Shesa's OCTOBER 2014 INVESTMENT BLOG
26 October 2014
OCTOBER 2014
Investment Blog
Shesa
Nayak
U.S.
Stock Market Commentary
Hello and Welcome to my October investment blog. Apologize for
little delay in publishing this month’s blog. Again, this month I do have a lot
of updates so please read with patience.
The DOW Jones closed last
Friday at 16,805.41, S&P 500
closed at 1,964.58 and NASDAQ closed at 4,483.72 points. After
a long time, the stock market had nearly 10% correction for NASDAQ, S&P and
DOW Jones. But last week the stock market roared back and gained some
significant lost ground. But commodity prices, oil, gold, silver, copper etc.
have been hammered hard due to strong US dollar, lackluster European economy
and mediocre growth in China. Under such circumstances having some cash on hand
may be very handy. I feel we could see a bottom in next few weeks and then
bounce back to new highs and that trend could continue to end of the year and
further.
Current
US Stock Market Trend and Wall Street this week
We
are amid the earnings season. Most of the companies have reported better
earnings including Apple. However, there are many earnings miss, notably IBM,
Google, Netflix, BOA, CocaCola, GE, McDonald etc. Next week the earnings
announcements will continue. Facebook (FB) is scheduled to report earning on
10/28, Tuesday after the close of market. Let’s keep an eye on that. I believe
we would continue to see high volatility during the month of October.
Where
the Stock market trending?
We are approaching the best 6
months of the year (Nov 1st – April 30), where equity market has
demonstrated better return on investment in the past. Moreover, in the mid election
year usually stock markets invariably did well wherein stock
market has returned about 32% on an average. It does not necessarily mean that
this year and going to 2015 will be replicating the past performance. However,
history provides us an indication on what we can expect in future. Please see my July blog for
details. This month I have a solid
small cap mutual fund that looks exciting at this point. I suggest looking into
the Mutual Fund list as there are some great funds listed on the portfolio.
Portfolio Update
Direxion Daily Gold Miners Bull 3X Shrs (NUGT)
This ETF has been extremely
volatile in last few weeks. It has been beaten down heavily. A couple of weeks
ago, I provided an update on my blog and to my investment group. The question
is, should we sell now? Obviously, it depends upon your investment strategy and
risk tolerances. If you did not read then please read that update. Evidently,
it’s not fun to see any equity coming down so negative. As long as we are not
invested too much, we can wait with patience. If we are invested more than what
we should have, it’s better to sell a portion of it and buy back if it goes
down further. Or hedge it with DUST (opposite to NUGT). Of course, DUST is no
cheaper as it has gone up 92% since I mentioned in my blog. However, if
NUGT falls you have a good protection. The main reason of NUGT downfall is
strong US dollar and bad European economy. I feel that there could be some
bounce in in next few months. But it can be noted that, if European economy
continue to fall further than US Dollar will go up higher and that may not be
good fold gold. Thus, if an investor is not comfortable with the high
volatility then it’s better to get out and be invested in stable dividend
paying stocks or Mutual Funds. HOLD.
Apple (APPL): On Monday,
10/21, Apple reported Q3 earnings per share of $1.42 on revenue of $42.1
billion, handily beating analysts' expectations. Analysts had expected the
company to report earnings of $1.31 a share on $39.88 billion in revenue,
according to a consensus estimate from Thomson Reuters. It also gave sales
guidance for the current quarter of $63.5 billion to $66.5 billion, versus a
Wall Street estimate of $63.5 billion. Overall, it was a strong result and
forecast. The new upgrade for iPhone 6 and 6+ seems to have earned excellent
result. It can be noted that the company sold 39.3 million iPhone during the
quarter. Analyst had project to sell 37-38 million iPhone. It also introduced
ApplePay on 10/20 and that could be good catalyst. The company is also planning
introduce AppleWatch starting early 2015 but did not provide any specific date.
Visualizing all these, I feel that Apple is still a good buy and the stock can
move north towards $115-120. BUY.
Bank Of America (BAC): Bank of
America reported a profit of $168 million, down from a year-earlier profit of
$2.5 billion. On a per-share basis, Bank of America posted a loss of one cent.
Analysts had expected a loss of 9 cents per share. The results included
settlement costs of 43 cents a share. It can be note that, BOA had a
$16.7bn settlement with the Department of Justice over the mis-selling of
mortgage-backed securities last August. One good thing is, the uncertainty is
gone. Now BOA could think of giving some dividend or buying its share. This may
be the catalyst for its share price to appreciate. In addition, interest rate
may not increase for next several months when it happens Banks will make more
money. I see this as good buy. Revenue fell to $21.21 billion. Analysts had
expected $21.36 billion. BUY.
Blackstone (BX): Blackstone reported a earning of 66 cents per share. Analysts in a
Thomson Reuters poll had forecast 72 cents on average. So it missed the
forecast resulting the stock to go down. Again the stock price has recovered
some ground. However, its distributable earnings, which show actual cash that
is available to pay dividends, rose 115 percent in the third quarter to $672
million. I still feel that BX is a good buy for long term visualizing its
fundaments and 7.5% dividend. BUY.
The Coca-Cola Company (KO)
Coca-Cola said profit fell 14 percent, dragged
down by unfavorable currency exchange rates. Adjusted for one-time items, it
earned 53 cents a share, topping the 52 cents a share analysts had expected.
Revenue was $11.98 billion, which missed Wall Street forecasts for $12.14
billion. After the earning announcement Coca-Cola’s shares fell $2.61, or just
over 6 percent, to $40.68. Though it did not forecast better 2015 still I think
it should be part of our core portfolio. HOLD.
