PSB Portfolio Update August 2012

| August 16, 2012

August 16, 2012

Stocks Gearing Up For A Breakout

Last month at this time, we talked about the pending rally in the major averages.  I pointed out stronger than expected US corporate earnings had started the initial leg up.

Also, a fresh batch of Chinese and US stimulus seemed to be the in cards.  But what really caused the rally to take off was the support for the Euro we heard from ECB President Mario Draghi.

In the process, the S&P 500 regained the critical 1,400 level… just 19 points away from a 4½ year high!

That was a week ago…

Since then, stocks have simply bounced up and down around this level on flat to positive economic data.  Given we’re in August, most traders are on vacation causing very light volume.  In addition, there’s a lack of headlines from Europe which is also keeping volatility and volume in check.

Basically, we’re in a “wait and see” mode regarding Fed or ECB stimulus…

While that’s been going on, our portfolio has seen some nice gains overall, and even larger gains in a couple of holdings.  Both FSI International (FSII) and US Home Systems (USHS) benefited from very positive company specific news.

We’re talking massive double digit gains over the past week alone!

In summary, stocks will continue waiting for word on new stimulus.  Given the technical resistance at 1,419 on the S&P 500, we’re going to need a major catalyst to break through this level.

Good or bad, stimulus is exactly what traders await.  In the coming weeks, we should have more insight into exactly what the major central banks might do.  If stimulus is announced, watch stocks breakout with vigor.

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.

. . . . FSI International (NASDAQ: FSII) – SELL

Shares of FSII screamed higher as they announced the merger with Tokyo Electron Limited.  The agreement will net FSI International $6.20 a share.  This represents a 75% gain on our initial purchase of $3.54 a share.

Since the stock’s future gains are limited, it’s time to cash out for a major profit… congratulations!

Let’s go ahead and sell FSII and cash out for a 75% gain in the process.

. . . . Magnetek (NASDAQ: MAG) – SELL

Since we purchased MAG back in February of 2011, it’s struggled to hold early gains.  In fact, shares have been unable to regain our initial buy price.

Even as earnings continue to grow at MAG, investors are focused on the most recent quarter’s slowdown.  Both revenue and operating profits have fallen this quarter from the previous year.

Let’s sell shares of MAG and use the capital for more profitable future trades.

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

Just like FSII above, USHS shares are benefiting from an acquisition.  It seems Home Depot has offered up roughly $12.50 a share for US Home Systems stock.

While the board at USHS has unanimously accepted Home Depot’s $93.8 million offer, securities attorneys are filing lawsuits in hopes to get more cash for shareholders.

Before this huge gain evaporates, let’s cash in for a 50%+ profit!  Congrats to everyone on a successful trade.

Let’s sell shares of USHS for a 50%+ gain.

. . . . Metalico (AMEX: MEA) – HOLD

Metalico shares have rebounded nicely from their sub $2 level.  Earnings release this past week helped drive this stock higher.

While the quarterly results themselves weren’t all that spectacular, the outlook in the ferrous and minor metals market for the remainder of 2012 has improved.  As a result, we’re going to continue holding shares of MEA in anticipation of a stronger turnaround in the scrap metal market.

Continue holding shares of MEA for future gains.

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

Carriage Services continues to make new highs for us, reaching $8.94 just yesterday.  As a result, CSV remains a top performer in our portfolio.

Continuing the positive news trend, CSV just announced they’ll be paying out a quarterly dividend of $0.025 to shareholders of record as of August 17th.  That will include us.  In addition, the company is preparing to secure a new credit facility that will provide better terms… dropping even more profit to the bottom line.

Continue holding CSV as we near our $9.40 price target.

Action To Take

  • Sell FSI International (NASDAQ: FSII).
  • Sell Magnetek (NASDAQ: MAG).
  • Sell US Home Systems (NASDAQ: USHS).

Category: PSB Portfolio Updates

About the Author ()

Comments are closed.