PSB Portfolio Update October 2013

October 17, 2013

Crisis Averted – For Now

Well, it’s been an eventful past few weeks.  The government was in shutdown for 16 days.  And, today we would have officially reached the US debt limit.

Fortunately, Washington got its act together just in time to agree on a deal to reopen the government and raise the debt ceiling.  By the time you read this, the deal should have been signed into (temporary) law.

Here’s the deal…

The government – and the 800,000 federal workers who were not being paid – goes back to work at least until January 15th.  The debt ceiling has been raised to operate through February 7th.  And, Congress must meet by December 13th to discuss a new budget deal.

I’m hopeful, but not optimistic, that the politicians will have plenty of lead time to come to a long-term agreement before another political crisis occurs.  This last shutdown is expected to cost the US half a percentage point of GDP – that’s $23 billion for those of you counting at home.

Our still fragile economy would be ill advised to take any further self –inflicted damage. And this time around, the financial markets may not be so patient.

In fact, one of the reasons I believe the deal came down to the last minute was because of investors’ overall complacency.  However, I don’t expect investors will be so forgiving next time around.

This likely will be (and it better be) the last time we come close to defaulting on our debt. The US image is already tarnished because of the latest round of political posturing.

Let’s hope we can get back on track for a strong finish to 2013.

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.

. . . . Five Star Quality Care (NYSE: FVE) – Sell

FVE has been stagnant for the last two months, trading in a very narrow range.  There also has been very little news out on the senior living communities operator.

After reviewing the fundamentals, we’ve determined there’s not enough upside potential with this stock to justify keeping it in our portfolio.

What’s more, if we sell now, we’ll basically be exiting at the same price we bought in.  Sell your shares of FVE here.

. . . . Full House Resorts (NASDAQ: FLL) – Sell

FLL has been a disappointing position for us.  Not only have the shares not recovered from their summer swoon, but the stock has been trading in a very narrow range for months.

We believe we have a better long-term position in the gaming industry with our Boyd Gaming (BYD) holdings.  As such, let’s cut this underperformer loose.

Now’s the time to sell your shares of FLL and preserve the capital for better opportunities.

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

PKD continues to impress and has rocketed to new highs for us.  In fact, our position is now up 56%.

The company is benefiting from an improving industry outlook.  Barge drilling and rental tools businesses are seeing growth with the improving global economy.

Moreover, with the shares trading at under a 10x forward P/E, there’s still plenty of upside left.  Hang on to your PKD shares for the opportunity at even bigger profits.

Action To Take

• Sell Five Star Quality Care (NYSE: FVE)
• Sell Full House Resorts (NASDAQ: FLL)

 

Category: PSB Portfolio Updates