PSB Portfolio Update July 2014

July 17, 2014

Finally Some Action In The Markets

After what’s been a very quiet summer for the US financial markets, this week has finally brought some action.  Just today, a Malaysian airline was shot down in Ukraine.  Investors are showing concern over the possibility of further conflict erupting in the region after this disaster.

In fact, there’s a clear move into safer assets this week with gold and silver up and bond yields down.  It seems clear that geopolitical risk still poses the biggest threat to the bull market.

On the other hand, domestic economic news continues to be solid.  In particular, the job market has improved substantially.  And, it looks like more robust hiring is gaining traction.

Perhaps the most interesting news over the past month comes from the Fed.  In a break from the norm, Fed Chair Yellen said small caps, social media stocks, and biotechs were overvalued.  Clearly, the Fed is trying to reign in potential bubble areas of the market – but this sort of thing is pretty much unprecedented.

While her comments won’t do us any favors, I believe we pick the sort of companies that should continue to thrive.  We typically look for businesses with strong fundamentals and low valuations.

In other words, I expect our portfolio will continue to outperform regardless of the overall small cap market.

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.

. . . . Iridium Communications (NASDAQ: IRDM) – Sell

IRDM has settled in around $8 per share and looks like it could trade sideways for a while, or at least in a fairly narrow range.

The position has been a moderate winner for us for much of the last four months.  But, with limited upside potential at this stage, we believe it’s time to sell.

At current levels, our trade will pull in profits of 28%.  That’s not too shabby considering what the overall small cap market has done over the same period.

Go ahead and sell your IRDM shares here.

. . . . Aware (NASDAQ: AWRE) – Hold

We got some excellent news from AWRE recently.  The company is offering a special cash dividend of $1.75 per share!  That’s obviously a huge perk for those of us who already owned the stock.

Keep in mind, the stock will drop by roughly the amount of the dividend once it’s issued. That’s fine.  We’re getting a huge boost from the dividend that will significantly lower our basis.

Even if the share price never returns to this level, we’re going to make money off this trade because of this huge special dividend.  Good for us!

. . . . Art’s-Way Manufacturing (NASDAQ: ARTW) – Hold

We’ve had ARTW in our portfolio since January and it hasn’t done a whole lot over the first six months or so.  It spiked briefly in April, but has pretty much hung out right around our buy price.

I still like the company.  It’s a well-run business in a niche industry.  At some point, it may get acquired.

But for now, with the stock not doing much, let’s move it from Buy to Hold.  If you already own ARTW, hang on to it for the time being.

Action To Take

• Sell Iridium Communications (NASDAQ: IRDM)
• Move Art’s-Way Manufacturing (NASDAQ: ARTW) from Buy to Hold

 

Category: PSB Portfolio Updates