Mock Portfolio Investing: Managed Portfolio

Last but not least, is my Mock Managed Portfolio. Here are the assumptions I am making:

  1. I will start again with $100,000.
  2. Generally speaking purchases will be made in in 5% – 7.5% increments and no more than 10% of my portfolio when reasonably possible.
  3. All avenues of trading will be allowed, indexing, buying on the dip, shorting, swing trades, etc.
  4. I like to think that I am a value investor seeking some growth along the way.
  5. This particular portfolio may resemble my other two mock portfolios in some respect, but this will likely change as time goes on. I have found it difficult to pick quality stocks and ETF’s to buy when they are this overvalued.
  6. I will remain heavy in cash as well anticipating some form of correction in the near future.

This is the portfolio:

Ticker Shares Paid
(SH) TSLA 22 $327.22
GE 189 $26.38
TEVA 250 $30.00
KR 220 $22.63
TGT 148 $50.41
SH 224 $33.45
PSQ 187 $40.00
GDX 232 $21.84
AXL 186 $16.13
BGS 228 $33.50
HBI 220 $22.69
LB S @ 55 171 $43.79
SKT S@ 33 290 $25.79

KR- Earnings and guidance reporting has not been all that positive lately, however I believe this is still a strong company. A 20 billion dollar market cap and reasonable fundamentals are why I like this pick. The over reaction to the Amazon-Whole foods merger is why I love this pick right now. KR’s debt is a concern for me, but not enough to scare me away at this point. Granted they have shown some weakness over the last few weeks, however a 30% drop in stock price is an over reaction in my opinion. I think Kroger can bounce back at least 10% in the next 6-12 months.

TEVA- This has been a difficult position for me to take. The government healthcare disaster, the industry as a whole is a mess. However, I like the generic market that TEVA is in. A robust revenue growth along with expanding income and profit margins make this even more attractive. The selling point, is the fact that all of the negatives are built into the current price and it has been beat up over the last year or so. With a 4.3% dividend, I’m willing to sit on this and wait, I find it hard to believe the price will drop more than another 4%, if it does at all.

GE- General Electric is likely my favorite position to be in right now. They are selling off arms of the business that classify it as a too big to fail. The strategies that they have taken on this far in regards to the cloud space, the internet of things, robotics, etc seems to be under the radar. Earnings are projected to rise 9% this year and another 13.5% next year. This is huge for a 226 billion dollar company. They have a little more debt than I like, but GE has worked hard to get this debt under control and off the books. Cash flows appear to be slowing down, but with their sell offs of under producing segments, this should improve very soon. With almost 50 billion dollars in cash, they are hardly in any financial jeopardy. The only issue I have right now, is where will GE show support for a bottom. I am seeing quite a bit of support around the $26 level with huge support @ $22. Ill wait a few weeks to see what happens, if it drops much further below $26 Ill ride it out to $22, then I’m a buyer. Otherwise, I’ll wait for it to cross a 20 day moving average on the way back up. The 3.67% dividend is almost appealing enough to take a half position right now.

TGT- I like TGT as a buy at this point as well. This is another example of an Amazon-Whole Foods merger over reaction. Target is an industry leader and solid business, it’s not going anywhere any time soon. Target is starting to show some strength @ the $50.50 level and the technical’s show some very strong support at this level from a 5 year perspective. I think it has put in a bottom. With a dividend approaching 5%, this is an attractive buy point.

BGS- I like BGS in the space in the market for two distinct reasons. I absolutely believe the reaction from the market regarding Whole Foods and Amazon is grossly overblown. There is no reason to believe that Amazon entering the online food space is going to take this significant of a space away from the big boys like TGT, KR, WMT, etc. If anything this move (even if it actually goes through) will force these companies to improve in this space. The second reason I love BGS here is that the markets are starting to roll over, and when they do, investors gravitate toward the staples and utilities. BGS has been beaten up quite a bit and still remains fundamentally sound. This is a buy as soon as it starts to show any signs of strength on a chart. It has hit some strong support at $33.50. If it bounces up here I’m a buyer, if it falls through, it could very well go to $24 before it rebounds and I am a buyer all day at that price. I think we will see a rebound here, however it may be worth the wait to be sure.

HBI- An 8.3 billion dollar company trading below market and industry PE, with a 2.64% dividend. Earnings have increased both one an annual basis and quarter to quarter comparison. Operating income, revenue and cash flows are all on the rise. Very strong ROE, however this may be somewhat inflated due to the above average debt, which is still respectable. Over the last several months HBI has shown strength in OBV, MACD, RSI as well as crossing above the 20, 50, and 200 day SMA. So really, who really thinks people are going to stop buying underwear?

GDX- I think gold has another run in it. The dollar is weakening, and that usually means gold is on the rise. I’m not sure how high it will go, but I think it has a chance to equal the run it had over the summer of 2016. The markets are showing weakness, and gold generally performs in bear markets. I would actually prefer to go with individual mining companies like ABX or MUX, but I think there is some safety in this ETF at this time.

PSQ and SH- I have been stating this like a broken record, the markets are showing weakness and I believe they are starting to roll over. These two ETF’s are my hedge (along with gold).

SPECULATIVE PLAYS:

BWLD- This is a fundamentally sound company that has had a recent drop in earnings and sales. Technically this is setting up for a nice little run. It may be worth a small position and see where it goes. If BWLD can correct this most recent dip in sales, I can see a 25% gain over the next 12 – 18 months easily. This is definitely a trade interest.

AXL- A fundamentally sound company that is in a poor market. Earnings are showing positive growth despite being in the auto industry. Margins are very good with an operating margin 3 fold higher than the industry average. My concerns are the debt, the industry it lives in, and technically this stock appears to be in limbo, it cant figure out if it wants to pop higher or lower. I really like AXL @ $12 a share, but…we don’t always get what we want. Just like BWLD, with no dividend, the risk vs reward of buying here just isn’t there, so I will buy a half position and see where it goes.

TSLA- Im shorting Tesla. This is the most over valued company that I know of. The rest of the industry is quickly catching up, and Tesla has remained stagnant. I am confident that Tesla will file for bankruptcy protection in the next 3-5 years, start over with new investors and someone else running the company and it will take off. I love Tesla as a product, but hate it as a business.

LB & SKT- These are strictly technical trades for me. I like the companies, but I am retail heavy in my portfolio. I think they can easily hit $55 (LB) and $33 (SKT) and then I am out with profit. If it takes a while to get there, I’m collecting over 5% dividend on each to sit and wait. I don’t see either of them falling in price significantly as they appear to have hit multi year bottoms at their current price.

HEDGES: Currently I am hedged in PSQ, SH, GDX, and 17% position in cash. Post correction, I expect to sell these positions and look toward other opportunities or put it all in VTI and let it ride back up.

WATCHLIST:

AOBC @ 18, BWLD cross above 20 day SMA, DG @ 66, DUK @ 81, RGR @ 48, SNR @ 9, T @ 35, TSCO @ 20 day SMA. If there is a significant correction, remaining cash in VTI.

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