QTR's Mid-Year Portfolio Recap

by: Quoth the Raven


To start 2014, I recommended 9 long and 5 short positions for the year.

To date, this portfolio has yielded 4.79% in the last six months. Longs have produced 10%, shorts are off 6%..

This is an updated look at the positions that I advocated.

A Small Introduction

To start 2014, I wrote two articles with my best trade ideas for the coming year. You can read both of these articles here and here. They laid out my short positions and long positions that I would have advocated going into 2014.

As I said to start the new year:

When combined with my last article, linked in the top paragraph, these are my definitive 14 trades heading into the new year. At the end of the day, it's 9 long positions and 5 short positions - which should be enough for a hedge.

We'll look back in a few months to see how this portfolio has performed. I wish all investors the best of luck heading into the new year.

Combined, here are the trades that I advocated with a small update and a list of how the price movement has fared. If equal weight was placed in all of these positions to start the year, this portfolio would have returned 4.79% in the last six months. Most of the positions here I would hold for the rest of the year, unless otherwise noted.

Without further ado, here's a recap of each selection for 2014, how they've performed, and my current thoughts on each position.



Ford (NYSE:F)

Price on December 31, 2013: $15.43

Current Price: $16.70

Change: +8.23%

My Thoughts 6 Months Ago:

  • Ford is spearheading the U.S. auto turnaround and had a record 2013 across the board, even with slightly less confidence about 2014 recently.
  • Ford's Fusion is expected to go head to head with the Toyota Camry for the best selling sedan in the U.S. in 2014.
  • Ford is likely to raise its dividends in 2014.
  • Ford will be positively impacted by the European auto markets having bottomed and turning around.

My Thoughts Now:

I continue to believe that Ford is a good name to be in.

My last article pointed out that the company's growth overseas should continue to act as a catalyst, while combined with domestic growth. I'm impressed by the reception of the F-150 thus far and thought the company's CEO switch went/will go off without a hitch. My current price target for Ford is $20.

My Latest on Ford: Ford Stalled on Its Way to $20


Tesla Motors Corp. (NASDAQ:TSLA)

Price on December 31, 2013: $150.43

Current Price: $228.81

Change: +52.1%

My Thoughts 6 Months Ago:

  • Despite its high valuation, Tesla is a company that has continued to execute the goals it sets out for itself.
  • Expansion of SuperCharger stations through 2014 will give Tesla a much larger footprint in Europe.
  • Tesla is a buy and hold for me, despite its valuation, as I truly believe it's not going to be bought out and will be a paradigm shifting, large scale success in the world of automobiles.
  • Increasing short position to start 2014 makes the company susceptible to a short squeeze in the coming year if you believe, like I do, that Musk is the kind of guy that always has something up his sleeve.

My Thoughts Now:

Tesla has executed every single step of the way.

If the past record of the company is going to be an indication of future progress, Tesla has a real shot at $400 no doubt. I continue to remain bullish on Tesla for the long-term, and feel the company has a chance to rewrite the automotive industry as we know it. Additionally, the company could branch out from vehicles in the future, after its Gigafactory is complete and operational.

My Latest on Tesla: Tesla's Got Momentum



Price on December 31, 2013: $15.92

Current Price: $14.83

Change: -6.85%

My Thoughts 6 Months Ago:

  • This is strictly a short-term call to go long on Crocs as I actually think the company is destined to swirl the bowl in the long-term.
  • Blackstone's involvement on the Board and with the new CEO coming on board are likely to result in some "shareholder first, fundamentals second" decision making - which will drive the price up in the short-term, but screw Crocs in the long term. (i.e. a $350 million stock buyback when the company is posting negative earnings)
  • Go long, but be hyper-vigilant about taking profits off the table as soon as they can be realized - this is by no means a multi-year hold.
  • Read my recent writeup on the Blackstone investment for details on this trade.

