PSB Portfolio Update March 2014

March 20, 2014

How Will Geopolitical Risk Impact The Markets?

Equities markets have recovered nicely, but there’s still quite a bit of risk on the table. The S&P 500 is up around 1.3% from this time last month but the general trend continues to be upward.

The big news, of course, is Russia’s annexation of Crimea.  While the actual economic impact to the Ukraine of losing Crimea is minimal, it’s the politics that matter.  Russia is setting a terrible precedent – to the point where the developed world has no choice but to take action.

In this case, those actions are sanctions. It shouldn’t impact US companies all that much, but anytime geopolitical risk increases by a hefty amount, there’s always a risk of it escalating into something more.

And don’t forget, a slowdown in China does pose a serious risk to global economic health. In fact, a potential economic slowdown in China is probably a bigger concern than what happens with Crimea at this point.

At least the US economy is recovering from the harsh winter.  Economic reports continue to improve, including better than expected housing data (permits) and labor market numbers (jobless claims).

It will be interesting to see if the positive domestic news is countered by the volatile overseas risk.  Right now, overall market volatility remains low.  But, that could easily change on short notice.  Stay tuned.

Now, on to the portfolio.

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.

. . . . Odyssey Marine Exploration (NASDAQ: OMEX) – Hold

OMEX has been a strong position for us so far and is currently up 34%.  It’s been as high as a 49% winner.  Not bad for a 6-week gain.  We basically bought the stock right near its 52-week low.

The shares are performing well at least in part due to its strong fourth quarter results. Revenues jumped 118% year-over-year on sales of recovered silver.  Meanwhile, profits came in at over $10 million for the quarter.

The company may post choppy results due to the nature of the industry (salvaging shipwrecks).  However, the long-term fundamentals look strong.

Hang on to your shares as OMEX has a bright future ahead.

. . . . Skullcandy (NASDAQ: SKUL) – Hold

SKUL is exploding higher on great news!  Our position is up 79% after hitting a brief high of 109% gains.

Here’s the deal…

The company blew away earnings expectations for the fourth quarter.  SKUL’s EPS came in at $0.13… way above the consensus estimate of $0.09.  The strong results were due in part to shrewd cost cutting measures taken on by management.

Even better, SKUL raised full-year guidance by a decent clip.  That suggests it could be a very good year for the company.  Let’s continue holding our shares for even bigger gains.

. . . . Aceto (NASDAQ: ACET) – Hold

Another quarter has passed us by, so we’ve collected another $0.06 dividend from ACET. That lowers are basis to $7.71 a share and means our current gains are a whopping 161%!

While we don’t normally focus on dividend stocks in this service (small cap stocks issuing regular dividends is fairly unusual), it just goes to show how valuable dividends can be.

Now, I prefer high growth small caps over income stocks, but it’s certainly not a bad idea to have a couple strong income stocks in our portfolio.

Let’s keep holding ACET, and keep collecting those dividends.

Action To Take

• None at this time

 

Category: PSB Portfolio Updates