This basket is being presented in order to take advantage of the “Best Months” of the year (November through April/June) for stocks. We will look to add these 20 stocks, in the table below, near current levels or on minor dips. Many of the positions did weaken today as the S&P 500 and NASDAQ daily winning streaks came to an end and are likely to open below the suggested buy limits. We will allocate a hypothetical $3000 from the cash position in the portfolio to each position. For each stock we have provided the ticker, name, sector, general business description, PE, price-to-sales ratio, market value, current price, a dividend yield and a suggested buy limit and stop loss. When a stock dips below its buy limit, it will be added to the Stock Portfolio.
These 20 stocks all have reasonably solid valuations as well as revenue and earnings growth. Most also exhibit positive price and volume action as well as other constructive technical and chart pattern indications. The group of 20 covers a broad array of sectors and industries. It also runs the gamut of market capitalization with a mix of large caps with more than $5 billion in market value, midcaps in the $1-5 billion range, and small caps under $1 billion.
We first sifted through the universe of U.S. traded stocks for those with a market cap of at least $100 million and average daily volume of 100,000 shares or more on average over the past twenty trading sessions. Then we winnowed the list down to only those stocks with relatively low price-to-sales and price-to-earnings ratios with some exceptions. A special nod was given to stocks with a below average number of analysts following them.
We then dug into numerous individual company charts before settling on these final 20 stocks. Our underlying theme was to find reasonably priced stocks that appear to be quietly growing sales and earnings while flying somewhat under the radar with only a limited number on The Street paying close attention to them. As market valuation goes higher, this becomes increasingly challenging, and a history of earnings surprises and estimates becomes even more important.
At the end of the screening process, we were left with a reasonably diverse basket. The computer and technology sector is well represented with five stocks, but the remainder of the basket includes consumer discretionary/staples, medical, construction, aerospace, business services and finance related stocks. We did not search specifically for top-performing stocks within any specific sector, this just happens to be what remained after our process.
Stock Portfolio Updates
Over the past four weeks through yesterday’s close (November 8), S&P 500 inched 0.1% higher while Russell 2000 declined 3.3%. Over the same period the entire stock portfolio slipped 1.6% lower excluding dividends, any interest on cash and any trading fees. Mid-cap portfolio positions declined the most, off 22.4% on average. Small caps slipped 4.2%, but Large caps advanced 2.1%.
Declines in AI-related stocks Axcelis Technology (ACLS) and Super Micro Computer (SMCI) were sizable in October. Per standard policy ACLS and SMCI positions were half positions after selling half when they each first doubled from their original purchase price so what remains is essentially all gains. ACLS was stopped out on October 19 for a total gain, adjusted for selling half on a double, of 97.1%. Surging 10-year Treasury yield, cooling AI-stock sentiment and profit taking appear to be the main drivers behind their retreat. ACLS did make it through our screening process this year as well, and we will look to establish a new position.
MGP Ingredients (MGPI) also stopped out in October for a total gain of 115.6% after accounting for selling half the original position when it first doubled. Aside from a solid run in June and July of this year, MGPI has been mostly treading water. We will move on and consider new trade ideas.
In the Large-cap portion of the portfolio, Amdocs (DOX) was stopped out in October for a gain of 27.1%. As of today’s close, DOX was still below the price it was stopped out at. Here again we will just move on to consider some new ideas.
All other existing positions in the portfolio are on hold.