PSB Portfolio Update June 2012

June 21, 2012

What The Markets Want

What do the markets want?

It seems nothing can satisfy these fickle markets.  The rally over the past couple of weeks was built on hopes for a positive outcome in two events… the Greek elections and the FOMC meeting.

Once we learned the outcome of the Greek election, the markets weren’t satisfied with the result and the S&P 500 sold off.  Apparently getting what you want these days isn’t enough.

After the risk event passed, investors turned their attention to the FOMC meeting this week.

As usual, expectations of QE3 were set much too high, and traders got ahead of themselves.  In the days approaching the meeting, markets rallied in hopes the Fed would offer up more free money to the markets.

Amazingly, the Fed did offer up another round of quantitative easing.  The Federal Reserve decided to extend “operation twist” until the end of the year.

Of course, that wasn’t enough to satisfy the greed of the markets…

Given the stream of poor global economic data hitting the wires, it’s no surprise.Chinese manufacturing has contracted yet again.  In addition, the Philly Fed released data showing US manufacturing has fell to a -16.6 reading.  This is the worst reading since August 2011.

However, all hope is not lost.

Along with the Philly Fed reading, we learned leading indicators beat expectations reaching 95.8.  That represents a rise of 0.3%.

These readings tell me that we may be in the heart of the current slowdown, but the economy may pick up its pace moving forward.

If that happens, we’ll see the markets move higher from here once more.

Now on to 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.

. . . . Phoenix Companies (NYSE: PNX) – SELL

Phoenix Companies continue to watch earnings plummet… growing last quarter’s loss to -$8.1 million for the first quarter of 2012.  In the year prior, PNX turned a profit of $3.6 million.

After watching this stock struggle to hold any gains, we’re selling out our position to put the capital to better use.

Let’s go ahead and sell PNX.

. . . . US Home Systems (NASDAQ: USHS) – HOLD

US Home Systems is on the rise.  Apparently, the home remodeling market is on fire… and USHS is taking advantage.  Last quarter, the company grew net income by 52% to $853,000.  In addition, EPS rose 38% to $0.11.

The best part is, USHS is forecasting revenues will rise in the second quarter of this year.

Since the stock price past our buy up to price, we’re moving USHS from a buy to a hold. Continue holding this stock for much bigger gains ahead.

. . . . JinkoSolar (NYSE: JKS) – HOLD

Over the past week, we’ve seen Jinko move higher in anticipation of earnings.  Even though earnings fell short of expectations, JKS shares didn’t react too poorly.  In fact, we’re still up on the trade.

This could partly be due to the new subsidy just approved in Japan to increase renewable energy.  The decision came in an attempt to reduce reliance upon nuclear energy.  As part of this subsidy, solar prices have been fixed well above the current cost per megawatt for the next 20 years.

That will bode well for margins in future earnings for solar players selling into Japan.  Since JKS past our buy up to price, let’s continue to hold shares for increasing gains in the coming months.

. . . . Aceto (NASDAQ: ACET) – Buy up to $9.25

Aceto recently changed their logo and reorganized their business structure into three segments… Human Health, Pharmaceutical Ingredients, and Performance Chemicals.

Recently, the stock was trading within pennies of our buy up to price.  In addition to the stock’s performance, we just cashed in on our first $0.10 dividend.  That payout represents an additional 2.23% yield.

If you don’t currently have shares of this company, continue to buy ACET for future gains.

. . . . Hawaiian Airlines (NASDAQ: HA) – HOLD

Since our last update, Hawaiian Airlines announced they’re expecting double-digit growth in 2012.  For May, HA’s traffic increased by 6% year-over-year to 782,093.

It looks like investors are finally seeing the value in HA.  In the process, Hawaiian Airlines traded above our buy up to price and is now a hold.

Continue holding HA for even bigger gains.

Action To Take

• Sell Phoenix Companies (NYSE: PNX)
• Move US Home Systems (NASDAQ: USHS) from a buy to a hold
• Move JinkoSolar (NYSE: JKS) from a buy to a hold
• Move Hawaiian Airlines (NASDAQ: HA) from a buy to a hold

Category: PSB Portfolio Updates