Portfolio Positioning With Caution and Bullishness

by: Soos Global Capital

As we close out this holiday-shortened yet crisis-news-heavy and extremely volatile week, I'm sticking to the portfolio game plan that I've laid out in recent articles, most notably, "Portfolio Shifts in the Face of 'New' Risks". As I said that I would, I took advantage of the big down moves this week to add positions such as General Electric (NYSE:GE), Lowe's (NYSE:LOW), Telefonica (NYSE:TEF), Stanley Black & Decker (NYSE:SWK), Johnson & Johnson (NYSE:JNJ), Schlumberger (NYSE:SLB) and Devon Energy (NYSE:DVN).

As always, readers are not to take what is said in this article as personalized investment advice and are obliged to opine and decide for themselves as to the appropriateness of any of these stocks in their own portfolios and investment plans. Given that, here's some food for thought. In the case of my specific portfolios, the intent has been to add more exposure in the energy sector, shift the balance from Consumer Staples more into Consumer Discretionary, and add strong companies that are growing in the global market places of emerging and emerged countries whose share prices appear to have reached good entry or re-entry levels. In addition, in some cases I added to so-called defensive positions such as utilities...Exelon (NYSE:EXC), Duke (NYSE:DUK)....and REITs that focus on senior care facilities...Senior Housing Properties (NYSE:SNH) and Omega Healthcare Investors (NYSE:OHI).

With these moves, I've aimed to make sure that the portfolios are appropriately positioned for both the "cautiously" and the "bullish" components of my overall "cautiously bullish" outlook. The global headwinds of this past week all converged at once - China's foot on the brake, the Koreas' military conflict and Eurozone tremors. Collectively, they masked some meaningful improvement in US economic data. This "good news", "bad news" mix of issues facing the markets seem likely to keep the overall price action quite choppy, highlighting the advantage of having a "shopping list" of assets to acquire once they reach what is deemed a valuable level.

We'll have a host of economic data in the US next week (see Briefing.com or similar sites for market consensus views) which might turn the spotlight back towards this side of the Atlantic, though some degree of sabre-rattling in Korea (verbal to be sure and possibly worse) will command attention, as will the contagion in the Eurozone that sent bond spreads of the peripherals to extreme wides these past couple of days. Also, noticeably absent this past week was "noise" from DC. Hopefully that will change next week since the clock is ticking as we head towards year-end and the markets would seemingly applaud some certainty on tax policy as we head into 2011.

Finally, any market view should constantly be tested and challenged in order to determine its soundness and to assess the conviction with which one continues to hold onto that view. For anyone with a bullish bent on the markets, whether near-term or with a longer horizon, I'd recommend a read of the following article that appeared on ForeignAffairs.com, "American Profligacy and American Power". The article is long but worth the read in my opinion for two key reasons. First, the issue of focus is the extreme level of US debt and fiscal deficit. Second, one of the authors, Roger C. Altman, has been dubbed the likely successor to Larry Summers in running the President's National Economic Council. The measures called for in the article, presumably the policy articulation that would be presented to the President, are of particular interest and market relevance. It's a sobering account that underpins the "caution" in my otherwise generally optimistic outlook, and should remind all of us: buyer beware.

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Disclosure: Long GE, LOW, TEF, SWK, JNJ, SLB, DVN, EXC, DUK, SNH, OHI, FXI, HAO, and many stocks in the SPX and QQQQ. Positions can change at any time without notice.