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.


Last Week’s Holds, Now Buys

Symbol Company Name Quantitative Grade Fundamental Grade
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
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
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
SNY Sanofi C D
TD The Toronto-Dominion Bank C C
TS Tenaris S.A. C C
WFT Weatherford International D C


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
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
PRGO Perrigo D C
RCI Rogers Communications D C
SIRI Sirius XM Radio D D
  1. KMB:
  2. SIRI:
  3. D-rated sell:
  4. B-rated:
  5. P:
  6. Run it through Portfolio Grader:

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