Author: Bob Freedland
Covestor model: Buy and Hold Value
Disclosures: AVD, CL, DG, ELLI, EQIX, JCP, LL, SBUX, LQDT, IBM, AAPL, MSFT, V, SWI, WPRT
The market was bipolar. It started with a lot of volatility and wide swings of optimism. Then came long periods of depression. It caught me flat-footed at times as I worked to preserve assets without leaving behind many opportunities.
My model strategy is to always look for stocks with both price momentum and good underlying prospects. However, I tend to be quick to cut a weak stock and swap it for another promising position.
In a volatile market, that often leads to more trading than usual. But I am very averse to incurring losses in my holdings.
Here’s what I did in the month of June:
- For starters, I closed out my position in American Vanguard (AVD) on price weakness.
- I initiated a position in Colgate Palmolive (CL) a long-time blue chip favorite of mine. It’s a well-managed consumer goods company with a nice dividend.
- I also established a position in Dollar General (DG), the discount retailer. It has strong price momentum and it plays in a recession-resistant niche.
- I sold my position in Ellie Mae (ELLI) on weakness. Although it subsequently has been quite a strong stock -- unfortuantely without me on board.
- I also initiated a position in Equinix (EQIX), a data center/cloud stock that has been growing quickly and experiencing strong price performance.
- Late in the month I bottom-fished for JCPenney (JCP). That position has not been successful to-date. I may be parting company with that stock.
- I also dipped my toes into Lumber Liquidators (LL) and may find myself parting company here as well if the stock doesn't turn around this month.
- Starbucks (SBUX) is another long-term favorite of mine bought. I bought it on a pullback. It appears so far that the weakness in China and Europe may well keep the stock depressed.
- One of my big past performers, Liquidity Services (LQDT), was sold on weakness. I got rid of it before it dropped another 20+ points. Selling stocks on technical weakness seems to be wise in today's market.
- I stepped out of my IBM, Apple (AAPL) and Microsoft (MSFT) shares as they demonstrated weakness after holding them for only a short period in the model. Apple and IBM have subsequently rebounded and may be worth another look.
- Visa (V) was added to the portfolio on technical strength. At this point it is trading above my own entry point.
- I had little luck staying in SolarWinds (SWI) or Westport Innovations (WPRT) due to the terrible volatility of the market in June turning strong stocks into weak stocks and giving strong-stomached investors like myself butterflies.
Investing is a challenging activity. Just picking a single stock is a challenge; Managing an entire portfolio requires the discipline to evaluate every holding. Plus the willingness to part quickly if needed. And to stay strong when short-term challenges divert one's attention from long-term potential.
I remain committed to working this portfolio and growing its value by searching out the strongest stocks and selling any holding on weakness that appears to be significant.