The DWCM Fund was up 3% this week far outpacing the four major indices. Technology continues to lead the way in this rally as the NASDAQ was up 1.8% for the week and is currently beating the other 3 major equity benchmarks anywhere from 6% to 10% for the year.
Apple AAPL on Friday hit an all time high while Google GOOG touched it's 52 week high this week. We continue to maintain our large position in Apple and hold an option position in Google.
The agriculture names such as Mosaic MOS, Monsanto MON, and Potash POT continue to outperform as well despite the drought conditions that continue to deteriorate the commodity crops especially corn. Deere DE reported an awful quarter this week and at one point was down over 6% on the week but rallied to close down about 3%. Although Deere sales were largely in line with estimates, earnings were not in which the company cited weakness in Europe as the main culprit.
We continue to see agriculture as a great place to be despite the run up in stock prices. However we would suggest adding to positions slowly or waiting for a pull back before committing any meaningful capital.
As we noted last week we thought that retail sales would be a key driver for the markets which on the surface seemed to be the case. Retail sales rose sharply to the upside although comps vs. last month were very week. It's hard to tell weather this means a turn in the data or a one time blip. Looking at the chart below the trend has definitely been to the downside. And as food prices continue to push higher, oil over $90 a barrel, and gas hitting $4 across the country due to refinery issues, the consumer faces an uphill battle.
| Source Barron's |
The markets in general in our view continue to feel over heated in the face of the strong headwinds such as the Presidential election, looming fiscal cliff, and European debt crisis. The markets may have likely priced in the kicking of these problems down the road further in which case any hiccup or failed attempts to stop any carnage could prove detrimental to stock prices.
Again we stress the balance of being cautiously in the market while have ample capital sitting on the sidelines.
As much as we like Disney DIS, we saw that it was time to take profits in our option position. The downfall of owning any option position in the Investopedia simulation is that you can only sell the position to close it out rather than also having the option to exercise the position and own the stock outright. If we had that option, we would have exercised the options thus buying the stock at a price lower than the price today and then selling part of it to lock in some profits and held onto a smaller position.
Disney, like so many other stocks during this summer, has rallied and reached a point of full valuation in our opinion and could get hurt in any meaningful market pull back. We will continue to watch Disney as this would be a potential core position that we would like to own for the long-term at a reasonable price.
Our cash position % wise finished unchanged week over week at 42.2% which we consider somewhat healthy. Ideally we would like to get that pushed back up to 50% as we approach the volatile fall season and the economic headwinds looming on the horizon.
The Week Ahead
We are in store for another light week of economic data especially during the early portion of the week. Look for rumors to begin peculating as people look forward to the annual Fed meeting in Jackson Hole, WY next week. This meeting has been the site for some major Fed announcement over the past few years which has led to large amounts of stimulus being handed out. If nothing comes out of this event the last week of August, look for a possible major pull back in the equity markets.
- Mon - Chicago Fed National Activity Index
- Tue - ICSC-Goldman Store Sales
- Wed - Existing Home Sales, FOMC Minutes
- Thu - Jobless Claims, PMI Manufacturing Index Flash, New Home Sales, FHFA House Price Index
- Fri - Durable Goods Orders
Have a great week!
DreamWorks Capital Management
FREE LECTURE: Our next finance lecture will be on Tuesday September 18th at the The Community House. The topic will be Balancing Your Changing Investment Needs: Emergency Fund, Investments, Retirement, Education, and Philanthropy. We will cover significant points regarding creating, developing, and executing on your wealth management plan. We hope to have another interactive group, so be sure to sign up by emailing me directly at pfenner@dwcmllc.com or by contacting The Community House at 248-644-5832. There is no charge and light refreshments will be served.
FREE LECTURE: Our next finance lecture will be on Tuesday September 18th at the The Community House. The topic will be Balancing Your Changing Investment Needs: Emergency Fund, Investments, Retirement, Education, and Philanthropy. We will cover significant points regarding creating, developing, and executing on your wealth management plan. We hope to have another interactive group, so be sure to sign up by emailing me directly at pfenner@dwcmllc.com or by contacting The Community House at 248-644-5832. There is no charge and light refreshments will be served.
No comments:
Post a Comment