PSB Portfolio Update January 2013

January 17, 2013

The Rally Keeps Rockin’ Well Past New Year’s Eve!

For equity investors, the rally has kept on rolling along in 2013.  In fact, we’re looking at a 3.3% gain on the S&P 500 index in just a couple of weeks.

As I’m sure you know, small cap investors like us have even better.  Take a look at the chart of the iShares Russell 2000 index (IWM)…

Over the past quarter, the small cap index has gained more than 7.52%… with roughly half of that coming in the first two weeks of 2013.  If we look back even further, we’ll find a 6-month return of 11.5%!

We’ll get back to performance in a bit…

While past performance is nice to see, it doesn’t tell the story of where we are heading. And that is sometimes a bit unclear.  With the Fiscal Cliff in our rear view mirror, we have primarily two drivers in the coming months ahead.

First, is earning season.  While things seem to be off to a good start, we have to wait and see how everything pans out.  I’m going to suggest that earnings for this past quarter were better than expected for most companies… but not for all.  In other words, when the pundits are done “grading” this earnings season, I think we’ll get some pretty good grades all around.

Second, the upcoming debate over the debt ceiling and further sequester negotiations are certain to drive the markets crazy.  That is, unless, they have the faith that Congress will yet again make the right decision and get the job done- even if it’s at the 12th hour.

If the markets react to the debt ceiling like they did to the Fiscal Cliff negotiations, then investors simply need to stay put.

Ultimately, after that we’ll have to see how the economic data rolls out over the next couple of months.  That will give us better insight into Q1 and Q2 this year.

Moving back to the portfolio performance, we’re seeing some huge winners right now in CSV, KKD, CFI, JKS, NLS, and TA.  They’re up by 145%, 92%, 84%, 80%, 49%, and 30% respectively.  We have FAR more positions up than down right now.  So let’s take a closer look at some of the key developments.

Here are the position updates…

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.

. . . . Security National Financial (NASDAQ: SNFCA) – SELL

The rally in SNFCA shares has simply failed to continue as I thought it might.  Really, the company isn’t doing anything wrong here.  However, it’s going to be tough going when we look at quarter to quarter comps.  And I’m worried it may take some wind out of the sails at SNFCA.  We just picked up a 5% dividend last week, so let’s walk away with nearly a double on this investment.  Congrats!  SELL SNFCA.

. . . . TravelCenters of America (AMEX: TA) – HOLD

I’d say we couldn’t have timed our purchase of TA any better.  In fact, we’re looking at a 35% gain on this investment in about six weeks!

The story is still the same at TA- if you buy the American growth story… then it’ll just happen to boost the trucking sector.  Hold TA.

. . . . Nautilus (NYSE: NLS) – HOLD

NLS released their estimated Q4 results yesterday, announcing operating income from continuing operations increased by roughly 50%!  What’s more, they’re seeing EPS for the quarter to be between $0.21 and $0.23.

The news sent shares screaming higher this morning to reach $4.86, or an overnight jump of more than 15%!

At this point, our trade has returned over 50% so far.  We’ve done our homework, so let’s continue to reap the rewards of holding NLS.

. . . . Great Panther Silver (AMEX: GPL) – HOLD

Great Panther is surprisingly the worst performing stock in our portfolio right now… it’s down by 20%.

The company just released fourth quarter and annual production for 2012, and it’s pretty impressive.  Metal production increased by 8% over the 2011 fiscal year, reaching 2.38 million ounces of silver.

Silver production increased by 4% to 1.56 million silver ounces, with gold production jumping 36% over 2011 reaching 10,923 ounces.

With the new projects set to come online later this year, there’s plenty of potential for a turnaround in GPL.  Continue to hold shares in anticipation of such a rebound.

Action To Take

• Sell Security National Financial (NASDAQ: SNFCA)

Category: PSB Portfolio Updates