Sunday Reads & Week Review – June 11, 2017

  • Jeff Miller (WTWA) pointed to this article suggesting that wholesale inventories were declining suggesting slowing economic growth and possible GDP impact.  Here’s a sample quote (bold is my add):
    • “The decline this month was in non-durables. Overally, I believe the rolling averages tell the real story – and they significantly declined this month. There is an obvious growth trendline in wholesale – but this was a bad month.  Inventory levels returned to recessionary levels.  To add to the confusion, year-over-year employment changes and sales growth do not match.”
  • The 10yr note crawled up a bit, S&P500 basically flat, but boy was there a bunch of noise in last week’s market activities.  So easy to get lost in the noise … (taken from WTWA)
  • Another pointer from this week’s WTWA – https://seekingalpha.com/article/4078993-value-valuation.  A solid opinion and teaching piece valuations.  I have my own thoughts on this topic, and slightly disagree with the author’s opinion about holding cash.  I hold cash often and if not, have targets to sell to raise cash; i am a vulture investor.  I try to take advantage of the inefficiencies in the market to purchase companies at a reasonable or discounted price.  Not having cash complicates my vulture behavior.
  • A good summary of GE valuations by Brian Gilmartin https://seekingalpha.com/article/4079472-ge-insider-buying-always-good-sign. GE is one of my top holdings (>5% of taxable account with cost basis of $17.50), and i continue to hold but uncomfortable exceeding my 5% with additional purchases until the sentiment starts to turn … per Brian’s review, it may be at the next earnings report, or trading activity breaking thru $27 or landing on $25.  For me, if it declines below $27 it will be hard to pass for a possible intermediate duration trade (12-18 months).
  • Portfolio changes this week included:
    • the removal of KR.  I made a mistake with the trade and let my emotional attachment to Fred Meyer and KR private brand products cloud my judgement.  The potential capital appreciation and dividend flow were not within my standard guardrails.  I sold with materially a break-even point – no loss, no tax penalty for my mistake.  Fail, fail fast, and learn …
    • the reduction of 75% of FPI due to management performance in my opinion – posted earlier.
    • the trimming of NWN to 50% of position.  The upper levels of valuation were reached, and as a Radar 2 stock, the position was reduced.  My purchase yield on NWN is 4.5% and there are equally interesting yields with greater capital potential (and less loss) than NWN.
    • the re-entry and increase in DSW.  I added to my daughter’s account and re-entered in my taxable at $16.40.  For my daughter’s account, i may sell the higher priced position for loss after 30-day wash.  For my account, a solid entry point before ex-div date, and a solid short or intermediate term trade for another ~5% gain.
  • What is the one company that i want to buy but the stock valuation is not yet right? …. MSFT.  I kick myself as i passed on purchase at $65 thinking that >%60 was better entry point.  MSFT is a missing element in my IOT narrative and i believe the better investment than the data center REITs, DLR or QTS.
  • Positions that could be added next week … PFE, but below $32.  I had opportunity Friday morning, but passed given all the thrash going on within the market and US / UK politics.  New positions on Friday make me nevous at times ….. less rational decision making i guess.
  • Later additions (after the first go in morning)

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