Author: Leif Eriksen
Covestor model: Performance With Protection, Global Growth Brands
Disclosure: Long HAIN, HAS, INT, RCL, HUN, TIE, ITW and TEVA
Welcome back from your summer vacation! Hopefully you didn’t pay any attention to your portfolio or the markets. Otherwise, it may well have been another summer of discontent. Didn’t this just happen to us one year ago? Not to be outdone by the Summer of 2010, the Summer of 2011 decided to make its decline more volatile and precipitous. It was certainly a splash of cold water on my summer. But that’s the market – it doesn’t care who you are and how it affects you.
My primary regret in the midst of these market meltdowns is not enough spare cash to take advantage of it. Which brings me to my “What I Did on My Summer Vacation” report.
August was a busy month for my Global Growth Brands portfolio. I took advantage of the volatility to make changes and become almost fully invested. In the spirit of the EGGB portfolio’s more aggressive mandate I unloaded DELL and HMC and added new positions in HAIN, HAS, INT, and RCL. I’ll comment on a couple of them.
HAIN is a stock I’ve been following for some time and was waiting for a pullback to get in. It’s a rapidly growing family of brands feeding a global trend towards healthier eating. Carl Icahn and Icahn Capital LP are major investors (source: Yahoo Finance as of 9/1/11 https://finance.yahoo.com/quote/HAIN/holders?ltr=1.
RCL is also a major brand in an area that should benefit from two trends: a growing global middle class and an aging U.S. population. The stock has been battered by concerns about the effects of a new recession on the cruise business and has seen quite a bit of insider buying recently (source: Yahoo Finance as of 9/1/11 https://finance.yahoo.com/quote/RCL/holders?ltr=1.
In my last monthly report (July – https://investing.interactiveadvisors.com/?p=10795 – I did not write an August report) I commented that I was going into “lock down mode” in my more conservative Performance with Protection portfolio. That was then…before August’s unexpected excitement. No, I didn’t panic and sell everything. But I did use the opportunity to raise some cash and reinvest it in what I consider more attractive opportunities.
For this portfolio, I sold BRKB, DELL, PEP, TOT, UTX, and WAT in August. And I bought new positions in HAS, HUN, TIE. I also added to my ITW and TEVA positions.
The impetus for the HAS position was a recent Barron’s article on the company and its CEO (“The Playful Transformer” Lawrence C. Strauss, Barron’s 8/27/11 http://online.barrons.com/article/SB50001424052702303599904576526104294941850.html?mod=BOL_qtoverview_barlatest#articleTabs_panel_article%3D1). In my follow-up research I discovered a company with significant growth prospects, a strong balance sheet, and a healthy dividend. I found it has characteristics that make it a good candidate for both of my Covestor portfolios; I added it to both.
HUN and TIE fall into the same category – economically sensitive stocks that have sold off inordinately and have seen significant insider buying (source: Yahoo Finance as of 9/1/11; HUN – see Jon and Peter Huntsman purchases on 8/8/11 https://finance.yahoo.com/quote/HUN/holders?ltr=1 , TIE: https://finance.yahoo.com/q/it?s=TIE+Insider+Transactions). They both have strong balance sheets and pay healthy dividends.
None of the changes I made to either portfolio was made with the expectation of near term returns. I expect the market to be rocky for some time to come. In the long run, however, I expect well run companies with strong market prospects to do well. And that’s what I look to invest in.
Until next month, many happy returns.
