Current Portfolio

Lot of mixed signals –

Over last few weeks, during the prime of earnings season, the markets underwent a “so-so” corretion. Call it years of practice, ability to recognize historical behaviour or plain simple luck, I was able to move at least 40% of money into cash. This was around mid Jan, 2014.

Now everything is not Black & White. What perplexed me that some of the leading stocks from 2013 just rolled over such as MDSO, AMZN, LNKD, etc; but the ones that jumped, went straight to stratosphere. Look at KORS, AKAM, NFLX, GMCR, etc. Interestingly some of the leaders have held steady as pointed out in my twits e.g. FB, GILD, PCLN, TSLA, GOOG, etc. Lastly, there is money flowing into housing and networking stocks, so we might be in sector rotation.

So final verdict dont worry about the gurus on CNBC, market will either go sideways or up (see my next post).

My Current portfolio –

CASH – 20% +

LONG

GILD – 9%

FB – 9%

FFIV – 5%

CMG – 5%

ALXN – 6% (Recent Buy)

NFLX – 5% (Recent Buy)

UTHR – 6%

LEN – 4% (Recent Buy)

DHI – 3% (Recent Buy)

QCOM – 3%

KORS – 3% (Will add more at $91)

FLT – 4%

MDSO – 5%

UA – 3% ( WIll add more at $101)

CLR – 2% (I might close it after having it for years)

REGN – 2% (Will add more on breakout from the base)

SHORT

TWTR – 4% (Recent Buy)

I recently closed GMCR. I am contemplating buying either TSLA, PCLN, (with earnings around corner, there is risk) AKAM, BIIB, ATHN or WYNN. I am also thinking of shorting AMZN – hey it’s ripe now.

Hmm! Need to revisit IBD’s market smith and telechart to finalize the buys.

 

 

Portfolio as of 03/06/2013 & Returns

My current holding are not significantly different from a month earlier. The major purchases that I made in last one month are PCLN, ARUN and KORS.

Slow but Sturdy

QCOM – (Entered at $59) – 4%

GILD – (Entered at $55 Pre-split) – 5%

EBAY – (Entered at $51) – 4%

F – (Entered at $16 and doubled at $9) – 6%

NOV – (Entered at $66) – 5%

ROST – (Entered at $65 and doubled at $57) – 4%

HAL – (Entered at $30, sold at $37 and added more at $35 later) – 3%

AAPL – (Entered at $350, sold 50% at $590, added more at $500 later) – 6%

PCLN — (Entered recently at $695) – 7%

HD – (Entered at $60) – 5%

CELG – (Entered at $103.5) – 3%

LEN – (Entered at $36 sold at $41) – 3%

DHI – (Entered $22.8 (recent)) – 3%

Aggressive growth

WLK – (Entered at $75, sold 50% $92 recently & reentered at $83) – 4%

LNKD – (Entered at $95, sold 50% at $124 recently; added at $132 & sold 50% at $160) – 3%

KORS – (Entered at 62.5 and doubled at $59.5) – 4%

CLR – (Entered at $75) – 3%

ARUN – (Entered at $24.5) – 4%

URI – (ENTERED AT $37.5) – 4%

CHUY – (Entered at $26.5 and doubled at $28.5) – 3%

CVLT – (Entered at $75.5) – 4%

DKS – (Entered at $50) – 4%

Perf1

Portfolio Holdings as of 02/04/2013 (& last three month returns)

