Yahoo CEO Marissa Mayer’s campaign to transform a faded Internet brand into one of the web’s coolest destinations just took an interesting turn. Yahoo (YHOO) is buying the New York Silicon Alley blogging network Tumblr for $1.1 billion.

It’s by far the biggest deal under Mayer’s tenure and potentially a great property as Yahoo takes on Google (GOOG) and Facebook (FB) in the $17.7 billion display ad market and emerging market for mobile advertising. A former Google executive, Mayer has impressed investors with her moves so far. The stock is up about 34% on the year and 70% since her arrival last year.

YHOO data by YCharts

The deal also opens the door to some interesting revenue opportunities if Yahoo and Tumblr CEO and founder David Karp (who’s staying on) can figure out a strategy to monetize the blog platform’s monster traffic without messing up what’s unique about the service, which hosts some 108 million blogs.

By bringing on Tumblr, Yahoo’s audience is expected to grow by 50 percent to more than a billion monthly visitors, according to the Yahoo press release. At Tumblr, Karp promised users at the fast-growing social network to stay true to its mission as a creative outlet for talent. “Marissa and her team share our dream to make the Internet the ultimate canvas,” Karp wrote in a post to Tumblr followers. “We also share a vision for Tumblr’s business that doesn’t compromise the community and product we love.”

Nice sentiment, but Tumblr will almost certainly become a more commercially driven site. Mayer’s has a board to report to and needs to show a return on that $1.1 billion.

Felix Salmon, who likes this deal, thinks Mayer may offer Tumbloggers the option to run ads on their sites and split the revenue with Yahoo. In addition, the Yahoo sales team with Tumblr now has a massive audience some advertisers will want to reach. They may be able to cross-sell on Tumblr and other Yahoo network sites.

Another big opportunity is mobile. On mobile, more than half of Tumblr’s 300 million monthly unique users are using the mobile app and do an average of 7 sessions per day, according to Yahoo. All manner of Internet companies (including Yahoo, Google and Facebook) are chasing the rapidly expanding mobile commerce market. To understand why, just take a look at the growth dynamics projected through 2016 in this chart from Statista:

On more skeptical note, Rocco Pendola at TheStreet.com called the deal “unimaginative” and wonders how Mayer will monetize the new traffic when the Internet company has done such a poor job of leveraging the eyeballs it already has.

The following Covestor portfolios own Yahoo as of May 20:

• Undervalued Opportunities managed by Eric Steiman
• Prudent Value managed by Sherman Lee
• Focus Growth managed by Analytic Investment's Hengfu Hsu

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Covestor Ltd. is a registered investment advisor. Covestor licenses investment strategies from its Model Managers to establish investment models. The commentary here is provided as general and impersonal information and should not be construed as recommendations or advice. Information from Model Managers and third-party sources deemed to be reliable but not guaranteed. Past performance is no guarantee of future results. Transaction histories for Covestor models available upon request. Additional important disclosures available at http://site.covestor.com/help/disclosures. For information about Covestor and its services, go to http://covestor.com or contact Covestor Client Services at (866) 825-3005, x703.

New Covestor portfolio manager Marty Leclerc of Barrack Yard Advisors (pictured at right) was recently a guest on Enterprise Radio. In the interview hosted by Eric Dye, Marty discusses the role of international stocks for a U.S. investor and the strategy he employs in the Core International portfolio.

Hear the full interview:

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Covestor Ltd. is a registered investment advisor. Covestor licenses investment strategies from its Model Managers to establish investment models. The commentary here is provided as general and impersonal information and should not be construed as recommendations or advice. Information from Model Managers and third-party sources deemed to be reliable but not guaranteed. Past performance is no guarantee of future results. Transaction histories for Covestor models available upon request. Additional important disclosures available at http://site.covestor.com/help/disclosures. For information about Covestor and its services, go to http://covestor.com or contact Covestor Client Services at (866) 825-3005, x703.

Barrack Yard Advisors

Portfolio Manager Martin Leclerc is a 30-year veteran of the investment management business. He began his career at Dean Witter…

Famed bond investor Jeffrey Gundlach of DoubleLine Capital went on Reuters TV Friday to discuss the 10-year Treasury (he's a buyer above 2%), Fed policy, Japan, U.S. stocks ("the case is that it's the best game in town - but if quantitative easing is your reason, Japan is even better"), his silver holding and sundry other topics having to do with this extraordinary low yield environment - including the danger of buying a house as investment right now.

