PSB Portfolio Update November 2014

| November 20, 2014

November 20, 2014

Back To Record Highs

Last month at this time, I was writing about fear taking hold of the market. Today, major US equity indices are back trading at record highs. Volatility comes and volatility goes.

The S&P 500 was even for the year just over a month ago. As of today, the index is closing on 13% gains for the year. Meanwhile, small caps (as measured by the Russell 2000) are back to positive on the year. The Russell is about 4% off its highs for the year.

Why the sudden reversal of investor faith?

Well first off, the Ebola scare died down significantly (and was heavily overblown in the first place). Perhaps more importantly, the Fed made sure to convey to the public that rates won’t be raised anytime soon.

Many now think rates won’t even rise in 2015. While the bond-buying stimulus has ended, low rates are going to be considerably low for the foreseeable future.

Finally, the US job market has improved substantially. Jobs gains are solid and unemployment has fallen. The only thing left is for wage growth to accelerate.

Overall, the economy continues to be resilient. And, that’s great news for the stock market.

Now, here’s a closer look at some of our 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.

. . . . Nevsun Resources (AMEX: NSU) – Hold

NSU has spiked over 10% today and is currently a 27% winner for us. At its high of over $4.50 today, the shares set a new 52-week high by over $0.25.
So what’s the deal?

Basically, there are rumors that QKR (a mining fund) could be bidding around $1 billion for the company. That would put the share price at around $5 per share if true.

NSU said today that the company is in fact considering strategic transactions. However, it did say any deal is still in the preliminary stages. Still, it sounds like there’s some truth to the rumor.

As such, the stock price should remain elevated until more details are known. We’re definitely going to hold on to the shares for now if we can get $5 per share out of the deal.

. . . . Carriage Services (NYSE: CSV) – Hold

CSV is the oldest stock in our portfolio. We bought this all the way back in 2011. It’s currently a 279% winner.

So why do we continue to hold it?

In a word, dividends. You see, over time we’ve significantly lowered our cost basis by getting a quarterly dividend each and every quarter.

In fact, the company just issued another dividend on November 10th for $0.025 per share. That effectively lowers our buy price to $5.07.

As long as the company continues to shell out dividends each quarter and the stock holds up, we’ll probably keep a hold rating on this one.

. . . . DryShips (NASDAQ: DRYS) – Hold

We’ve had DRYS in our portfolio for two years, and it’s the second oldest of our current holdings. Unlike CSV, it hasn’t performed all that well. Although, prior to September, it was a decent-sized winner for us.

So why are we still holding it, and why didn’t we sell it when it was a winner?

DRYS is one of those companies which I believe is long due for a turnaround. I see no reason why this stock won’t be $5-$6 per share or higher at some point in the future.

You see, the dry shipping industry got crushed by the global recession. And, it’s taking a very long time to recover. However, it will recover over time. There’s always going to be a need for bulk shipping overseas.

We’re taking a very long-term view on this company. DRYS is an excellent stock to stash away in your portfolio for the long haul. The share price is cheap, and the industry is bound to rebound at some point.

Action To Take

  • None at this time.


Category: PSB Portfolio Updates

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