Weekly Portfolio Summary

Oh how the times change so easily.  It's become apparent that the stock market of 2017 is gone and what has taken its place is one filled with uncertainty and volatility.  Repeatedly over the last number of weeks we face wild swings as our President tweets, aids calm fears, and new complications arise.  It's important to note that for the last month and a half, we've truly been in the grips of a macro environment where everything from Presidential Tweets, Fed statements, Jobs reports, and other extraneous political and macroeconomic news controls the markets.  The one thing that could potentially put some calm to the market - earnings season - only started on Friday and despite what was a strong showing out of our biggest banks, what started as strong gains were wiped out and met with losses as people got prepared for a weekend which included fears of us dropping missiles on Syria (it happened Friday night and then called a "complete success"), as well as fears that the President would fire people in the Justice department that have been related to Mueller's Russia investigation and the newly formed investigation related to Trump's personal attorney Michael Cohen.  I absolutely hate politics.  I don't like hearing about them all the time, I don't like the divisive entity which they've become and I really hate when they have an impact on my portfolio, but it's important to recognize that, for now, it does.  What I haven't necessarily figured out is if I have to reposition my portfolio in some way, or if I just ride things out for a longer-term view. 

Looking at my portfolio, it continues to underperform the overall market, which isn't terribly thrilling, personally.  To date, the S&P 500 is down 0.65% while my portfolio is down about 2.29 %.  The good news is that I can recover from that and the year is long.  Need to stay diligent and focus on making the right moves to help my portfolio through these more complex times.  I have a strong cash position that consists of over 16% of my portfolio and while I have potentially been too cautious at times, I have capital ready to deploy if I find the right names and prices to get into.  At this time, it's the best I can do.

Looking into the next week, Honeywell will report their first quarter results.  The stock has dropped quite hard since it peaked in January and I'm looking for them to post a solid quarter with two percent or higher organic growth.  I do have some concerns that all of the Trade war talks will make management come out a bit more cautiously and cause the stock to pull back further.  Despite that, we are seeing and hearing more news swirling around about the company in the M&A markets, which fits in line with management's statements of being interested in participating more.  Also helpful would be good progress to spinning off their two divisions later in the year (currently one is expected to spin off in the third quarter and the second one to spin off before the end of the year).  As for the quarter, expectations are for earnings of $1.90 on sales of $10.02B.  Given they don't report until Friday, a lot can happen between now and then, and like the banks, it's entirely possible that they report strong numbers only to be sold off over fears of weekend political events.

  
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.
House's Money
Playing with the
House's Money






Ones:
Citigroup (C, $70.87, +74.66%) - 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.  Yet while I say that, here's Citigroup, significantly under performing both the market and its sector.  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.  Charts are starting to provide a more positive feel as well, thought they aren't perfect.  We do risk a "death cross" in the stock, but it has been recovering for the last week or so now and showing a decent upward trend with supporting metrics.  We do risk the 200 DMA being a line of resistance, as that line started to turn over as well.  With the bank about to be back into the mix of buying it's own stock back, I suspect we're not going to see much more down side from here.  The Fed's stress tests will be coming up, and I expect this to turn out to show positive results which will allow the company to return more cash to shareholders through dividend increases and share buybacks as we go into FY 19.  The Fed continues to raise rates and the economy is strong.  The 10-year has retreated as fears of recession from trade wars kick in, but they still seem to be unfounded.  Now we're reached a point where we have a bit of a floor in the charts, as our price point is around the same price the stock hung at from June - September last year.  The stock is well into corrective territory and pushing towards recessive.  I have estimated a 2018 TBV of $64.75.  My price target is $77 for 2018 projections factoring in a 1.2 multiple against TBV and a multiple of 12 for earnings of $6.40.  This stock has gotten extremely cheap, despite the rises in rates.  It is possible that the global economy could start cooling due to all the tariff chatter, but I don't expect Citigroup to be severely impacted by it at this time.  I missed my chance to buy the stock around $67 on a number of occasions.  Now after this earnings report, if I can get the stock below $69, I should be jumping on it.  Citigroup is 11.87% of my portfolio.

Honeywell (HON, $146.12, +245.18%) - 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.  We've seen a pull away from that, though, due to the Presidential rhetoric regarding trade wars with China.  Despite the fears, I don't see Honeywell largely impacted as they are actually building much of what they sell within the country.  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.  The company has stated they intend to be a player in the M&A space, but if they don't find something they like, the money will be tagged for share repurchases instead.  That's a primary reason why it's difficult to even consider selling any of the position at this time.  The stock has sold  off more than 11% and while things still look a bit shaky, I believe the stock is starting an ascent higher.  It has crossed back above the 200 DMA and I believe it will stay there.  This may be one company that actually manages to break out again after announcing earnings Friday morning, as trends are favorable, but nowhere near over heated at this time.  It's worth noting that the stock has been trading in line with the overall market, too, though.  I reiterate my multiple of 21 while noting that 22 isn't out of the question.  This maintains a 2018 price target of $166, though a multiple of 22 could bring the price to $174.  HON is 14.66% of my portfolio.

Home Depot (HD, $172.85, +178.22%) - 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.  While I believe the company is still in its middle innings of growth, the stock market has gotten much more hesitant on the name as rising rates, and dampened housing starts numbers have put pressure on a stock that was already correcting from its elevated prices.  In the quarterly earnings report, the company projected a 28% earnings per share increase from 2018 due to $4B in anticipated share repurchases and the reduced tax rate, placing the estimate at $9.31 - and this is coming from a company that has a long history of under promising, so keep that in mind.  The stock has retreated over 17% from its highs as the stock approaches its 200 DMA.  This level seems to be a very key holding point in the charts.  If it breaks, it could have a pretty strong breakdown - even if I do think the stock is worth buying below the 200 DMA, there would have to be patience for when to buy it.  I had said when I sold my cash position that I would consider getting back in if it pulled back to around $172.  I never expected it would actually happen, but I am now carefully looking for a potential entry point.  The market, itself, is very volatile, so I may not be ready to dive in just yet.  The chart is showing some early signs of a bottoming process, but nothing is for certain yet.  I'd rather buy going back up than on the way down right now.  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 $214.  HD is 8.14% of my portfolio.