Here's the full interview:

On individual stocks, he followed up on speculation that he's short Chipotle:

Well, I'm not really short Chipotle. I think it's a great time to short it though. I'm actually looking at a $380 price. It might get there today, I don't know, but it hasn't gotten there recently. That's like the perfect price to short it at, and at that price I think I'll come in and do it. I think this price of Chipotle is remarkably high versus their earnings. It's a 40 P/E for a company that has good products - I like their products, I go there. I'm not an anti-Chipotle's products. But I think that there seem to be lines out the door and very saturated and that means where's the growth going to come from? If you're pushing out maximum volume with lines out the door and you've expanded your store count to be almost ubiquitous, then where are you going to go from there? I have a hard time seeing why the P/E is supposed to be 40 for a stock, a company that's more mature now than it used to be.

On Apple's newly issued bonds:

Apple's corporate bonds? Yeah. Not really. They don't yield very much. They're super safe. I mean, Apple is like a cashflow machine. You know, I kind of like Apple these days just as a trade. I think it's formed a base. The P/E, when you strip the cash out, is really pretty low. The P/E on the business is 7 or lower depending what day you look at it. That's pretty low. And now it's a mature business, they're having challenges with product innovation, but they're a cashflow machine. I think I'd rather own Apple stock than Apple bonds.

But not really:

Yeah, I don't like [Apple] long-term. I think Apple's stock may stay around $500. Maybe now and then it goes into the $300's, but it could stay there for years. It's kind of like the new Microsoft where the company is very big, lots of cashflow, but what's next? And we don't know what's next for Apple.

He likes stocks exposed to the stronger housing market, and finds Steve Eisman's thesis for Ocwen (OCN) to be particularly compelling.

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Covestor Ltd. is a registered investment advisor. Covestor licenses investment strategies from its Model Managers to establish investment models. The commentary here is provided as general and impersonal information and should not be construed as recommendations or advice. Information from Model Managers and third-party sources deemed to be reliable but not guaranteed. Past performance is no guarantee of future results. Transaction histories for Covestor models available upon request. Additional important disclosures available at http://site.covestor.com/help/disclosures. For information about Covestor and its services, go to http://covestor.com or contact Covestor Client Services at (866) 825-3005, x703.

An unmanned aerial vehicle (UAV) is an aircraft system without an on-board human pilot. These are remotely or autonomously operated transportation platforms.

Combined with a ground station or integrated with other elements, a UAV becomes an unmanned aircraft system (UAS) which can be advanced enough to take off, fly, and land by itself. UAVs can provide many services and there is a growing interest in using them for commercial applications.

UAVs or drones were historically military in nature. The idea is to separate the loss of an aircraft from the loss of human life. Modern aircraft performance can also be limited by the physical boundaries of human beings, so remotely piloting them can increase air dominance.

Drones can be fitted with equipment to fill multiple purposes, including reconnaissance and surveillance. Armed versions of drones can also provide offensive capabilities, allowing it to destroy an enemy target once identified.

Currently, there is a growing movement for using drones for non-combat purposes. Startup companies such as Matternet aim to use UAVs to connect people living in remote areas without access to reliable roads. Recharging at a network of ground stations, Matternet UAVs will carry critical payloads such as medicine and supplies to rural locations.

Schools and organizations are now sponsoring drone development competitions to spur technological advancement, and communities such as DIYdrones help individuals make UAVs for personal functions such as aerial photography and mapping.

In the future, drones could integrate with other services to enhance our everyday life. Perhaps when you enter a hotel, a UAV can assist guests as a concierge. Maybe instead of drive-thru windows, a pharmacy can provide a landing pad for individuals to pick up medication using personal drones. Also consider personal companion drones that are an extension of your mobile devices. The possibilities seem endless at this point.

Several hurdles prevent this dream from reality, including regulation, air traffic, and information security. Drones also carry a negative public perception and are still relatively costly for mass consumption.

Despite these roadblocks, the Federal Aviation Administration is developing guidelines for civil operation of small UAVs with a target submission date of 2015. Once enabled, we believe this will be the birth of brand new markets with new investment opportunities, and it would benefit investors to watch trends in this sector very closely.

