It was a short but sweet week, especially if you had some extra cash to spend on the open Monday (we did!). As earnings season kicked off for us (6 of the 30 names in the models reported), I am happy to say we are off to an excellent start. Here is how the models look today, which I thought was a pretty "Good Thursday":
Top 20, where we exited our first position since late February today, had an outstanding week, rising 2.6% and expanding its lead over the S&P 500 by 1.4% YTD. We had a nice snag on IIIN Monday, as it was one of our strong reporting companies, but the strength was diverse. INTC and JNJ were obviously big contributors (also both having reported), but there were many other companies that helped. Of course, not everything worked, but no real disasters.
CG/B advanced a healthy 1.8% and expanded its lead over the 60/40 balanced index by almost 1%. INTC and JNJ obviously helped a lot. Now, if we could just get that other large Technology stock to kick in!
Market Outlook
This was an excellent test of the market early this week (on S&P watchlisting U.S. debt for a downgrade) that leaves me with conviction that we can continue this rally. I have had some concerns about near-term congestion, but I haven't let that influence the portfolios. The key thing to watch in my view remains interest rates. Absent a very large increase, I still believe that we are on a path to 20% return for the S&P 500 (and a very modestly positive bond market return). With the year almost 1/3 over, I find it interesting that the S&P 500 is exactly on track (actually slightly ahead, but the 6.95% includes dividends - the price return of 6.34% is almost exactly 20% divided by 3). For the balanced index, I had projected about a 13% return for the year, and it is currently at 4.59%, perhaps a little ahead of where I expected due to bonds doing a bit better than expected.
Articles
- Gambling Equipment- TradeKing All-Star Blog
- Negative Short-Term on Energy - Seeking Alpha
I want to apologize for a technical problem today. It all started with my oversleeping, but that's a whole other story and something I don't recommend during earnings season. I wanted to sell the stock we sold in Top 20, but I was sorting through various potential replacements. We have a 8:30 EST cut-off, and I got the trade in right about that time. Our goal is to have the trades available well in advance of the market open, but I cut it too close. Most subscribers did receive the alert before the open, but many didn't. The emails were sent in time, but certain ISPs (mine included) are very slow to deliver these types of bulk messages. In any event, there was no harm done fortunately, because the stock we were buying didn't budge all day, and the stock we sold rallied from the open for another 90 minutes or so. While my focus is primarily on picking great stocks and managing the portfolio, delivering a great customer experience is very important to me too.
After a tough start to the year, it appears that we will string together our third consecutive winning month. As I said in early December, when we were sitting on top of the mountain looking down on our benchmarks, it's not in my DNA to rest on my laurels. I don't believe we have stale positions or too many that are overdone to the upside, but I remain vigilant for opportunities to improve both portfolios. My goal (shared on 1/1/11 here) remains to beat the S&P 500 by at least 12% this year and to beat the benchmark for CG/B by 7% or more (that would be a real feat if I am right about the direction of the market). We are ahead of that pace for now in both models, and the only promise I make is to try my hardest. While I don't have anything definite, I do want to share that I have added 5 or 6 new names to my watchlist recently and have several candidates that I deem worthy of consideration in the near-term.
Happy Passover and Easter,
Alan Brochstein, CFA
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