I would rather forget last month. After nine months of gains, I hit a nasty double digit loss. In truth, this sort of thing was inevitable and the preceding months were as much a part of the process as last month was. The previous month’s write-up and links to others can be found here. I do this stuff because I happen to believe that anyone writing about investment should disclose his own performance.
The weakness at International Business Machines Corp. (NYSE:IBM) and Citrix Systems, Inc. (NASDAQ:CTXS) was a bit more predictable and I topped up on both. I suspected tech would be weak over earnings and held back buying more before their earnings. In fact, this approach helped me avoid disasters in companies I like and have held before, such as Fortinet Inc (NASDAQ:FTNT) and F5 Networks, Inc. (NASDAQ:FFIV). It was definitely a month of dodging bullets! I’ve put some performance charts at the end of this post for those interested. I will update my current portfolio on my blog in a few days.
For now, it’s the usual format of reviewing the articles for January (i.e. three months previously) and picking out some investing ideas that readers might find useful. The companies in bold are those that I hold now. Acuity Brands, Inc. (NYSE:AYI) was sold because it hit its price target. F5 Networks, Inc. (NASDAQ:FFIV) was sold because it hit its target and my general tech caution.
| View | Company + Article Link | Performance Since Fool Article |
| Buy | -4.8% | |
| Buy | 19.1% | |
| Buy | 8.1% | |
| Buy | 3.9% | |
| Buy | .2% | |
| Buy | 14.5% | |
| Positive | Acuity Brands | 10.4% |
| Positive | Intel Corp (NASDAQ:INTC) | 14.3% |
| Positive | Capital One | 3.8% |
| Positive | F5 Networks | -39.8% |
| Positive | 8.3% | |
| Evaluation | Covidien | 6.9% |
| Evaluation | Cooper Companies | 13.1% |
| Evaluation | Fastenal (NASDAQ:FAST) | -2.1% |
| Evaluation | Perrigo | 13% |
| Caution | PPG Industries (NYSE:PPG) | 6.7% |
| Caution | MSC Industrial | 3.8% |
| Caution | Varian Medical | -11.8% |
| Caution | Quest Diagnostics | -.7% |
| Caution | Check Point Software (NASDAQ:CHKP) | -4.4% |
| Caution | Dover Corp | 1.6% |
| Caution | McDonald’s | 7.5% |
| BUY STOCKS | 6.8% | |
| NON BUY STOCKS | 1.9% |
Superficially these numbers look good, but let’s recall that the S&P 500 has put on over 12% in 2013. The ‘buy’ stocks averaged 6.8%, ‘positive’ recorded (0.6)%!, ‘evaluation’ returned 7.7%, and ‘caution’ did 0.4%. The difference between what I bought and didn’t was 6.8% to 1.9%.
Some observations and conclusions
- It’s been a relatively tough period for tech stocks like Fortinet, F5 Networks, IBM, and Citrix, and cyclicals like Dover Corp (NYSE:DOV), Fastenal Company (NASDAQ:FAST) and MSC Industrial Direct Co Inc (NYSE:MSM).
- The defensives are starting to look fully priced with nice gains for The Cooper Companies, Inc. (NYSE:COO) and Perrigo Company (NASDAQ:PRGO).
- Tech ‘value’ ex Intel Corporation (NASDAQ:INTC) and Check Point Software Technologies Ltd. (NASDAQ:CHKP) hasl helde up better than the growth tech stocks.
- Nothing but nothing seems to stop the market wanting to buy yield with stocks like Johnson & Johnson (NYSE:JNJ) and McDonald’s Corporation (NYSE:MCD).
In conclusion, think it’s time to start thinking about buying some select industrial and/or technology stocks.
Some stocks to consider
With these thoughts in mind, I think Intel Corporation (NASDAQ:INTC) and Check Point Software Technologies Ltd. (NASDAQ:CHKP) are worth a look. I’ve covered both after their recent results in articles linked here and here. Intel Corporation (NASDAQ:INTC) is a curious beast in the market place. It offers a high yield, good value, and cyclical exposure to consumer electronics, but it is also faces long-term challenges from ARM core processors. It also offers a restructuring story as it adjusts to the shift in computing devices. Gross margin appears to be bottoming and while it hasn’t turned the corner yet ,the potential upside in the stock remains.
As for Check Point, in retrospect, its last results were okay and there are some signs that its customers are more willing to buy its new products. Like Intel Corporation (NASDAQ:INTC), it offers a genuine value proposition because of its high cash conversion and potential to leverage its technology into expanding its sales. On the other hand, I think the market is tired of seeing falling product and license growth and a ‘cash harvesting’ approach to its business development. If that should change, I’m sure the stock will go higher. But will it?
The next two stocks are both industrials. I still think Fastenal Company (NASDAQ:FAST) is expensive and am concerned with the falling sales growth, but if you are looking for some short-term upside from the idea that industrials will come back then, it is a great stock to look at. Its visibility is limited and it is exposed to short cycle decision making by purchasers, all of which leaves it susceptible to violent changes in sentiment by its customers. Bad when it’s bad, good when it’s good. If you like the industrial space and want a near-term play, then Fastenal is worth picking up.
Another industrial worth considering is PPG Industries, Inc. (NYSE:PPG). I like its end market exposure and its purchase of Akzo Nobel’s U.S. household paints division. Aerospace and automotive are the two stand out sectors within industrial, and PPG Industries, Inc. (NYSE:PPG) is well placed in both. Its long-term dividend record is excellent and it is a very good generator of cash and has the potential to generate some synergy-based cost savings with the acquisition. Despite reporting a good quarter — notably better than so many other industrials — the stock has lagged the overall market and looks decent value. I may pick some up.
The last stock for consideration is Capital One Financial Corp. (NYSE:COF). The stock has underperformed this year and the credit card companies do face challenges to net interest margins thanks to low interest rates and the maturing of higher rate loans. Moreover, the weak recovery has left the yield curve relatively flat and loan demand is not where it usually is at this stage of an economic recovery. No matter, if you believe that employment will keep increasing and the recovery is ongoing, then at some point demand will come back. Meanwhile, asset quality and delinquency rates carry on improving so Capital One Financial Corp. (NYSE:COF) is well positioned to catch an uptick in end demand.
Additional data
As discussed above, here is how this lousy month affected performance since inception. The blue line is my portfolio the red line is the S&P 500.
The article What I Bought and Sold This Quarter originally appeared on Fool.com and is written by Lee Samaha.
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