Slow but Sturdy

QCOM – (Entered at $59) – 5%

GILD – (Entered at $55 Pre-split) – 5%

EBAY – (Entered at $51) – 5%

F – (Entered at $16 and doubled at $9) – 8%

NOV – (Entered at $66) – 6%

ROST – (Entered at $65 and doubled at $57) – 5%

HAL – (Entered at $30, sold at $37 and added more at $35 later) – 5%

AAPL – (Entered at $350, sold 50% at $590, added more at $500 later) – 8%

FFIV – (Entered at $104) – 4%

HD – (Entered at $60) – 6%

Aggressive growth

LEN – (Entered at $36) – 4%

DHI – (Entered $22.8 (recent)) – 3%

WLK – (Entered at $75 & sold 50% $92 recently) – 3%

LNKD – (Entered at $95 and sold 50% at $124 recently) – 3%

CLR – (Entered at $75) – 4%

URI – (ENTERED AT $37.5) – 5%

CHUY – (Entered at $26.5 and doubled at $28.5) – 3%

FB – (Entered at $25.5, sold some at $32.5 but added more at $28.9 later) – 3%

CVLT – (Entered at $75.5) – 5%

DKS – (Entered at $50) – 4%

LVS – (Entered at $54) – 2%

Returns generated in two accounts (aggressive and long term (401K + stocks)) in last three months –

Returns

BREAKING OUT – 01/25/2013

With the bull still wild, we have another good set of promising breakouts.

TPX

Before we go anywhere let’s look at a breakout we talked about yesterday. Interestingly, GAAP EPS of $0.39 for Q4 were 54% lower than the prior-year quarter’s $0.84 per share. For the quarter, gross margin was 50.0%, 210 basis points worse than the prior-year quarter. Operating margin was 15.0%, 840 basis points worse than the prior-year quarter. Net margin was 6.9%, 850 basis points worse than the prior-year quarter. Decreased 7.01% to $342 million from the year-earlier quarter.

But it did one thing right – The EPS of $0.60 a share, beat the $0.55 average analyst estimate. Revenue of $342 million also beat the $339 million estimate. Result-

TPX

The surprise of the day is a break out of good ole Proctor and Gamble. Earnings is the driver for this BO. Kudos to the management’s effort, the Adjusted gross and adjusted operating margins popped 110 basis points to 51.2% and 20.0%. Underlying second-quarter sales ticked up 3% year over year–on top of a 4% increase in last year’s second quarter–including a 5% jump in baby and feminine care, 4% in health care, and 3% in fabric and home care.

PG

CHUY: Fast growing TexMex joint broke out today. But there is a road bump right ahead. I entered it at $26.4 today.

CHUY

HAL: Been a long time favorite of mine – Halliburton. It broke out today. I have owned it since it’s early 30s. I would wait for some consolidation before entering now due the run up it had in last two months.

Today’s BO was due to better than expected earnings. All three of Halliburton’s international regions and 8 of its 12 product lines set new revenue records. Sequentially, the Middle East/Asia region increased revenue 14% to $1.2 billion, and in the Europe/Africa/Commonwealth of Independent States region, revenue increased 8% over the same time frame to $1.2 billion as well. Overall, Halliburton’s international operating margin improved to 17.6% from 14.6% in the prior quarter. But the picture was exactly opposite in US. The revenue dipped 5% sequentially to $3.8 billion while adjusted operating income declined 22% over the same time frame to $465 million. The operating margin for the region declined to 12.4% from 14.1% last quarter, still above Baker Hughes’ BHI 8.7%. Overall the revenue was up 3% YoY.

HAL

Other key breakouts have been – PCLN (Priceline), ROSE (Rosetta Resources – Need to compare this with CLR), TEX (Terex), THO (Thor Industries) and CPWR (Compuware – a prime recruiter in Detroit Area.)

Break Out Watch List – KORS, JOBS, ISRG, MDVN, CTRX, LL and LNKD.

Lastly, what happens when you miss the estimates by miles –

SCSS

Analysts polled by FactSet expected the company to earn 32 cents per share on revenue of $229.8 million.

Net income fell to $12.5 million, or 22 cents per share, for the period ended Dec. 29. That compares with $15.4 million, or 27 cents per share, in the same quarter last year. Select Comfort’s total revenue increased 17 percent to $220.6 million. Select Comfort expects to earn between $1.65 and $1.80 in fiscal 2013 fiscal. Analysts forecast $1.89 per share.

Well, you get pummeled!

SCSS

I initiated a short at $23.5 with stop at $24.5. Now I will close it at $21. This being a bull market. I think any short is a risky proposition.

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!