We’re making a number of changes to the newsletter portfolios.
By Brian Nelson, CFA
Changes in Dividend Growth Newsletter portfolio
We’re removing Medtronic.
Medtronic (MDT) reported decent fiscal fourth-quarter results May 25 that showed revenue advancing ~5% and bottom-line earnings-per-share beating consensus by a couple pennies. We’re not messing around in this frothy market though, and we’ve learned from our miscue with Teva Pharma (TEVA). Medtronic has too much debt this late into the credit cycle for our comfort, and frankly, we’re starting to question more and more why it might have changed how it measures free cash flow. We’re letting shares go from the Dividend Growth Newsletter portfolio. The company was added to the Dividend Growth Newsletter portfolio under $40, and all 78 remaining shares of Medtronic will be removed at $85.84.
Changes in Best Ideas Newsletter portfolio
We’re removing Kinder Morgan.
We’re taking profits on Kinder Morgan (KMI) quite simply. We added the company to the Best Ideas Newsletter portfolio in the mid-teens, and we’re removing it for a decent profit as shares now reflect a better approximation of intrinsic value. We are removing all 157 shares at $19.43. You may remember us calling the top on Kinder Morgan – well, we also called the bottom. We’re exiting a bit after Mr. Buffett did.
We’re removing Financial Select Sector SPDR.
The Financial Select Sector SPDR (XLF) has been a big winner for the Best Ideas Newsletter portfolio. First added in January 2011 at $13.46 per share, the ETF has rocketed higher to $23.63 per share, the price at which we are removing all 178 shares from the newsletter portfolio. The yield curve continues to flatten, and Trump’s ambitious agenda regarding modifying Dodd-Frank looks significantly less likely, in our view.
We’re removing SPDR S&P Bank ETF.
As with Kinder Morgan and Financial Select Sector SPDR, we’re taking profits on the SPDR S&P Bank ETF (KBE). This was added in January 2011 at $21.07, and shares of the ETF have nearly doubled to $41.97, the exit price for the 100 shares included in the Best Ideas Newsletter portfolio. A flattening yield curve and reduced optimism regarding Trump’s promise to modify Dodd-Frank are our two main reasons.
We’re removing Teva Pharma.
Nobody is more disappointed with the performance of Teva Pharma than I am. In fact, I’m quite disgusted by how the market is treating this company. We should have taken profits on Teva at the time it took on a mountain of debt, and we’re learning from this. That’s why we’re removing Medtronic from the Dividend Growth Newsletter portfolio at this time. We’re not going to let a big gain turn into a loss. There’s nothing worse than that, in my view. Teva Pharma’s 77 shares will be removed from the Best Ideas Newsletter portfolio at $28.67. We still think shares are cheap, but we’re moving on. See Step 4 in the “14 Most Important Steps to Understand the Stock Market.”
We’re removing Michael Kors.
We recently wrote up our take on the changing preferences of millennials in the context of Tiffany, and we don’t think Michael Kors (KORS) will be immune to such changes either. We’ve already taken profits on Coach (COH) in the Dividend Growth Newsletter portfolio, and we’ll be removing Michael Kors in the Best Ideas Newsletter portfolio at $36.83. We’re disappointed in this one, too, as with Teva, we think the market is being unfair to shares, which still look cheap. See Step 4 in the “14 Most Important Steps to Understand the Stock Market.”
We’re available for any questions.
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