Tuesday, April 7, 2015

Soos Global Investor Update....(April 7, 2015)



(A Friendly and Important Disclaimer Note (in addition to legal language below):   If you’re reading this post and are not currently investing with Soos Global (which, of course, is something we should discuss!), please bear in mind that while we share details on changes made to our portfolios, it's important to consider that our portfolio decisions are taken in a much broader context of our overall portfolio strategies and our assessment of each of our investor's unique financial profiles.  As such, what we do, and when we do it, is specific to our investor portfolios and is NOT intended, in any way, as advice for use by others.  Readers are reminded that all comments posted here are for information and entertainment purposes only!  Any commentary, especially those that include specific mentions of 'buying' or 'selling' or 'positions', is made solely for those limited informational and entertainment purposes, and NOT as advice.  We're delighted to hear thoughts and comments.  Thx!)


Soos Global Investors:  below are a few of my thoughts on markets overall, and in some cases, on specific positions in our portfolios. 

Today's data in Europe, EuroZone (EZ) manufacturing PMI, beat estimates.  This raises expectations that EZ economic growth is picking up, expectations that have already been bolstered by ECB QE kicking in.  The Euro has bounced off recent lows and appears to be finding some floor from which to recover after having been sold-off aggressively in the past year (from levels of 1.4000 to 1.0500, and now 1.0850.  See chart below).


European stocks have rallied YTD, reflecting renewed optimism about European economic prospects.   As you can see in the chart below, the ETF of European equities, VGK, has rallied YTD.  What's not as evident, however, is that part of the upside was lost due to the EUR currency weakness over that time period.  Looking ahead, if the EZ economy continues to improve and the EUR is able to continue its recent rebound, then VGK could have meaningful upside through 2015.  I'm still of the view that the EUR has fallen too much (USD rallied too much), and that EZ's economy should continue to slowly improve, therefore, I'm watching this situation closely as a new add to our positions.

When that time arrives, I would expect to consider using an ETF (such as VGK) that diversifies the risk across several countries and industry sectors.  I wouldn't hedge the EUR exposure inherent in that position since, as I've mentioned, I think over time the EUR will rally back. (fyi…there are ETFs that provide the same exposure to European stocks but embed a currency hedge to protect against a fall in the EUR, and if my currency view should change, I'd consider those alternatives). 

One final note regarding Europe:   our current exposure.   On a direct basis, it is quite limited.  Namely, we own Unilever (UN) and Telefonica (TEF)….but our 'indirect' exposure is more meaningful given that many of our large, multi-national holdings have significant business footprints in Europe (and, correspondingly, in most cases, in Emerging Markets, where our direct exposure is also very limited).  Until recently, I've felt that this 'indirect' exposure was the better risk/reward tradeoff, however with improving growth prospects and current valuations, that could change.


With Q1 over and earnings starting to be reported in coming days, I'm a bit concerned about earnings disappointment.  That said,  the concern isn't too high since many analysts have lowered earnings estimates throughout the first Quarter as more and more companies announced sober guidance.   With broader US stock indexes still at or close to historic highs, any meaningful disappointments in earnings could result in a market selloff, though any selloff would likely be mitigated by the market's reaction that weakness in the US economy would delay a Fed rate hike.  So this balancing act between strong/weak economic and corporate earnings growth vs expectations of Fed rate hikes, in my view, is likely to keep the equity markets somewhat volatile, but within reasonable ranges close to current levels.  Correction?  Certainly possible.  Debacle?  Some new catalyst would have to emerge for the outlook to migrate to this extreme. 

Clearly, individual stocks' volatility will vary and when I perceive an overreaction by the market, in either direction, I expect to adjust our positions accordingly.

In that light, our Walgreens (WBA) position has performed quite well, and is currently the highest percentage holding in the portfolio.  I expect to maintain a strong position in WBA, though I might consider trimming part of it at higher levels.

I'm still looking to exit Davita (DVA), having sold ½ of it earlier this year, as I continue to prefer valuations and potential in other sectors.  I'm concerned that the further we get into the Presidential race, the more talk there will be about cutting Federal funding for all kinds of Medicare, Medicaid, Obamacare issues.  It will be very challenging to anticipate which stocks will be the winners/losers in those debates, so with this kind of anticipated lack of visibility, I'm looking to exit healthcare for now, and at best maintain only small opportunistic positions over time as they become available.

