Author: Andy Schornack
Covestor models: Financial Services, Market Maven
The models continue to perform well into 2012 as both the Financial Services and the Market Maven portfolios are showing strong gains year to date. I like where both are positioned.
The Financial Services model did not have any changes during the month of March, but I am currently reviewing my watch list for new opportunities.
New York Community Bancorp (NYB) was in the news recently for assuming roughly $2.3 billion in deposits from Lehman Brothers’ Aurora Bank FSB. The company was paid money to assume the deposits and anticipates the funds to be immediately accretive to earnings. NYB continues to be a core position in the portfolio.
The Market Maven model had more movement as I took gains on some of my position in NYB, as well as the advance in the share price of Best Buy (BBY), to add to Supervalu (SVU). Supervalu right now is a very strong buy based on my analysis. The stock is heavily shorted and trading at a significant discount to peers, and trades at a low multiple of cash flow.
The company reported earnings on April 10 for its fiscal year ended in February. I expect to see a rebound into summer as the company can continue to demonstrate its ability to reposition its balance sheet over the coming years. SVU is the second largest position in what at the moment is a rather concentrated portfolio of stocks.
Overall, I continue to be positive on the momentum of the underlying economy but am still cautious. This time of year always seems to be finicky in the markets so it is important to rely on the fundamentals and your thesis. I always try to review my research for confirmation of the assumptions and data behind my thesis. If I believe them to be true, I will likely be steadfast in my positions.
My goal in both models is to provide dividend income while structuring the portfolio for long-term profits. The Financial Services portfolio is particularly structured to provide dividend income with a target minimum yield of 3%. This strategy is designed to provide a stable return of capital during the market volatility that can be redeployed into new opportunities or added to existing positions.
