PSB Portfolio Update January 2014

| January 16, 2014

January 16, 2014

What’s In Store For 2014?

The stock market has seen very little volatility to date in 2014.  So far, the major indices are basically flat on the year.  However, there’s plenty of big news ahead.

For one, earnings season has just begun.  This week the focus was mostly on financial stocks.  Starting next week, major companies report fourth quarter earnings from a variety of industries.

Economics news continues to paint a positive picture for the US economy.  Retail sales are ticking up, inflation is low, and the job market is slowly improving.

So how will the Fed react?

That’s the big question ahead.  Will positive economic data force the Fed to accelerate the pace of its stimulus reduction?  So far, it doesn’t seem like it’ll be the case.  But, it definitely deserves our scrutiny in the weeks ahead.

Finally, the government actually seems to be avoiding major drama for a change.  A full-year budget had been agreed to and eliminates the possibility of a government shutdown.

The debt ceiling issue remains on the table for February.  However, it appears that Congress is willing to be more reasonable about negotiating – a major change from 2013.

In the meantime, our portfolio continues to perform extremely well, with several big winners. Let’s take a look at a few notable positions.

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.

. . . . Consumer Portfolio Services (NASDAQ: CPSS) – Hold

CPSS has exploded higher since December.  At the end of November, the shares were trading for roughly $6.  As of this writing, the stock’s all the way up to $9.24 – good for 51% gains.

The stock has popped for a couple reasons.  First off, CPSS announced the closing of a $183 million term securitization.  Basically, it’s a big, new source of revenue for the company based on subprime auto loans.

Perhaps more importantly, Moody’s has affirmed its rating on the company’s auto loan ABS products.  That means, investors can have a definitive idea of the overall risk level of the products – and are more likely to buy.

We think CPSS still has plenty of room to grow.  Hang on to your shares for bigger gains ahead.

. . . . SkullCandy (NASDAQ: SKUL) – Hold

Another position in our portfolio that has performed really well since December is SKUL. The shares hit a low of under $5.50 in mid-December, but have climbed all the way to a high of $8.00 a share recently.  Currently, our position is a 47% winner.

First off, the stock was upgraded in December by Roth Capital Partners.  That’s always a good thing for shareholders.

Since then, the company has debuted new products at the CES this month.  And, SKUL has partnered with Toshiba to bring its audio products to the laptop business.  That’s a nice, additional source of recurring revenue for the company.

SKUL still has plenty of upside left, so keep holding the shares.

. . . . ZAGG (NASDAQ: ZAGG) – Sell

One of our retail sector stocks not performing as well as hoped is ZAGG.

The company’s fortunes are tied closely to the launch of Apple (AAPL) products and Apple device sales.  However, with the holiday shopping season over and no new AAPL product launches anytime soon, we don’t think there’s a lot of upside to this position for the foreseeable future.

Because we have stronger retail stocks in our portfolio already, it’s a good time to purge one of our only underperformers.

Let’s go ahead and sell ZAGG here and reallocate this capital to more exciting opportunities.

Action To Take



Category: PSB Portfolio Updates

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