Author: Robert Freedland
Covestor model: Buy and Hold Value
Disclosure: Long AMZN, COP, JCI, PRGO)
After waiting patiently with several positions that were lagging the market, I chose to ‘swap out’ several holdings that had short-term issues and moved into new positions in what appeared to be more promising investments. It appeared that this strategy was successful as the model had a good month in February. Let’s take a look first at the positions that were exited, and then examine the new holdings briefly.
In early February I finally unloaded my shares of AT&T (T). The stock was trading weakly likely in anticipation of the finally-announced introduction of the iPhone 4 at competing Verizon (VZ) stores. The second shoe to fall on the AT&T (T) stock performance was the announcement of fourth quarter results on January 27, 2011, with profit falling 60% to $1.1 billion for the quarter down from $2.7 billion the prior year. The company did eke out a 2.1% growth in revenue. In addition, the company lowered guidance for the full year down to ‘mid-single digits’ while analysts “were looking for 9% or better earnings growth this year.” I moved on.
Another stalwart of mine, Colgate-Palmolive (CL) was sold in February also on less than exciting reports from the company. On January 27, 2011, Colgate (CL) announced 4th quarter results with declining earnings and revenue “pressured by currency changes and rising costs.” This also took the air out of this usually dependable company. I moved on.
Finally, my other ‘favorite’ Sysco (SYY) was sold during the month. This stock was a victim of rising costs of raw material and the relative inability to pass them on to their customers who were facing a weak economy with lackluster consumer demand. This became evident on February 7, 2011, when the company reported its 2nd quarter results with net income dipping nearly 4% on higher costs. Earnings of $258.2 million or $.44/share were down from $268.3 million or $.45/share last year and under expectations of $.46/share. As I noted last month, Sysco (SYY) has been trading anemically for some time and this latest announcement was enough for me. I moved on.
During the month I established new positions in Amazon (AMZN) which I believe is developing its own unique ‘moat’ in the rapidly growing online retail community. I added ConocoPhillips (COP) to add some exposure to the energy sector, Johnson Controls (JCI) for what I believe is the developing rebound in the auto industry as well as the potential increasing importance in environmental controls, and Perrigo (PRGO) in the generic and consumer products business. All of these companies have reported strong quarterly results and I believe their prospects remain bright over the short, intermediate, and longer-term.
Sources:
AT&T:
“Verizon announces iPhone 4 release date in early February” Washington Post, 1/12/11 http://www.washingtonpost.com/wp-dyn/content/article/2011/01/12/AR2011011203853.html
“AT&T Q4 profit drops 60%” St. Louis Business Journal 1/27/11 http://www.bizjournals.com/stlouis/news/2011/01/27/att-q4-profit-drops-60.html
“AT&T Guides Below Street, Stock Dips” Scott Moritz, TheStreet.com 1/27/11 https://www.thestreet.com/story/10987076/1/att-guides-down-stock-follows.html
CL:
“Colgate-Palmolive 4Q earnings dip, sales decline” Michelle Chapman, AP 1/27/11. https://finance.yahoo.com/news/ColgatePalmolive-4Q-earnings-apf-2981108618.html
SYY:
“Sysco 2nd-quarter profit falls 4 pct on food costs” AP, 2/7/11 https://finance.yahoo.com/news/Sysco-2ndquarter-profit-falls-apf-1813028234.html