Photo Credit: steve_lodefink

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Covestor Ltd. is a registered investment advisor. Covestor licenses investment strategies from its Model Managers to establish investment models. The commentary here is provided as general and impersonal information and should not be construed as recommendations or advice. Information from Model Managers and third-party sources deemed to be reliable but not guaranteed. Past performance is no guarantee of future results. Transaction histories for Covestor models available upon request. Additional important disclosures available at http://site.covestor.com/help/disclosures. For information about Covestor and its services, go to http://covestor.com or contact Covestor Client Services at (866) 825-3005, x703.

Jonathan Wee

I’m a growth investor with a long-term view on macroeconomic trends. As a systems engineer, I use processes and tools…

The Long Term GARP investment portfolio rose 1.2% (net of fees) in the month of April 2013, which was better than the S&P 500 Index performance of 1.8%. Many companies in the portfolio reported good earnings and also provided strong guidance for the remainder of 2013.

We believe a primary way to build the asset value of a portfolio is to own companies which grow their revenues and earnings quarter after quarter, year after year. Every portfolio is trying to accomplish this task and those enterprises which show growth with their results ultimately get rewarded. There were a few hiccups this quarter, but in general, the companies in the portfolio had a nice quarter.

Liberty Interactive (LINTA) is the owner of QVC, Bodybuilding.com, Provide Commerce, Buyseasons.com, and Backcountry.com, and has large passive minority positions in other large, well known internet based business like the Home Shopping Network.

Liberty Interactive gained a majority stake in TripAdvisor when it bought out Barry Diller’s voting shares. The shares are attributed to the tracking stock* of Liberty Ventures Group (LVNTA).  Liberty Interactive will report earnings on May 8, 2013.

Iconix Brands (ICON) is the owner of a broad range of well known brands like OP, Mossimo, Joe Boxer, Peanuts, and Sharper Image. Iconix Brands announced strong results for the first quarter of 2013, and increased their guidance for the rest of the year.

Quest Diagnostics (DGX) is the largest health care diagnostic testing company in the United States. The company again showed disappointing earnings and guidance in April, but did raise their repurchase plans for 2013.

Intuit (INTU) announced the tax reporting period for 2013 was a bit soft. The company will report earnings on May 21, 2013. Starbucks is the largest coffee and tea company in the world. It reported strong earnings on April 25, 2013.

Liberty Media (LMCA) has assets inside a holding company structure that includes Starz Media, the Atlanta Braves, 50% ownership of Sirius Satellite (SIRI), almost 20% ownership of Live Nation (LYV), 16% ownership of Barnes & Noble, and a few other non controlling positions of small public and private enterprises.

Liberty Media announced that it increased its stake in Sirius (SIRI) Satellite Radio to over 50% and increased its position in Live Nation (LYV). The company reports earnings on May 8, 2013.

VCA Antech (WOOF) is the second largest owner of animal hospitals in the United States and also owns laboratories for the diagnostic testing of animals. The company announced good first quarter earnings, continues to buy existing animal hospitals, and announced a $125 million buyback.

IAC Interactive (IACI) owns Ask.com, Match.com, Meetic, Service Magic, Vimeo, CollegeHumor.com, and the Daily Beast, among other web sites. The company announced solid results on April 30,2013, bought back 1.4 million shares during the quarter, and initiated a new 10 million share buyback program.

Moneygram International (MGI) is the second largest money transfer and bill payment company behind Western Union. The company reported good earnings on May 2, 2013. British Petroleum (BP) announced better than expected earnings for the 1st quarter of 2013.

Unilever (UL) is a massive food company based in the UK that gets over half of its nearly $50 billion of sales in the emerging markets of Asia and Africa. Unilever reported a good quarter and raised the dividend by over 10%.

If you would like to open a mirroring account at Covestor.com for the Y H & C Long Term GARP Portfolio, please click here.

*A tracking stock is a type of common stock that "tracks" or depends on the financial performance of a specific business unit or operating division of a company—rather than the operations of the company as a whole. Tracking stocks trade as separate securities. As a result, if the unit or division does well, the value of the tracking stock may increase—even if the company as a whole performs poorly. The opposite may also be true.

The investments discussed are held in client accounts as of April 30, 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable.

