Portfolio goal. Growth. This is high beta, unapologetic growth portfolio with some safeguards and some boring investments. The goal remains unchanged.
Basic Principles. Most of the stocks in this portfolio were chosen for long term investment, which, for me, is about 18 months. Every stock is under review all the time, with a major review of the portfolio twice a year. I can trade around any position if I feel like it. The portfolio is not diversified by sectors. Diversification reduces risk, but it also reduces potential gain. No change in basic principles either.
Strategy. As I already mentioned in my blog before, political environment doesn't look good for the economy. Strategy changes: increased cash cushion, reduced long positions, more trading around positions. This estimate is not changed, despite huge bull run on the end of the last year and extremely bearish beginning of 2014.
Paradigm Changers. These are stocks of companies that are changing business in sectors or even in the whole world.
Creamer's recommendation. As a part of research, I visited a local store. And liked it a lot. Company sells various home improvement stuff, mostly restored old furniture and other decorations. There is no real competitor in US, because unlike others, this company got style.
Probably the best Spanish, and maybe European bank out there. High yield, big investments around the world. Bought it because I believe in resolution of Euro troubles. This is also can be placed in International part of the review.
Reduced position since last review.
Risk: Currency fluctuations, more problems in Eurozone.
When Cramer recommended to by Diana Shipping (DSX), I did some analysis. I think material intensive growth in China is over, country is trying to change growth model to less material intensive. Which means less demand for general cargo shipping in the world (i.e. raw materials). Which, in turn, means that DSX is dead money. Not only China demand for raw materiel is not growing, but also a lot of general cargo ships have been built in the last 10 years. Less demand, more supply, no profit. I decided to go with DCIX, because it owns container ships, which should do good when trade is growing. So far, stock didn't live to expectations and I am not sure it's not a mistake.
Risk: multiple risks related to supply/demand in container ship business.
Plan: Not sure. Thinking about it.
Sold Applied Materials (AMAT) since last review. Also bought and then sold FIAT(OTCPK:FIATY).
I wanted to buy cosmetics company for a while. Most of cosmetics are produced by diversified companies, which is not exactly what I wanted. I don't care about toothpaste, razors and cotton swabs. l'Oreal is a pure cosmetics company, located in France, fits the bill.
I have a group of closed-end funds, which are bought when at discount to net asset value or at low premium and sold at high premium. There are two groups of funds: corporate bond funds and muni funds. There are too many of them and they are rotating too fast to present them in the portfolio review. Watch my trades on stocktalk of Seeking Alpha.
Disclosure: I am long ARMH, DSW, DCIX, EADSY, FB, GOOG, HSBC, LRLCY, MMM, PII, RH, SAN.
Additional disclosure: Positions can change any time.
My apologies to my readers. I promised article yesterday, but writing it now, about 10 AM Central time.
So why Airbus (OTCPK:EADSY)? Well, try to find another industrial company which has orders for 8 years ahead. I know another one, Boeing (BA), but Boeing is in US, and one of my investment theses is that Europe just started recovering. So if there is a choice between similar US and Euro companies, I choose Europe.
When I'm looking at Airbus (and at Boeing for that matter), I ignore all noise about new exciting products (A350, Dreamliner etc.). What matters is core business. Core business of Airbus is A320 family. Company has backlog for 8 years at least. Producing 42 aircraft a month is not enough, so company is going to increase output.
As usual, I can't ignore dangers. First of all, it's competition from Boeing 737. But demand is so great, there is a place for both companies (BA also has about 8 years backlog). Second danger is from Bombardier (BORAF) and Embraer (ERJ), both of which are developing their own 120 seat aircraft. This danger is not significant so far. Reasons: planes are not ready yet, they only compete in part of A320 segment, A320 has a very good history with airlines.
Disclosure: I am long EADSY, .
Additional disclosure: I have no positions in other stocks mentioned. Positions can change any time.
When I bought FIAT (OTCPK:FIATY) in November, I listed my reasons. I also mentioned that I like the stock below $8, but might reconsider if it goes up a lot.
Now it happened. Stock jumped because FIAT bought the remaining part of Chrysler. I'm not sure that reasons for this jump are valid, so I declared a victory and closed position. 20% in less than two months is good enough, and I'm not sure stock really worth that much.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
As usual, I'm trying to see market future based on three metrics.
