Saturday, October 15, 2016

TLH Weekly Review 10/14/16

"It ain't over til it's over"  Anonymous


It seems the party is over. No I'm not talking about Hilary Clinton and the damning WikiLeak email release. Though it is quite entertaining to see all the dirt come out on her. The next debate will be all the more unpredictable, and that is probably one of the few guarantees in life.

I'm talking about the interest rate plays that were favorites among investors for so long.  I should be more specific though. The party isn't completely over for
Real Estate(+1.2%), Utilities(1.3%), Telecom(0.7%), and Consumer Staples(0.4%) as each sector showed decent gains this week as investors snapped up shares as dividend yields have risen during the fall.  Still these sectors are amongst the hardest hit so far as the poster children for stocks that fall when rates rise.

Visit StockCharts.com to see more great charts.

Just in case you weren't sure the Fed was going to raise rates it was made clear in the September FOMC minutes release.  Everyone is expecting the next hike to come in December and I agree here.  It just makes sense, and we can all breath a sigh of relief that it's finally over when it does come.

Financials such as bank stocks have seen a boost, and continue to be a leader in a higher rate environment. We did get earnings from WFC, JPM, and C this week. The biggest news in my opinion came from Stumpf's resignation from Wells Fargo.  That was for sure a necessary step as he was in charge during the massive defrauding of customers. Each banks earnings were well received by the market for the mot part.

Speaking of earnings next week Q3 earnings start to hit full throttle. The portfolio will have a few names reporting including IBM, and PM.  I'll be eagerly looking to see how the turnaround at IBM is going.  I think the worst is behind us for the stock. I've also noticed they are heavily advertising their Watson program. Hopefully the spending on is paying off. That's what I'd like to see.

Gold and Silver continue to lag. The strong dollar I think will continue to be a headwind for the metals.  A lot of people go crazy over this market. Not sure why.  To me it makes sense to play it only if you are a trader, or holding to play a trend. If you're playing a trend I can see where it makes sense to hold for a few years, but considering there are no dividends or interest it's hard for big institutions  to be buyers. Visit StockCharts.com to see more great charts.



As for the portfolio there was some news. No earnings reports were received this week. Cognizant(CTSH) continues to claw back some of it's improper payment issue's loss.  That just goes to show you how many people hit the sell button now and ask questions later.  I guess I can't blame them.

Hershey's(HSY) CEO announced his resignation.  That's not much of an issue. This is a simple company to run.  Keep raw material costs low, and continue to sell sweet tasty treats for a decent profit. There has been some buzz about sugar sales taxes, such as the recent one in Chicago. I don't see that affecting food products as much as I do beverage products. That's a big factor why I was comfortable going ahead with a buy.  Either way the more I look at the company the happier I am that I added shares. 

Boston Beer(SAM) received a downgrade and that took a big bite out of shares. I'm hoping the worst is behind us after the next earnings report.  This stock unfairly represents a large portion of the portfolio due it's high share price so when it does get it's footing back I'm expecting the portfolio to do really well. Make no mistake this is a well run company. 

The I-Shares Biotech ETF(IBB) took some lumps as Illumina issued some bad revenue news.  That sent the ETF down 6.3% for the week. Ouch!  I've definitely got my work cut out for me the rest of the year.

The portfolio was doing a nice job outperforming SPY for awhile, and it's taking a breather now.  I'm confident once a few sectors prop back up we'll be right back on track.  Once SAM, IBB, and the tobacco names regain some footing I expect the portfolio to leap ahead.

Cheers,

The Long Haul Investor



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