The post The Long Term GARP portfolio delivers in April appeared first on Smarter Investing

Covestor Ltd. is a registered investment advisor. Covestor licenses investment strategies from its Model Managers to establish investment models. The commentary here is provided as general and impersonal information and should not be construed as recommendations or advice. Information from Model Managers and third-party sources deemed to be reliable but not guaranteed. Past performance is no guarantee of future results. Transaction histories for Covestor models available upon request. Additional important disclosures available at http://site.covestor.com/help/disclosures. For information about Covestor and its services, go to http://covestor.com or contact Covestor Client Services at (866) 825-3005, x703.

Yale Bock

Founded by Yale Bock, Y H & C Investments is a registered investment advisor with the State of Nevada. Yale…

I like to invest in companies that are financially healthy, with a solid line of products, a reasonable market share, strong growth potential, and that are valued at a reasonable price. It is not easy to find companies that meet all of these requirements, but when I find one  I usually allocate a good portion of my portfolio to it – generally around 10%. The latest company to catch my attention in this way is Oracle (ORCL).

ORCL data by YCharts

Oracle is one of the world’s largest providers of enterprise software and a leading provider of computer hardware products and services. Oracle is also one of the big players in the cloud computing revolution, and even more importantly, it is one of the pioneers.

For many years, Oracle has provided cloud computing services, including clustering, server virtualization, Service-Oriented Architecture (SOA), shared services, large-scale management automation, and more recently, engineered systems.

Oracle Cloud includes software application services, such as Oracle Fusion Human Capital Management (HCM) Cloud Service and Oracle Fusion Customer Relationship Management (CRM) Cloud Service, and software platform services such as Oracle Database Cloud Service and Oracle Java Cloud Service, among others. Oracle seeks to be an industry leader in each of the product categories in which they compete, and to expand into new and emerging markets.

I’m investing in the cloud computing model for three main reasons:

1. In my opinion, cloud computing has the potential to end piracy.  Once all software platforms live on a cloud, people won’t be able to just burn a DVD with the software and pass it around.

2. Cloud computing will create stronger ties between clients and providers. Once you operate your company using the infrastructure of a specific vendor, it will be very difficult to move away from that infrastructure.

3. Updates will be more frequent and mandatory. People won’t be able to skip releases anymore. A lot of people currently still using Windows XP, for example, are skipping several releases of Microsoft Windows. Under the cloud model, new releases could be part of the deal, and adoption will be higher.

Though the explosion of cloud service applications may be recent, cloud computing itself it is not a new field.  If you think about it, email clients such as Hotmail, AOL, and Yahoo Mail are all cloud services, applications that store data and are accessed via a web browser, and all of them were created about 15 years ago.

As cloud computing becomes the new “trendy industry,” I believe people are making irrational decisions on some companies within this market. For example, the P/E ratio of VMare (VMW) was over 60 just one year ago and today it is around 45. This is a fairly high valuation for a company that doesn’t pay dividends, and for a stock down sharply year-to-date. I always prefer to look for value stocks, and if I can’t find them, I simply add the stocks to my watch list and wait for the right moment.

So if you are also considering the cloud computing model, there is no need to go crazy. Microsoft (MSFT), a position that I added to my portfolio a couple of months ago might be one of the largest beneficiaries of the implementation of this technology worldwide.  The same is true of Oracle (ORCL), Dell (DELL), or possibly even Adobe (ADBE).

The reason I like Oracle is not only because is one of the leaders and pioneers in this industry, but also because at the current valuation it is very attractive.

Oracle’s P/E ratio is only around 15, as compared with its average of 30 over the last 10 years. The P/E ratio of Oracle is close to its lowest level in 10 years.

Although EPS increased nearly 400% in 10 years, the price of the stock has increased by only around 170%. History has taught us that prices generally follow earnings.

Oracle is also generating great value for its customers. The company recently acquired cloud-based software providers such as RightNow and Taleo, which I believe should help it to gain market share in the enterprise cloud software market.

“Oracle is moving aggressively to offer customers a full range of Cloud Solutions including sales force automation, human resources, talent management, social networking, databases, and Java as part of the Oracle Public Cloud," said Thomas Kurian, Executive Vice President, Oracle Development, when RightNow was acquired in October 2011.

