The USA Stock Only portfolio model had one stock that became overvalued. Plantronics [PLT] reaching 132.9% Fv, and providing a 75% return.
Actual price movements have outstripped earnings estimates and rankings are showing some negative values.
Monsanto [MON] was recently acquired by Bayer of Germany. The stock was acquired at $128/share which provided the portfolio a gain of 18.5%.
With the two stocks removed from the portfolio the allocation across market capitalization categories is showing an underweight to LargeCap stocks and a corresponding overweight in SmallCap.
The allocation between stability and opportunity is slightly underweight to opportunity (Aspirational) stocks. Fortunately, the allocation across all sectors is within targets. The largest undervaluation is in Utilities, but it is less than ½ percent.
Ideally, the portfolio would benefit from LargeCap, Aspirational stocks that are not an Industrial. The reason to avoid an Industrial stock is that the sector holds the largest overvalue at 1.8%. It is not out of range, but we can add in other places without increasing the weighting to Industrials. Twenty-three stocks appear as possibilities and we narrowed that down to four Consumer Discretionary stocks. Two already have positions in the portfolio, Ford Motor Company [F] and Hanesbrands [HBI] and two will be new additions, Walt Disney [DIS] and Expedia [EXPE].
Ford Motor Company [F] currently is at 86.4% fair value and represents 0.35% of the portfolio. We will be adding 1,200 shares bring the weighting to 0.89%. The second existing stock is Hanesbrands [HBI] at 71.8% fair value and represents 0.23% of the current portfolio. Hanesbrands ranks #14 overall in the World-Plus universe We will be adding 750 shares increasing the overall weight in the portfolio to 0.79%.
The two new names that will be added to the portfolio are Walt Disney [DIS] and Expedia [EXPE]. Walt Disney is a highly diversified entertainment company addressing global markets. It is currently at 82.5% fair value and ranked highly in terms of EBIT/share, EBITDA/share and Free Cash Flow/Share. Earnings estimates are also looking favorable.
Disney enters the portfolio with a 0.78% weight as we add 200 shares.The last stock to be added to the portfolio is Expedia [EXPE] an online travel company. The stock is currently at 76.0% fair value, still undervalued. The stock also ranks highly in the World and World Plus universe. We will be adding 150 shares with a portfolio weight of 0.68%.
These actions bring the portfolio closer to targets in asset allocation for market capitalization and improved market characteristics for both Core and Aspirational classifications. Sector weightings also improved to where all 10 sectors are within targets.
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