Author: Andy Schornack
Covestor models: Financial Services, Market Maven
The financial sector came alive in January 2012, driving outperformance for both my Financial Services and the Market Maven models. This is in comparison to both the S&P 500 and their individual benchmarks, the S&P 500 Financials Index and Russell 3000, respectively.
The Financial Services model did not have any changes during the month of January. During February, I did sell down the position in Morgan Stanley (MS) after a nice run up, but it remains a top five position in the portfolio. Likewise for the Market Maven model. Jim Cramer has now also put his hat in the ring and is recommending Morgan Stanley as both a play on Facebook’s IPO, but more importantly also for what MS is doing right. The thesis is not much off what I have been articulating in my investment reports over the last several months: well capitalized, good risk management, and trading at a discount to peers.
The Financial Services portfolio’s sleepers sported a very successful January. Tower Group (TWGP) and Bank of America (BAC) both saw nice gains during the month. In February, I added to the position in TWGP in the Financial Services model. I continue to like these two names in 2012.
Overall, the market is seeing positive momentum as jobs numbers, economic data points, and the economic recovery continue to provide reassuring numbers. On a localized level, I am seeing and hearing more positive comments than in recent years. Banks are getting competitive for business loans and even providing more flexible extensions of credit than years past. Minnesota continues to have a relatively stable economy with lower unemployment rates than the nation’s average. This leads me to be more bullish on the market in the near term and more positive on the recovery as a whole.
The Financial Services portfolio is structured to provide dividend income with a target minimum yield of 3%. This should provide a stable return of capital during the market volatility that can be redeployed into new opportunities or to add to existing positions.
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