Oracle’s Chief Executive Officer, Larry Ellison, has snapped up more than 70 companies in a $40 billion buying spree to add programs that help large corporations manage human resources and operations. Of note, the acquisition of Taleo in 2012 was cheaper than what SAP paid for competitor SuccessFactors.

This acquisition gave Taleo an enterprise value of 4.7 times its estimated sales that year, according to data compiled by Bloomberg. SAP paid 7.4 times SuccessFactors’ estimated sales. Ellison’s approach is to never overpay for deals, and as an investor, I appreciate that.

Another thing that I like about Oracle is that they are repurchasing stock like never before. For me, this is the best indicator of a company’s financial strength and commitment to the future. On December 20, 2011, Oracle’s board of directors approved repurchase of shares of common stock for $5 billion, and on June 18, 2012, it was expanded by an additional $10 billion. 2012 set an all-time record of repurchase shares from the company totaling $9.07 billion. So far in 2013 the company has already repurchased $1.58 billion. I expect repurchases to continue in 2013. At the same time its dividend yield is an all-time high, which makes the stock purchase even more attractive.

One final thing that I love about Oracle is that free cash flow has grown notably, especially over the last couple of years. The current ratio is also at all-time high, which means the company is more likely than ever before to pay its short term obligations by using its short term assets (cash, inventory, receivables).

Forget about new fancy cloud computing stocks that over promise and under deliver.  If you really want to take advantage of this new technological development, I believe Oracle is one of the strongest candidates out there.

The investments discussed are held in client accounts as of April 30 , 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable.

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Covestor Ltd. is a registered investment advisor. Covestor licenses investment strategies from its Model Managers to establish investment models. The commentary here is provided as general and impersonal information and should not be construed as recommendations or advice. Information from Model Managers and third-party sources deemed to be reliable but not guaranteed. Past performance is no guarantee of future results. Transaction histories for Covestor models available upon request. Additional important disclosures available at http://site.covestor.com/help/disclosures. For information about Covestor and its services, go to http://covestor.com or contact Covestor Client Services at (866) 825-3005, x703.

Libardo Lambrano

I am a value investor, an investment philosophy that boils down to investing in undervalued, under-researched and unpopular companies. Reasons…

In my last article, I noted that “Big Money” managers were wildly bullish on U.S. stocks—74% were bullish and only 7% were bearish.

But what about those legendary masters of the universe - the global macro hedge fund managers who, if their reputations are to be believed, hold the fates of companies and even entire countries in the palms of their hands?

At last week’s Ira Sohn Investment Conference, we got to hear the latest investment themes from some of the biggest names in the business, including Bill Ackman, Jim Chanos, Stanley Druckenmiller, and David Einhorn, among others.

Some of these “smart money” guys haven’t been looking too smart of late.  Ackman has taken enormous losses in JC Penney (JCP); at one point, his losses on the investment were over $500 million.  He also appears to be on the wrong side of a very large short position in Herbalife (HLF).

This year Ackman is recommending Procter & Gamble (PG), even though it is sitting near 52-week highs and is trading at a substantial premium to the broader market…after a long run in which consumer staples have outperformed.

Ackman is agitating for management change. We’ll see how Ackman’s recommendation plays out, but I wouldn’t expect market-beating returns here.

Most of the speakers focused their comments on individual stocks, but there were some “big picture” themes worth noting as well. Kyle Bass of Hayman Capital reiterated his bearish call on Japan, saying that “the beginning of the end has begun.”

I agree with Bass’ view on Japan and recently called it “the short opportunity of a lifetime” on the Trading Deck. I can’t say I agree with Bass in his bullish defense of gold, however.

Stanley Druckenmiller, a legendary investor and a former top trader under George Soros, had perhaps the most interesting macro perspective.  Druckenmiller argued that the commodity supercycle—the massive decade-long bull market enjoyed by most commodities—is over.  The primary culprit?  A slowdown in commodity demand from China.

I would take Druckenmiller seriously here. This is a man who enjoyed a 30-year run without losing money and who is one of the best managers alive today.  Druckenmiller sees the slowdown in China—coming at a time when commodity production is being ramped up globally—resulting in a supply glut and sharply lower prices.

I believe this is good news for companies with large raw materials costs and for countries that import large volumes of commodities, but it is very bad news for Brazil, South Africa and Australia, among other resource-rich countries.