I have been looking to add some biotech, though I still believe that the sector, after having been the outperformer of 2014, is still too pricey.  Many street analysts refer to it as being in a 'bubble'.  Whether that's true or not, I do think we'll see some sector rotation out of biotech into other sectors that have ytd underperformed, most notably, energy.  If that happens, and in turn, biotech cheapens to reasonable valuations, I'd be interested in adding an ETF of the sector (such as XBI…see below), in that way diversifying the individual company risk of FDA approvals, new-product testing, etc.


Finally, I continue to like the 'yieldy' assets in our portfolio such as fixed income ETFs, preferred stock/bond ETFs, a convertible closed end fund, a utility ETF and some REITs.  As I've been saying for some time, the Fed's need to raise short-term rates is likely to be minimal for quite a while, and while that's going on, in the face of world where the risk of 'Deflation' continues to outweigh 'Inflation', I remain a fan of longer-term fixed income and yieldy assets.

As always, if you have any questions, please email or call.
I look forward to keeping you posted.
Best,
Ed


Please continue to visit Soos Global Market Musings for updates.

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(Please note: This article is solely meant to be thought provoking and is not in any way meant to be personal investment advice. Each investor is obligated to opine and decide for themselves as to the appropriateness of anything said in this article to their unique financial profile, risk tolerances and portfolio goals).
Disclaimer: Please read and consider important information related to all communication made by Soos Global on this site by clicking here.
Additional Disclaimer: currently long many stocks/ETFs including UN, DVA, WBA, TEF.  Positions may change at any time without notice.   

Friday, February 6, 2015

Soos Global Investor Update (Friday, Feb. 6, 2015)



(A Friendly and Important Disclaimer Note (in addition to legal language below):   If you’re reading this post and are not currently investing with Soos Global (which, of course, is something we should discuss!), please bear in mind that while we share details on changes made to our portfolios, it's important to consider that our portfolio decisions are taken in a much broader context of our overall portfolio strategies and our assessment of each of our investor's unique financial profiles.  As such, what we do, and when we do it, is specific to our investor portfolios and is NOT intended, in any way, as advice for use by others.  Readers are reminded that all comments posted here are for information and entertainment purposes only!  Any commentary, especially those that include specific mentions of 'buying' or 'selling' or 'positions', is made solely for those limited informational and entertainment purposes, and NOT as advice.  We're delighted to hear thoughts and comments.  Thx!)
                                                                       
With today’s stronger than expected NFP report, I sold out of our positions in short-term bond ETFs.  I had been holding them for a while in a ‘holding pattern’ with the goal of earning some yield above cash, with the idea that as soon as there would be a catalyst to add to the Fed’s reasons to hike sooner rather than later, I’d exit.  Today’s NFP report, I believe, qualifies as one such catalyst.  Despite a mix of data in recent weeks, this number, both stronger than expected for Jan, and revised up in Dec and Nov, is certainly going to be a major talking point at the Fed’s next meeting.  The wage growth in particular.
To be clear, I do not expect the Fed to hike aggressively.  I still think that the ‘hiking assignment’ that the Fed will have will be limited to a relatively small, very deliberate, measured increase in short term rates.  But in that environment, I’d expect money to move out of short-term ETFs into longer term fixed income where the risks of inflation still seem pretty remote and where global growth is moderate at best.
With equities at or near all time highs, and with earnings outlooks less than euphoric, I’m still allocating a portion of the portfolio to ‘high dividend/fixed income’, seemingly defensive plays.  In that context, I’m holding longer term bond ETFs, preferred ETFs, REITs and utilities.
Will look to reinvest the cash into other ‘holding pattern’ fixed income or preferreds, or directly into stocks when opportunities appear.
Separately, in recent days, I took profits on Pfizer (PFE) and bought an initial position in Symantec (SYMC) which I’d like to build on in addition to other cyber-security plays.
Will keep you posted.
Ed

Please continue to visit Soos Global Market Musings for updates.

