Despite some turbulence today and yesterday, the month is off to a great start. Before I go into the usual review of the weekly performance and my outlook, I want to take a moment to discuss today's trades. In CG/B, we had a position that has gotten much closer to its target price and was too big in my view relative to the opportunity. The stock is a bit overbought and close to resistance. With that said, we kept the majority. In Top 20, we shed a piece of one of our best stocks. What we sold today was the second purchase (as of last night's close, it was up 26% in just four weeks). Our original position was up 62% since 12/3. The stock returns about 32% over the next year if it hits my target, which is well below the average. It is also quite overbought and due for some potential backfill. With that said, I don't expect it to give up much. Our buy would return 46% or so to my one-year target if attained. Hopefully that explains the trades. Here is how we look performance-wise:
Top 20 is ahead of its benchmark by 4.59% YTD and is up 1.1% MTD compared to the S&P 500's gain of just 0.25%. We have been helped by surprisingly robust performance still by our smaller companies - the Russell 2000 is actually down a little MTD now. We also got a boost from our emerging markets ETF as well as a certain Large-Cap Technology company finally bouncing, at least a little.
CG/B is ahead of its benchmark by almost 2% and is up .48% MTD compared to the blended index being essentially flat. Bonds, which we are significantly underweight, are down on the month and benefiting us. After the trade today, we are about 73% in stocks, just under the maximum and well ahead of "normal" 60% exposure, while bonds are at about 21.3% and cash is now at 5.7%.
Outlook
I feel like a broken record, but, for the benefit of those new to the service, I continue to believe that we end the year near 1500 on the S&P 500 as PE ratios expand modestly. While the dip in March was most likely the bulk of the near-term consolidation I was expecting, I think that many stocks are still extended. This is an environment ripe for a change in leadership. I am expecting Energy and Industrials to make room for Financials and Technology to get back in the race. The M&A activity remains quite robust, which suggests we keep our focus on smaller companies despite the overall Small-Cap index being a bit ahead of itself. One of the big focuses in coming months will be the Fed Policy. The market could get nervous about interest rates, but I expect longer-rates to be stable to only slightly higher.
Update on My Own Analyst
Some of you have been asking me about the new service, which is now a little over 5-weeks old and going well I believe. We were able to keep the vast majority of our initial subscribers and continue to refine the offering. If you trade around your positions or are interested in trading stocks off my watchlist or that are interesting due to sharp changes in the price, it might be for you. For more info, check out the new My Own Analyst Brochure
Articles
- Seeking Alpha: Boost Technology and Cut Energy
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- Trade King: Big Cap Technology is Attractive (27 names)
Speaking of TradeKing, I will be hosting a live webinar on Tuesday, May 3rd in the evening. The topic is "How to create and use target prices", a similar presentation to what I will deliver in Las Vegas on May 11th at the Money Show. I will send out details regarding accessing the event as soon as they are available.
Regards,
Alan Brochstein
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