PSB Portfolio Update May 2015

The Summer Doldrums 

US equities are setting record highs again this week. While stocks are moving more sideways than up, we’re still clearly in the midst of a bull market.

The S&P 500 is up 1.5% since our last update, and has climbed 4% for the year. In the meantime, small caps stocks (as represented by the Russell 2000 index) are down small over the month, but are still up 5% for the year.

The move from small caps to large caps is most likely due to standard asset allocation shifts. Investors may be looking to lower risk a bit as we head into the summer. Overall, there are no major red flags in regard to small cap investing.

In fact, just look at our portfolio…

Not only have several of our positions reached new highs, but some returns have exceeded 100%. In general, the last couple months have been very good for our holdings.

With earnings season pretty much done with, it’s time to head into the summer. The hot months are typically a slow period for the financial markets, with a lot of sideways action in stocks.

With geopolitical risk lower than it has been in recent months, the summer of 2015 is also likely to be fairly tepid. Of course, you never know for sure. Still, I’m not expecting a whole lot of action in the stock market.

Regardless, I fully expect out positions to continue to thrive.

Now, let’s take a look at a few of our more interesting positions.

Position Update

. . . . JAKKS Pacific (NASD: JAKK) – Hold

JAKK, our trade from just a couple weeks ago, is off to a hot start. The toy and game company is already up 12% for us. Not bad for a two-week return!

There isn’t one single thing driving the stock higher. Although, as I said in the trade summary, the shares are clearly undervalued. Basically, several analysts are seeing this as well, and have begun to revise earnings estimates higher.

With the shares trading at just around 9x projected earnings, there’s still plenty of room for this position to run. With the recent surge, I’m moving JAKK to Hold.

. . . . Marchex (NASD: MCHX) – Hold

Another recent position that has taken off for us recently is MCHX. The stock is now a 23% winner. Once again, for three months, that’s an excellent return.

Marchex has a couple really good things going for it. First off, the company posted a healthy profit of $4.6 million during the first quarter on sales of $42.6 million. Secondly, the company just issued a $0.02 dividend, which effectively lowers our buy price to $4.04.

Between the good earnings news and the dividend, it’s no wonder investors are becoming interested in buying MCHX shares. With the strong month, I’m now moving MCHX to Hold.

. . . . Carriage Services (NYSE: CSV) – Hold

CSV is easily our oldest position in the portfolio. Believe it or not, we’ve had this stock for over four years. While many of you may not have been around when we bought these shares, I just wanted to point out another recent milestone.

First off, the position is now an over 400% winner! It’s currently up 405%, very near the portfolio high. How many stocks out there can give you that kind of 4-year return?

What’s more, the company just issued another dividend. Over the four years we’ve held CSV, we’ve now accumulated 45 cents of dividends. It’s one of the reasons why this stock has been such a valuable investment.  

Action to Take 

• Move JAKKS Pacific (NASD: JAKK) from Buy to Hold
• Move Marchex (NASD: MCHX) from Buy to Hold

Category: PSB Portfolio Updates