‘The Tweed Update’ by Roger Tweed

Guest Author Roger Tweed

Guest Author Roger Tweed

Back Where We Started – Our portfolio emerged from the carnage of the past five weeks in worse shape than the S&P 500. Double-digit declines in Hertz Global (HTZ), Linn Co., LLC (LNCO), Goodyear (GT), Anadarko Petroleum (APC), Fifth Third Bancorp (FITB), and JetBlue Airways (JBLU) caused our portfolio to give up all its gains for the year. Over the past five weeks, our portfolio dropped 9.6% while the S&P 500 fell 5%. Since its January 9 inception, our portfolio is flat while the S&P 500 has gained 2.68%.

Only one of our stocks went up over the past five weeks: health care REIT Ventas (VTR), which climbed 8.5%. Ventas’ 4.4% dividend and impressive earnings and revenue growth are attractive, especially in turbulent markets.

Our largest losses were in our energy, travel, industrial, and banking positions. These were hit hard by several factors: the precipitous drop in the price of oil, fears that the Ebola virus would reduce travel, European economic weakness, and falling U.S. interest rates. Hertz was our worst performer, dropping 27%. Both Hertz and rival Avis Budget (CAR) have fallen over 30% from their mid-August highs as Ebola has dominated headlines. JetBlue fell 11% as airline stocks have also been punished due to Ebola fears. Although current levels for travel stocks may look enticing, we are not yet finished with Ebola headlines.

Linn Co. fell 22% and Anadarko dropped 16%, as domestic crude oil fell briefly below $80 per barrel. With the Saudis and Kuwaitis accepting price cuts, traders feared that oil was in free fall. But the forced selling in oil stocks seen on October 15 seems to have marked the bottom in oil prices, and I expect oil producers to gain back these losses through the winter. Goodyear declined 18%, as fears of Euro Zone recession, with no European Central Bank (ECB) stimulus in the offing, drove down international industrials. Promises from the ECB for asset purchases starting this coming week have brightened Europe’s economic picture, but industrials should still be avoided. Fifth Third dropped 12%, as declining interest rates make it harder for banks that earn the bulk of their profits from lending. The “V-shaped” bottom in interest rates on October 15 indicates to me that bank stocks will recover.

We have a lot of ground to make up, but I feel that our growth stocks have the ability to outperform the S&P 500 when the year-end rally begins. I look to Ventas, Bank of America (BAC), and Facebook (FB) to lead the portfolio through the remainder of the year.


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