Let’s usher in the new year by reviewing the returns of year 2013

Have anyone of you guys seen the Wolf of the Wall Street. Nice movie and nice year to realease it too. Just a fun fact for the market geeks and the movie buffs – 1997 was the year last roamed by the Wolf of the Wall Street, Jordan Belfort and 1997 was the last year when we saw a 30% returns.

One of my friends told me that he really doesnt want to let go of the year 2013. Yep, it’s been a phenomenal year. The $SPX, the reprsentative of the the broad market, gained 29.6%. as mentioned earlier, it was it’s best annual gain since 1997. Nasdaq gained 38% and the blue chips, Dow Jones Industrial Average, bagged 26.5%. We will discuss about the intricate details in the coming posts, some of which might spook you, some might startle you and some might make you rethink the 2014 invesment strategies.

So let’s delve into returns my portfolio generated. Following are the returns generated in real accounts, no paper money, Sire!

The account in interactivebrokers –

IBReturns2013

This account has companies such as Priceline (PCLN), Chipotle Mexican Gril (CMG), Apple (AAPL), Gilead Sciences (GILD), etc.

Following is the returns of account where I hold Micheal Kors (KORS), Celgene (CELG), Bank Of America (BAC), etc.

 TDReturns

Lastly, the returns from the 401K account which in addtions to the mututal funds such as FSCSX, has Facebook (FB), Continental Resources (CLR), Green Mountain Coffee (GMCR), etc.

401KReturn

This is, in a nutshell, the returns I generated over last year.

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Portfolio as of 7/28/2012

I have been expanding my foot print slowly but steadily. Portfolio as of 7/16/2012.
Cash = 30%

STX = 3% (Might add more depending on OCZ acquisition and today’s results). Why Did I buy?

EMC = 4% (Expect it to reach $29.5) . Reasons of purchase.

AAPL = 4% (Set more buy @ $569)

WDC = 6% (Expect it to reach $49.5) Why Did I buy?

QCOM=5% (Expect it to reach $69, if it stays over $59 for few more days) Why Did I buy?

APA=6% (Expect it to reach $119) Reasons

HAL =5% (Expect it to reach $40) Reasons

UA=3% (Set additional buys @ $54.9) Reasons of purchase.

SCSS=2% (Set additional buys at $25.9) Reasons of purchase.

SWKS=4% (Will add more at $25.9) Reasons of purchase.

EQIX=5% Reasons of purchase.

ALLT=4%

ALXN=6% Reasons

FFIV =3% (In Red) Reasons

F=5% (In Red)

TLT=5%

Bernanke does it again!

There is just too much to write. So I will split this post into two – Bernanke and Non-Bernanke (vis-a-vis the earnings).

After being down 82 points in the early going the Dow reversed course and closed 78 points higher on Tuesday. Wow! Then the Nasdaq surged 1.1% as the technology sector led the market today.

The reversal was due to Fed Bernanke’s testimony this morning that the Fed is willing to do what it takes if the economy and labor markets do not improve.  He expects historically low rates to remain in place at least until the end of 2014 and most importantly he convinced the participants that the policymakers at the central bank seem to be preparing for additional moves to spur the economy in the weeks or months ahead.

This low interest rate environment should help stem any serious correction in the market averages.

So, where does yesterday’s trading action leave us now? First, I don’t think that this is a short squeeze anymore. Second, yesterday qualified as a decent follow through day from Friday’s key reversal which is a positive development.

Moreover, the basing action in some stocks and the sector rotation is almost clear now. One last thing to notice is that the junta seems to have realized that the tech and oil & gas stocks have been beaten to death. See below –

In fact we see rise or less “severe” damage to stocks even after the poor guidance.

  1. To exemplify, look at the the turn around in STX after it pre-announced a revenue miss by 0.5 Billion dollars (seriously!) or even QCOM which reported fiscal Q3 revenue and earnings per share a little light of consensus, and a Q4 view below analysts’ estimates.
  2. And of course an earnings beat is amply getting rewarded. e.g. MLNX – up 43% after hours, SCSS – up 17% after hours and SWKS – up 10% after hours.

So step in but be cautious.

