Portfolio Positions Review

Let’s do a portfolio review of each of our positions in the portfolio. I’m starting at the most recent additions to the portfolio and will get through about half this week. I will have the rest for you next Tuesday.

Triquint – This company, along with AVGO is in a duopoly for “Bulk Acoustic Wave (BAW) duplexer[s] designed to meet the strict CDMA/LTE” as the company puts it. Let me put it this way, TQNT are selling a huge amount of chips into the latest high end handsets, including the iPhone 5S. Speaking of which, that Apple/China Mobile deal that was formally announced this week, included this line, “offer more 4G LTE bands than any smartphone in world”. That’s good stuff for TQNT. We need management to deliver for us though. And on that note, there’s an increasing amount of activist and/or private equity interest swirling around this name as the stock hangs in the single digits.

Pandora – The determinant for being a bull vs. a bear on this Internet/mobile radio company is whether or not you think they’ve hit critical mass. If Pandora has become a de facto standard for modern-day radio-listening, then you have to own this stock because that would mean we are in the first or second inning of a long secular growth cycle for the company. If, on the other hand, you think as I do, that the company is rather losing its small toehold as more/cheaper/better/easier-to-get-to alternatives come to market. Apple radio, Scutify, Google Play music, Xbox Music, etc are all big competition for this company and each are barely getting started. The stock is trading at more than six times next year’s revenue estimates and at more than 100x next year’s earnings estimates. Long way down if they don’t maintain critical mass.

Spy – This was put on as a short-hedge against our mostly long portfolio, and it’s gone against us since day one, as the markets and our portfolios have continued booming upward. With this position now more than 10% against us, I’m quite near the point of doing the disciplined, prudent thing and cover it for now.

Cree – Secular growth in LED lighting makes this company a likely target as growth continues apace. At 25x next year’s earnings estimates it’s not cheap, but it’s not wildly expensive in this bubble blowing bull market we continue to ride.

Calgon Carbon – The CEO here has been in place for only just over a year and he’s really been pretty cutthroat on driving returns for shareholders. Stock buybacks, cost cutting, and this:

We also discussed the importance of securing high performing coal with the lowest total cost of ownership to produce activated carbon at our two virgin plants and to increase the amount of coal under long-term contract.

In order to determine the right price point, we studied purchase costs, inbound transportation, handling, plant productivity, and first time quality of activated carbon. Our results identified several bituminous coals/blends that perform better than our traditional coals/blends.

I’m very pleased that we have recently contracted with two highly regarded coal companies for the supply of bituminous coal that meets our cost/performance criteria. The terms are competitive with the current metallurgical coal market and are structured to protect Calgon Carbon from the frequent large swings of this coal market. Both contracts will begin immediately and expire at the end of 2018. And as a result, our coal under contract for that term is now approximately 70%.

I’d love to hear from anybody in the industry who could elaborate on this “better than our traditional coals/blends” note. That comment and others in the press release make my “spider-senses” go off and not in a good way.

3-D Stock Printing Basket – DDD and SSYS are just in bubble-blowing bull market mode. Each company is continually rolling out exciting new products and raising the topline guidance. They’re not cheap and I wouldn’t want to chase them here. Which brings us to XONE, which is a much younger and smaller company than DDD and SSYS. More risk, but more potential long-term upside in XONE, if they can end up growing their sales like DDD and SSYS have.

IEF (Short) – Interest rates are still at basically all-time historic lows if you look at any chart that measures interest rate movements over a time frame of decades. No matter how many Treasuries the Fed buys, the ramifications of the last five years of 0% Fed Funds rates on long-term interest rates is already set in place — and the pendulum will likely swing far to the other direction before this new cycle is finished, which would put this IEF ETF down near $70 ten years from now, down from its current $100.

Intel – PC sales trends seem to have finally bottomed and that might very well have put in a bottom for Intel here in the low- to mid-$20s. For meaningful upside in this stock though, we’ll need to see some traction in mobile and tablets. Nice 4% yield while you wait though.

Carrier Infrastructure Basket – Juniper and Ciena both reported another strong round of earnings and guidance, bucking any trend from Cisco, which has much more exposure to government and enterprise spending vs the Juniper and Ciena which are much more exposed to carrier infrastructure. Put simply, Juniper and Ciena mostly sell to the AT&Ts and Verizons and other major telecom carriers of the world rather than say, the JP Morgans, PepsiCo’s and Pfizers, where Cisco dominates. Steady as she goes for now as we try to catch this cyclical growth phase for these two vendors.