PSB Portfolio Update February 2013

February 21, 2013

Is There Volatility Ahead?

The past month has been generally good to stock investors, both large cap and small cap.  The S&P 500 is up 2% over a 1-month period.  And, small caps, as measured by the Russell 2000, have done even better.  The Russell is up 2.5% over the same timeframe.

A strong earnings season and solid economic data have been the main catalysts propelling stocks higher.  Certainly, there’s been a heck of a lot less investor fear in recent weeks.

Just consider at the S&P 500 Volatility Index, the VIX – also known as the fear gauge. Recently, the VIX had fallen to over 5-year lows.  That’s a significant sign of investor content.

However, things can sure change in a hurry.

As of this writing, the VIX had jumped 25% in the last couple days.

What’s causing the spike?

It turns out, there are still a few things out there investors are worried about.

For one, this week’s economic data wasn’t as rosy as the past few weeks.  The housing and job market recovery have cooled just a bit.

There are also renewed fears over political issues.  Will the politicians be able to sort out the automatic spending cuts set for the coming weeks?  Is the debt ceiling going to be a problem?

The next couple weeks should provide answers to these questions.  But, it could be volatile in the meantime.

We’re not worried about a long-term setback in stocks.  However, with short-term volatility likely on the horizon, we’re going to take profits in some of our big winners.

In fact, now’s a great time to take some profits off the table and enjoy the fruits of our savvy investing.

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.

. . . . Jinko Solar (NYSE: JKS) – SELL

JKS has been a terrific winner for us.

The shares hit a high of $9.95 recently, good for a 146% gain.  That’s quite the return on investment.  Especially, since we achieved it over just an 8-month period.

However, the stock is pulling back with the recent market selloff.  It’s fallen back to the 20-day moving average.  That’s a great place to sell.  In case this market pullback continues, we don’t want JKS to fall all the way to the 50-day moving average.

Let’s sell our shares here and collect over 100% gains.

. . . . Krispy Kreme Doughnuts (NYSE: KKD) – SELL

KKD is another huge winner in our portfolio.

The doughnut maker hit a high of $13.40, or 116% gains.  It’s also pulled back a little with the market drop this week.

Here again, the stock is sitting just below the 20-day moving average.  And, we definitely don’t want it to drop to the 50-day.

Let’s sell here and capture over 100% gains in KKD.

. . . . Culp (NYSE: CFI) – SELL

CFI, the mattress maker, has also done very well for us.

At its recent peak, the stock hit $18.15 for a superb 118% gain.  Like many other positions, CFI has also pulled back with the market selloff these last couple days.

However, we can still lock in 90% gains or more if we exit now.  That’s still an excellent return on our position.

Sell your shares of CFI now.

. . . . Horsehead Holding (NASDAQ: ZINC) – SELL

ZINC has been solidly in the black for us since breaking above our buy up to price last December.  It’s currently sitting at over 20% gains.

But, the stock hasn’t approached its portfolio high mark of 46% gains in almost a year. Considering how much the stock market has rallied since then, we don’t expect ZINC to go much higher anytime soon.

Let’s go ahead and lock in our profits here.

Action To Take

• Sell Jinko Solar (NYSE: JKS)
• Sell Krispy Kreme Doughnuts (NYSE: KKD)
• Sell Culp (NYSE: CFI)
• Sell Horsehead Holding (NASDAQ: ZINC)

Category: PSB Portfolio Updates