PSB Portfolio Update June 2013

June 20, 2013

Has Volatility Peaked?

We’re seeing a pretty big selloff in stocks after Bernanke’s comments yesterday.  The Fed is expecting to taper its bond buying program towards the end of the year – and investors are apparently already missing the stimulus.

The pullback really doesn’t make a whole lot of sense – considering the only reason the Fed would taper stimulus is because the economy is improving.  Oh well, market irrationality is why I have a job.

I believe the selloff will be short-lived, particularly once economic numbers start rolling in. In the meantime, unless other major news breaks, we think the current run up in volatility has peaked.

Let’s shift focus briefly to our portfolio.  We’ve been getting some comments about why we’re holding Golden Star Resources (GSS) and Great Panther Silver (GPL), which are both down.

Basically, those two stocks are the portfolio’s only exposure to gold and silver.  Should fear of a market correction ramp up, investors will run to the safety of precious metals.

And if that happens, those two stocks will jump higher in a hurry.  In other words,they’re a hedge against uncertainty.

We’ve had a lot of big winners in the portfolio this year, so we like the idea of hedging our downside risk with precious metal stocks.  Moreover, we intend to hold those positions for the long-term.

So don’t sweat the fact that they’re both down a fair amount right now.  That’s what you should expect from a hedge when most of the rest of our portfolio has been going higher.

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.

. . . . Parker Drilling (NYSE: PKD) – Hold

Parker Drilling is on the move!

Our position is up 26% as of this writing.  That’s after a stellar week, where the stock jumped roughly 18%.

From a technically standpoint, PKD blew through its major moving averages.  That’s an excellent bullish signal.

Although there may be some short-term pullbacks ahead, the shares are trading comfortably above their 200-day moving average.  Such a move implies the stock could be trending higher for the foreseeable future.

With the big jump in price, PKD has moved above our buying range.  We’re moving the position to hold.

. . . . SMTC (NASDAQ: SMTX) – Buy up to $2.50

SMTX is one of the older positions in our portfolio.  And now, it looks like the stock could be primed for a big move higher.

First off, there’s been a fair amount of insider buying lately.  Over 50,000 shares have been bought by corporate insiders in recent weeks.  That’s a very strong signal the company is in better shape than the market realizes.

What’s more, the company is well below both its 50-day and 200-day moving averages. There’s an excellent chance the stock will bounce back towards those levels.

Let’s move our buy up to price down to $2.50.  Grab shares in SMTX if you haven’t yet done so.

. . . . Aceto (NASDAQ: ACET) – Hold

Our ACET position continues to rack up gains.  In fact, the company just issued another quarterly dividend for $0.055.

The latest dividends drop our initial buy price down to $7.89.  Our current return on the position is now a solid 63%.

Keep in mind, even if the share price doesn’t continue to appreciate, every quarter our cost of ownership decreases – and our return on the position rises.

Let’s continue holding ACET and racking up solid gains.

Action To Take

• Move Parker Drilling (NYSE: PKD) from Buy to Hold
• Move SMTC (NASDAQ: SMTX) buy up to price to $2.50

 

Category: PSB Portfolio Updates