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), 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) 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 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 Pandora (P).
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. 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 |
