tax losses and the trading divisions suffered because of low volatility.  There were also a fair amount of one-time charges,  which were expected to take advantage of tax loss benefits and other similar related events.  In general, the report was good for an institutional bank. NIM was higher and the forward outlook was postie, and with it, the bank stocks took off.  The markets will be closed on Monday for Martin Luther King Day, so Citi will be the next big bank report and I expect that we'll get another similar report and stock price results.  More specific to Citigroup, itself, I'm expecting earnings of $1.19 and revenues of $17.22B.  I hope to see an increased NIM here as well, but do expect to see more one time charges and probably some sort of comment around increased credit card reserves build-ups which could spook people like they did last quarter.  An increase in lending would also be good to help show strength in the customer base.

With the new year started and tax reform passed late last year, we have to start to adjust the overall view of things as we move forward.  The corporate tax cuts will greatly help US-centered companies.  It'll help multi-nationals based in the US as well, but not as much as those with all business in the US.  Retailers and Restaurants are already showing benefits from this as well as a strong holiday sales season.  That said, multi-national companies will benefit from the synchronous global growth we are currently experiencing as well.  That global growth will be another major theme for now - industrials will be the focus of fund managers and there's not near the supply of stock there was a decade ago.  Financials will also be desired targets as these are the kinds of stocks that benefit from growing economies and rising interest rates.  Tech has the possibility to be a market leader, though I don't feel it will be as strong as it has been the last few years.  You'll likely have to be a bit more picky in what you choose here because tech has also been a bit a safe-haven for funds due to their secular trends.  The same goes with drug stocks - they better have something big going on, or you likely won't see them grow as strong as the overall market.  Defensive stocks are probably one of the weaker areas to be in.  You need a diversified portfolio, but you need to pick best of breed in the area and you probably want it to be a lighter position than others.

I'll try to weave these themes into my stocks below and we'll want to consider how it needs to affect how I manage my portfolio.  This last week my portfolio was up 1.6% compared to 1.4% for the S&P 500, however, I'm trailing the S&P 500 by a percent on the year so far.  I don't want to get too hard on myself as there are times during various rotations and rests that my portfolio under performs the market, and my portfolio did surge going into Christmas.  However, it's also important to be skeptical of my holdings and whether I'm positioned best for where I believe things are going.  It's a new year and it's going to be a wild ride.  Let's dig in!

  

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, $177.09, +15.79%) - I started a position in Apple because I wanted some hyper-growth in my portfolio to help keep it charged going forward.  My timing appeared to be pretty good for getting in and I feel I'm struggling to find the right point to complete my position, however, the company has been getting verbally beat up a little lately too.  First it was words around too much or not enough supply (can't really have it both ways, can you?).  Then there was an apology for slowing down older phones as batteries got older.  Now we had an activist investor come out and challenge Apple, saying they should be doing more to prevent child addiction to the devices.  Despite the negative news, the stock has essentially creating a new base around the $173 mark.  Over the last week, it's started to show signs of breaking out as the stock is now above the $175 ceiling that existed during that base building.  Short-term RSI and MACD have turned positive and the OBV may not be far behind.  I can't say the stock is going to $200 from here, but it certainly seems poised to go up.  It's been difficult to find a buy point, so if the stock pulls back at all, it may be the right time to just dive in.  While I know I'm certainly a bit late to the game, I still feel this is a good stock to hold going into this market environment.  The company will continue to generate cash from service revenues and it maintains a faithful following.  It is possible this stock won't grow as fast as it has, but I believe it will still be able to outpace the market.  My 2018 earnings estimate is $11.50 and the price target is $195 based on a 17 multiple.  This likely doesn't factor in anything for stock repurchases or special dividends due to repatriation, as it's unclear how much Apple may try to repatriate.  AAPL is 5.61% of my portfolio.

