This is an update to our model portfolio report, 35 Stocks for December 2017.
New Actions Required
- Long Model: Close position in Peabody Energy Corp. (BTU) (price target).
Sell Side Upgrades and Downgrades Today
- Short sale model: Cree Inc. (CREE) was downgraded to Underperform with a $28 price target.
- Short sale model: Cree Inc. (CREE) was added to JPMorgan’s Analyst Focus List as a short idea, while its Underweight rating and $28 price target was maintained.
Also of Note
- Long model: After the market close, Micron Technology Inc. (MU)announced an outstanding F1Q18 and provided F2Q18 guidance for revenue and EPS well ahead of consensus. We will follow up with a more detailed note (earnings release).
- Long model: TriNet (TNET) announced the dismissal of a securities class action suit.
- Long model: Exelixis, Inc. (EXEL) announced expanded FDA approval of Cabometyx for patients with RCC.
- Long model: Apollo Global Management (APO) agreed to buy the Qdoba Restaurant subsidiary from Jack in the Box (JACK) for $305m cash with an expected April 2018 close.
- Short sale model: Axalta Coating (AXTA) was initiated with a Market Performrating at Raymond James.
- Short sale model: Symantec Corporation (SYMC) was initiated with a Holdand $30 price target.
- Short sale model: Under Armour (UAA) may be fully pricing in tax reform’s expected impact, according to Wedbush.
- We are introducing a new Buy and Hold Long Model for the imminent launch of our Research Marketplace product.
For the MTD December, the Core Long Model is up +1.84% on a simple cumulative return basis (sum of daily returns). This compares to the S&P 500 up +1.28%, the Nasdaq up +1.32%, and the Russell 2000 down -0.44%.
The Core Long/Short Model is down -5.29%. The Opportunistic Long/Short Model, which assumed a 100% cash position in the short sale basket just prior to the close on December 8, is down -3.88% MTD.
Presaging Major Sell Side Actions in December 2017
- MTD nine stocks in the long model have received 12 positive price target revisions, and six stocks have received six ratings upgrades from sell side firms, led by Arista Networks (ANET) with four price target revisions.
- MTD one stock in the short sale model has received a negative price target revision, and three stocks have received five ratings downgrades led by Flowserve (FLS) and Cree (CREE).
Latest Model Portfolio Stock Returns and Price Targets
Stock Selection Criteria
Our criteria for selecting stocks in these model portfolio strategies, which heavily weight proxies for cash flow growth and ROIC, include the following:
- Relative Value
- Operating Momentum
- Consensus Estimate Revision Momentum
- Fundamental Quality
We rebalance our model portfolios every month and have been tracking long-only and long/short unaudited theoretical daily returns since March 31, 2009. This theoretical return data does not make any assumption for costs such as execution fees, margin, slippage, or any other type of cost.
This return data, including more than two years of rolling 12-month return data for each model portfolio report that we have collected so far, is available on request.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: As a simple quantitative model based on fundamental rankings, the portfolio models do not take into account rumors or pending M&A transactions. Theoretical return data do not assume the impact of costs such as execution fees, margin fees, slippage, the availability of stocks for short selling, or any other kind of cost. There are limitations inherent in our theoretical model results, particularly with the fact that such results do not represent actual trading and they may not reflect the impact material economic and market factors might have had on our decision making if we were actually managing client money. We do our best to provide accurate information in this report, but do not guarantee its accuracy. DISCLOSURES Ascendere Associates LLC ("Ascendere") is in the business of providing equity research and related consulting services to retail investors, investment advisors, and hedge funds. 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