So on January 3, I wrote a post about my thoughts on some stocks. Now, it's time to check up on my predictions. So if you would have taken my advice and purchased the companies I mentioned on January 4, how would you have done?
First, let's break it down into 3 categories: Stocks I said to buy, hold and sell.
The buys were: HBAN, PBCT, GE, CHK, HPQ, MSFT, BA, YUM.
The holds were: DUK, AEP
The sell was: BAC
So lets take a quick look at the overall percentage change on these as of the close of the market on 2/17/12.
For the BUYS:
HBAN has a gain of 7.22%. PBCT has a loss of 2.89%. GE has a gain of 3.88%. CHK has a gain of 3.56%. HPQ has a gain of 11.24%. MSFT has a gain of 14.05%. BA has a gain of 1.37%. YUM has a gain of 10.65%.
For the HOLDS:
DUK has a loss of 2.88%. AEP has a loss of 2.86%.
For the SELLS:
BAC has a gain of 38.04%.
Ouch. Well the good news is overall, you would have done very well had you invested in these on January 4. The bad news is that you would have really missed out on one hell of a run up from BAC.
Looking forward, I do believe a market pullback is in the cards in the next month or so. Currently, all the major indexes are at highs unseen for several years. While it is true that the US economy seems to be doing a decent recovery and people are getting back to work, the year end numbers for a lot of companies came in very underwhelming. The estimates were very low - so expectations were that there would be a lot of surprises in companies beating estimates. While several did, many more either just made estimates or missed in either sales, profits or both. This is a material weakness in the overall economy and shows that although things are improving, we are still a long way off from where we can say we have a strong and thriving economy.
With that in mind, the unemployment numbers seem to be coming down - which means more people are applying for credit and spending. Obviously these are things that must happen and be sustained for the corporate earnings to get back to where higher stock prices can be sustained in reality - and not just in future expectations.
So I do have some changes in my overall views on the following stocks - and some new additions to the list. I still believe that HPQ will continue its upward momentum. Meg Whitman is really a great CEO and her leadership alone adds value to the company. GE is expected to raise its dividend again in the fourth quarter of the year. It's financial wing should also start paying internal dividends again - which could add some serious value to the company. As the economy improves, yet housing prices staying fairly flat in most regions, I would like to add some newer buys to the list. Home Depot (HD) and Lowe's (LOW) should see improving sales in direct correlation to the improving employment situation. As improvements/repairs/additions to peoples homes have been either delayed or patched during tough times, with more people getting back to work but still unable to sell their homes, I see a lot of positive momentum for these home improvement leaders. Also, both of these companies have P/E at 20 - which might be seen as a little high, but with increased sales, the 20-times correlation stays with an increase in share price.
With this same line of thinking, banks should be making more loans to people who now may qualify for personal and consumer loans with the additional household incomes. I am keeping a buy for HBAN and PBCT and upgrading BAC to a hold on the news that they are selling it tower in the Boston financial district, cutting its CEO's compensation and making it correlated to the company's performance and it's settling its legal action with the US in the robo-signing fiasco. With all these in mind, I believe its incredible run up YTD will maintain, but probably will not keep its momentum for much further gains.
Utilities such as DUK and AEP seem to have been flat or decreasing so far this year - much as I said in the past post. With a mild winter and record low prices for natural gas, I would maintain a case-by-case review for each company, but with the two I am more familiar with (DUK and AEP) maintain a hold. I do see them holding their current values though. As for CHK, natural gas prices can't get much worse. I still see a lot of potential upside for this company - especially if things with Iran get worse. I am keeping a buy on this stock.
As for the fast food arena, YUM has made a run up to a 52 week high. Adding to this list I will be putting both YUM and McDonalds (MCD) as holds.
Again, I believe that in the next month or so to be a pullback in the overall markets. Personally, I am keeping my powder dry and waiting to buy anything else until this happens. Again, only time will tell if these predictions will hold or not - but I'll be sure to do another checkup on these predictions in around 6 - 8 weeks.
