Portfolio Updates: Continuing to Buy Dips
By: By Christopher Mistal
October 22, 2015
DJIA, S&P 500 and NASDAQ have bullishly traced out and completed the “W” or “1-2-3” swing bottom pattern we first started looking for at the end of September. DJIA and S&P 500 have climbed above their respective mid-September highs by the widest margin. As of today’s close, NASDAQ has managed to close above its mid-September closing high on a couple of occasions, but has yet to exceed its intra-day September high.
[DJIA Daily Bar Chart]
[S&P 500 Daily Bar Chart]
[NASDAQ Daily Bar Chart]
However, one potential area of concern, which has been cited by other sources as well, is the laggard, nearly dismal performance of small-cap stocks recently. Small-cap performance, measured by the Russell 2000, has been lacking and it was lacking today as the index mustered only half the gains of either DJIA or S&P 500. At the moment, this laggard performance is not without precedent and not really as big of a deal as some may think. In fact, if you were to review page 110 of the Stock Trader’s Almanac 2015, you would find it is actually quite normal for small-caps to be lagging large-caps at this time of year. This laggard performance by small-caps typically starts in mid-September and lasts until late-November or mid-December when the “January Effect” usually begins to take hold. So even absent small-cap participation, large-caps can continue to rally.
[Russell 2000/Russell 1000 Seasonal Chart]
Stock Portfolio Updates
Since last update on October 6, the Stock Portfolio has gained 0.8% while the S&P 500 and Russell 2000 have climbed 2.0% and 1.0%, respectively, as of yesterday’s close. This performance is respectable considering the sizable cash position that was held in the portfolio at the start of the month. Our Stock Portfolio produced gains across all three market cap ranges. Mid-cap stocks were best up 1% while small-caps and large-caps both advanced 0.7%.
Nine of the sixteen new stock ideas presented on October 13 have been added to the portfolio. Most of the new additions were added last week. CCS, PLOW and LGIH were added to the small-cap portfolio. TMH was added to the mid-cap portfolio. CNC, DHI, HBI, NTRS and TSCO were added to the large-cap portfolio. As of yesterday’s close, PLOW and HBI were the weakest performing since being added, both off 2.2%. Team Health (TMH), up 19.9% (before today’s beating) and LGI Homes, up 10.8% performed the best.
With the exception of LGIH, TMH and DHI, all other new trade ideas from the mid-October basket can be considered on dips below their buy limits or at current levels. See table below for current, stock-by-stock advice.
As a reminder, should Global Brass and Copper Holdings (BRSS) trade at or above $24.66, sell half of your original position. BRSS traded as high as $23.93 today and has been one of the top performers in the portfolio over the past few months, successfully bucking commodity and broad market weakness.
[Almanac Investor Stock Portfolio – October 21, 2015 Closes]
ETF Portfolio Updates
A mid-month market breather allowed the addition of three open ETF trade ideas. iShares NASDAQ Biotech (IBB) was added on October 7 when it traded below $300 per share. SPDR Financial (XLF) was added on the fourteenth at $22.90 and the short heating oil trade using PowerShares DB Energy (DBE) was executed when it broke down through support at $13.84.
With the exception of IYZ, XLB and DBE, the rest of the ETF Portfolio can still be considered on dips below their respective buy limits. A few of the buy limits, like the one applied to IYT, are currently well below current market prices. Be patient, we do not want to chase these positions. There is still ample uncertainty out there that could easily volatility. 
Due to recent gains, numerous stop losses have been updated. See table below for latest advice.
[Almanac Investor ETF Portfolio – October 21, 2015 Closes]
Disclosure Note: At press time, officers of the Hirsch Organization, or accounts they control held positions in CNC, HBI, IBB, IWM, NTRS, PLOW, QQQ, TMH, TSCO, XLV and XRT.