Food for thought –

  • FDA approves Vivus’s diet pill (ABC)
  • Over 70% of earnings beating estimates (REU)

 

 

 

Portfolio as of 5/2/2012

STX – 4% (Sold some today)

WDC – 7%

APA – 6% (Super Long Term)

QCOM – 6%  (Super Long Term)

ALLT – 5% ( Added some more after recent earnings)

GNC – 5%

FFIV – 7%  (Super Long Term)

URI – 7%

HAL – 6%  (Super Long Term)

VMW – 7%  ( Long Term)

TXRH – 3% (Initiated Yesterday)

UA – 3% ( Stop set at $93 and will add if it goes above $103)

TLT – 6%

F – 7%  (Super Long Term)

SWI – 3% ( Will add more around $43.9)

PCLN – 3% (Took significant profit off the table recently)  (Long Term)

CASH – 10%

Stocks which make up less than 5% of PORTFOLIO might be sold or added based on criteria, market condition, etc. I am very nimble and hence very low turn around time.

Shorts in the Making – GMCR, DECK, NFLX and Double Top!

Let’s quickly look at some of the stocks. PLease enlarge the images to get the entry points.

ON 5/3/2012 – I initiated a short of decker at $54.7 – 3% position. Stop loss is set at $57

On 5/3/2012 – with stop loss set at $31, I initiated a short of GMCR at $29.5.

Lastly, why so many shorts – DOUBLE TOP in the making?

Deja Vu!

Before we move forward let’s review the market

If you look at the half-hourly chart of S & P 500 for last few weeks you will observe a lot of indecision. This can stem from a market that is awaiting a jobs report or the one that has rallied almost 25% since October bottom but bumping into some bad data or a market that is just waiting for earnings to come out. This is a typical sideways movement that needs just one or two catalysts to either jump up or break down.

Till Friday morning, we were all hunky dory – raising toast to the best quarter since 1998.

But by now, you guys must have heard, read and pondered about the jobs report that came out on Friday morning. Entire market was expecting creation of 205000 jobs with lowest estimate being 193K but to everyone’s disappointment the number came in at 120000. This is exactly the catalyst that I mentioned above. Following is the S & P 500 futures –

Going Forward –

The question is where are we heading from here. Let’s look at the slightly bigger picture –

We will definitely get temporary support at 1375-1370. But that floor might not last long if Alcoa comes out with bad numbers on Tuesday after close. I personally expect the floor to crack on Monday itself. This market might turn into a sideways market or 5-7% correction if this is just one-off jobs miss and not a trend.

The real correction will start if –

  1. We get more of such job reports.
  2. The companies fail to meet Q1 numbers.
  3. Manufacturing margins start contracting.
  4. The inventories start piling up.
  5. Europe’s problem resurfaces.
  6. Israel goes after Iran.

All these events individually have the capability of turning a flat market in to an intermediate/full blown correction. A correction that can go beyond 12-15% – That’s spooky.

In terms of technicals if we fail to hold on to 1336, we are looking at lower lows and lower highs. This means that we are in correction. The breakouts will fail, the industrial sector & commodities will sink and we will stare at repeat of 2011.

Deja Vu!

There is a stark resemblance between job numbers & rally at the beginning of 2011 and the similar macro economic data points in 2012. All of them  fizzled out, making 2011 one of the worst trading year in last 20 years. In case 2012 tries to follow the suit of 2011, I suggest that please sit on the sidelines unless you are nimble (like really really nimble) or you are willing to take 15-20% loss or you want to buy stocks such as QCOM,APA, EMC, etc for long-term. The top traders have always said that it’s good to sit out when market goes sideways and hop in when the direction is confirmed.

This is the kind of summer where I would use the old adage -“Sell in Summer and go away”.

Question is why side ways and why not a full fledged correction?

Never underestimate the Printing Press. One off job report might not bring back QE3 from dead but few of such reports will definitely get Feds going.

 

 

 

 

 

 

Lastly what do we do with current portfolio?

Just as not all fingers are alike similarly different kinds of stock in a portfolio deserve different treatment.

