John Cofran's  Instablog

Here is a look at the entire portfolio, as of December 17, 2010:

	Weight	Yld/Cost
Cash	9.27%	0.00%
FE	5.81%	5.87%
PFF	5.49%	7.48%
EXC	5.02%	4.89%
JNK	4.64%	8.50%
HYG	4.61%	7.95%
PSEC	4.02%	12.45%
LLY	3.93%	5.53%
PPL	3.81%	5.27%
AGNC	3.76%	19.87%
NLY	3.72%	15.21%
HPT	3.53%	8.32%
CWH	3.16%	7.58%
PBI	3.16%	6.01%
FTR	3.04%	8.98%
ELNK	2.91%	7.11%
ADC	2.80%	7.86%
VZ	2.75%	6.09%
SNH	2.69%	7.10%
KMB	2.61%	4.26%
HCN	2.58%	6.07%
COP	2.54%	3.84%
WWE	2.29%	10.13%
LINC	1.93%	6.64%
NYB	1.77%	6.18%
SKX	1.38%	0.00%
TLAB	1.29%	0.00%
CHRS	1.29%	0.00%
RSH	1.20%	0.00%
CBK	1.09%	4.13%
MSFT17.5Calls	0.68%	0.00%
WINN	0.67%	0.00%
CIM	0.56%	17.90%

Thus far, 2010 has been a great year for us with a YTD return of 37.9%. Looking ahead, I will continue to focus on dividend capture of high yielding (>4%) stocks, REITs, ETFs and MLPs. The strategy remains to generate income of 1% per month, as well as appreciation of 1% per month on average.

In addition to high-yield dividend capture, I will continue to use a small portion of the portfolio (< 20%) to seek opportunities to take advantage of temporary price/value displacements, with a focus on low EV (enterprise value) / EBITDA (earnings before interest, taxes, depreciation and amortization) multiple stocks.

As for my market outlook, I continue to see upside to 1,280 on the S&P 500 in the short-term, followed by minor consolidation. Looking out further into 2011, I expect the S&P to rise close to, and possibly test, its all-time highs in the 1,510 - 1,576 range. Ultimately, I expect the re-test of the old all-time highs to fail, resulting in a 10% - 20% pullback from the 2011 highs.

Disclosure: Long FE, PFF, EXC, JNK, HYG, PSEC, LLY, PPL, AGNC, NLY, HPT, CWH, PBI, FTR, ELNK, ADC, VZ, SNH, KMB, HCN, COP, WWE, LINC, NYB, SKX, TLAB, CHRS, RSH, CBK, WINN, CIM

Despite being stuck in neutral the last week of October, our portfolio gained 3.3% for the month. We are now up over 34% on the year and have gained an average of 1% a week for the last 21 weeks.

I am beginning to position the portfolio more aggressively ahead of what I expect will be a strong finish to 2010. Cash levels are down to 12.5% and I have allocated a portion of the portfolio to deep value/turnaround situations, including RIMM, CHRS, SKX and CBK. I am also looking at adding shares of WINN, JAKK, CHS ans CTRN.

Third quarter earnings have come in strong thus far, and mid-term election gains by the Republicans should set the market up for a strong finish. I continue to have faith in the mid-term election cycle, which predicts a 49% run from the mid-term low to the following year high. At just 12.5% of the portfolio, I have begun to transition to a fully invested position. As the rally takes hold over the next 6 months, I expect to move to over 100% invested.

Overall Sentiment:  Bullish.
Portfolio Yield: 7.41%
Projection: Break-out to 1,280+ this winter.

Top 5 Positions:

1. Cash - 13%
2. First Energy (FE)- 6%
3. iShares S&P U.S. Preferred Stock Index (PFF)- 6%
4. Eli Lilly (LLY)- 5%
5. Excelon (EXC)- 5%

Disclosure: LONG: RIMM FE PFF LLY EXC ADBE ELNK WWE SKX

The last few trading days have been a struggle after the markets broke out of it's trading range on Monday. A lackluster jobs report this morning have the markets retreating once again, back into it's trading range below 1,130. A weekly close below 1,130 will render Monday's breakout a false signal. Failure to close above 1,130 will likely indicate an end to the September rally and set us up for a 5 - 8% pull-back. Downside support near 1,065.

We continue to position the portfolio conservatively, with a 22% cash position and a higher than typical weighing towards less volatile high yield corporate bond and preferred stock ETFs.

I remain bullish on the mid-term election year market cycle, and will use the expected 5 - 8% near-term pull-back to position the portfolio for big gains from late October through early 2011.

Overall Sentiment:  Near-term cautious. Long-term bullish.
Portfolio Yield: 7.45%
Projection: Short-term correction of 5% - 8%. Support near 1,065. Break-out to 1,280+ this winter.

Top 5 Positions:

1. Cash - 22%
2. iShares S&P U.S. Preferred Stock Index (PFF)- 5%
3. SPDR Barclays Capital High Yield Bond (JNK)- 5%
4. Johnson & Johnson (JNJ)- 4%
5. iShares High Yield Corporate Bond (HYG)- 4%

Disclosure: Long: PFF, JNK, JNJ, HYG