As I had indicated, we are adding a new name to CG/B and selling one of our winners in Top 20 to buy something more attractive. Both of our buys have a very strange commonality: The CEOs both own well over $100mm of stock. Both companies are in the top decile in my opinion in terms of quality too. The buys also reflect my positive relative sentiment to Large-Caps.
In CG/B, we are selling the rest of a retailer we held for almost a year, booking a 75% gain. While the stock may continue to appreciate, it is equally likely to see some profit-taking unless it surprises to the upside. The risk/reward leaves it only minimally qualified for inclusion in the model. We are taking the proceeds along with some excess cash to add to another retailer with a 3.2% dividend (the sale was a below-market 1.3%) as well as establish a new position in a semiconductor company with a whopping 4.3% dividend. I may be early, but the recent pre-announcement was due to transitory issues rather than any long-term structural problems. I have followed this company for over a decade - it is extremely high quality and less prone to earnings volatility than its peers. The stock is oversold, sitting on some support and not too far from very deep support. I am starting small and looking to add to the position once it has settled down.
In Top 20, we are selling a retailer that has performed quite nicely since we bought it earlier this year. The stock may stall near its all-time high (from 2007), and it offers 25% upside to my one-year target. While I had several candidates to consider, I decided to go back to a Healthcare name that we sold at slightly higher prices earlier this year. The stock ran up sharply to an all-time high after we sold, but it has pulled back substantially though maintaining its uptrend. I view the upside over the next year as about 50%.
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