|Company||Symbol||Date Sold||Sell Price||Price Now||Today's Change||Gain/Loss Since Sale|
|American Airlines Group||AAL||08/17/2015||$43.97|
|Update : Update: April 24, 2015. Two pieces of good news for shares of American Airlines Group (AAL) today. The shares closed up 2.44% to $52.71. First, earnings for the first quarter of... more Read Jim's Original Sell|
|Update : Update February 21, 2015. Precision Castparts (PCP) has clawed its way back, rather nicely, from the disappointment over its December quarter earnings released on January 15 (preliminary) and January 22... more Read Jim's Original Sell|
|Update : Update: May 4, 2015. One of my core rules of investing—one that I find especially useful for not falling in love with a stock—is that when the reason that you... more Read Jim's Original Sell|
|Update January 31, 2015: Watch Apple (AAPL) today: Is there enough hope for more good news next quarter to keep Apple shares moving up after today’s blowout quarter? For the company’s fiscal first quarter that... more Read Jim's Original Sell|
|DaVita HealthCare Partners||DVA||03/20/2015||$81.86|
|Update July 8, 2013: I guess Warren Buffett’s Berkshire Hathaway (BRK.A) is a bigger short-term risk taker than I am. Buffett’s company increased its stake in DaVita Healthcare Partners (DVA) by $73.4 million after the... more Read Jim's Original Sell|
Update: April 24, 2015. Two pieces of good news for shares of American Airlines Group (AAL) today. The shares closed up 2.44% to $52.71. First, earnings for the first quarter of 2015, announced before the open today, April 24, rose to a record $1.2 billion, or $1.73 a share. That was slightly above expectations for $1.71 a share and tripled earnings (excluding special credits) in the first quarter of 2014. Revenue fell 1.7% to $9.83 billion, but that was in line with projections. While passenger revenue per available seat mile fell 1% domestically and 4.1% internationally, operating expenses dropped by 7.1% from the first quarter of 2014 thanks to a huge 42.2% plunge in fuel costs as oil prices collapsed. American Airlines Group closed its last hedges on fuel costs in July 2014 and has been naked ever since. Pretax margins, excluding special charges rose to a record 12.7%, up 8.6 percentage points from the first quarter of 2014. Second, American Airlines put off delivery of five Boeing 787 Dreamliners intended for international routes. Four will not be delivered in 2017 and the last will be delivered in 2018. American also announced that it would speed the retirement of some older MD-80s and 757s. The goal is to reduce supply growth, especially on international routes were capacity growth has been cutting into fares. American now projects that its international seating capacity will climb 1% in 2015, down from earlier projections for a 1.5% increase. The really good part of this second piece of news is that American’s U.S. competitors seem to be following suit. Last week Delta Air Lines (DAL) announced that it would cut expansion in global markets by 3% in the fourth quarter. United Continental Holdings (UAL) this week said it would reduce growth outside the United States by 0.7%. (Both American and United Continental are members of my Jubak’s Picks portfolio.) Although this trend certainly isn’t great for Boeing (BA), which is still looking to increase production on the 787 so it can move into the black for each airplane it produces, capacity restraint is the key to airline profits. The industry has a tendency to expand capacity so fast in good times that it posts huge losses in any drop in traffic. The longer the industry can put off that development in this cycle, the longer it will remain profitable I added American Airlines Group to my Jubak’s Picks portfolio back on December 2, 2014 at $47.76 as a hedge on falling oil prices since the airline would see a rapid drop in fuel costs if oil continued its plunge. The question now that oil looks to have bottomed is how much longer to hold the shares. Fuel costs always lag the price of oil so American Airlines still has several quarters of falling fuel costs to go by my estimation. In the fourth quarter fuel fell to $2.52 a gallon. For the first quarter that dropped even further to $1.83 a gallon in comparison to $3.10 in the first quarter of 2014. Credit Suisse projects that fuel cost at American will rise slightly to $1.94 in the second quarter (versus $3.03 a gallon in the second quarter of 2014), then to $2.06 in the third quarter (vs. $2.98), then to $2.16 in the fourth quarter (vs. $2.52). In 2016 fuel costs will, at $2.36 on average for the year, exceed average fuel costs for 2015 of $2.00 a gallon. That would suggest that on falling fuel costs alone the stock would be a reasonable hold into the third quarter of 2015. At that time investors might begin looking ahead at the higher costs per gallon in 2016 and they will certainly see, if the Credit Suisse projections are correct, a pattern of a declining reduction in fuel costs on a year to year comparison. Falling fuel costs aren’t the only thing this stock has going for it in 2015. The integration of operations between American and U.S. Airways after the 2013 merger is now substantially complete and with the issuance of a single operating certificate this month the group can now move workers and equipment to maximize efficiency. The group has also now unified its frequent flier and other market programs. Summer is usually a good time for air travel and for airlines if capacity discipline stays in place. I wouldn’t forget that this is a notoriously cyclical industry so I’m not raising my target price on yesterday’s news a great deal. As of April 24, I’m tweaking my target price to $66 by September from the current $64.
