Selected Portfolio Position Review: 05-22-19

Each week we produce a chart book of 10 of the current positions we have in our equity portfolio. Specifically, we are looking at the positions which warrant attention, or are providing an opportunity, or need to be sold.

While the portfolios are designed to have longer-term holding periods, we understand that things do not always go the way we plan. This monitoring process keeps us focused on capital preservation and long-term returns.

HOW TO READ THE CHARTS

There are four primary components to each chart:

• The price chart is contained within the shaded area which represents 2-standard deviations above and below the short-term moving average.  
• The Over Bought/Over Sold indicator is in orange at the top.
• The Support/Resistance line (green) is the longer-term moving average which also acts as a trailing stop in many cases.
• The Buy / Sell is triggered when the green line is above the red line (Buy) or vice-versa (Sell).

When the price of a position is at the top of the deviation range, overbought and on a buy signal it is generally a good time to take profits. When that positioning is reversed it is often a good time to look to add to a winning position or looking for an opportunity to exit a losing position.

With this basic tutorial let’s get to the sector analysis.

ABT – Abbott Laboratories

• As noted previously, earlier this year we made a decision to overweight healthcare in portfolios. This has proved to be defensive with healthcare holding up despite the pullback in the market.
• We remain long our holding of ABT currently with stops moved up to support.
• Stop is set at $72.50

AEP – American Electric Power

• Defensive Utility and Real Estate stocks continue to get a bid during turmoil as well. We remain long utilities currently.
• AEP is overbought short-term but remains on a buy signal for now.
• While stops have been moved up to important support we will take profits on a break of $82.
• Stop-loss is moved up to $78

BA – Boeing Corp.

• A couple of months ago we took 1/2 position in BA on the initial sell-off following the 737 MAX crash.
• We said then we would give the stock a wide berth to find its bottom and it has been basing since then.
• It is still too early to take on additional holdings and with BA on a “sell” signal and not deeply oversold we will be patient.
• Stop-loss remains at $300 for now.

DOV – Dover Corp.

• Despite the restart of the trade war, DOV continues to hold its ground.
• We continue to hold our position for now and continue to keep a close eye on industrial and material sectors.
• Our stop is set at $87.50

HCA – HCA Healthcare

• Both HCA and UNH continue to hold critical support levels and have been working off their overbought condition.
• As noted above, money has been rotating into healthcare which is why we continue to overweight holdings there for now.
• Stop-loss remains at $115 for now.

MSFT – Microsoft Corp.

• Money continues to chase technology despite the more extreme overbought conditions in the sector.
• We remain long our position after taking profits and will look for an opportunity to increase exposure.
• Our stop-loss is moved to $112.50

NSC – Norfolk Southern

• Despite lackluster performance in the “transportation” sector, Railroads continue to hold up much better than the market.
• NSC is overbought but remains on a buy signal.
• Stop-loss is set at $180.

UTX – United Technologies

• UTX has recently pulled back from its highs and is sitting on support. We would like to see support hold and have the overbought condition worked off a bit before adding to our position.
• Defensive sectors continue to get a bid from investors looking for safety and yield so we like our positioning for now.
• Our stop-loss is moved to $125

VZ – Verizon

• VZ continues to perform well because my kids are using all their data and I am getting the bill.
• VZ just broke out to an all-time high after consolidating for several months. This is a good sign.
• We will add to the position when we get a corresponding buy signal. We would like to see the recent move higher consolidate and hold at higher levels confirming the breakout.
• Stop loss is currently set at $58

YUM – Yum Brands

• Who doesn’t like Kentucky Fried Chicken? YUM continues to power higher along support.
• Currently, YUM is very overbought and is potentially threatening a sell signal. So, we will be patient here looking for an opportunity to add exposure.
• Stop-loss is set at $92.50. Look to add at $95 if it holds.