14 for 14 Portfolio Update: January Performance – A Better Start than Denver – Just!
This year, for better or worse, we have decided to update our portfolio performance on a monthly basis. As a reminder we began the year by recommending 14 larger cap long ideas and 14 names that we would be more cautious about. We screened 7 and 7 in the mid cap space and also did a sector specific screen for chemicals. These are picks for the year – not for any given month and they are slightly more biased to valuation than they are to fundamentals/revisions.
- We are losing in our first month on the large cap side as, while two of our real favorites – AA and CAT – have done well, the rest of the long group has not. Absent DOW’s activist driven rally – helped further by better earnings, our cautious group have all had negative absolute performance, but on a simple average basis – not as much as the long group.
- We have been more successful so far on the mid-cap side – which was where we had most success in 2013. All but one of our mid-cap concerns underperformed the S&P500 in January, while we had a big win with UFS.
- Our chemical picks did poorly in January as our long ideas all performed poorly and our more negative group generally did better – the exception being AXLL.
- While not every company on our screen has reported Q1 earnings yet, we include a chart showing the 5 most positive surprises and 5 most negative surprises from our screened groups. While LYB had the greatest positive surprise it was almost all because of a lower tax rate. The DOW gain was partly a tax rate benefit. The Alcoa miss is exaggerated because of the very small numbers involved, EBITDA estimates missed by less than 0.5%.
- We also show a review of revisions for the month (2014 full year) – again looking at the best and worst. Stocks we like dominate the negative side of the chart.
- Short term we would focus on the companies that we think have high valuations and have real Q1 earnings risk because of the weather – see our piece published yesterday. This would include, GNRC, RPM, IP, LPX, SEE and POL, all of which are on one of our “concern” lists for 2014.
For the full report and tables, please see our published research.