Update February 21, 2015. Precision Castparts (PCP) has clawed its way back, rather nicely, from the disappointment over its December quarter earnings released on January 15 (preliminary) and January 22 (final). The company’s earnings beat Wall Street estimates by a penny at $3.09 a share (excluding one-time items) but revenue rose just 4.3% year over year to $2.46 billion, matching the Wall Street consensus. But the kiss of disappointment came in when the company announced downside guidance for fiscal 2016 (which begins in April.) Earnings for that year will be below the $15.50 to $16.50 per share in the company’s prior guidance. The big worries for the year, the company said, will be inventory destocking at a single aircraft maker (read Boeing) and lower demand from the oil and gas industry (ya think?). The days after the preliminary report took the stock down to $199 (on January 16) as a flock of analysts rushed to cut their target prices and to downgrade their ratings from outperform to neutral or lower. From that bottom on Janaury 16, however, the stock has climbed back to close at $219.61 today—a 10% gain in a month. Partly that’s a reaction to the over-reaction by Wall Street analysts. After all the company did say that despite those revenue worries earnings per share from continuing operations will show growth in fiscal 2016 over 2015. But a significant part of it is a reaction to improving fortunes at Boeing (BA), Precision Castparts’ biggest single customer for metal parts that go into everything from engines to engine mounts to airframes. Boeing shares have rallied to an all time high on those improved prospects for aircraft deliveries and Precision Castparts shares have gone along for the ride. Just as important, the market has started to include Precision Castparts among those industrials such as Cummins and Caterpillar that see a recovery in sales in the second half of calendar 2016. The bottom for the oil and natural gas sector now looks to many of us to be around mid-year—that development would certainly remove a worry hanging over the stock. The view that this might be a time to buy for a second half recovery got a boost when the end of the year regulatory filings from Berkshire Hathaway showed Warren Buffett taking his position in Precision Castparts to 2.9 million from 2.1 million shares. The second half recovery in the oil an gas sector in the general global economy that drives sales at Precision Castparts to the power generation sector isn’t going to be some kind of moonshot. So while I think you do want to own these shares for the second half of the year, I am cutting my target price to $270 by October from my previous target of $298. That would be a 23% gain. Shares of Precision Castparts are up 52.7% as of Friday’s close from my original purchase on February 1, 2011. The stock is a member of my Jubak’s Picks portfolio http://jubakam.com/portfolios .
