SET Portfolio Update June 2014

June 10, 2014

So much for a quiet summer for stocks… The bulls have taken charge and the S&P 500 is surging to new all-time highs.

As I pointed out last month, the ‘Sell in May and go away’ crowd was in danger of missing out on a big rally in stocks this summer.  And it happened quickly…

Since May 15th, the S&P 500 has shot up 5% to reach a new high of 1,955.

Why are stocks surging to the upside? Let’s take a closer look at some of the catalysts…

First off, we have a Goldilocks scenario for economic growth in the US.  It’s not too hot and it’s not too cold.

We continue to see solid economic data from things like factory orders, motor vehicle sales, and growth in consumer credit.  These are signs of a cyclical upturn and a strong consumer.

But at the same time, the employment and inflation data show that the economy isn’t running too hot.  That means the Fed will be able to keep their very accommodative monetary policy in place to support the economic recovery.

What’s more, the three biggest threats to stocks have dissipated over the last few weeks. The situation in Ukraine/Russia has calmed down, small-cap stocks have rebounded, and financials have found solid footing.

In short, all signs point to more upside for stocks and our ETFs.

Now, onto the updates…

. . . . iShares MSCI Global Metals & Mining Producers (PICK) – Buy up to $20.00

PICK has been trending higher over the last three months.  But it hasn’t jumped to the upside like some of our other ETFs over the last few weeks.  This is one ETF that should get a big boost from a rebound in global economic activity in the second half of the year. Grab your shares up to $20.00.

. . . . Market Vectors Unconventional Oil & Gas ETF (FRAK) – Hold

It was a strong earnings season for companies in the US onshore oil & gas business.  This is being driven by profitable growth of unconventional oil and gas.  FRAK has moved above our $32.00 buy up to price.  So I’m moving it to a hold.  Needless to say, FRAK stands to be a big winner as this business continues to grow.

. . . . Financial Select Sector SPDR (XLF) – Hold

Financials are on the upswing as the threat of the dispute between Russia and Ukraine has settled down over the last few weeks.  The latest rally pushed XLF above our $22.25 buy up to price.

Picking individual winners and losers in the financial sector is difficult with so many legal problems impacting the sector.  But the overall trend for the sector is up.  And holding a basket of stocks cushions the blow from any individual company that screws up.  Continue holding for more upside.

. . . . Guggenheim Solar (TAN) – Hold

TAN has stabilized recently after a wild start to the year.  If you dig beyond the price volatility, there’s a lot to like about solar stocks.  Sales growth is accelerating and earnings are growing at a rate much better than the overall market.  In other words, solar stocks deserve a premium valuation. Continue holding.

. . . . First Trust Consumer Staples AlphaDEX Fund (FXG) – Hold

FXG has broken out to new highs over the last few weeks.  This ETF has a tremendous amount of bullish momentum right now.  Continue holding for bigger gains.

. . . . PowerShares Dynamic Leisure and Entertainment (PEJ) – Hold

PEJ is enjoying a nice surge to the upside over the last few weeks.  The upbeat data on the expansion of consumer credit is clearly having an impact on consumer discretionary stocks.  We should see PEJ pick up steam from here… continue holding.

. . . . PowerShares Dynamic Media Portfolio (PBS) – Hold

After a rough start to the year, PBS has rebounded over the last few weeks.  The selloff was overblown and the strong fundamentals of many of the stocks contained within PBS should continue to push PBS higher going forward.  Continue holding.

. . . . iShares Transportation ETF (IYT) – Sell

The outperformance of IYT in 2014 has sent IYT through our $145.00 price target.  That’s our cue to capture gains!  Go ahead and sell IYT if you haven’t already done so.Congratulations on this impressive 23.8% gain!

. . . . Morgan Stanley Cushing MLP High Income Index ETN (MLPY) – Hold

MLPY is at a new high.  The booming US onshore oil and gas business has turned energy master limited partnerships into cash producing machines.  The payouts on this ETF should continue to grow as more oil and gas flows through the pipelines, holding tanks, and other assets. Continue holding.

. . . . iShares DJ US Home Construction Index Fund (ITB) – Hold

ITB has rebounded despite the lackluster report on construction spending in April. Investors are clearly looking for a rebound in the spring and summer.  And for good reason… this is typically the busiest time of year.  What’s more, the recent drop in interest rates should push some buyers off the fence as they look to lock in a low interest rate on their mortgage.  Continue holding.

Action To Take

• Sell iShares Transportation ETF (IYT) for a 23.8% profit.

 

Category: SET Portfolio Updates