Usually the most important metric. And it's not clear now. On the positive side, economy is growing. Not only in US, in the whole developed world. On the negative, we have two metrics on the top of the range: S&P P/E ratio, currently 20.32, is much higher than average (about 15) and quite high for non-recession times. Profits as percent of GDP, currently above 12.5% before tax, are at all-time high. It doesn't mean that market is at the top. But to make market growth sustainable, GDP should grow faster. Fortunately, it does grow at around 3.5% last 2 quarters. In short, fundamentals are neutral to slightly positive.
They are gr-r-r-r-r-r-reat!. Except for the fact that almost every stock index is overbought. But, as we know, overbought condition can be worked out as a function of price or as a function of time. And trend is your friend (unless it's the end).
Scary. I mean, the sentiment is very, I would say, extremely, bullish. I don't remember such sentiment since the end of 1998. Of course, we had one more year of huge growth left then. But it all ended bad. The only bright spot: most people are still reluctant to invest in stocks, it's still a market for professionals. So there is a room for expansion yet. But if average Joe doesn't come to the stock market soon, things might get really ugly. Because bullish sentiment usually means that there are no buyers left.
I write to explain to myself what I think about market. Started this article with a bearish feeling, which was helped by the fact that the last quarter of 2013 was obviously huge window dressing by (grossly) underperforming funds. But, with technicals very bullish, fundamentals neutral to slightly bullish and bearish sentiment I have to come to conclusion that things aren't that bad and we might still have bull market in 2014. Of course, a lot of things can happen and even without major events market can behave quite unexpectedly. But I think the best idea would be to be brave, take some risks and make money on the long side.
Yes, my investment accounts (not counting one pure fixed income account and retirement accounts) made 23.9% this year! Well, that's below 31.5% of S&P total, but I still have some fixed income and cash on my accounts. My long term performance (since February 1998) jumped 13.8%, which still beats Dow, S&P, Nasdaq or almost any index you can find. Maybe you can't beat the market, but I can. Well, anybody can. It's just a lot of work.
Anyway, I'm raising my champagne tonight for the New Year.
I closed position in Red Hat (RHT) today. Initial idea was to play on cloud, described here. But later on, I started to doubt that PaaS (platform as a service) is a way to go in the cloud. That lead to understanding that initial idea was wrong (here) and that RHT is not the way to play on cloud.
I waited for a better price through this summer and fall, decided to sell into Christmas rally. Because I didn't know the future at the time, decided to sell a half before earnings report and a half after. So it is.
Of course, after company managed to beat the estimates and pop up after earnings report, it's hard to think that decision was right. But rear view is always 20/20. And discipline trumps conviction, greed and anything else.
Yes, I took some loss on this position. Well, good gains are coming with high risk.
I opened position in FIAT (OTC:FIATY) today. There are a lot of reasons.
First of all, I like the cars. 500 (Cinquecento) is a great small car. Fun to drive, surprisingly comfortable and shamelessly cute. On my vacation in Italy last April I drove Alfa Romeo Giulietta. Another great small car, all bells and whistles, fun to drive, beautiful and roomy. In US you can buy a version of Ala under badge of Dodge Dart. It was made longer, wider, but some of design edge was lost, unfortunately.
Yes, FIAT owns most of Chrysler. And I think that collaboration promises to create more great vehicles and more profits for shareholders.
But main reason is expected pickup of vehicle sales in Europe. Europe is coming out of crisis. The process is slow, uneven, messed up by politics, but it's going on. I expect vehicle sales to recover quite soon, because people drive cars in Europe. It might sound surprising, everybody "knows" that public transportation is so good in Europe, you don't need a car. Yeah, right. Almost every family in Western Europe has at least one vehicle, most have one for each adult member of a family. Public transportation can't beat convenience personal transportation provides.
I thought about two companies: FIAT, which is in the best financial health among European auto companies, and Peugeot (OTC:PEUGY), which is the worst. But since spring, Peugeot is up a lot, and financially doesn't look any better than before. FIAT, on other hand, is down about 10% from it's top about a month ago. So FIAT it is.
Make no mistake, no investment is sacred. I'm not sure I'll keep FIAT above 8.50. But at 7.70 (buying price) it looks great.