It May Be Time to Trim Away at Your Portfolio

by Louis Navellier | October 29, 2013 10:21 am

I mentioned this before, but let me say it once again: October has been a simply spectacular month. As I write this, the Dow is up over 2% for the month while the S&P500 has rallied nearly 4.2%! Now that the budget gridlock has ended in Washington (for now) and Janet Yellen is all but elected to be next Fed chair, I expect money to continue pouring into the market through the end of the year.

But the rising tide won’t lift all boats, necessarily. The stock market is becoming increasingly selective, where a minority of stocks will likely continue to account for the vast majority of returns. The select few will be quality stocks that are characterized by strong sales and earnings growth. And as we progress through third-quarter earnings season, we’re seeing which stocks have what it takes to attract new money in this market.

Take Kimberly-Clark (KMB[1]), for example. KMB shares have risen 8% since the consumer goods company reported estimate-topping sales and earnings growth for the third quarter. These strong quarterly results, compounded with the fact that a weak dollar will boost the company’s results going forward, compelled me to upgrade this stock to a B-rated buy. KMB is just the kind of company I’d recommend for new money in this market.

And earnings season is also an important time to determine which of our holdings we should consider trimming. Sirius XM Radio (SIRI[2]) certainly disappointed shareholders when it missed analyst’s earnings estimates by a penny. But what really sent shares down nearly 10% after the announcement was the fact that the company reduced its estimate for 2013 self-pay net subscriber growth. So I had little choice but to downgrade SIRI to a D-rated sell[3] this weekend. So if you still have a position in SIRI, I’d recommend you find a good time to trim this position in favor of a stronger stock—perhaps B-rated[4] Pandora (P[5]).

The key takeaway from this is if one of your stocks takes off after earnings, take a close look at it. Run it through Portfolio Grader[6]. If you see that the stock is getting Cs, Ds or Fs (especially for its Quantitative Grade, which indicates a stock’s risk-to-return ratio), you may want to consider taking partial profits or trimming it entirely. All too often, this month’s winners become next month’s laggards, so harvesting partial or full profits is recommended.

If you invest in a lot of blue chips, I’ve posted a guide below that should help get you started. After taking a close look at the latest data on institutional buying pressure and each company’s fundamental health, I decided to revise my Portfolio Grader recommendations for each of the 74 stocks listed below.

Upgrades

Last Week’s Holds, Now Buys

Symbol	Company Name	Quantitative Grade	Fundamental Grade
ABB	ABB	B	C
ALL	The Allstate Corporation	B	B
BBBY	Bed Bath & Beyond	B	B
CLX	Clorox	B	C
CPB	Campbell Soup	B	C
DD	E. I. du Pont de Nemours	B	B
DELL	Dell	B	C
DHR	Danaher	B	C
DISCA	Discovery Communications	B	C
FRX	Forest Laboratories	B	C
HUM	Humana	B	B
KEY	KeyCorp	B	C
KMB	Kimberly-Clark	B	B
LO	Lorillard,	B	C
LTD	L Brands	B	C
MJN	Mead Johnson	B	B
MSFT	Microsoft	C	B
NEE	NextEra Energy,	B	C
NLSN	Nielsen Holdings N.V.	B	B
NVS	Novartis	B	C
OMC	Omnicom Group	B	C
PNC	The PNC Financial Services	C	B
SHW	Sherwin-Williams	B	B
TJX	TJX Companies	B	B
VFC	V.F. Corporation	B	C
VLO	Valero Energy	B	C
WDAY	Workday	B	C

Last Week’s Sells, Now Holds

Symbol	Company Name	Quantitative Grade	Fundamental Grade
ALXN	Alexion Pharmaceuticals	D	B
AMZN	Amazon.com	C	C
AZN	AstraZeneca	C	C
CHK	Chesapeake Energy	C	C
EPD	Enterprise Products Partners	C	C
GS	Goldman Sachs	D	B
HCN	Health Care REIT	C	C
HOT	Starwood Hotels & Resorts Worldwide	C	B
KSS	Kohl’s	D	C
M	Macy’s	D	C
NSC	Norfolk Southern	C	B
NU	Northeast Utilitites	D	B
PEG	Public Service Enterprise Group	D	B
PPL	PPL	D	B
SNY	Sanofi	C	D
TD	The Toronto-Dominion Bank	C	C
TS	Tenaris S.A.	C	C
WFT	Weatherford International	D	C

Downgrades

Last Week’s Buys, Now Holds

Symbol	Company Name	Quantitative Grade	Fundamental Grade
A	Agilent Technologies	C	C
ARMH	ARM Holdings	C	C
AVGO	Avago Technologies	C	B
BMO	Bank of Montreal	C	B
BX	The Blackstone Group	C	C
CHKP	Check Point Software Technologies	C	B
CMI	Cummins	C	C
EMN	Eastman Chemical	C	B
GIB	CGI Group	C	B
HOG	Harley-Davidson	C	C
KYO	Kyocera	C	C
MCO	Moody’s	C	B
MHFI	McGraw Hill	C	B
NI	NiSource	B	C
SJR	Shaw Communications	C	C
SRCL	Stericycle	C	B
SYMC	Symantec	D	B
UTX	United Technologies	C	B
XLNX	Xilinx,	C	C
YNDX	Yandex NV	C	B
ZMH	Zimmer Holdings	C	C

Last Week’s Holds, Now Sells

Symbol	Company Name	Quantitative Grade	Fundamental Grade
ABT	Abbott Laboratories	D	B
CHL	China Mobile	F	B
CNP	CenterPoint Energy	D	C
DVA	DaVita HealthCare Partners	D	B
MTB	M&T Bank	D	B
PCAR	PACCAR	D	C
PRGO	Perrigo	D	C
RCI	Rogers Communications	D	C
SIRI	Sirius XM Radio	D	D

Source URL: https://investorplace.com/2013/10/74-stock-grades-msft-amzn-kmb-gs/

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