iShares MCI Eurozone ETF (EZU, $45.705, +10.60%) - Things like tax reform and rising rates had kept the US dollar stronger for awhile, keeping a lid on this Euro Zone ETF.  Recently, the stock has started a new ascent, which is frustrating for someone looking to fill a position.  Like Apple, I may have to take advantage of any pullback, at this time, to get into what will likely be a continued ascent.  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.  While I am looking to fill my position, I'm also trying to be patient - something that isn't exactly easy when the market is this bullish.  Chart trends have shown the break out and there's room for some more, but it is also showing signs of going a little too far, too fast.  As we've seen in the market over the last year, just because it looks like it's getting too hot doesn't always mean it is.  I will continue to try to express patience, but I can't be too patient.  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 7.23% of my portfolio.

Twos:

Citigroup (C, $76.84, +89.00%) - In a market with growing economy, tax benefits for corporations, and a rising interest rate, I don't know how financials - especially banks - can't be a holding in your portfolio.  If they can't outperform the overall market, there's something extremely dangerous going on.  Granted, Citigroup's stock rose a lot in the last year in anticipation of this, however, it's still quite undervalued in comparison to its peers.  It's also one of the highest capitalized banks, so it has money to work with and is better protected from downturns.  The company reports on Tuesday and its results will likely help shape the next leg for the stock.  After I sold a portion of stock near the 52-week high, Citi has been forming a base around the 50 day moving average.  Just recently, it's been showing signs of starting to break out.  If the price gets above $78, expect to see another price surge.  For now, indicators like the MACD and momentum have been a bit week, the RSI is starting to show signs of a breakout in the daily charts and the OBV has been consistently strong, indicating upward price action isn't likely to stop yet.  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.  Citigroup is 12.66% of my portfolio.

Cedar Fair (FUN, $64.50, +13.17%) - This stock is what I'd call a blend.  It's clearly a defensive stock, given its high (over 5.5%) yield and the fact that it's an MLP.  However, the stock is very much a growth stock too, as it ties into the societal needs for experiential get-aways.  Add in the tax benefits which should be strong for this mostly US-based company and the future benefits of the capital expenditure clauses and it's possible that this company's growth may accelerate in coming years as they look to build new rides.  This year they will be opening four new rides and it is expected to be a strong draw to those parks.  While weather impacted the company's ability to deliver in 2017, I don't expect that trend to be consistent.  The charts are really choppy for this stock.  MACD is bearish all over, RSI is weak, but potentially trying to stabilize, the OBV is generally flat, and the stock is below both its 50 and 200 DMA.  I expect the stock to continue to be choppy until earnings in February.  By that time, it may be well positioned to start taking off again, should they report good fourth quarter results and have positive things to say about the year ahead.  I maintain my multiple to 21 and 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 12.66% of my portfolio.

Home Depot (HD, $196.42, +216.17%) - I continue to hold Home Depot for the desired home experience.  Millenials are starting to form more and more households and buying houses.  The economy is getting better and people are getting some tax money to put into things like home improvement.  Add into that the fact that Home Depot is a mostly US based company, and you should see a significant tax benefit to the company itself.  For now, the company is still in the middle innings of what should be a great period of growth.  As rate increases continue, we will get to a point where people won't be as likely to put money into the home, but I don't see us really reaching that point until sometime next year at the earliest.  In the short-term, the stock has climbed quite a bit already on this news.  It's entirely possible that when the company reports next month that we'll see a selloff, as has been a common pattern, so beware of that.  In fact, the charts make it hard to prevent yourself from thinking the stock has gone a bit parabolic as it almost hit $200 this week.  The RSI has entered overbought territory across all views, yet the OBV continues to show ongoing strength.  The MACD in the daily charts has gotten choppy and the volatility charts are quite high too.  In short, there's short-term risk in the stock.  We're well above the price target I've set, however, much of this is likely due to the tax benefits the company will receive as they likely look to buy back even more stock than originally stated last month.  I reiterate my 2018 earnings estimate to $8.24, a 12% increase from 2017 estimated targets or $7.36.  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 12.43% of my portfolio.