(Sign up to "Follow by Email"!  And share with others!)

(Please note: This article is solely meant to be thought provoking and is not in any way meant to be personal investment advice. Each investor is obligated to opine and decide for themselves as to the appropriateness of anything said in this article to their unique financial profile, risk tolerances and portfolio goals).
Disclaimer: Please read and consider important information related to all communication made by Soos Global on this site by clicking here.
Additional Disclaimer: currently long many stocks/ETFs incl LQD, CHI, PFF, PFXF, SYMC.  Positions may change at any time without notice.  

Tuesday, January 20, 2015

Soos Global Investor Update (Tues, Jan 20, 2015)



(A Friendly and Important Disclaimer Note (in addition to legal language below):   If you’re reading this post and are not currently investing with Soos Global (which, of course, is something we should discuss!), please bear in mind that while we share details on changes made to our portfolios, it's important to consider that our portfolio decisions are taken in a much broader context of our overall portfolio strategies and our assessment of each of our investor's unique financial profiles.  As such, what we do, and when we do it, is specific to our investor portfolios and is NOT intended, in any way, as advice for use by others.  Readers are reminded that all comments posted here are for information and entertainment purposes only!  Any commentary, especially those that include specific mentions of 'buying' or 'selling' or 'positions', is made solely for those limited informational and entertainment purposes, and NOT as advice.  We're delighted to hear thoughts and comments.  Thx!)

Soos Global Investors: 

Just a quick update on markets and some portfolio moves….

First some thoughts on the markets in general….Some time ago I said that I was leaning very heavily into the camp that the Fed would not raise rates nearly as much as the market had been pricing in.  In line with that view, I started putting cash to work in fixed income, especially higher quality, longer dated fixed income, that I believed would trade well once the market recognized that the Fed was not going to tighten aggressively, if at all, and that even if the Fed were to hike rates by 25 or even 50bps, the net result would be a flatter curve, as long rates didn't (and still don't) have much cause to move higher (IMHO).  I still don't see any wages pressures nor any tightness in other means of production, so to argue that long rates have to rise, seems inconsistent with the facts on the ground, certainly here in the US, but even more so around the world.  Some of our holdings in this space include BSV, CSJ, LQD, PFF, PFXF, CHI, and in general, I expect to 'clip coupons' on these ETFs until either the rate view changes or until additional equity opportunities of appropriate risk/reward arise.

In stocks, I've pretty much stayed the course….lots of tech, a reasonable amount of high-dividend paying stocks in telecom, reits, utilites, and trying to cherry pick stocks when the market bashes them on earnings disappointments that appear to me to be not that disappointing!  Of course, despite having very little oil related positions (XLE and KYN), it was hard to avoid some pain in that space, but I'm light and mainly focused on finding companies that I think will survive the mayhem in oil's rout.  On that note, I do think that lower oil prices will persist for some time, partly due to supply/demand issues, but more because of geopolitical issues.  I think the real force behind crushing oil prices was Saudi Arabia's desire to put Iran's back against the wall, and the US's desire the do the same to Putin.  So my overall thinking on oil is that it manifests a much more dangerous world, with the now larger possibility that either Iran or Russia react in some way that could be catastrophic.  I'm not yet moving the family into the bunker, but I do think that volatility runs the risk of episodic spikes, so I'm on alert for that.  I also think that equities, while still not over-inflated in terms of valuation, could have a tougher time rising than falling in the face of market volatility and geopolitical events.  So I'm staying quite long but defensive, and poised to move cash or low-yielding fixed income money into equities on pullbacks.

In terms of some specific portfolio moves in recent weeks/months….The surging USD through 2014 and collapse in yields put significant downward pressure on commodities in general, and in particular, gold and copper.  As a result, our Yamana (AUY) holding suffered.  I bought more in Q4 at lower levels, and after the 30-day wash-sale period, sold the higher cost lots in order to book the loss for 2014.  We're now holding a smaller overall position at lower cost basis as we start 2015.

