In June, we realigned portfolios for the second half of 2015.
Some European and Asian ETF holdings were severely reduced or completely eliminated.
In their place, we added domestic funds we think will benefit as housing continues to recover and domestic interest rates normalize.
Rate Plays
In addition, we invested in two new stocks that we think have the potential for superior longer term growth.
In order to capitalize on interest rate normalization, we decided to add the SPDR S&P Bank (KBE) and the SPDR S&P Regional Bank ETFs (KRE).
If interest rates begin to rise, both areas of banking should benefit from a steeper yield curve.
Rather than bet on either money center banks or regional entities, we decided to split our allocation between the two.
Housing
In order to benefit from a rise in household formations and the accompanying increase in demand for housing, we invested in the iShares US Home Construction ETF (ITB).
Although we like Lennar (LEN), Toll Brothers (TOL), DR Horton (DHI) and other builders, we decided to spread the risk both geographically and generationally by buying ITB.
In addition to our new ETF positions, we added two new single stock positions: ANI Pharmaceuticals (ANIP) and Fitbit (FIT).
Fitbit
I have been a user of Fitbit since its very earliest days. I believe the current move toward health quantification is in its early stages.
In my opinion, the products and service Fitbit delivers are superior to the others in the group.
ANI Pharmaceuticals is a generic drug manufacturer with an interesting approach to the business.
Currently, the company’s production facilities are far bigger than needed for production of their current product line.
Presently, this excess capacity is rented out to other pharmaceutical manufacturers.
Drug Pipeline
However, ANI’s pipeline of drugs based on its proprietary research is deep and growing.
As those products receive FDA approvals, the company will have the necessary production and distribution capacity in place to bring those products to market.
In the meantime, revenues have grown at high double digit rates since 2010, and earnings improved significantly in 2014, resulting in ANI becoming profitable.
I believe this trend will continue based on recent new contracts for one of its most popular products and potential for increasing market share.
With its strong balance sheet and solid growth potential, I think the stock is deserving of a premium PE ratio and possibly much higher prices.
Photo Credit: Joel Kramer via Flickr Creative Commons
The investments discussed are held in client accounts as of July 2, 2015. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable.