Honeywell (HON, $159.07, +275.77%) - Honeywell is my preferred choice for an industrial play right now.  As I said, with global growth taking shape, industrials is where the big money is going to go.  Honeywell, as a conglomerate has itself in various parts of the industrial economy, but their biggest space is in aerospace, which appears to be really starting to take off (no pun intended).  Add onto that, the fact that the company is going to spin out its home and turbo businesses, both which are very strong in their own rights, you have a lot of potential for value creation in front of us.  That's a primary reason why it's difficult to even consider selling any of the position at this time.  When I try to validate this position against the charts, I just find myself amazed.  The entire month of December, the stock churned and stayed, essentially, flat-lined after pulling back from its 52-week highs.  Just this week, the stock broke out from that trend.  And despite all that churning, the medium and long-term RSI, OBV, and the MACD all stayed positive.  In the short term, the MACD has gone from short-term bearish and crossed back over to bullish.  The company reports next Friday and it appears the stock is ready to roar into that call.  The one concern to note is that the RSI is in overbought territory now.  So it's possible the stock gets too heated as we go into that call.  That said, this might be the right stock and right situation to see something go into a long-term overbought trend, which is extremely bullish, despite how it sounds.  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 15.11% of my portfolio.

Ionis Pharmaceuticals (IONS, $53.22, +5.26%) -  I chose this as my speculative stock to try to make significant gains in my portfolio.  It is a pick that is in a sector that may not perform the best in this economic state, however, it's also a company that has a couple new drugs going to market this year.  Their ability to get to market and be successful in doing so will be key in my speculation being successful.  Information we receive between now and when the company reports in February may be a key factor that decides the fate of this year's performance.  The stock's technicals aren't looking very good, frankly.  It is possible that the stock has started a bottoming process, but the OBV and RSI both have long-term bearish trends.  That said, the OBV has a positive short-term trend line and the short-term MACD has gone short-term bullish and could cross into the overall bullish side of things.  If this trend can continue, there could be more significant gains in front of us as we see roughly 10% of the stock is currently shorted as well.  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 11.79% of my portfolio.

On Semiconductor (ON, $23.57, +161.72%) -   This tech stock still has strength as it plays in the Internet of Things (IoT), automation, and power saving.  That said, the stock has been climbing like I haven't seen in years.  I expect there to be a top, the question is when.  Currently, I'm closely watching the stock and how it behaves technically until we hear the next earnings report.  Speaking of the technicals, they look strong right now.  Everything is trending positively with little or no real sign of rolling over at this time.  That said, the RSI is approaching overbought territory again, so that is something to watch for.  I maintain my 2018 earnings estimate 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.  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 5.89% of my portfolio.

Pepsico (PEP, $117.38, +62.36%) - This is the one stock I hold that's purely defensive, being that its part of the consumer staples sector.  Despite the sector, Pepsico has clearly been a best of breed name among consumer packaged goods companies, showing an ability to grow its products and quickly correct issues as they arise.  The company will report soon and I expect to hear good progress on organic growth trends.  As interest rates rise and the economy grows, though, people won't pay as much for the future earnings of a slow-growth company.  As such, the stock's price may stay relatively flat while earnings increase and the multiple slowly decreases.  That said, it's important to be diversified and hold something that can help your portfolio out when there's a negative rotation.  Every time we've seen one of those over the last few months has been times when Pepsico's stock performs its best.  The charts show quite a bit of weakness, some longer term, some shorter.  I see a longer term down trend in the OBV and RSI.  There has been a mix of up and down in shorter term trends for those.  Generally, what I see is a lot of indications of a slow rollover happening.  The stock is about to break its 50 DMA to the down side and the price and 200 DMA are slowly converging as well.  I suspect we'll eventually see the price break the 200 DMA, but as it does it will likely become more attractive on a long-term basis.  That will depend a lot on the state of the economy and interest rates, though.  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.  I do caution that it's possible that multiple is starting to decrease already, though.  PEP is 7.43% 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.