Still, you might want to take the words of all of these masters of the universe with a grain of salt the size of their egos.  Consider this: 88% of hedge fund managers underperformed the S&P 500 last year.

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Covestor Ltd. is a registered investment advisor. Covestor licenses investment strategies from its Model Managers to establish investment models. The commentary here is provided as general and impersonal information and should not be construed as recommendations or advice. Information from Model Managers and third-party sources deemed to be reliable but not guaranteed. Past performance is no guarantee of future results. Transaction histories for Covestor models available upon request. Additional important disclosures available at http://site.covestor.com/help/disclosures. For information about Covestor and its services, go to http://covestor.com or contact Covestor Client Services at (866) 825-3005, x703.

Charles Sizemore

Sizemore Capital Management LLC is a registered investment advisory firm located in Dallas, Texas. Charles Lewis Sizemore, CFA is the…

By Xavier Brenner

Though the copper, lumber, orange and cotton markets don't get the same coverage in the business press as stocks and bonds, these commodities make the world go round.  Big swings in commodity prices have a far-reaching impact on consumers' pocketbooks and impact businesses and industries across the globe.

Many major commodity markets have been in a slump in recent months. Hedge fund manager Mark Dow, for one, thinks it's not over:

My view on there being a bubble in commodities that is unwinding has not changed, despite the mini-crash in precious metals last month.

Here are five aspects to the commodities downturn to consider:

1) Commodity markets are usually keyed to broad economic trends -- and that's the case in 2013, according to the World Bank which issued its Global Economic Outlook in January predicting raw material prices will fall this year. Why? Economic growth in the U.S. and China is middling, and Europe is flat on its back.

2) Thanks to a spike in crude oil production and slower global demand, the U.S. government is forecasting that a gallon of regular gasoline will cost about $3.50 this summer — down more than 10 cents from 2012.

Brent Crude Oil Spot Price data by YCharts

3) Australian miners are feeling the negative impact of the commodity price implosion. Iron ore, Australia's biggest export item, fell to a 2013 low on May 16 to $126.70. The stocks of local gold miners such as  Kingsgate Consolidated (ASX: KCN), Medusa Mining (ASX: MML) and Perseus Mining (ASX: PRU) are getting crushed.

4) One of the big surprises in commodities is the slump in lumber prices, given the robust housing recovery in the U.S. The culprit seems to be slower demand in China. So far this year, the commodity has fallen more than 15%.

5) Copper futures touched an 18-month low last month, according to this piece in the Wall Street Journal. In recent years, China has had a ravenous appetite for the stuff and represents about 40% of annual copper demand. Not this year: China's first quarter GDP came in at below forecast, some 7.7%.

Copper LME Settlement Price data by YCharts

And check out this trio of charts down below from the Bespoke Investment Group, which notes the alarming decline of three popular commodity EFTs:

It doesn't get much uglier than the three charts below. Since their highs in 2011, commodities like gold, silver, and oil have all been in relentless downtrends with lower high after lower high. While the ETFs for all three commodities--SPDR Gold Shares (GLD), United States Oil Fund (USO), iShares Silver Trust (SLV)-- saw rebounds in the second half of April, the rallies have all since fizzled and resulted in lower highs. While GLD still is still about 2.5% above its mid-April closing low, SLV made a new multi-year low on a closing basis today. There's always a bear market somewhere.

The investments discussed are held in client accounts as of May 1, 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable.

The post Five takeaways from the global commodities rout appeared first on Smarter Investing

Covestor Ltd. is a registered investment advisor. Covestor licenses investment strategies from its Model Managers to establish investment models. The commentary here is provided as general and impersonal information and should not be construed as recommendations or advice. Information from Model Managers and third-party sources deemed to be reliable but not guaranteed. Past performance is no guarantee of future results. Transaction histories for Covestor models available upon request. Additional important disclosures available at http://site.covestor.com/help/disclosures. For information about Covestor and its services, go to http://covestor.com or contact Covestor Client Services at (866) 825-3005, x703.

We have seen a big rally in U.S. stocks and that is what we are seeing still yet! With all the whining and crying and doomsday scenario gurus are selling with their newsletters, the markets have risen to new all-time highs. That is why we are trend followers. We listen to the markets foremost. The market is our boss.