  1. Reduce all the momo stocks such as LULU, ALLT, SCSS, TPX, HLF, ULTA, CLR, ALXN, etc to 1/3 of original position. A risk averse investor might sell all. The reason is the panic grips the owners of such stocks with higher multiples faster than does the rest of the market. Just a reminder, small cap stocks corrects more than larger cap stocks during a correction.
  2. Stick with oldies such as HAL, APA, STX, WDC, PG, COV,etc unless the fundamentals show a major shift such as margins contraction trend,etc. Some of them have already seen fair share of correction.
  3. To defend your portfolio you can buy long term US treasury bonds such as BLV, TLT, etc. They tend to be haven during such corrections.
  4. A very active trader might try putting in shorts such as SH, HDGE, RWM, etc.
  5. Keep an eye on the leaders of this bull and see how they perform during the correction. By leaders I mean – AAPL, ISRG, CMG, SCSS, ULTA, LULU, TSCO, FFIV, etc.
  6. Start running scans to look for stocks with excellent fundamentals that are holding up well. They might be the future leaders.
  7. Lastly add to your existing value positions or buy new ones (after fishing for course) after market has gone corrected by 10%. But remember an oversold market can become more oversold!
  8. Again, In case 2012 tries to follow the suit of 2011, I would suggest that please sit on the sidelines unless you are nimble (like really really nimble) or you are willing to take 15-20% loss or you want to buy stocks such as QCOM,APA, EMC, etc for long-term.

I believe that capital preserved is the capital created for future investment opportunities.

If you are really, really lost, I will talk more about correction, handling of stocks during corrections and going short later on in the week.

By the what do you think?

Thanks For participating!

Market and Porfolio

Stocks fell on Wednesday to finish with sizeable losses, but they managed to close off their session lows.

The Nasdaq lost 1.5%, while the S&P 500 shed 1% and ended under the 1400 level. The Dow Jones industrial average dropped 0.9%.  This will end NASDAQ’s 7 week winning streak.

The day’s news largely was on the negative side. The Institute for Supply Management’s service sector index fell 1.3 points in March to 56, indicating the sector continues to expand, but it was below forecasts. Payroll services provider ADP said private companies added 209,000 jobs last month, below expectations. And there were lingering worries over the latest Fed minutes, which came out Tuesday and indicated policymakers are not planning for additional economic stimulus measures.  Finally Spanish bond sale reminded that the PIIGS are still lurking around.

Now the question is – Whether SPX will break the 3 month trend line? This breach of support will be indicative of changing sentiment. And finally our good old 50 DMA will come into prominence. But these things do happen after such a run up. In fact we might see some more profit taking tomorrow based on the long weekend ahead, specially to ward off surprises by Euro and Friday’s  job data.

Now if you look around most of the leaders hung in today with minor correction on low volume to average volume. The leaders of this bull market seem healthy and in control. Some such as PCLN bucked the trend today. On equity side SNDK lost 7% after company cut its revenue forecast and trimmed it’s margin.

Portfolio Time –

The only company to be beaten up today was ALLT. It has been up more than 55% YTD, but 8 out of 11 analyst, who follow this name, maintain buy recommendation on it with average price target of $25. SXCI and  URI almost gave back their yesterday’s gains.

Declining crude is taking its toll on WLL, CLR and APA, though continental is clinging to the 50 DMA.

The earning’s change in latest quarter mentioned above is not correct. It seems that Telechart lags the fundamental data update by a month or so. I recently trimmed FFIV, sold all ALXN. I might close CLR and URI of the 50 DMA is broken comprehensively. I plan on taking some profit off ALLT and LNKD. The idea behind taking profit is to have enough cash in hand to a scoop new buys or make additional buys when stocks bounce of the 50 DMA, such as CRUS below.

Lastly during such times, when market is going sideways, keep an eye on Leaders. They will break before market craters. Thus acting as precursor to the impending correction. The leaders of this market are ULTA, SCSS, AAPL, PCLN, CMG, ISRG, TPX, STX, FFIV, EMC, VMW, RAX, etc.

Some good reads –

  • Employment up 209K (ADP)
  • ECB holds steady (MW)
  • Fed signals no need for more easing (BL)
  • Gold continues post-FOMC minutes fall (BL)
  • Copper falls as dollar rises (REU)
  • Brent slips toward $124 on Saudi supply (REU)
  • Sagging orders suggest eurozone in recession (FP)
  • Eurozone retail sales disappoint (REU)
  • German factory orders disappoint (BL)
  • Spanish yields reach 12-week high (BL)