PSB Portfolio Update August 2014

August 21, 2014

Will The Markets Be Able To Withstand Geopolitical Turmoil?

US equities have been surprisingly resilient while much of the rest of the world is dealing with political, economic, and downright hostile situations.  Despite the turmoil, it hasn’t stopped the S&P 500 from returning to record highs.

Basically, the strength of the US economy is making American companies into the only safe-haven equities in the world.  However, the success hasn’t transferred to small caps.

In fact, the Russell 2000 is essentially flat on the year.  You see, while US equities are considered safe overall, riskier investments (like small caps) aren’t exactly en vogue.

However, the Russell 2000 has climbed significantly from its bottom in early August.  And, we could be on the verge of an upside breakout.

In the meantime, investors will be playing close attention to the combative situations in Ukraine, Iraq, and Israel.  US markets will also closely follow the economic health of China and Europe, and to some extent, Japan.

Fortunately, the US economy continues to thrive.  The job market is definitely on the upswing. And, it looks like housing has rebounded.

As long as the economy shows growth, the stock market should continue to hold its ground.

Now, here’s a closer look at some of our positions.

Position Updates

Please Note:  We don’t necessarily update every open position each month.  We focus on the positions experiencing significant news, notable price movement, or a change in recommendation.  Please refer to the Performance page on our website for our current buy, sell, or hold recommendation for any positions not mentioned in the Update.

. . . . Nevsun Resources (AMEX: NSU) – Hold

Copper miner NSU continues its slow, steady grind upward.  The company has been as high as a 20% winner for us recently, and could be consolidating for a much bigger run higher.

In the most recent quarter, NSU accelerated production, sales, and net income.  It’s hard to argue when all three key areas are improving.

Yet despite strong results, the stock is trading at just 7.8x projected earnings.  In other words, the share price seems to be trading at an attractive discount (which could easily translate to more investors buying in).

Let’s hang on to NSU shares for bigger gains ahead.

. . . . MicroFinancial (NASDAQ: MFI) – Buy up to $8.20

After not doing much since we bought the stock, MFI has finally surged back to our buy price.  With the stock sitting at the 200-day moving average, it could be setting up for a nice move higher.

More importantly, the company issued a dividend on July 31st for $0.07 per share.  That effectively lowers our buy price to $7.89.

With the stock back in play, we’re lowering the buy up to price to $8.20.  Go ahead and buy the shares if you haven’t done so already.

. . . . American Electric Technologies (NASDAQ: AETI) – Sell

AETI, a provider of power delivery solutions to the energy industry, seemed like the kind of company which could offer some excitement to shareholders.  But, the stock has barely moved an inch since we bought it.

Even the spinoff of one the company’s business units has barely registered as a blip on the stock chart.  That’s not the sort of investment we’re looking for.

While I like the company’s products, it doesn’t seem there’s as much upside to this investment as we normally like to see.  Moreover, with the share price trading just above where we bought it, we can exit without a hassle.

Let’s sell our AETI shares here and redeploy the capital for more exciting opportunities.

Action To Take

• Sell American Electric Technologies (NASDAQ: AETI)
• Move MicroFinancial (NASDAQ: MFI) buy up to price to $8.20

 

Category: PSB Portfolio Updates