Amazon.com (AMZN)
Amazon reported its fiscal Q3
financial results and they were below analyst expectations. It came short of
Wall Street EPS and revenue expectations, causing the stock price to sink
almost 12%, or roughly -$37/share. AMZN reported EPS of -$0.95, while the Zacks
Consensus Estimate was -$0.74, and revenues were $20.58 billion below consensus
of $20.86 billion in revenues. The company also said it expects holiday quarter
revenue of $27.3 billion and $30.3 billion, below analyst expectations of $30.9
billion. That's an increase of 7 percent to 18 percent — slower growth than the
prior-year holiday quarter when sales rose 20 percent. This is not good. The
company has always looked for future growth rather than making any meaningful
profit. It has been almost 20 years the company is in existence. I will not add
any position to the existing share and just hold it for some more time. HOLD.
Direxion Daily Gold Miners Bear 3X ETF (DUST)
As said earlier, this ETF has gone up
92% since I mentioned in my blog on
July 20. We had an incredible run! Now it’s time now to take some profit. However,
I will still keep some portion of my portfolio to hedge against downturn for
NUGT. HOLD.
Now let’s take a quick
look to my this month’s addition:
Fidelity
Small Cap Discovery (FSCRX)
The small cap stocks have been hit very hard in last
few weeks and so also the mutual funds. If we see the ROI
than this mutual fund looks very compelling at this moment. Though, past
performance is not always the reflection of future return, that’s a major
determining factor. Mutual Funds are long-term investment and
not short term trading. Therefore, I would like to buy keeping longer time
horizon in mind. The minimum investment for this fund in Fidelity is
$2500 and subsequent investment is $100. In the long run, small cap have provided
better return than large cap. Since this fund is almost at its 52 week low it
looks very compelling to me. I would invest minimum in the beginning and then
keep adding and accumulating over a period of time.
Let’s look to this
fund performance as of 9/30/14:
Year-to-date
|
1 Year
|
3 Year
|
5 Year
|
10 Year
|
Life of Fund
|
|
FSCRX
|
-1.84%
|
4.79%
|
25.50%
|
17.91%
|
12.23%
|
+11.44%
|
NAV: 29.34. NTF:
No Transaction Fee
Fund
Inception: 9|26|2000
Morningstar
Rating: *****
Minimum
Investment:
$2500
Load: No Load in
Fidelity. No Transaction Fee in Fidelity.
Expense
Ratio:
1.01% (Less than average)
Beta: 0.91 è Risk: this is less
volatile comparing to market move
Fund Manager: Chuck
Myers since 3/1/2006
Equity
Portfolio:
Equity
|
Suggested Price (USD)
|
Current Price (USD)
|
Suggested Date
|
% Changes
|
My Opinion (see disclaimer)
|
STOCK
|
|||||
AAPL
|
58
|
105.22
|
1/25/13
|
81%
|
BUY **
|
BIDU
|
86.43
|
222.55
|
4/18/13
|
157%
|
HOLD
|
GOGO
|
14
|
16.51
|
9/1/13
|
18%
|
HOLD
|
SLW
|
22
|
19.74
|
10/1/13
|
-10%
|
HOLD
|
FB
|
47
|
80.67
|
11/13/13
|
72%
|
HOLD
|
TSLA
|
135
|
235.24
|
11/13/13
|
74%
|
HOLD
|
AGNC
|
20.02
|
23.02
|
12/14/13
|
15%
|
BUY
|
MA
|
78.7
|
74
|
12/12/13
|
-6%
|
BUY
|
NLY
|
10.77
|
11.36
|
2/2/14
|
5%
|
BUY
|
KO
|
38.55
|
41.03
|
3/9/14
|
6%
|
HOLD **
|
KNDI
|
19.4
|
14.01
|
3/9/14
|
-27.8%
|
HOLD
|
AMZN
|
311.73
|
287.03
|
4/12/14
|
-8%
|
HOLD **
|
BAC
|
14.74
|
16.72
|
5/11/14
|
13%
|
BUY **
|
QIHU
|
85
|
68.19
|
6/22/14
|
-20%
|
HOLD
|
BX
|
32.42
|
30.66
|
8/24/14
|
-5%
|
BUY **
|
ETF
|
|||||
GDX
|
27
|
20.47
|
4/1/13
|
-24%
|
HOLD **
(Note: I may sell if it goes further down)
|
DUST
|
15.33
|
29.4
|
7/20/14
|
92%
|
HOLD - take profit **
|
NUGT
|
27.38
|
19.31
|
9/21/14
|
-29%
|
HOLD **
|
MUTUAL
FUND
|
|||||
FBIOX
|
128
|
227.22
|
3/1/13
|
78%
|
HOLD
|
PRHSX
|
60
|
70.9
|
2/2/14
|
18%
|
HOLD
|
FSCHX
|
142.24
|
148.02
|
4/12/14
|
4%
|
BUY
|
OBCHX
|
16.14
|
17.01
|
6/22/14
|
5%
|
BUY
|
FSCRX
|
29.34
|
29.34
|
10/25/14
|
0%
|
NEW -
BUY
|
Note: Sold EDC on 9/29/14
with a profit of 8%
|
|||||
Economy News to watch next week
Tuesday:
Durable
Goods Orders, Consumer Confidence Report.
Thursday:
Initial
Claims for Unemployment, Third Quarter GDP Estimate
Friday:
Personal
Income, Consumer Sentiment Index
Also you can go to the following URL:
Source: Marketwatch.com
Folks, that’s all for today. Wish you good
investing! Stay tuned for my next month’s blog. Thanks for your time. If you
want to get alert on my action then please subscribe to shesagroup_invest@googlegroups.com. Please feel free to send
me your comments and suggestions or alert request 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 this 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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