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

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Performance Year To Date – Three Best purchases, Two Ugly Mistakes and One Missed Boat (& a Sexy Short!)

Performance in Quarter 1

Last four months have been one heck of a roller coaster ride. One account lost 12% where as the other account made 15%. But overall the returns have been in the vicinity of 30% YTD.

The major boost that the portfolio got was from the turn around of STX and WDC, the largest holding.

Please see below –

BEST PURCHASES OF THE YEAR –

AAPL

SCSS

ALXN

WORST SALES

URI

FFIV

MISSED BOAT

SWI

SEXY SHORT –

GMCR

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.

We are in midst of baton transfer..

This might seem to be a writing on the wall now but we are not there yet. We are gradually approaching the correction phase. If the market craters through 1358, the bulls will officially sign off.

We have seen all the phases of transition –

  1. Broken almost 5 month old trend line.
  2. Market tries to capture it but fails.
  3. Market breaches 50 DMA.
  4. It tries to recapture the moving average but fails
  5. And finally we are staring at a lower low after lower high.

This is an old school failure. The shorts will show up every where. Unfortunately if we review last two summers this market might end up going sideways. So be careful while shorting.

I already have 15% of my portfolio invested in TLT, BLV and RWM. I will add some more once the down side is confirmed. As of now I don’t see too many obvious shorts. All the good stocks are either in consolidation phase or approaching 50 DMA.

Portfolio is already 50% cash – will try to create more cash.

Let’s browse some charts. One thing is clear – all the recent breakouts have failed. This is a strong indicator of weak market. Leaders are either consolidating or trying to hang on to 50 DMA. Remember in a correction, leading stocks decline by average 2-2.5 times the general market correction. The ones that end up correcting the least and have strong fundamentals are prospective leaders of next bull market.

Earnings – STX, URI and ISRG

We are not out of the woods yet, but today’s price action is a step in the right direction.  The Dow posted its best day since March 13th gaining 194 points +1.50% and in the process moved back above its 50 day moving average.  The S&P 500 and NASDAQ also moved above their 50 day lines gaining +1.55% and +1.82% respectively. NASDAQ made its biggest gains since Dec 20th, 2011. Advancing stocks led declining stocks by 3.25 to 1 on both the NYSE and NASDAQ. But the turnover was slightly lower in both the exchange.

This rally was courtesy – demand of Spanish bonds and good earnings. The investors showed good appetite for Spanish bonds, even though the yields on 10 year notes spiked. It’s early in the earnings reporting season, but as of Tuesday morning 74% of the 39 companies that have reported exceeded analysts’ expectations. But the fickleness of news and volatility of the market definitely reminds me of last year. So being defensive is not bad at all. That said, I am taking out the small index short but will leave the BLV and TLT in place.

Lastly, a buy order of AAPL set long time ago at $581 got triggered today. Let’s see where it takes us.

EARNINGS –

Seagate technologies, STX, the one that I have advocated for last month or so came out with flying colors.

The hard drive maker brought in revenue of $4.4 billion, up from $2.7 billion in the prior year’s quarter, and above the average analysts’ forecast of $4.38 billion. Excluding items, Seagate earned $2.64 a share on net income of $1.2 billion, up from 25 cents a share and $113 million in the prior year’s quarter. Analysts surveyed by Thomson Reuters were looking for earnings of $2.11 a share.

Seagate also achieved a gross margin of 37% during the third quarter, comfortably above its forecast of 33%. These margins are strongest in company’s history. Seagate reaffirmed its $5 billion revenue target for its fiscal fourth quarter on Tuesday, as well as its $20 billion goal for calendar year 2012. The hard drive specialist also raised its fourth-quarter gross margin forecast from 33% to 34.5%.

This stock has formed a two month-long base and will breakout with a gap tomorrow. If you are interested then set a buy for $28.7 and double it up if it goes below $28. If we are in a bull we will go up till $30 in next few days or so. Following is an older chart of STX but the picture still remains the same expect for another blockbuster earnings.

United Rentals, URI,  is the one that I bought around $42 when it broke out a month ago but got out when it went below $40 and 50 DMA. The company mainly rents construction and industrial equipment in North America, including backhoes, forklifts and heaters. It also sells some new and used gear. The company has moved away from the construction rentals with the purchase of RSC holdings that gave URI quite a bit of industrial exposure.

United Rentals earned 36 cents a share in first quarter, reversing a 32-cent loss in the same quarter last year, and trouncing the Street’s estimate of 5 cents. Sales climbed 25% to $656 million, easily topping projections of $610 mil. For the prior three-quarters, sales grew 13%, 18% and 25%. The company’s rental revenue increased 21% in the quarter, reflecting year-over-year increases of 6.3% in rental rates and 18.4% in the volume of equipment on rent. 

“Once again, we drove profitable growth faster than the construction recovery,” CEO Michael Kneeland said. “Both core areas of our business — general rentals and specialty operations — realized higher rates year-over-year on a fleet that was about $600 million larger on average.”

Tomorrow URI will open above consolidation. Once again if this is a bull market it will start drifting towards $50. Remember PEAD.