In addition, I took some profits on Davita (DVA)…still think the co will benefit from the theme of 'US obesity and consequent kidney disease' but the stock has been relatively quiet recently after moving higher earlier in '14, and with no dividend, there's a cost of capital to owning it unless there's a nearterm catalyst for upside.  Still holding DVA, but will be on the lookout for earnings and for how upcoming US election rhetoric impacts health related stocks as Obamacare becomes front and center in the campaigns.

Used some proceeds to add to Unilever (UN).  It's a better fit in the theme of 'global EM emerging middle class'.  Today they announced earnings that were slightly below street consensus, yet the stock held reasonably well (considering past quarterly earnings misses which were greeted more severely!).  The company is really a play on the EM space given its global footprint.  They've adjusted product line offerings and cut costs as global growth has slowed.  I still believe UN will be a major beneficiary of emerging economies.  Their dividend too is compelling.

I also added from cash to our convertible bond closed end fund, CHI.  It's yield is over 8%, and I think that though equities could correct from current levels, I don't expect a meltdown.  In fact, with central banks likely to be on the move again (esp ECB) in terms of stimulus, I think equities can hold their ground especially since in general they're not at overly inflated PEs. Also, with US Treasury yields having come down, yield-hunters are back in action looking for yieldy plays.

Will keep you posted….
If you have any questions or thoughts, please let me know.

Best,
Ed

Please continue to visit Soos Global Market Musings for updates.

(Sign up to "Follow by Email"!  And share with others!)

(Please note: This article is solely meant to be thought provoking and is not in any way meant to be personal investment advice. Each investor is obligated to opine and decide for themselves as to the appropriateness of anything said in this article to their unique financial profile, risk tolerances and portfolio goals).
Disclaimer: Please read and consider important information related to all communication made by Soos Global on this site by clicking here.
Additional Disclaimer: currently long many stocks/ETFs incl BSV, CSJ, LQD, CHI, PFF, PFXF, DVA, UN, AUY, XLE, KYN.  Positions may change at any time without notice. 

Thursday, November 20, 2014

Hotspots: AUY, HIMX, XLE, TAN.....and putting cash to work in Preferreds


A Friendly and Important Disclaimer Note (in addition to legal language below):   If you’re reading this post and are not currently investing with Soos Global (which, of course, is something we should discuss!), please bear in mind that while we share details on changes made to our portfolios, it's important to consider that our portfolio decisions are taken in a much broader context of our overall portfolio strategies and our assessment of each of our investor's unique financial profiles.  As such, what we do, and when we do it, is specific to our investor portfolios and is NOT intended, in any way, as advice for use by others.  Readers are reminded that all comments posted here are for information and entertainment purposes only!  Any commentary, especially those that include specific mentions of 'buying' or 'selling' or 'positions', is made solely for those limited informational and entertainment purposes, and NOT as advice.

Thanks for reading.  And please email or call w/any questions or to discuss in more detail.   Also, please visit http://stockcharts.com/public/1587236 to see our charts of close to 100 stocks/etfs on our radar screen.

Best, Ed
 (If you'd like to exchange thoughts on this post or on other subjects, please connect with me through the Private Chat tool on the right side of this page, or if you'd like to email thoughts, please do so through the Contact Form feature.  For public airings, please use the Comment feature below.  Looking forward to hearing your thoughts!)


(Below is a note sent to investors yesterday as part of our ongoing regular portfolio updates..fyi).

Just a quick update on the portfolio and market thoughts.

You'll recall that in late September, I moved some of our cash position into fixed income ETFs with the thought that the market was overly pessimistic about interest rates rising.  Given the capacity excesses both in terms of labor and other means of production, it seemed then, and continues to seem to me now that long-term interest rates would be unlikely to spike higher any time soon.  Yes, with the Fed having completed QE and with the US economy continuing to show some signs of life, especially in the labor market, the market is correct to anticipate a move upwards in short-term rates by the Fed, but anything more than a small, deliberate move would not be in sync, in my opinion, with the economic realities.   In particular, while the Fed minutes of late have made a big deal of the improving labor market, the reality is that job growth of roughly 200k per month is still only a 'slow' pace of job growth and would really need to be over 300k per month to make a serious dent in the un- and under-employed numbers which then could trigger some meaningful wage pressures.  Until then, it's not surprising that wage growth has remained stagnant.

