Shesa's AUGUST 2014 INVESTMENT BLOG

                        24 August 2014
AUGUST 2014 Investment Blog
Shesa Nayak  

U.S. Stock Market Commentary

Hello and Welcome to my August investment blog.

The US Stock market particularly NASDAQ has been riding high. The DOW Jones closed this Friday at 17,001.22, S&P 500 closed at 1,988.40 and NASDAQ closed at record 4,538.55 points. NASDAQ hit 13+ years high, S&P 500 hit new all time high last week and closed almost at its pick. Let’s see whether NASDAQ can break the record set on March 10, 2000, when the index peaked at an intra-day high of 5,132.52, and closed at an all-time high of 5,048.62.

Wall Street this week

Last week was dominated by Fed agenda. According to the FOMC minutes, long-term unemployment and weak wage growth remain a problem, so the Fed plans to keep interest rates low for some time.  Fed chairman Yellen reiterated this at the Kansas City Fed's annual retreat. I do not think there will be interest rate hike until the beginning or later part of 2015. This is good news for the market.

Tuesday, 8/19, The Commerce Department reported that new residential construction projects jumped 15.6% during the month to 1.093 million, the highest level its reached since December. Also, existing home sales increased at the strongest pace of the year so far.

Thursday, 8/21, the manufacturing PMI for August came in better-than analyst expected and rose to the highest level since April 2010. Production and employment surged and new orders started picking up again.

On International front, Russia & Ukraine, Iraq, Libya crisis remain tense but no major attention to derail the U.S. stock market last week.

Should we invest now?

Market is almost at its pick. As said earlier, all stock market indices DOW, NASDAQ and S&P 500 are on their multi-year high or at their all time high. So the question is, should invest now? Should we sell our equities and remain on the sideline? What should we do? This is the question that I keep hearing from lot of folks. The answer depends on our investment strategy. It’s difficult to give any specific answer. But let me analyze my thought. As the market goes up, so also the risk associated with the equities goes up. This in turn, diminishes the opportunity to get better Return on Investment (ROI). Hence, chances of making significant gains are very negligible. As far as I am concerned, I would not be chasing any particular equity, rather I would have a list of equities in my shopping list and keep watching on them. Those lists could include Mutual Funds, ETF, Stocks, and Options. I would put a limit order and wait for the market correction then buy at the price that I feel comfortable. In order to profit from the market we need to have patience and not just through our money to any stock for that matter. Moreover, whether the market is up/down there will be some equities available to buy/sell. If we have such opportunity then we should not miss it. At present, I could see one such stock that I have selected for my August stock pick.

Now let us go to this month’s Stock pick. I am going to write about a fundamentally superior company that looks compelling at this point.

The Blackstone Group L.P. (BX)

The Blackstone Group is a publicly owned investment manager. The firm also provides financial advisory services to its clients. It provides its services to public and corporate pension funds and also manages private equity funds, real estate funds, funds of hedge funds. The company is diversifying and acquiring companies from different sectors, making investment in Europe and having solid organic growth. It has superior fundamentals and dividend, which is very compelling. Let first look into the fundamental aspect:

Revenue: $7.6 Billion with a quarterly revenue growth of 57.6%
Profit: $1.58 billion with a quarterly profit growth of whooping 144.9%
Earnings Per Share (EPS): $2.13
PE Ration: 15.25 and Forward PE of only 8.83%
PEG Ratio: 0.38
Institutional Holding: 79.6%
Book Value: $11.46
Dividend: 5.20%, forward dividend 4.2%
Market Cap: $18.98 billion
Return on Equity (ROE): 27.56%

From the above statistics we could see that fundamentally it’s a solid company with excellent revenue and profit growth. The good thing is that, it also pays more than 5% dividend. Now the stock market is up and there is high probability of some correction. If stock market takes a beating, BX could also fall but to a lesser extent. The reason, it has a solid 5% dividend and great fundamentals. When stock market falls, investors tend to look for dividend paying stock with solid fundamentals and BX is one such company. The company had 52 weeks high of $36.08. Currently, it trades at $32.42 that gives us 10% discount from the top. I believe such stock should be a log term holding for any investment portfolio. Hence, paying a dollar this side or that side does not make a huge difference in the long run. If the stock falls further it could be an opportunity to add more shares and do dollar cost average undoubtedly! Overall, this looks to be a very good buy for me.