Intuitive Surgical, ISRG, is a medical robot maker and has been one of the strongest leader of this bull.

The medical robotics maker’s earnings rose 35% to $3.50 a share. Revenue climbed 28% to $495 million. Analysts polled by Thomson Reuters expected Intuitive Surgical to earn $3.14 a share on sales of $464.7 million. Intuitive Surgical also forecast 2012 sales will rise about 20% from 2011’s $1.76 billion. It had expected 17% to 19% growth. A key to growth has been winning acceptance for robotic-assisted surgery in more procedures. The company said da Vinci-assisted procedures grew 29% in Q1 from a year earlier.

Gross margin edged up to 71.9% from 71.8%. Revenue from instruments and accessories climbed 32%, while services revenue jumped 27%. Systems revenue grew 24%, as da Vinci systems sold rose to 140 units from 120 units a year earlier. 

With a new product in late 2011, Intuitive Surgical aims to expand robotics-assisted surgery to gallbladder operations and cardiac procedures, such as heart valve repairs.

I am a big fan of this company and owned it’s share for short period prior to last quarter’s revenue. I will add some if the price drops to $555.

IBM and INTC

There were other earnings such as IBM’s better than expected earnings but a slight miss on revenue side. Chipmaker Intel  posted better-than-expected first-quarter results, easing concerns that sluggish PC sales might weigh on its performance. The Santa Clara, Calif.-based company also forecast revenue for the current quarter above analyst expectations. But the company said its gross profit margin would fall this quarter. Intel earned 53 cents a share in the first quarter, down 5% from the year-earlier quarter but 3 cents better than analysts were expecting. Sales rose 0.5% to $12.91 billion, vs. views of $12.84 billion.

Tomorrow’s earnings –

Date After Close Before Open
18-Apr KMP
VMW
MLNX
FFIV
SCSS
PLCM
CLB PII
QCOM
CBST HAL
YUM
EBAY
TSCO

More on the day Ahead

Didn’t I tell you?

Before we move forward –

  • First thing that I did on Sunday night after posting “Deja Vu!” is – I followed my instruction.
  • I sold 60% to 100% of my holdings in most stocks. The ones left untouched were – QCOM, STX and APA.
  • I will add some APA around $85 and some QCOM around $63.9
  • I even parted ways with some of AAPL and PCLN shares. I plan on adding some of them after they correct by 5% or market corrects shows direction .
  • I sold a major portion of my most profitable stocks of the quarter such as AAPL, PCLN, SCSS, CLR, SXCI, HLF, GNC, ALLT, FFIV, F and RHT.
  • I will wait and see the action of top stocks before I make new purchases or additional purchases. Top stocks that I will be eyeing –
    • SXCI
    • AAPL
    • PCLN
    • ULTA
    • TSCO
    • SCSS
    • TPX
    • HLF
    • GNC
    • KORS
    • LNKD
    • FFIV
    • CMI
    • RHT
    • PII
    • ALXN
    • UA
    • STX
    • WDC
    • URI
    • FOSL
  • I sold all the shares of LNKD (a minor portion), WLL (took a major hit), URI and FOSL (recently opened). Last two had gone under water prior to sale.
  • I bought TLT, BLV and RWM as mentioned on Monday morning. First thing in the morning 😉

So this is where we stand today.

  • The market averages fell sharply as the Dow dropped for the fifth day in a row losing 214 points -1.65%.  The S&P 500 lost -1.71% and the NASDAQ was down -1.83%.
  • Down volume swamped up volume on the NYSE by a 13 to 1 margin and by 12 to 1 on the NASDAQ.  Declining stocks outnumbered advancing issues by a 5.6 to 1 margin on the NYSE and 4.6 to 1 on the NASDAQ.
  • Number of stocks above 50 DMA are on a decline.
  • Let’s look at the sectors
Sector name Price from 52 Week high Price from 3 month high
XLE Energy -15.21 -10.48
XLB Materials -13.95 -7.07
XLI Industrial -7.93 -6.58
XLF Financial -10.3 -6.32
IYZ Telecom -16.48 -6.05
SPY Market Index -4.22 -4.22
XLY Consumer Disc -4.12 -4.12
XLU Utilities -5.46 -4.01
XLK Technology -3.08 -3.08
XLV Health Care -2.99 -2.99
XLP Staples -2.65 -2.65

  • The market is approaching oversold territory. Below is the graph of overbought vs oversold stocks.
  • The number of stocks declining to 52 week lows have started to exceed the number of stocks new 52 week highs.
  • Let’s look at some of the declines encountered by the leading stocks.

Good Reads –

  • China surprises with trade surplus (REU)
  • German exports unexpectedly rose (BL)
  • French economy grinds to a halt (REU)
  • European investor confidence sees decline (BW)
  • Top forecasters see euro weakness (BL)
  • U.S. small business optimism falls (NFIB)
  • Weekly retail store sales up +0.5%(ICSC)
  • Skilled-worker visas see surge in demand (WSJ)
  • U.S. profit growth still expected to stall (BL)
  • Goldman’s Dominic Wilson sees more danger (BI)

Poll Time –