Ionis Pharmaceuticals (IONS, $43.62, -13.73%) -  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 and the sector has been remarkably resilient.  Their ability to get to market and be successful in doing so will be key in my speculation being successful.  While the stock has sold off considerably, it seems we've found our floor around $40.  While there are some signs of the bottom getting set in place, I'd feel better if we retested the lows and held them.  Otherwise this may be nothing more than a head fake.  RSI on the weekly seems to be bouncing off of oversold territories, long-term OBV seems to be holding its gradual ascent as well.  The MACD in the daily charts is starting a bearish crossover, which could be the start to a run higher, but typically just means a bounce off of oversold territories.  I'm interested in adding to my position around these lows to dramatically lower my cost basis.  The stock has held here, historically, and I still believe there are opportunities for greater upside than is being credited at this time.  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.  Any ascent from here is likely to be more gradual until the company gets in front of the FDA, though.  Ionis is 10.21% of my portfolio.

Twos:
Apple (AAPL, $174.77, +11.07%) - I started a position in Apple because I wanted some hyper-growth in my portfolio to help keep it charged going forward.  While the company's ability to continue to come out with new versions of its flagship phones and devices is important, as is coming up with new devices, my view of the company is more about its service segment now - how it can create recurring revenue streams that just don't stop because people will give up their iPhones and its services only after giving up everything else.  Charts are showing signs that the stock has started to turn positive.  Despite all of the fears related to a Trade War and China cracking down on Apple, the charts have resumed a more bullish trend in the overall price, RSI, OBV, and momentum.  While all of these are positive, it is worth noting it's been on weaker volume.  For now we see strength, but it's a strength that can turn on any headwind.  My 2018 earnings estimate is $11.50 and the price target is $195 based on a 17 multiple.  I have lowered my ranking to a 2 based on the additional trade war risk, increased value, and relative market uncertainty.  AAPL is 11.69% of my portfolio.

Cedar Fair (FUN, $62.76, +9.90%) - 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 getaways.  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 stock's performance has been relatively weak through the last year and long-term trends show the continual downward push.  Weekly charts worry me in that the 200 DMA is now turning into a ceiling of resistance.  They are also showing signs of a bottoming process, though and volume tends to be higher on positive days.  The daily trends show an RSI pushing near oversold territory and the stock typically rallies into its busy season.  While winter certainly seems to be sticking around longer than desired in the mid-west, I think delays into starting the season aren't impacted yet.  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 13.19% of my portfolio.

House's MoneyOn Semiconductor (ON, $25.01, +177.71%) -   This tech stock still has strength as it plays in the Internet of Things (IoT), automation, and power saving.  The stock had a very impressive move in 2017, but we seem to have hit significant resistance in the $25 - $27 range in 2018.  The company's plays into sensors for automated driving and IoT are a strong tech trend, but they've hit resistance when there were some deaths caused by automated driving and Facebook ran into its Cambridge Analyitica issues.  The charts aren't really telling a lot one way or the other at this time.  I have noticed that the 50 DMA seems to be a line in the sand at this time, where when we go under it, we tend to turn back around quickly to maintain the trend.  In the daily charts, the MACD is just starting to have a bullish crossover and the RSI has plenty of room to run at this time.  Based on the patterns I'm seeing, the stock could be on an ascent for new highs in May.  I raised my 2018 EPS estimate to $1.73 and am increasing my multiple to 16.  The multiple reflects what people are willing to pay in this environment, though it might be a bit high for traditional standards.  As such, that gives us a  price target of $27.50.  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.  As such, I'm watching the stock over the next month or so as this is typically an area where it tends to sell off.  ON is 6.61% of my portfolio.

Pepsico (PEP, $109.26, +50.58%) - 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.  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, I anticipate the stock will experience some multiple contraction over the next few years.  That's not to say the stock can't rise, just that it's not likely to rise as fast as the S&P 500.  That said, it's important to be diversified and hold something that can help your portfolio out when there's a negative rotation and the company's 15% dividend increase helps make it a little easier to hold the stock, as it keeps the yield around 3%.  The stock is sitting under a 200 DMA that has started to trend downwards, meaning that it's likely to become a strong ceiling of resistance.  Additionally, I've noticed that the 50 DMA appears to also be acting as a ceiling.  We're approaching a time where we will find out if the stock will be able to break through that level or not.  It's hard to not notice that the stock appears to be chopping around these current price levels as though it's working to regain strength to go higher.  We'll have to let things play out a little bit longer to see what happens with the 50 DMA.  If it breaks through, I expect it to run up to the 200 DMA.  If not, we'll have to be a bit more careful.  Despite my low cost basis, I am considering easing into more of the stock at the mid-100 levels to increase my exposure to the name and sector.  I don't anticipate that the name is going to rocket up, though, but rather that it's simply a slow and reliably steady name for me.  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 giving a multiple of 20, which may be generous given the current state of the overall market and sector.  This puts my 2018 price target at $115.  I do caution awareness for the downside.  As I said, the stock seems to already be compressing its multiple and I see nothing stopping the market from giving it a multiple of 18 (putting a downside target of $103.50).  PEP is 7.36% 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.

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