PSB Portfolio Update December 2012

| December 20, 2012

December 20, 2012

Santa Comes Early… Or Is It A Fiscal Cliff Finale?

Is the Santa rally a bit early this year?  Or is the latest run in stocks all due to the improving negotiations in Washington?

It’s looking like a little of both here…

The Santa rally is traditionally a term we reserve for a rally happening the week between Christmas and New Years.  But it’s looking as if Santa’s arrived earlier than normal.  The Santa rally is often the result of hedge funds buying stocks in hopes of making their portfolios look a bit better in the fourth quarter.

But the recent move higher appears to have originated as a result of level headed talk between Washington and the Republicans.  It appears as if the gap in “Fiscal Cliff” issues has been narrowing closer in recent days.

And judging by the political positioning, a final deal may be just around the corner!

If a Fiscal Cliff deal arrives before Santa does, we’re sure to see the ignition of a major stock rally.  You see, the entire issue of the Fiscal Cliff revolves around the budget and tax changes set to take place come January.  It’s believed by many that these changes could take the US economy off a “cliff”… so to speak.

But a deal to avert the existing preset tax and spending changes could keep the US economic recovery going.  Once passed, the belief is that businesses will have the ability to forecast spending without fear of how tax changes would impact them.

This could, in turn, lower unemployment and improve just about every single sector of the American economy.  That’s why a last minute deal is not just good for US stocks, but the entire economy.

As part of the run up to such a deal, we’ve seen some of our current holdings rally hard… with returns reaching 73%, 77%, 97%, and even 128%!

A Fiscal Cliff deal is nearly on the table, and our portfolio couldn’t be better positioned to take advantage.  Let’s just hope politicians don’t mess this up.

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.

. . . . JinkoSolar (NYSE: JKS) – HOLD

JinkoSolar continues to rally beyond most folk’s expectations.  But for us, we know why it’s happening… the $1 billion in loans guaranteed to JKS from China’s Development Bank.

In addition, the Chinese government continues to roll out billions in solar subsidies to make sure that their domestic energy production goals are met.

But JKS is also making headway in other countries, such as South America.  With the rally taking JKS to new multi-month highs, we’re going to keep holding shares for more gains.

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

If absurdly huge triple digit profit growth wasn’t enough, SNFCA has just announcedthey’ll be issuing a special 5% dividend to shareholders of record on January 11th.

For us, SNFCA is almost a clear double at this point, trading up to nearly $11 a share Wednesday!  I’d say we’re in for more upside here, so let’s hang on tight as this stock takes off.

. . . . Culp (NYSE: CFI) – HOLD

Culp continues to be a strong member of our portfolio as it’s repeatedly making new 52-week highs.  What’s more, a special dividend was paid to shareholders earlier this month… a whopping $0.50!  That’s brought our cost basis down to $8.33, and we’re talking about a 74% gain on this trade.

I see no reason for this fabric maker to slow down as fundamentals remain very strong.Hold shares of CFI.

. . . . Cobra Electronics (NASDAQ: COBR) – HOLD

Cobra caught a bid last week and crossed over our buy up to price of $3.75.  The stock traded just pennies below this at $3.72 on Wednesday.

COBR was also awarded the Canadian Office Products Association’s “Most Innovative Product Award of Excellence” and “People’s Choice Award” for best new product of the year.

The product in question…

The Cobra Tag.  This is an alarm and loss prevention system for protecting smartphones and other personal items (such as car keys).

With great innovations coming in 2013 and the holiday sales season in full swing, let’s continue to hold Cobra.

Action To Take

  • Move Cobra Electronics (NASDAQ: COBR) from a Buy to a Hold

Category: PSB Portfolio Updates

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