My Thoughts Now:

I would be out of this Crocs position now, taking the small loss. As I stated above, this was for a short-term play, but never wound up yielding anything worth waiting around for. Exit, or turnaround and go short.



Price on December 31, 2013: $561.02

Current Price: $642.46 (split adjusted)

Change: +14.52%

My Thoughts 6 Months Ago:

  • Apple will likely find success in its ploy to get Carl Icahn off of their backs regarding an increased share buyback.
  • Apple will continue to grow across the board as the "tablet effect" on PC sales starts to wane and Mac, iTunes and iPhone continue to break records and post fantastic numbers. Apple will continue to gain PC market share.
  • iTunes Radio, Chinese infiltration into mobile and good coming 2013 holiday sales should all catalyze a strong year for the company.
  • Apple will be releasing new products in 2014, a watch and some type of TV-related product are the two top contenders.

My Thoughts Now:

Apple continues to be one of the most fundamentally sound companies on the face of the Earth. Buybacks and great Mac sales are fueling what is likely to be a monster year for the company. Apple recently beat earnings, performed a 7:1 split, and will likely be introducing new products this fall.

My Latest on Apple: Why Apple is the Perfect Stock for Anyone (Editor's Pick)


REITs and Housing Related Companies like Home Depot (NYSE:HD)

Price on December 31, 2013: $64.56 as gauged by (NYSEARCA:VNQ)

Current Price: $74.30

Change: +15.09%

My Thoughts 6 Months Ago:

  • (NASDAQ:AGNC) and other dividend heavy REITs have been hit since the Fed's comments all the way back in May of 2013, so they're cheap.
  • I'm expecting "normal" increases in housing prices and rent rates across the board.
  • REIT concerns surrounding rising interest rates are overblown and not likely to stand in the way of a coming bullish year for the housing sector.
  • Bank owned home sales continue to generate more bang for their bucks as housing prices continue to rise, telegraphing a bullish 2014.
  • Companies like Home Depot and Lowe's (NYSE:LOW) will benefit from another good housing market year.
  • Read my full write-up on the housing market for 2014 here

My Thoughts Now:

I'm still cautiously optimistic on the housing market, but would advocate taking some profits from REITs that you've been holding for the last six months.


General Motors (NYSE:GM)

Price on December 31, 2013: $40.87

Current Price: $36.20

Change: -11.43%

My Thoughts 6 Months Ago:

  • With Ford having paved the path to the U.S. auto recovery, General Motors stands to be the next to offer a lucrative investment to those who go long.
  • The U.S. Government is set to exit the company in early 2014 and it's likely going to prove to be a large catalyst upward for the stock.
  • GM is likely to unlock some of its cash once the government does exit. They've been stockpiling cash for years, compiling a reserve of nearly $27 billion.
  • GM offers warrants (as part of its restructuring) that trade dollar for dollar with the current stock price, but offer significantly more potential for gains over the next year. More on that in my article here.

My Thoughts Now:

There's no way we could have seen the ignition switch recall coming. Despite that, the stock has clawed back from lows in the $30's and I continue to contend that GM could be a good long term hold based on the traction its gaining overseas. If you want to exit, I'd wait until it once again eclipses $40. if you're looking to get speculative, the company's warrants are the cheapest they've been dollar for dollar with the stock in a while. I averaged at $32 before getting out of GM just weeks ago.


Bank of America (NYSE:BAC)

Price on December 31, 2013: $15.57

Current Price: $15.54

Change: +/- 0%

My Thoughts 6 Months Ago:

  • With continued cost cutting that's going to run into 2014, Bank of America is set to continue producing an improving bottom line, regardless of possible stagnant revenues.
  • Although legal issues remain the Bank's biggest caveat, BAC continues to settle litigation relating to the subprime crisis one at a time and will continue to do so in 2014.
  • CEO Brian Moynihan remains focused on the fundamentals, leading with a clear head, and is the backbone of the bank's lucrative performance in 2013.
  • Warren Buffett, already yielding a $5 billion profit on paper in his Bank of America investment, remains satisfied in the company and hasn't sold his position.
  • Bank of America dividends are expected to rise in 2014.