Update: May 4, 2015. One of my core rules of investing—one that I find especially useful for not falling in love with a stock—is that when the reason that you bought a stock disappears, vanishes, or just proves to be wrong, you should re-evaluate the purchase. And most of the time you should sell. What about that “most of the time”? When should you hold on even when the reason for your original buy has vanished? The best reason is that if another reason for the purchase—and I mean something other than a wish to get back to breakeven—steps forward. If the new reason is convincing on its own, enough so that you’d buy the stock on that basis even if you didn’t own it already, then hang on, I’d say. Toyota Motor (TM), a member of my Jubak’s Picks portfolio, is exactly such an example. Back in February 2013 when I added these ADRs (American Depositary Receipts) to the portfolio, a major reason was the weak yen policy being pursued by the Abe government and the Bank of Japan. By making massive asset purchases, the Bank of Japan would drive down the price of the yen against the U.S. dollar and other currencies. That would give a boost to overseas sales of Japanese exporters—since Japanese goods would be cheaper in dollars or whatever. The shares of these exporters would get an extra boost when sales in their stronger currencies were translated back into weaker yen on the company’s Japanese balance sheets Toyota has been a pretty good play on the weaker yen. Back in February 2013 when I added the ADRs for Toyota to the portfolio the yen traded at 93.53 to the dollar. Today, May 4, 2015, the yen closed at 120.12 to the dollar. That’s a move of 28% lower on the yen against the dollar. My position in Toyota Motor’s New York traded ADRs is up 42% in this period with some of the gain coming from the weak yen and some coming from new products and improved sales in North America. But now the Bank of Japan looks like it has lost its belief in its own weak yen policy. Growth in Japan has slowed to a crawl and the central bank pushed its goal of 2% inflation off into 2016. And despite that, the Bank of Japan says, there’s no need for more stimulus or larger asset purchases. The yen is not going to fall precipitously against the dollar over the next few quarters. So time to re-evaluate Toyota? Certainly. Time to sell? I don’t think so. For two reasons, one short term and one longer term. On the short-term side, there’s a lag between the assumptions Toyota used on the yen/dollar exchange rate in its last set of financial projections and the exchange rate now. Back in February 2015 the company forecast that the yen would trade at 115 to the dollar from January to March 2015. The yen traded at 120 to the dollar on May 4 so Toyota still has a foreign exchange wind at its back. Although, I’d say that most of that wind has been exhausted. The longer-term reason to hold onto Toyota here has to do with a significant change in the attitude of Japanese companies toward dividends and stock buy-backs. After years as among the least shareholder friendly companies in the world and with an economy-wide preference for holding onto cash rather than passing it along in dividends or buy-backs to shareholders, Japanese companies seem to be changing. A recent campaign by U.S. activist investor Daniel Loeb to get robot-maker Fanuc to distribute some of its $1.9 billion in cash to shareholders has resulted in the company deciding to double its dividend payout. Historically most campaigns to increase shareholder distributions have died quietly from neglect at Japanese companies. What’s changed is that Prime Minister Shinzo Abe has energetically pushed for Japanese companies to distribute more of their $1.9 trillion in cash to shareholders as part of his campaign to revive growth in Japan. Combined with efforts to get Japanese companies to raise wages, the two efforts are aimed at putting more cash in Japanese pockets so the Japanese will turn into more active consumers. It hasn’t hurt Abe’s campaign that Japanese companies haven’t been investing their cash either. It has just been piling up in company bank accounts. Fanuc, for example, had 20% more in cash and short-term investments at the end of calendar 2014 than it did a year earlier and almost double the level it had in 2010. Fanuc will raise its dividend payout ratio to 60% with this distribution from 30%. The payout among the companies in the Nikkei 225 Stock index was just 20% at the end of 2014 so there’s a lot of catching up to do. (That payout ratio compares to 42% for the Standard & Poor’s 500 and 62% for the EuroStoxx 50.) Toyota reports earnings for the January to March 2015 quarter on May 7 and the company is expected to announce a dividend increase for calendar 2015 and a share buyback. Management has indicated that its goal, in the short-term at least, is to increase cash returns to shareholders, either through dividends or buybacks, to 40%. A change in policy governing returning cash to shareholders could be a big deal for Toyota in global stock markets. Right now the yield on Toyota’s ADRs is just 1.8% in comparison to 4.1% at General Motors (GM) and 3.8% at Ford Motor (F) Toyota has grown its dividend by just an annual 3.8% over the last five years. How big a change should investors expect? I see a significant move by Toyota but I really don’t know how aggressively the company will join the trend in Japan. But I do think that anything which flags that Toyota has joined the movement to increase returns to shareholders will push up the share price. And increases in shareholder returns should be enough to pick up where the weak yen left off. It’s certainly worth holding through May 7 to find out.
