Celeritas Investments Portfolio For 2017

| About: SPDR Gold (GLD)
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Summary

Chipotle Mexican Grill is our biggest holding.

Gold options generated most of our returns in January.

We remain cautious on the market this year, with 19.5% of our portfolio in cash.

We are entering 2017 with a cautious view on most sectors and the market in general. Below, we will provide information about our holdings in 2017, with a commentary on every held stock.

Stock

Weight

Chipotle Mexican Grill

17.5%

Alphabet

17.2%

AV Homes

13.5%

Murphy Oil

12%

SPY Put Options (Jan 19 2018, Strike 215)

10.2%

GLD Call Options (Jan 19 2018, Strike 120)

5.8%

Advanced Micro Devices

4.3%

Cash

19.5%

Chipotle Mexican Grill (CMG)

We believe that the company will succeed in its turnaround. The company is still expanding (opened 270 restaurants in 2016), without issuing any debt. The rate of decline for same store sales is slowing down, with Q4 having the lowest comps since the E-coli outbreak. In addition, December 2016 and January 2017 jump in SSS gave us relief that the turnaround is not far away and will be seen in the second half of this year. Promotions are expected to decrease this year, which will expand Chipotle's depressed-margins. However, we believe that the first quarter in 2017 may carry some negatives. That's because a huge number of Chipotle's customers have saved their promotions (nearly free meals and deliveries) from the loyalty program "Chiptopia," for the Super Bowl night.

Chipotle is our biggest holding, and we believe that as a result of a higher number of stores, and customers seen waiting in lines in so many of these stores, total sales can explode once SSS enters the positive territory. And there is a high negativity surrounding the stock (5 days to cover) - thus, it takes only one good quarter for the stock to appreciate aggressively.

For more information about Chipotle, read this article.

Alphabet (GOOG)(GOOGL)

We believe that Alphabet stock is undervalued with respect to the cash flows that the company generates. If we assume that FCF grows 10% annually in the coming 10 years (and that's realistic when you know that FCF doubled in the last three years), 5% in each of the following 10, and 2% thereafter, the stock will be worth $1154 (at 8% WACC). That's a 44% upside from current price level.

In addition, the company's latest efforts into the autonomous cars industry gave us relief about the company's seriousness in diversifying its sources of revenue. Alphabet's CEO said in the company's latest earnings call that Waymo has achieved a great threshold on the path to commercialization, which means that we might see this anytime this year, or at most, next year (as we said in our latest article about Alphabet: If Tesla (NASDAQ:TSLA) did it, Alphabet can definitely do it).

AV Homes (AVHI)

AV Homes remains one of our biggest holdings despite its latest sell-off. The sell-off was caused when December home sales decreased 10% in the US. While we believe that is a worrying for the housing market in general, we are on the safe side with AV Homes. That's because the stock is already pricing in a decline in home sales, its price-to-sales ratio is 0.5 and its enterprise value-to-sales ratio 0.88. Yesterday, we added more shares, and we still believe in the company's strong financial position and its concentration in the Charlotte-North Carolina market, where prices are controlled by the sellers due to low supply of houses there. For more information about AV Homes, read this research paper we made previously about the stock.

Murphy Oil (MUR)

This is our only holding in the energy market. Investing in Murphy Oil will give investors access to cheap oil under Murphy's grounds. The company's proved reserves can be bought at a cheap price through buying Murphy Oil stock ($10/boe, while $30/boe for EOG Resources (NYSE:EOG))

In addition, the company is focusing on cutting down its expenses, which will decrease investors' breakeven cost per boe (which includes EV/proved reserves and Opex/boe). Murphy Oil investors need a 15% increase in oil prices to get a positive return from investing in the stock (for more information, read our latest article about the stock).

Options

  • Gold (NYSEARCA:GLD) Calls: This is the first time we have been long gold this way. 5.8% of our portfolio is invested in gold, which is very high considering that we are buying options. However, this proves our strong belief in the appreciation of the yellow metal this year. We believe that the dollar rally is over-stretched; the ECB's latest action, which involves scaling down bond purchases, will cause more convergence between the two most important currencies (the EUR and USD). In addition, President Trump's protectionist policy and threats to start a trade war with China will let investors' money flow again into the yellow metal.
  • SPY (NYSEARCA:SPY) Puts: Buy the rumor, sell the fact. The SPY rallied aggressively since Trump's win in the elections. However, we believe that the market, as always, is over-stepping the fact that things won't go smoothly. And even if things did, the market has already priced in most of the policy's benefits and didn't price any of the negatives (trade war, judges opposing the president, lack of sufficient control of the government by the president, etc.).

Advanced Micro Devices (AMD)

Actually, we are not buying this stock on strong fundamental basis. We are just following the trend, and we made a decent profit by doing that. The market's attach with fundamentals is weakening over time; it's focusing on the story instead. AMD is giving the markets this story.

The latest rumors about a corporation-deal with Intel (NASDAQ:INTC) have increased the stock price by more than 20%, and we believe this is just the beginning. These rumors if true, and there is a high probability that they are (read this), will increase AMD's revenue significantly. With the stock trading at a price-to-sales ratio of less than 3, we believe there is so much room for the stock to grow. Imagine what would happen to the stock if AMD entered the autonomous cars industry, as Nividia (NASDAQ:NVDA) did.

In addition to all of that, we wrote call options for Coca-Cola (NYSE:KO) at $47 strike price, which will expire in May 2017. It has been two months since we wrote our article about KO stock peaking at $42/share. Since that time, the market rallied more than 4% while KO stock was down slightly.

We hope that 2017 will be a good year for all investors.

Happy investing to all.

Disclosure: I am/we are long GLD, CMG, AMD, GOOG, MUR, AVHI.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: We are short SPY, and wrote call options for KO.