I am fairly comfortable with my current holdings. I have >15% cash in taxable, and plenty of dry powder in nontaxble accounts as well. I will continue to look for opportunitistic profit taking in the Radar Position 2 companies, and writing covered calls for some others. Over the next few weeks, i think the 10yr Treasury is the key indicator and it will be watched carefully … i read somewhere this weekend that 2.4% on 10yr is a critical point. that is about the point where i am willing to take positions in the 7-10yr durations – investment grade muni and corp (not sure about treasuries).
For new positions or building existing ones, the favorites remain (pending logical entry points): STAG, QTS, MSFT, SWKS, CSCO and APPL. Of all these, MSFT is probably my favorite. Shorts being considered though too early on all 3 right now: THO, NFLX and NVDA.
Here is an interesting article from SA this morning … now the content itself is a bit hazy and incomplete, but there is a very good data insight that cannot be emphasized enough … maybe it could be called the importance of ‘mathmatical context’. In our increasing use of headlines, tweets, and other ‘snackable’ information, context and understanding are secondary. For investors, that surface understanding can cost us …
“Just as logically, there should be some “proportionality” to yield curve tightening. While today’s yield curve would require only an 85 basis increase in 3-month Treasuries to “flatten” the yield curve shown in Chart 1, an 85 basis point increase in today’s interest rate world would represent a near doubling of the cost of short term finance. The same increase prior to the 1991, 2000 and 2007-2009 recessions would have produced only a 10-20% rise in short rates. The relative “proportionality” in today’s near zero interest rate environment therefore, argues for much less of an increase in short rates and ergo – a much steeper and therefore “less flat” curve to signal the beginning of a possible economic reversal.”
Closed FPI position (last remnents of a speculative REIT purchase) – first time was on earnings and discussion, and this last time was on inconsistencies from the CEO on up-coming lease renegotiations. This is just a bad picture forming and i do not have the stomach or patience to wait and watch dishonest / obscurely speaking CEO. I swallowed a 9.5% loss in non-taxed account for this mistake. Key learning from this mistake … do better research on the CEO, the company promises (and how they’re kept), as well as stronger competitor analysis.
NWL position was reduced by 30% in taxable account. My cost is <$12/share, but i am just running out of confidence in consumer, as well as taking an opportunity to reduce my investments in oil-based plastics. This was simple housecleaning, no message to risk / reward for the company other than the macro consumer fatigue that i see looming on the intermediate horizon.
TJX position was reduced as well by 30% in taxable account. The position sold cost was >$77, and i just did not see the patience path to profit and i had gains to offset … take the loss and focus on the lower priced positions that actually have profit potential in near/intermediate term. TJX is completely out-of-favor, and i have paid the price for underestimating the negative sentiment. Key learning from this mistake, exaggerate the risk discount in price targets … i was 10% off.
I still have a very small position in FPI … waiting for the dead-cat bounce to make next decision, and the time is nigh. Two recent articles in SA help a bit, but for me i am not patient enough to wait this one out. I will take my money and go play somewhere else.
Probably the icing on the cake for my decision is the distrust of CEO now established with his inconsistent narrative on lease renewals, as well as the renewals scheduled over next 24 months. Risk for surprises is just too high.
here is a pretty good graphic from Bespoke – https://www.bespokepremium.com/think-big-blog/fang-trading-range-screen – the number of OB stocks suggests time for the short side of the market for those wanting a bit of a trade?
- love point they are trimming portfolio and reinvesting proceeds for future rather than giving it all ack to shreholders
- analyst focus is pharma
- there were good points made about jnj credo and a bit of tranparency on drug pricing
more finacials this weekend
Not sure i agree with the investment conclusion, but its rational and holds together based on the data analysis.
Personal Portfolio Commentary
- sold all of my WTR >$33.00 (sell target within Radar Position
- added an incremental slice to T (intend to add more if price continues to drop >of 5.75% yield
- cannot speculate on probability either way)
- T becomes one of largest taxable holding
- targets this coming week
- CTWS liquidation
- NWN liquidation
- Select REIT out-of-money (OTM) call sales
I took a ‘buy along the way’ dollar cost averaging approach to increasing my portfolio position of Radar 1 stock T. Add on price was $36.20, and overall position in taxable account (the only account w/ T holding separately – not in ETF or Fund) to 5.87% making it one of my top holdings w/ only BMO the same size. The new addition lowers my cost basis to $36.89; an unfortunate negative position. I am prepared to take an equal size (or larger) addition but only after Q2 earnings and the TWX event is resolved.
i have been watching EMB for some time, and just could never pull the trigger. In part due to things like this article https://seekingalpha.com/article/4087450-dangerous-emerging-markets-dollar-debt, and the other part is the thinly traded ETF and all the concerns with a potential vicious cycle in such ETFs. (as The Heisenberg as repeatedly pointed out https://seekingalpha.com/author/the-heisenberg/articles#regular_articles). One idea that i will take a closer look at is individual countries with lower risk, e.g., Chile, Poland and Malaysia.
