Author: Andrew Fletcher, Fletcher Wealth Management
Covestor model: Fundamental Targets
Disclosure: Long FE, PFE, NRG, CVA, WLP, XOM, WU
Amid questions of how Congress would be able to avoid a U.S. debt default, August 2011 started out with a continuation of the market’s downward slide that began in May. Standard and Poor’s added to the early declines with the announcement that the agency was degrading U.S sovereign debt. As the month progressed, equities began to establish support, but at August’s end, the S&P 500 had lost 5.68% of its value. With its 4.92% loss (according to Covestor’s calculations), the Fundamental Targets model outperformed its benchmark in August.
Trades
With such uncertainty in the air, we were hesitant to make any purchases during the month. However, due to the price drop in the overall market, more of the stocks on our watch list became more attractively valued, and may be purchased in the coming month.
No holdings met their target sell prices during July.
Newsworthy updates on holdings
FirstEnergy Corporation (FE) reported 2Q 2011 earnings of $0.43 per share of common stock on net income of $171 million and revenue of $4.1 billion. (Company press release, 8/2/11 http://www.prnewswire.com/news-releases/firstenergy-announces-second-quarter-2011-earnings-126572893.html)
After reviewing new clinical trial data for Eliquis, a stroke-preventing blood thinner developed jointly by Pfizer Inc. (PFE) and Bristol-Myers, analysts for ISI Group and Leerink Swann & Co now believe it be a sales leader in this lucrative market. (“Pfizer, Bristol-Myers Pill May Lead $9 Billion Stroke Market” Naomi Kresge and Albertina Torsoli, Bloomberg.com 8/29/11 https://www.bloomberg.com/news/2011-08-28/pfizer-bristol-myers-blood-thinner-eliquis-cut-deaths-in-study.html)
NRG Energy, Inc. (NRG) announced a definitive agreement to acquire Energy Plus Holdings LLC. Energy Plus will provide NRG an additional retail platform to expand its customer services and products in multiple retail markets.(Company press release, 8/16/11 https://www.businesswire.com/news/home/20110816005775/en/NRG-Energy-Acquire-Energy-Holdings-Adding-Scale )
The Oklahoma Bureau of Narcotics is partnering with the City of Tulsa and Covanta Holding Corporation (CVA) to dispose of prescription drugs collected through the Safe Trip for Scripts Program. (“Tulsa Waste to Energy Facility to Dispose of Old Pharmaceuticals” Waste Management World 8/2/11 http://www.waste-management-world.com/index/display/article-display/1739197281/articles/waste-management-world/waste-to-energy/2011/08/Tulsa_Waste_to_Energy_Facility_to_Dispose_of_Old_Pharmaceuticals.html )
Covanta has also announced that they will be designing, building, and operating a new facility in Clarington, Ontario. (Company press release, 8/17/11 http://www.prnewswire.com/news-releases/covanta-energy-receives-notice-to-proceed-for-the-construction-of-the-durham-york-energy-centre-127951713.html)
WellPoint Inc. (WLP) completed its acquisition of CareMore Health Group. (Company press release, 8/22/11 http://www.prnewswire.com/news-releases/wellpoint-completes-acquisition-of-caremore-health-group-128177278.html)
Exxon Mobil Corp (XOM) and Rosneft signed an agreement for oil and gas extraction from the Russian Arctic, after BP’s talks with Rosneft fell through. The agreement also gives Rosneft the option to invest in properties in the Gulf of Mexico and Texas. (“Exxon, Rosneft tie up in Russian Arctic, U.S.” Darya Korsunskaya and Braden Reddall, Reuters 8/30/11 https://www.reuters.com/article/2011/08/30/us-rosneft-exxon-idUSTRE77T2OM20110830)
Continuing to expand its global reach, Western Union (WU) has extended its relationship with Online Money Transfer SAL to offer the Western Union Business Solutions payments service across Lebanon. (Company press release 8/8/11 https://www.businesswire.com/news/home/20110808005213/en/Online-Money-Transfer-S.A.L.-Offer-Western-Union)
Conclusion
I’ll continue to choose strong individual companies, value-priced versus their industry peers according to my calculations.
As long as my overall portfolio moves with the market, I do not worry when quality stocks drop in price, as that helps move stocks on my watch list onto to the buy list.