My Thoughts Now:

With the DOJ settlement looming in the background, investors have been scared away from Bank of America stock. After the small hiccup during the Fed's stress tests came and went, and with Monynihan still at the helm, this investor likes Bank of America for the long-term hold, still.

My Latest on Bank of America: I Expect Bank of America at $18 Very Soon


Microsoft (NASDAQ:MSFT)

Price on December 31, 2013: $37.41

Current Price: $41.32

Change: +10.45%

My Thoughts 6 Months Ago:

  • Microsoft's CEO search will finally end, allowing the spotlight be on the business of the company, as opposed to the search for a new executive.
  • Microsoft's Surface 2, an outstanding product, will continue to catch the eye of reviewers and become second in command firmly to Apple's iPad.
  • The Xbox One, as I've predicted, will act as a gateway into the living rooms of millions of families, allowing Microsoft to monetize supplemental items that come with it being your home media hub (i.e. movies, music, downloads).
  • Microsoft pays dividends that continue to increase consistently on a yearly basis.

My Thoughts Now:

I love the job that Satya Nadella is doing and I'm expecting Surface 3 to do big things for Microsoft - cementing them as a hardware company and bridging the gap between PC and tablet. I'm also encouraged by the recent bullish news out of Intel signaling that the PC market collapse could be on its way to ending. Would love to hold Microsoft here.

My Latest on Microsoft: The New Microsoft - Heading to $45


Potash Corp. (NYSE:POT)

Price on December 31, 2013: $32.96

Current Price: $37.96

Change: +15.17%

My Thoughts 6 Months Ago:

  • Cheap long term calls make for an inexpensive way to leverage a long investment in this potash staple.
  • As Uralkali uncertainty continues to wane, confidence in the ongoing stability and demand of the sector could push Potash Corp back to its pre-volatility levels of $40.
  • Negative catalysts of lowered guidance, as well as Uralkali volatility, will be left behind in 2013.
  • Potash continues to pay an attractive dividend.

My Thoughts Now:

I continue to believe that Potash is going to make its way back to the $40 price target that I set for it around the holidays last year. With an impressive dividend yield, Potash is a great company to have in your portfolio while you're "waiting" for it to appreciate.

My Latest on Potash: Potash Inching Closer to My $40 Price Target



Twitter (NYSE:TWTR)

Price on December 31, 2013: $63.65

Current Price: $38.13

Change: +40.09%

My Thoughts 6 Months Ago:

  • Twitter is finally starting to correct after screaming upwards to the tune of 40% post-IPO.
  • Company supports an extremely aggressive $37 billion market cap - For social media comparisons in market cap, LinkedIn (NYSE:LNKD) currently supports a market cap of $24 billion, Yelp (NYSE:YELP) $4 billion.
  • Recent analyst sentiment, led by Macquarie, heading into the new year is bearish.
  • Twitter's traffic volumes in certain countries are in question, a far cry from the aggressive growth necessary to support such a major valuation.
  • High P/E social media stocks could be the first to be susceptible to a macro market correction, I've often argued, and high valuation ones make for good hedges into the new year.

My Thoughts Now:

This would be the time that I would cover my Twitter short form the beginning of the year. After yielding nearly 50%, Twitter has been product of many an analyst upgrade lately, and I see it running back up into the $40's - at least - without issue.


Diebold Corp. (NYSE:DBD)

Price on December 31, 2013: $33.01

Current Price: $38.89

Change: -17.81%

My Thoughts 6 Months Ago:

  • As a company whose main appeal as an investment has been its consistent dividends, slowing growth in dividends is likely forecasting a slow 2014.
  • The company's CFO, Brad Richardson, is leaving after a Q3 loss and a settlement with the SEC - likely to drag on the stock in 2014 as the company transitions.
  • The company is trading at around 17 times forward earnings and is telegraphing a slowdown, making it susceptible to macro market pullbacks.