Even though the U.S. stock market is very extended in price since moving up these last few months, the trend seems to be getting stronger in our opinion. Our attempts at testing the short side has yielded feeble results at best.

So in our last report we said we would fade the strong up moves in the markets but also look for stock breakouts to stay with our trend following philosophy. We try to catch the beginning of a trend reversal (which in this case would be a downward move) but we do not consider ourselves ever more right than the markets--and so we cut losses quickly and attempt to ride the current waves.

The markets are in all time high territory and so we expect a big improvement in the economy in order for this bull market to continue. This is what we believe the markets are telling us, not necessarily what the news is telling us though.

A correction is inevitable and so we believe we just have to keep our eyes on stocks that have charts that are not too extended if we are to initiate any large positions.

We also feel that there has to be a gradual comeback at some point for the commodity based stocks like steel, copper and coal for the market to really heat up. If these basic materials stand pat or gently glide down in price we believe we will be in great shape. If they fall hard we would say that the world economy has fallen into a dangerous deflationary spiral. If they rise hard, we believe inflation can take the breath out of the markets.

Right now we are looking for the sectors that are causing the markets to rise into all time highs. There are some really well known stocks like United Parcel Service (UPS), Target (TGT), Wal-Mart (WMT), Cree (CREE) and Google (GOOG) lighting up the new highs lists, so we are looking for emerging companies that show the potential to follow in their footsteps.

We have shared enthusiasm for this rally. However, as always we are very careful and ready for the potential corrective move or reversal to come.

The investments discussed are held in client accounts as of April 30 , 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable.

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Covestor Ltd. is a registered investment advisor. Covestor licenses investment strategies from its Model Managers to establish investment models. The commentary here is provided as general and impersonal information and should not be construed as recommendations or advice. Information from Model Managers and third-party sources deemed to be reliable but not guaranteed. Past performance is no guarantee of future results. Transaction histories for Covestor models available upon request. Additional important disclosures available at http://site.covestor.com/help/disclosures. For information about Covestor and its services, go to http://covestor.com or contact Covestor Client Services at (866) 825-3005, x703.

Jesse Barkasy

I have traded my own accounts for 24 years and have worked as a professional trader for 13 years.

My Stockdiagnostics model has 14 positions and about 12% cash as of April 30, 2013. Two of the 14 positions are what I term multi-industry investments: Leucadia (LUK) and Boulder Income Fund (BIF). Boulder Income Fund is a traditional closed-end fund invested around 25% in Berkshire Hathaway (BRK.B).

With Boulder trading at approximately a 15% discount to NAV, it seems like an attractive way to invest in Berkshire, in my opinion. Leucadia and Berkshire are in a joint mortgage venture called Berkadia. The Berkshire annual meeting is held in May, and we are starting to see some of Buffett's comments in the media.

Berkshire Hathaway has a long term position in Wells Fargo (WFC).  Portfolio’s holdings in Wells Fargo were sold on May 6, 2013 in an attempt to eliminate overexposure while recognizing that the banking sector is not much more attractive than average these days.

JP Morgan (JPM) was sold in the last 60 days, as well. The portfolio has been in and out of Safeway (SWY) at a loss, but continues to hold Kroger (KR) in the grocery sector. Fast growing Service Now (NOW) was bought and sold at a loss.  The volatility of NOW is a bit too high, and the cash flow characteristics of NOW are not yet appropriate for the model.

J.M. Smucker (SJM) is a brand name food company, as is J & J Snack Foods Corp. (JJSF). Crocs (CROX) and Hanes Brands (HBI) are name brand sellers in the shoe and apparel fields that have earned a place in the portfolio.

Cigna (CI) is a recent addition to the portfolio offering exposure to the healthcare and insurance sectors. Comcast (CMCSA) has been in the portfolio for quite a while. Between the multi-industry companies and the consumer staples companies like Kroger, Crocs, Comcast, J&J Snack Foods, J. M. Smucker and Hanes, I personally believe that Jim Cramer would agree that the portfolio is diversified.

There has been a bit too much turnover lately in the model, but I believe the turnover rate will moderate as most of these companies will  become core holdings.

The investments discussed are held in client accounts as of April 30 , 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable.

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James Roberts

I worked for a micro-cap value hedge fund as a research analyst for 8 years and then opted for semi-retirement…