Covestor model: TenStocks
Disclosure: Long HTCH, BAC
We added a new investment to the TenStocks Covestor portfolio at the end of February. This brings our current holdings to five. We are now approx 60% invested and 40% in cash.
The new investment is Hutchinson Technology (HTCH), a maker of suspension assemblies for hard disk drives. Western Digital (WDC) is its biggest customer. Hutchinson is in the process of moving manufacturing from the US to Thailand. The company incurs transition costs on both sides of the move. We believe HTCH may be at a turning point. We invested at a healthy discount to stated net tangible assets. If HTCH can make its way back to break-even, the stock should trade up to tangible book.
Julian Assange and Wikileaks may be in possession of information about Bank of America (BAC), our largest holding. There is a possibility this information will be released soon. If so, we may see some price volatility on BAC as the info becomes public. Short term price volatility and associated bad press does not change our long term view that Bank of America will do well over the next year or two.
We continue to believe the market is overvalued and that there is risk to the downside. ‘In Bernanke We Trust’ may be a good enough mantra for current bullish market participants, but it is not good enough for our capital. We need to see tangible value in our investments. Global markets (and the USA in particular) are tempting a new crisis of confidence. It can come in a day, without warning. Worshipping false gods is a fool’s errand. Those who appear invincible and all powerful today can become powerless, empty shells tomorrow. The unchangeable and the unthinkable can change in a day. Just ask the people of Tunisia, Egypt or Libya.