Portfolio Update:

Equity
Suggested Price (USD)
Current Price (USD)
Suggested Date
% Changes
My Opinion (see disclaimer)
STOCK
AAPL
58
101.32
1/25/13
75%
BUY - see update
BIDU
86.43
214.19
4/18/13
148%
HOLD
GOGO
14
17.65
9/1/13
26%
HOLD
SLW
22
24.9
10/1/13
13%
BUY
FB
47
74.57
11/13/13
59%
HOLD
TSLA
135
256.78
11/13/13
90%
HOLD
AGNC
20.02
23.35
12/14/13
17%
BUY
MA
78.7
76.48
12/12/13
-3%
BUY
EXEL
5.82
4.11
12/12/13
-29%
SELL
NLY
10.77
11.77
2/2/14
9%
BUY
KO
38.55
41.12
3/9/14
7%
BUY
KNDI
19.4
19.28
3/9/14
-0.6%
HOLD
AMZN
311.73
331.59
4/12/14
6%
HOLD
BAC
14.74
16.13
5/11/14
9%
BUY - see update
QIHU
85
101.75
6/22/2014
20%
BUY below $85
BX
32.42
32.42
8/24/2014
0%
NEW
ETF
GDX
27
26.1
4/1/13
-3%
BUY
EDC
25
33.84
1/2/14
35%
HOLD
DUST
15.33
16.33
7/20/14
7%
BUY - Take some profit it's up 20% as of 9/4/14. Updated 4/9/14.
MUTUAL FUND
FBIOX
128
207.48
3/1/13
62%
Accumulate
PRHSX
60
67.21
2/2/14
12%
Accumulate
FSCHX
142.24
154.43
4/12/14
9%
Accumulate
OBCHX
16.14
17.77
6/22/2014
10%
BUY

Company Updates

Apple Inc (AAPL): Apple came out with solid result last quarter. I posted the update on my Blog earlier. I feel that next few months should be eventful for Apple. It has several product launches scheduled for September (rumored iPhone 6) and then in October it will release its fourth-quarter operating results.  After that, we have the holiday shopping season, which will drive demand for the company's latest iPhones, iPads and Mac computers. In addition, the company is aggressively buying its stock back and paying over a 2% dividend. Hence I may not see significant upside from here but still it should be there in one’s portfolio.

Qihoo 360 Technology Co (QIHU): It is expected to report its earning this Monday, 8/25, before market open. I am expectign the company to again post robust revenue growth and profits. Let’s wait and see.

Kandi Technologies (KNDI): Last Monday, the company announced that it delivered the first 208 electric vehicles for the launch of a car-sharing program in Shanghai. This is good news. Electric car has huge potential in China. On any dip, I will be a buyer of this stock.

Bank of America (BAC): Bank of America finally reached a $16.65 billion settlement with the U.S. Department of Justice. The company will take a earning hit in Q3 and that may reduce the earning of about 43 cents. However, after this, the stock has gone up. I think it is still a good buy for long term.

Economy News to watch next week

·      Monday: New Home Sales.
·      Tuesday: Durable Goods Orders, Consumer Confidence Report
·      Thursday: Initial Claims for Unemployment, Q2 GDP growth report
·      Friday: Personal Income, University of Michigan consumer sentiment

Folks, that’s all for today. Stay tuned for my next month’s blog. Thanks for your time. Please feel free to send me your comments and suggestions to shesa.nayak@gmail.com

Disclaimer: This blog is meant to provide my personal opinion rather than professional recommendation to buy/sell any stock, ETF, mutual fund or any other security(s). As an investor, it’s your hard earned money and you decide what is best for you. The above are merely my own suggestions and please contact a professional money manager to buy/sell any security. I do not earn any money by writing such blog. I have position on whatever security I write on the blog and avoid recommending any security that I do not follow.


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