‘The Tweed Update’ by Roger Tweed

Guest Author Roger Tweed

Guest Author Roger Tweed

Still in the Lead-

Our 2014 Portfolio held onto its lead over the S&P 500 during the past four weeks. Since February 21, our portfolio was essentially flat, with solid gains from Fifth Third Bancorp (FITB), Bank of America (BAC), and Hewlett-Packard (HPQ), being offset by large losses in LinnCo, LLC (LNCO), International Paper (IP), and JetBlue Airways (JBLU). During the same period, the S&P 500 gained 1.7%. Since our portfolio’s January 9 inception, it has risen 2.44% while the S&P 500 has gained 1.58%.

Fifth Third led the portfolio with a gain of 9.1%. Regional banks are currently in the sweet spot as they are less affected by international or even national financial issues that can negatively impact money center banks. At the same time, the benefits to domestic banks from higher U.S. interest rates will make regional banks like Fifth Third more profitable. Bank of America was our second-best performer, rising 7.8%. As the tensions over Crimea moderated, the shares of large banks like Bank of America began to recover. Then, the Federal Reserve’s hint of higher interest rates earlier than expected, combined with a successful round of stress tests, gave a further boost to large bank share prices.

Hewlett-Packard gained 7.3%, as the company increased its annual dividend to 2%. HP has now increased its dividend in each of the past four years, and the dividend growth rate for that period is 20%. Earnings growth is estimated at 41% for 2014.

LinnCo, LLC lost 10.5%, as the company issued guidance that its quarterly distributions will be flat in 2014 due to higher costs associated with the Berry Petroleum acquisition. Master Limited Partnerships were also hurt by the fear of higher interest rates. International Paper lost 6.9% as declining earnings estimates caused by weather-related problems in the Southeast U.S. this year, and fears of slowing demand in China have hurt the company’s stock. Earnings for 2014 and 2015 are still expected to grow by just under 20% each year. JetBlue shares lost 4.9% as winter storms proved challenging for east coast air carriers. I think this selling was more “knee-jerk” and not based on facts. The airline saw gains in traffic, consolidated capacity, and revenue per available seat mile in February.

Facebook (FB), our best performer, lost 2%. The shares seem to be in a consolidation phase after sprinting to $72 in early March. I look for these shares, and our portfolio, to see more gains in the spring.

2014 MODEL PORTFOLIO

(As of March 21)

Stock Amount  Change  Index Amount Change
FITB $    912.21                 8.2% FB $    874.12            15.5%
IP $    732.48                       (6.7%) JBLU $    774.41                     (4.4%)
BAC $    860.44                 3.8% FUN $    311.82              (0.1%)
APC $    835.90                 5.7% VGK $    757.38               (0.5%)
GT $    834.52                 3.7% VTR $    834.82                 2%
LNCO $    732.94              (11.7%) HTZ $    795.18               (1.6%)
HPQ $    926.55               14.1%

STOCK TOTAL – $ 8,278.75;  REIT/ETF TOTAL – $ 1,904.02; CASH TOTAL – $  61.59

GRAND TOTAL          $  10,244.36  GAIN/LOSS since 1/9/14             2.44%

S&P 500 Index                             GAIN/LOSS since 1/9/14                     1.58%