Author: Robert Freedland
Disclaimer: Robert owns ECL, CHD, MCD, MMM, SYY, T and TJX in his Covestor Buy and Hold Value Model.
July continued the recent pattern of volatility, but the bias has been to the upside as the S&P which opened near 1,000 at the beginning of the month pushed towards 1,100 as the month neared a close.
Positive elements of the month included the capping of the Deep Water Horizon oil spill, which while concerns continued regarding seepage and damage to the underground well structure, the absence of the billowing cloud of crude and methane gushing onto the nation’s television screens 24/7 was a big relief. Economic news continued to be mixed with corporate profits generally coming in strong but a dip appeared to be in progress as housing starts and unemployment figures reversed recent positive trends.
The Senate managed to overcome the Republican filibuster on financial regulation as well as an extension of unemployment benefits and got those bills to the President who was a bit distracted by the Sherrod affair having gotten successfully misled by clever video editing by Breitbart. Responding to regional concerns over tourism in the Gulf the President promised a weekend in Florida for the First Family. While the actual effects of the new financial regulation laws may be debated, the removal of this unknown over the heads of business aids all investors who dread what might be more than even what has become.
In my own portfolio I parted with my Ecolab (ECL) shares last month after taking a loss. I utilize fundamental information and momentum in selecting stocks but their own price action determines my own decisions regarding ownership—selling losing stocks quickly and completely and gaining stocks slowly and partially. While still waiting for a portfolio-driven signal to add a new position, my portfolio remains approximately 50% in cash with 6 positions remaining.
Church & Dwight (CHD) remains a steady performer with a strong stable of consumer products. The stock price rose in value during the month.
McDonald’s (MCD) also participated in the strength of the market in July, moving ahead, particularly towards the end of the month. Earnings are expected to be released on July 23rd. The company continues to innovate with menu items such as Smoothies and soon to be released Oatmeal for breakfast. They refresh their stores and update interiors regularly and are poised for continued growth.
3M (MMM) had a strong month climbing from $78.55 on July 1 to as high as $84.75 by the close of trading on July 22nd. They announced a 43% increase in earnings on July 22nd, beating expectations, with terrific results coming out of Asian business which increased 42% for the company. Bullish guidance from the company also is encouraging as the company expected positive results through 2010.
On July 1, 2010, Sysco (SYY) traded at $28.50 and had climbed to $30.58 by July 22nd. With a 3.4% dividend on top of this recovery play, Sysco (SYY) is about my favorite company to survive any economic downturn with an increased market share and improved prospects. As people start getting back to work, expect more people to be eating out and spending money at their local restaurants.
On July 1, 2010, AT&T (T) traded at $24.34. On July 22nd they reported a strong quarter and by the 22nd the stock was trading at $25.51. With a 6.8% dividend I suppose the only thing that might make this stock feel some pain would be the ever-announced development of a Verizon-iPhone arrangement. The latest quarterly announcement from 2Q2010 reported a 26% increase in earnings and led management to raise guidance for the year. Even though the landline business remains in the doldrums, the wireless portion–especially with the exclusive Apple (AAPL) iPhone deal—continues to become an ever-important portion of the revenue and income stream for T.
My last holding is TJX Companies (TJX) the parent company to TJMaxx, Marshall’s and some other discount chains. On July 1, 2010, TJX traded at $42.91. This company finished the month essentially unchanged trading shares at $42.25 on July 22nd. TJX did announce plans this month to expand Marshall’s into Canada which should be a good market for them. Overall continued growth at a little less torrid pace, the company announced same store sales increases of 3% for June, 2010. They also guided earnings expectations higher for the year. But clearly, this wasn’t the hottest stock in my portfolio this month!
I continue to work my own strategy of picking high quality companies and letting their own price performance control their future in my portfolio as well as my own bias towards the market whether it be towards cash or towards equities. Hopefully another few strong days to the upside will provide me with another opportunity to purchase a new holding, but I shall allow the market to direct me in this direction as well.