As we continue to be in an environment where equity markets are at or near all-time highs, where earnings are likely to have trouble keeping pace with previous quarterly gains, where Japan has recently been confirmed to be in recession and where Europe continues to struggle economically (in addition to geopolitically with Russia/Ukraine on its doorstep), I continue to believe that putting some portion of the portfolio in income producing assets makes sense, and, as I've been doing when specific equities retreat to more compelling valuations, using our cash, or money that is in fixed income ETFs, to then purchase more equities.

Currently, I'm considering adding some preferred bond/stock ETFs to the mix.  Their yields are north of 5%, they trade generally with less volatility, and the credit quality of the companies appears to be good.  I'm also looking to add some of the fixed income ETFs that we already have.

As for equities, I continue to position the portfolio around our key global macro themes, most notably being the global emergence of middle class consumers in a growing number of countries around the world.  While we have many successes in the diversified mix, and I'd be delighted to discuss them with you any time, I do want to comment on some of the 'hot spots' in the portfolio so that you're up to date on my tactical and strategic plans:

XLE, TAN:  The rout in oil prices has put pressure on our XLE etf, and our solar etf whose ticker is TAN.  I  believe that oil prices will bounce from current levels, so I expect to hold both for now, but I'm considering selling TAN  at higher levels as the theme of a global move into alternative energy sources should lose some urgency with oil and natural gas prices having fallen so low.  Some M&A activity in the wind/solar space of late has helped give TAN a boost, but a more meaningful run up in TAN, I believe, would have to be preceded by a move up in oil and related companies, which might likely be captured by XLE.

Yamana (AUY)….continues to suffer on weak gold prices, mostly due to strong USD, but also due to expectations of lower demand from India as the country looks to slow gold purchases in order to stem the current account deficit.  The stock got hit hard on its last earnings release which missed expectations and was muddied by higher taxes in Chile and by problems with their Brazilian mines.  Given how low the stock trades, it could easily be a target by other gold miners as the whole space is suffering currently from  weak global growth, strong USD and ample supplies.  There was talk last week that AUY would spin off their Brazilian mines, news that the market liked.  I plan on holding on and expect the current extreme negative sentiment in this pace to abate, at which point, AUY, being a low-cost producer, could stand to do well.

HIMX…has had a hard time recovering from market expectations that Google Glass is not going to happen.  HIMX, being partly owned by Google, was expected to play a big role in the Google Glass wearable market.  The whole wearable market is still evolving, and I expect HIMX to be a player in that space.  In the meantime, it is not a one-horse wonder.  It's ICs and semis are used in a growing diversity of products with a growing diversity of customers.  The coming months should be particularly telling as to consumer appetite for 'wearables'.  Many new products are being featured for the upcoming shopping season, and I'd expect the flurry of activity amongst designers and manufacturers to pick up once the most compelling versions of the products are identified.

In each of the cases above, I'm keeping a particularly close eye on how events unfold and will keep you posted if things evolve in a way that warrants a change in course.
In the meantime, please email or call if you have any questions.
Best,
Ed
Please continue to visit Soos Global Market Musings for updates.

(Sign up to "Follow by Email"!  And share with others!)

(Please note: This article is solely meant to be thought provoking and is not in any way meant to be personal investment advice. Each investor is obligated to opine and decide for themselves as to the appropriateness of anything said in this article to their unique financial profile, risk tolerances and portfolio goals).
Disclaimer: Please read and consider important information related to all communication made by Soos Global on this site by clicking here.
Additional Disclaimer: currently long many stocks/ETFs incl HIMX, AUY, XLE, TAN, PFF, PFXF, PGF.  Positions may change at any time without notice.

Thursday, October 2, 2014

Equity Market Rout In Context...& Portfolio Implications



A Friendly and Important Disclaimer Note (in addition to legal language below):   If you’re reading this post and are not currently investing with Soos Global (which, of course, is something we should discuss!), please bear in mind that while we share details on changes made to our portfolios, it's important to consider that our portfolio decisions are taken in a much broader context of our overall portfolio strategies and our assessment of each of our investor's unique financial profiles.  As such, what we do, and when we do it, is specific to our investor portfolios and is NOT intended, in any way, as advice for use by others.  Readers are reminded that all comments posted here are for information and entertainment purposes only!  Any commentary, especially those that include specific mentions of 'buying' or 'selling' or 'positions', is made solely for those limited informational and entertainment purposes, and NOT as advice.



