PSB Portfolio Update March 2015
More Volatility Ahead?
Just looking at end points, US equities are right about where they were when I sent last month’s update. However, that doesn’t really tell the story.
Over the month period, the S&P 500 dropped down below the 50-day moving average. It’s since rebounded back to near record high levels. So, the results don’t look interesting, but the last month has certainly seen some volatility.
The biggest news happened this week, with the March Fed meeting.
The central bank dropped the word “patient” from its discussion on raising interest rates. However, the Fed doesn’t seem to be in a hurry to make the first rate hike in years.
It will now come down entirely to economic news. The Fed would like to see more improvement in wage growth, employment, consumer confidence, and inflation numbers. Until that time, rates will stay near zero.
Despite general flatness in most stocks, small caps have performed remarkably well. In fact, the Russell 2000 is performing over 2% better than the S&P 500 for the year.
That’s certainly a welcome change and good news for small cap portfolios like ours.
There may be more volatility ahead as investors try to determine when rates will go up. In the meantime, we have to be pleased with small caps, which are weathering volatility quite nicely.
Now, here’s a closer look at some of our positions.
Position Update
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.
. . . . Demand Media (NYSE: DMD) – Hold
We bought DMD as our first trade of 2015 and it proceeded to drop to 52-week lows. It then climbed back up to about $5 and sat there for the entire month of February.
However, March has been a different story. The company handily beat Wall Street expectations for fourth quarter losses, performing much better than expected.
The shares shot higher on the news and are currently 12% gainers for us. That’s certainly a welcome turnaround. Given the recent move, we’re moving the position to hold.
. . . . GAIN Capital (NYSE: GCAP) – Hold
GCAP has been a big winner for us so far. In about six months, we’re up a solid 57% in the shares. Not bad!
And that’s not all…
The company just issued another $0.05 dividend on March 11th. That’s the second dividend we’ve collected and effectively lowers our buy price to $6.28.
It’s hard to beat a stock with great returns and a steady dividend. Let’s continue holding GCAP and reaping the rewards.
. . . . Aware (NASDAQ: AWRE) – Sell
We’ve held AWRE for about 9 months now, and it’s been pretty flat for about the last 6 of those. Despite the lack of action, we’re up 28% on the position.
However, there’s basically been no meaningful news since last October. The stock has basically just moved sideways over the period, with no reason to suggest an upside breakout is going to occur.
Since we’re up on the position, and given how quiet the company has been, let’s go ahead and sell here. Close out your AWRE position and take the profits off the table.
Action to Take
- Move Demand Media (NYSE: DMD) from Buy to Hold
- Sell Aware (NASDAQ: AWRE)
Category: PSB Portfolio Updates