The FED and labor. Another one of those articles that are definitely worth reading regardless if you agree or not – https://seekingalpha.com/article/4087457-yellen-employment-policy-errors. A couple of obvious things to note: a) data headlines are dangerous if you do not understand the real data and who takes the time to do that? b) there’s usually more than 1 way to tell the story with the same data, and c) things are not as they seem – population growth and employment growth twin data trends – looking at employment without population growth is like looking at the kitchen output without noticing how much is getting eaten.
As my weekly update pointed out, i identified 3 companies in my radar #2 space that just did not hold sufficient potential growth rates or income streams. They are on the selling block. Today, WTR crossed $33.00 / sh, and i sold my remaining small position at > $33. More cash in the taxable account where better opportunities are surfacing.
This week may be a bit longer than normal after a week off and too much gnashing of teeth over reallocation decisions.
- Another great roundup of recent analysis and news; many of commentators and referenced sources are in my standard readings. i still believe that Q2 earnings reports will have major influence on all things stocks for 2nd half of 2017 – https://seekingalpha.com/article/4086427-s-and-p-500-weekly-update-fireworks-another-dow-theory-buy-signal
- a short example of why the headlines on a data set may not always tell the whole truth … the disection of jobs numbers is much more important than the overall jobs added or unemployment rate reported. where were those jobs and are they creating growth or maintaining the current picture –
- GE … i own it. think that it’s getting fairly priced (for an entry point), but i just cannot pull trigger to buy more when so much of their business is tied to either oil / gass or nukes. My cost basis is <$14, so i doubt i will sell soon, but can’t buy more. https://seekingalpha.com/article/4086226-general-electric-buy-dip-will-last
- S&P earnings are going to be interesting and as stated before an important pivot point (personally, i am looking at revenue and forward looking statements – not so much the absolute values but the confidence with which companies talk about the next 6 months … less uncertainty or more headwinds, which will it be?). FactSet has the overview data of reportings. https://insight.factset.com/earningsinsight_07.07.17
- Jeff Miller pointed to BLS data on unemployment and astutely points out the margin of error (confidence intervals with the data) … for us data geeks, this is an important view, as so many commentators bounce off an absolute number rather than the range, and the 90% ranges are fairly large. https://www.bls.gov/charts/employment-situation/civilian-unemployment-rate.htm
- Great quote from Jeff Miller’s weekly update this week https://seekingalpha.com/article/4086455-weighing-week-ahead-seinfeld-market
- “Stock market valuation. Stocks overall seem mildly attractive if you consider expected earnings and interest rates. More importantly, some are significantly overvalued and others are attractive. Stock and sector picking are more important than market valuation.”
- Watch for Brian Gilmartin’s update later today for S&P earnings update http://fundamentalis.com/?p=7050
Top Watch Items for this up-coming week (possible entry points)
- ETF – EMB
- REIT – STAG (this selection is biased toward my narrative, rather than absolute value entry point – target @ $25)
- IOT – still up in the air between (T, CSCO and SWKS) … if i had to bet on it today, i would select both CSCO and SWKS
- Health – PFE (my position is 2/3 complete), though from a delta to target pricing perspective, OMI is better priced (just not convinced yet of OMI business promise)
- Consumer – TJX and TSCO (but read below)
Recent falling knife catching exercises – a mini post-mortem
- TSCO has been one of my recent disasters. I bought it all the way down, basically starting at $58/sh. I thought a floor was established $51.50, but when the price declined to $51, i sold 50% (the most expensive shares) taking a 12% loss. Commentary: i recently made two mistakes (VOD and CAH) selling too soon, so i held TSCO longer than i really wanted to. My initial stop was pegged at $52, and i did not pull trigger. My take-away is to have a more formal 3-phase dashboard when prices are pushing on sell limits — and hold myself accountable to taking the prescribed actions (not ‘hoping for a bounce’)
- Yellow Alert = <-2% loss
- Orange Alert = <-5% loss
- Red Alert = <-7% loss
- Action can be taken at any alert level, but a sell must be triggered at Red alert.
Possible trimming and cash building
- WTR above $32.50 and ideally >$33.00
- NWN above $62.00
- CTWS above $57.50
Jeff Miller’s Weekly Indicators
This is an interesting graphic … not sure the value other than “hmmm…”