Thanks for reading.  And please email or call w/any questions or to discuss in more detail.   Also, please visit http://stockcharts.com/public/1587236 to see our charts of close to 100 stocks/etfs on our radar screen.

Best, Ed
 (If you'd like to exchange thoughts on this post or on other subjects, please connect with me through the Private Chat tool on the right side of this page, or if you'd like to email thoughts, please do so through the Contact Form feature.  For public airings, please use the Comment feature below.  Looking forward to hearing your thoughts!)




On the heels of yesterday’s equity market rout, it’s worth considering the move in context, namely, relative to where the market has been in recent months, and relative to where it’s been over the past couple of years.  The charts below reflect both.
The first chart, showing recent months, is particularly troubling, especially the ‘thumbnail’ on the side that highlights the activity in recent days in which the DJIA broke down aggressively below its recent trading range (note:  the shaded blue area shows and +/- 2 std. dev. range around the previous 20-day simple moving average of prices).





The second chart shows the past two years’ price history.  It’s a healthy reminder of just how far the market has come, and depending on your fundamental outlook, could raise concerns about a major market pullback that would make yesterday seem like a rounding error!!   Conversely, what looked like an awful setback yesterday, might really have been only a small move in the larger context, and along those lines (pun intended), one could also note that several times over the past two years, the market ‘corrected’ (not literally, which would be a 10% move, but more figuratively in the form of a major selloff that broke the uptrend at that time), and each time, the 200 dma (white line) was the support from which the market resumed its uptrend.



Which will it be this time????

We’ll see.

But away from the day-to-day gyrations, the underlying global macro view that I shared in recent missives still stands.  I think a continued pullback in equities is likely, though I don’t anticipate an ‘Armageddon’!  I think the Fed will begin to raise rates in H1 ’15, but only moderately and in slow, measured, well advertised steps.  With all kinds of commodity prices having fallen in recent months, most notably in the energy and agricultural space (see charts below of commodity indexes), and with plenty of excess capacity still in manufacturing and labor, there’s no evidence of prices pressures that should force the hand of the Fed to move more aggressively.



 I think that when bond markets overreact to anticipated Fed moves and, in turn, the bond market sells off hard, it makes sense to consider adding fixed income for a relatively small portion of the portfolio (as we’ve done last week).  On equities, though I am concerned about upcoming earnings meeting expectations and justifying current valuations, I don’t see grotesquely high PEs in general that would cause concern about a broad market ‘correction’ (literally this time, meaning 10%).  I don’t see that.  With the S&P currently at roughly 18x PE, and with companies generally in ‘lean & mean’ conditions on an operating leverage basis and on a balance sheet debt/equity basis, it’s hard to find too many signs of a bubble, except perhaps in small-cap land, which btw, would explain the recent 10%+ selloff from July highs.  

I continue to use cash to selectively buy what appear to be undervalued names in the various themes that drive our strategies, with particular focus on the ‘emerging middle class’ theme keeping our exposure in consumer discretionary and technology quite high.  I’m also looking at EM countries where currencies have fallen in value vs the USD on its recent run-up, and where local currency debt and equities have slipped.  At some point, when the USD tops, those EM local currency bonds and equities could be compelling.

Will keep you posted.

Best,
Ed


Please continue to visit Soos Global Market Musings for updates.

(Sign up to "Follow by Email"!  And share with others!)

(Please note: This article is solely meant to be thought provoking and is not in any way meant to be personal investment advice. Each investor is obligated to opine and decide for themselves as to the appropriateness of anything said in this article to their unique financial profile, risk tolerances and portfolio goals).
Disclaimer: Please read and consider important information related to all communication made by Soos Global on this site by clicking here.
Additional Disclaimer: currently long many stocks/ETFs.  Positions may change at any time without notice.