‘The Tweed Update’ by Roger Tweed

Guest Author Roger Tweed

Guest Author Roger Tweed

Rough and Tumble – Like the major averages, our 2014 Portfolio bounced around between gains and losses over the past five weeks. In the end, strong showings from JetBlue Airways (JBLU), Hewlett-Packard (HPQ), Hertz (HTZ), and Facebook (FB) overcame a big loss in Bank of America (BAC), and losses in Goodyear (GT) and LinnCo, LLC. (LNCO), to record a gain of 1.1%. During the same period, the S&P 500 gained 1.9%. Since our portfolio’s January 9 inception, it has risen 3.81% while the S&P 500 has gained 3.43%.

JetBlue led the portfolio, gaining 5.7%. After the company reported first quarter earnings and revenue that missed estimates in late April, the shares were punished. Since then they have recovered nicely as investors attributed the misses to bad weather in the Northeast, and to Easter and Passover taking place in the second quarter of 2014 versus the first quarter of 2013.

Hewlett-Packard gained 5.6% after reporting first quarter earnings that were in-line with expectations, but revenues that were below consensus. After CEO Meg Whitman explained that the company’s turnaround was still on schedule, the initial losses that accompanied the announcement were erased. Facebook gained 4.1%, but the shares have struggled to stay above $60. Although the market still prefers stocks with earnings growth, dividends, and low PEs, Facebook’s exceptional earnings growth may be winning investors over, however. Hertz also gained 4.1% as investors anticipate that Hertz will benefit from a strong summer travel season.

Bank of America lost 8.9%. The shares fell over 6% when the company announced that an accounting error on the treatment of certain notes it assumed during the takeover of Merrill Lynch had led to the bank overstating its capital ratios. Besides causing considerable embarrassment and calling the bank’s management into question, this mistake also forced the suspension of BAC’s plan to buy back $4 billion in stock and increase its dividend by 400% to $0.20 per year. In addition, persistently low interest rates, which hurt bank profit margins, kept the shares under pressure.

Goodyear shares fell 5% after first quarter earnings and revenues missed estimates on lower than expected sales. The company did reaffirm full-year guidance.

LinnCo, LLC. lost 2.5% despite the company’s swap of assets with ExxonMobil (XOM) that will provide cash flow to cover its distribution. Since its purchase, our portfolio continues to lead the S&P 500, and I am anticipating that our stocks will breakout soon. (Past columns can be found at www.TAEM.us)

roger-tweed-052014