My Thoughts Now:

Again, this would be an area where I would cover and move on. Diebold has strengthened and found some foundation, with good analyst coverage supporting the thesis that the company is going to continue to move upward.


Pandora (NYSE:P)

Price on December 31, 2013: $26.60

Current Price: $27.52

Change: -3.46%

My Thoughts 6 Months Ago:

  • Pandora will be facing increased pressure from iTunes Radio moving into 2014.
  • Pandora's audience metrics to end the year - the catalyst for the stock for most of the end of 2013 - were an illusion of sorts.
  • Pandora is losing the race to both iTunes Radio and Spotify for international markets.
  • Pandora is severely overvalued with a $5 billion market cap and a P/E of over 100 - making it one of the first stocks to be susceptible to macro market corrections of any sort.

My Thoughts Now:

I happen to think Pandora is screwed now, more than ever. The company hasn't turned a profit and is now up against Google, Amazon, Spotify, and Apple in the streaming music niche. In addition, Apple's recent purchase of Beats would have my nerves on edge if I were a Pandora long. I stay short here.

My Latest on Pandora: A Pandora Short Could Still Reap 50% Gains


Herbalife (NYSE:HLF)

Price on December 31, 2013: $78.70

Current Price: $64.34

Change: +18.25%

My Thoughts 6 Months Ago:

  • Despite the stock's amazing 2013, 2014 is likely the year that the fundamentals of the business catch up to the stock price.
  • Herbalife has telegraphed slowing revenue growth in its last quarter's earnings.
  • The question of distributor sales versus retail sales remains unanswered and the main crucial point in determining whether or not the company is an illegal pyramid scheme, as defined by the FTC and SEC.

My Thoughts Now:

With the FTC, FBI, DOJ and SEC all currently probing the company, I am now more confident than ever in my thesis that Herbalife is a global confidence game that is likely to be shut down by regulators. I remain steadfastly bearish on Herbalife until its regulatory issues are cleared up - one way or another.

My Latest on Herbalife: Carl Icahn Will Sell Out of Herbalife


Questcor (QCOR)

Price on December 31, 2013: $54.45

Current Price: $91.00

Change: -67.13%

My Thoughts 6 Months Ago:

  • The company starts 2014 under review from several regulatory and government agencies with regards to promotional practices.
  • Scrutiny on the company's one product, Acthar Gel, leaves it susceptible to having "all of its eggs in one basket".
  • Questcor is already at the upper end of its all time highs, trading near a $3.6 billion market cap.
  • 38% of the float is held short and there's a significant amount of short interest and bearish arguments in the public domain with regards to the company.
  • The company is being looked at under a microscope for its questionable relationship with the Chronic Disease Fund.

My Thoughts Now:

Going short, you would have had your clock cleaned on this one. Despite the price action, there are still serious questions that I have with regards to this pharmaceutical company. Their merger with Mallinckrodt (NYSE:MNK) should give pause to bears that want to short now. However, I doubt we have heard the last about QCOR and its controversial drug, Acthar.

My Latest on Questcor: Questcor's Buyout Could Fall Through


To conclude

As you can see, my long positions for the year have averaged 10.8% growth amongst them. Due to Questcor's buyout, my shorts for the year have yielded -6.01%.

This puts my total portfolio return at 4.79% since the beginning of the year.

We've had some major winners in trades like going short Twitter and going long Tesla. We've also had some major losers in Questcor's buyout - even if I do believe the company remains suspect. Herbalife's short should continue to work when regulators put their foot down for the company, and I'm expecting a GM push back over $40 soon.

I look forward to reevaluating these positions with you at the end of this year - where I'll then introduce my "Attractive Trades" for 2015.

Best of luck to all investors.

Disclosure: The author is long AAPL. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article. I am long AAPL, PFHO, BBRY, FB, DAL and am short HLF. I hold a straddle in AMZN.