Model Portfolio Results — Dec. 23, 2011 through Feb. 17, 2012

*** Feb. 18, 2012 Update:  I forgot to add in the dividends when I posted this on Feb. 17, 2012.  The performance numbers are now adjusted to include dividends earned through January 31, 2012. ***

 

This week’s stock market recap:

Automotive industry stocks are just beginning to heat up.  Review some recent suggestion here:  Johnson Controls, Harman International, Group 1 Automotive, Dana Holding Corp., Borg Warner. I am definitely not recommending owning the auto manufacturers, such as GM and Ford, but instead owning the companies which supply the auto components.

Telecom stocks are lagging the market.  Considering their huge dividends, and earnings growth rates, growth & income investors should be quite pleased to bargain hunt in this sector.

Growth stocks continue to significantly outperform growth & income stocks year-to-date.  

Both the Aggressive Growth Portfolio (+11.44%) and the Growth Portfolio (+12.30%) have significantly outperformed the S&P 500 Index (+7.58%).  (see below)

Happy investing!

Crista Huff

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2012 Model Portfolio Results:  Aggressive Growth 

As of 02/17/12, seven stocks are up and one stock is down.  The total portfolio* is up 11.44%, including dividends earned through 01/31/12.

Comcast (CMCSA) shares are up the most +22.36% from 12/23/11 through 02/17/12; from $23.84 to $29.17 per share.

Comcast reported 4Q earnings this week, increased its dividend by 44%, and announced a $6.5 billion share buyback — $3 billion of that slated for 2012.  Standard & Poor’s Research maintains a $33 price target and a 4-Star Buy rating, but expect near-term price resistance as the stock retraces its $30 high from 2007.

Harley Davidson (HOG) shares are up at +17.50% from 12/23/11 through 02/17/12; from $39.19 to $46.05 per share.

HOG could easily trade $42-$46 in the near-term; the next resistance level is at $54.  Read: Outlook and Price Targets on Automotive Stocks (Part 1) — SeekingAlpha.com, February 15, 2012

Kroger (KR) shares are down -2.29% from 12/23/11 through 02/17/12; from $24.48 to $23.92 per share.

*Results assume equal dollar amounts purchased in each stock, rounded off to full shares, using the closing share prices on Dec. 23, 2011.

 

2012 Model Portfolio Results: Growth

As of 02/17/12, eight stocks are up and one stock is down.  The total portfolio* is up 12.30%, including dividends earned through 01/31/12.

Apple (AAPL) shares are up the most +24.49% from 12/23/11 through 02/17/12; from $403.33 to $502.12 per share.

Based on remarks from Apple executives and amounts of free cash flow, Morgan Stanley Research commented on February 15, 2012, “We believe Apple has the ability to pay out a 1.9-3.8% annual dividend yield based on a 50-100% payout ratio of its CY12 US free cash flow and a share price of $500. This compares favorably to an S&P 500 average yield of 2.2% in 2011 and IT sector average of 1.2%. Conversely, if Apple were to pay the S&P 500 average yield, it would need less than 60% of its $18 billion of US free cash flow in CY12.”  Such a dividend announcement would drive the share price up tremendously, as growth & income mutual funds and investors would start snatching up shares in Apple.

Comcast (CMCSA) shares are up +22.36% from 12/23/11 through 02/17/12; from $23.84 to $29.17 per share.

Comcasted report 4Q earnings this week, increased its dividend by 44%, and announced a $6.5 billion share buyback — $3 billion of that slated for 2012.  Standard & Poor’s Research maintains a $33 price target and a 4-Star Buy rating, but expect near-term price resistance as the stock retraces its $30 high from 2007.

Google (GOOG) shares are down -4.50% from 12/23/11 through 02/17/12; from $633.14 to $604.64 per share.

Google is trading in a tight range, roughly $602 – $615, after peaking at $670 in January and suffering an earnings disappointment.  Usually this tight range is indicative of a subsequent upward move, but if the stock decides to dip once more, watch for a quick bounce at $565.  Earnings growth remains well above average, and I would have no qualms about buying at the current price.  The 2012 PE is a very low 14.3.

*Results assume equal dollar amounts purchased in each stock, rounded off to full shares, using the closing share prices on Dec. 23, 2011.

 

2012 Model Portfolio Results: Growth & Income

As of 02/17/12, seven stocks are up in price and three stocks are down in price.  The total portfolio* is up 4.61%, including dividends earned through 01/31/12.

Prudential (PRU) shares are up the most at +20.56% from 12/23/11 through 02/17/12; from $50.92 to $61.39 per share.

PRU hit a high of $67.52 in 2011, as it continued plodding along toward its pre-Financial Meltdown high of $103.  Expect continued momentum.

Lorillard (LO) shares are up +11.77% from 12/23/11 through 02/17/12; from $113.67 to $127.05 per share.

LO just started reaching new highs again.  With a current yield of 4.88% — and your yield even higher if you already own the stock — EVERYBODY should hold this stock for further gains.  Do not trade out for other opportunities.  Only sell if you need to pay tuition!

Verizon (VZ) shares are down -3.80% from 12/23/11 through 02/17/12; from $39.98 to $38.46 per share.

Verizon remains an undervalued growth & income stock.  The current yield is 5.20% and earnings are expected to grow 16%, 12% and 11% in fiscal years 2012 through 2014.  Big telecom stocks have not participated in this year’s rally.  Bargains abound for patient investors.

*Results assume equal dollar amounts purchased in each stock, rounded off to full shares, beginning with the closing share prices on Dec. 23, 2011.

 

Comparable Results of Market Averages

The Dow Jones Industrial Average is up +5.34% from 12/23/11 through 02/17/12; from 12,294 to 12,950.

The S&P 500 is up +7.58% from 12/23/11 through 02/17/12; from 1265.33 to 1361.26.

 

Questions?  Contact Crista Huff at research@goodfellowllc.com.

 

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