We have a few trades for Conservative Growth. We are reducing our exposure to one of our Consumer Discretionary names for a few reasons. First, it has rallied almost 10% since we added to our position three weeks ago despite some softness in the overall market. Second, the return to my target is the lowest of any stock in the model (27%). Third, while I like the story, the company is leveraging its balance sheet further to repurchase stock, leaving it a bit less "conservative" than I would like it to be. Finally, the stock is a little overbought. Looking ahead, we will likely sell the rest of the stock, but, for now, the near-term trends seem positive (riding a big share repurchase).
We are adding to the small bank, which we had trimmed to make room for another bank. It has fallen over 10% in just three weeks. This stock offers 44% to my target. We are also adding to our Energy position, which offers a return of 53% now to my target. The whole sector has been weak, but this company has been in the news due to a Brazilian oil spill. I am not too concerned about the ability of the company to cover any liability. We had trimmed it to purchase the stock we are now trimming. To put this trade in perspective, the stock we are selling has rallied almost 10%, while the stock we are buying fell over 8% in just three weeks. On 1.5% of the portfolio, this 18% swing resulted in an enhancement to the portfolio of over 0.25%.
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