Wednesday, February 13, 2013

Portfolio Update (6 months later)

My portfolio gains versus the S&P, Dow, and NASDAQ.
It's been about 6 months now after I bought my first round of stocks. Overall, my portfolio has performed consistently well and netted a total return of 12% so far, which amounts to about $600 of passive, tax-free income. In this post, I will summarize the results below with a bit of commentary.

First, let me go over my current portfolio as well as some positions that I've closed since my initial purchase.

Company Ticker Status % Gain
Cisco Systems Inc. CSCO Closed 16%
Citigroup Inc. C Closed 14%
Hewlett-Packard Company HPQ Open -3%
Intel Corporation INTC Open -8%
JetBlue Airways Corporation JBLU Open 21%
JPMorgan Chase & Co. JPM Closed 8%
Knight Capital Group Inc. KCG Open 24%
NRG Energy Inc. NRG Open 17%
Office Depot Inc. ODP Closed 14%
Pepco Holdings, Inc. POM Open 2%
PG&E Corporation PCG Open -7%
Safeway Inc. SWY Open 32%
Staples, Inc. SPLS Closed 9%
Xerox Corporation XRX Open 16%

As you can see, I closed positions in Cisco, Citigroup, JPMorgan Chase, Office Depot, and Staples.

Cisco was one of the very first companies that I invested in and was mainly for testing the waters. I sold it at about $19 once I hit the 15% profit mark. While it currently sits at $21, I didn't really do a thorough valuation so I have no qualms about selling it early so that I can reinvest my cash elsewhere.

I bought Citigroup in August 2012 when the price had stabilized after falling significantly. That caught my attention and after doing an initial valuation, I found it to have very solid fundamentals. Plus, as a Citibank customer, I have been extremely satisfied with their banking service and their technology. I sold it shortly thereafter in October after a modest gain at $35. Currently it sits at $44. I'm not sure what to make of this. I sold it because I read that the financials of financial firms can be misleading due to the various ways that the balance sheet can be manipulated. I didn't want to take a risk so I sold it early. Maybe a slight regret after seeing how the stock has been doing, but I'd rather play it safe.

JPMorgan was a similar situation to Citigroup. I did not want to be involved in any company whose business I do not fully understand.

I bought Office Depot and Staples in August 2012 after office supply stocks had been falling steadily for 6 months. I happened to get extremely lucky and bought just as they started rising again. But regardless, I found that they were significantly undervalued at the time despite concerns of losing business to things like online retailers. I sold them after they had risen past my margin of error. In retrospect, they had risen far further than that, but again, hindsight is 20-20.

Most of my currently open positions that have netted gains are pretty straightforward: JetBlue, NRG Energy, Pepco, Safeway, Xerox. All of them had solid fundamental numbers, a good outlook, and (aside from NRG) products and services that I am personally happy with.

You may have noticed that I left out Knights Capital Group. I will admit, this particular stock was my little "experiment" (read: gamble). There was a huge fiasco regarding the company on August 1, 2012 that disrupted several companies in the NYSE and caused them to lose over $400 million. As a result, the stock price plummeted and I wanted to test to see if it was a market overreaction. I figure that as one of the largest trading firms on Wall Street, it must be able to get back on its feet and resume its business. This was completely my intuition and it happened to be correct.

Now, we arrive at the trickiest and most important part of the portfolio: the losses. I have three stocks that are currently sitting on losses: HP, Intel, and PG&E.

I bought HP after doing some basic fundamental analysis. The company has been plagued with a lot of problems, both external market forces and internal organizational issues. I found that the market forces (i.e. declining PC and printer sales) were not enough to justify its low price. However, a lot of organizational changes within the company in addition to some weak earnings in the past two quarters have caused the price to dip quite far down. However, it has been recovering steadily since December 2012 so I am still optimistic and confident in my analysis. Despite all of the financial problems HP faces, it still gives out a regular 1% quarterly dividend, which is a positive sign and offsets some of the recent losses. I plan to invest in the long term, so I'm not particularly worried. I will hold onto the stock for 20 years if I have to.

Intel also faced some earnings disappointments in the past quarter or so. The price dipped significantly before I bought it so I figured it would be a good time to enter. Intel has proven to be at the forefront of semiconductor technology time and time again and I don't see any good reason why it would not be a solid investment for the future. The CPU isn't going anywhere and Intel has also had big successes with their integrated graphics cards. It also gives out a 1% quarterly dividend as icing on the cake.

Finally, we have PG&E. I wanted about 20% of my portfolio to be in very consistent, solid companies with a nice dividend. I figured that energy would be a good place to put that money. I suspect that I just got unlucky with the timing of buying the stock. These minor price fluctuations aside, it gives over 1% in dividends quarterly. I am happy with their service and think that the energy needs of the West coast isn't going to alter considerably. If anything, it will go up in the coming years. There are some government regulations surrounding energy companies, so it is unclear to me how this will affect the company's profits. All-in-all, this was just a money dump for me.

Obligatory Disclaimer

The author is not a financial adviser, tax accountant, or lawyer and disclaims any and all liability for the contents of this blog. The information reflects the author's personal research and experience, which may contain errata.