January 31, 2015Watch Apple (AAPL) today: Is there enough hope for more good news next quarter to keep Apple shares moving up after today’s blowout quarter? For the company’s fiscal first quarter that ended in December, Apple reported yesterday after the close, the company earned $3.06 a share, a huge 46 cents a share above the Wall Street consensus. Revenue for the quarter of $74.6 billion easily beat the Wall Street projection of $67.69 billion. iPhone unit sales of 74.5 million set a new record and buried the Wall Street consensus of 66 million for the quarter. Earnings per share grew 48% from the first quarter of fiscal 2014. Operating cash flow of $33.7 billion hit an all-time record for Apple. Apple had closed down 3.5% or $3.96 a share to $109.14, for the day as traders decided to sell before the news. In after hours trading the shares climbed $6.26 or 5.74%, to $115.40. That leaves the stock short of its 52-week high of $119.75—but not all that short. Today will it be sell on the news or buy because today’s great report will raise hopes that next quarter will be even better. I’d vote for the second alternative. There was enough in the company’s guidance and enough in analyst post-earnings comments to make me think the momentum will continue. For example, the company’s guidance was typically conservative but significantly not, for a change, below the Wall Street consensus for the quarter that ends in March. Revenue will total $52 billion to $55 billion versus the current consensus forecast of $53.79 billion and well above the $45.6 billion in the March quarter of fiscal 2014. Gross margins will climb to 38.5% to 39.5% vs. 39.3% in the year earlier quarter. The December quarter is always the company’s big quarter, of course, and Apple was riding the momentum of iPhones with bigger screens and a refreshed line of Macs. Next quarter needs the promise of its own excitement for the shares to rise above the $119.75 52-week high. Apple will probably be able to build on its big momentum for the quarter in China. The iPhone 6 and 6 Plus only hit China in October, but sales in China climbed by 70%. Apple has said that it will open 25 new stores in China in the next two years And new products? Right now the Apple Watch is planned to hit the market in April 2015. There are persistent rumors of a bigger iPad with a 12- or 12.9-inch screen to match the 12-inch screens that Samsung introduced on its tablets in January 2014. March 2015 is possible but mid-2015 seems more likely. A MacBook Air with Apple’s Retina display could see the market in mid-2015. And, of course, there are the once and future rumors of a new Apple TV something. Is that enough to keep the hope alive? It’s not the strongest lineup—and Apple is a September and December quarter story in most years. But with the revenue momentum the company has coming out of the December quarter, it might be enough. I wouldn’t go wild on Apple here. And it’s certainly not time to load up the truck. But if you own it, I think holding on for a while to see how the momentum goes is a reasonable play. After all, it’s not like the market is over-run with growth stocks right now. As of January 28, I’m raising my Jubak’s Picks portfolio http://jubakam.com/portfolios/ target price for Apple to $132 by March from the current $120 a share.
July 8, 2013I guess Warren Buffett’s Berkshire Hathaway (BRK.A) is a bigger short-term risk taker than I am. Buffett’s company increased its stake in DaVita Healthcare Partners (DVA) by $73.4 million after the stock dropped by almost 6% on July 2 after the U.S. Medicare System proposed cutting its payments for dialysis services by 9.4% in 2014. (For more on the proposal, the drop, and DaVita and its major competitor in the sector, Fresenius, see my post http://jubakpicks.com/2013/07/03/davita-takes-a-hit-on-proposed-medicare-cuts-but-i-still-like-the-business-model-for-this-stock-pick/ ) Berkshire Hathaway now owns 15.6 million shares. In my July 3 post on DaVita I had recommended waiting to buy because I felt that Wall Street analysts would be busy cutting their earnings estimates on the news until the company reported earnings n August 11. The stock might show further weakness then if the company cut guidance for the rest of 2013. DaVita is a member of my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/ . The shares closed up 2.03% today. Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/ , I liquidated all my individual stock holdings and put the money into the fund. The fund did own shares of DaVita HealthCare Partners as of the end of March. For a full list of the stocks in the fund as of the end of March see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/