Portfolio A1 Swaps Oils: PBR for TSO

For someone who is largely a discretionary trader, one of the more difficult aspects of a fully mechanical trading system is sitting on the sidelines trying to get up the enthusiasm to root for stock that you wouldn’t otherwise follow. Rarely do I watch Portfolio A1 dump one stock in favor of another, pump my fist in the air and yell at my monitor, “It’s about time, dammit!” Today is one of those days, however, as I can let my lukewarm feelings about the refiner Tesoro (TSO) depart along with the stock, while at the same time welcome into the Portfolio A1 fold Petroleo Brasileiro (PBR), the state-owned Brazilian whose stock has traced almost a straight line over the past five years in rising from 5 to 65, all while generally paying a 2% dividend in the process. PBR has been a favorite of my discretionary portfolios for several years and I can only hope that it hasn’t gotten ahead of itself at this stage.

Speaking of newcomers, last week’s strong portfolio performance was led by newcomer Mobile TeleSystems OJSC (MBT), whose 7.5% weekly gain helped to more than double the portfolio’s advantage over the benchmark S&P 500 from 1.5% to 3.3%. With Russia and now Brazil, 2/5 of the portfolio is invested in ADRs; and when you consider that portfolio stalwart Terex (TEX) has a strong China component, it is worth noting that Portfolio A1's stock ranking system is unwittingly endorsing the BRIC growth thesis, albeit with limited exposure to India.

Now that my discretionary portfolio overlaps this mechanical portfolio as far as PBR, TEX and AMKR are concerned, it will be interesting to see if Portfolio A1’s performance changes dramatically, for better or for worse.

There are no other changes to the portfolio for the coming week.

A snapshot of the portfolio is as follows:

Portfolio A1 Seeing All Green

On the heels of last week’s lackluster performance, the portfolio roared to life this week, with all five of Portfolio A1’s holdings logging weekly gains. This enabled Portfolio A1 to stretch its performance margin over the benchmark S&P 500 from 1.7% to the current 4.2%.

Note that Tesoro (TSO) paid out a dividend of $0.10 on Friday. In keeping with the precedent established with the treatment of an earlier Rock-Tenn (RKT) dividend, I am automatically reinvesting the cash proceeds into the appropriate stock.

Once again, there are no changes to the portfolio for the coming week.

A snapshot of the portfolio is as follows:

Selloff Tests Portfolio A1

Portfolio A1 muddled through a difficult week in the markets, with losses of 7.1% in Tesoro (TSO), 5.3% in Rock-Tenn (RKT), and 4.5% in Terex (TEX) accounting for the bulk of the damage. As a result of the three hard hits, the portfolio’s margin over the benchmark S&P 500 index has fallen all the way from 4.75% to 1.70%. The coming week should provide a good test of the resilience of the portfolio’s holdings. Frankly, I would expect to see some changes if we don’t see signs of improvement in the options expiration week ahead.

There are no changes to the portfolio for the coming week.

A snapshot of the portfolio is as follows:

Portfolio A1 Roars Back Behind TSO and TEX

After two weeks of losing ground to the benchmark S&P 500 index, Portfolio A1 roared back last week, with all five stocks in the green. The strong performance was led by a 6.4% gain from newcomer Tesoro (TSO) and a 6.3% gain in portfolio leader Terex (TEX), which is now up over 29% in just 3 ½ months. The gains in TSO are particularly gratifying, as they allow me to get my hopes up that the fifth and final holding in the portfolio may now begin to add value rather than destroy it, as has generally been the case so far.

As shown in the graphic below, the portfolio now has a healthy 4.75% cushion on the S&P 500. This is below the year’s best 6.77% advantage from April 29^th, but at least is heading in the right direction once again.

For accounting purposes, it should be noted that TSO recorded a 2 for 1 split during the week.

There are no changes to the portfolio for the coming week.

A snapshot of the portfolio is as follows:

Portfolio A1 Holds Steady as RKT Loses Altitude

For the second week in a row, at least one Portfolio A1 holding fell 10% during the week. Last week it was Tesoro (TSO), which continued to recover this week; the most recent victim is Rock-Tenn (RKT), whose fall was offset almost imperceptibly by a $0.10 dividend paid out on 5/21. While RKT has been a strong performer since being added to the portfolio during the first week in March, the recent weakness makes this holding vulnerable to being dropped in the coming weeks.

In spite of RKT’s difficult week, Portfolio A1 has increased its performance advantage over the benchmark S&P 500 to 2.2%.

There are no changes to the portfolio for the coming week.

A snapshot of the portfolio is as follows:

Portfolio A1 Struggles Behind TEX and TSO

Portfolio A1 had a difficult week. New addition Tesoro (TSO) dropped 10% from Monday to Wednesday, following the refiners down, yet rallied impressively to end the week just barely in the red. The situation was worse at Terex (TEX), which was Portfolio A1’s largest holding coming into the week. Terex struggled throughout the week and finished 8.5% off of Monday’s high. As bad as that sounds, the heavy equipment manufacturer is still flat for the past month and up 84% over the past year.

The week’s lackluster performance dropped Portfolio A1’s cushion over the benchmark S&P 500 to 2%, down from the 4.5% advantage as of last week.

There are no changes to the portfolio for the coming week.

A snapshot of the portfolio is as follows:

Portfolio A1 Likes Tesoro

It has been interesting to watch the Portfolio A1 stock ranking system search for a fifth a final holding for this portfolio. This week Enersis (ENI) has been dropped after drifting sideways for a week, to be replaced by Tesoro (TSO). In this instance, the change is more the result of Tesoro’s rising star than a particular dissatisfaction with Enersis: from mid-January to the end of April, Tesoro has more than doubled. Still, a May 3^rd earnings report failed to impress and appeared to stall the stock, yet gives the portfolio a chance to buy Tesoro in during what may turn out to be just a pause. I would love to see some stability in the holdings and I think TSO’s prospects are probably a little better than predecessors ENI, WCG (which looks to be recovering), NTY and PCCC.

In the bigger picture, the portfolio maintains its 4.5% cushion over the S&P 500, with a 7.9% gain since the February 16, 2007 inception.

There are no other changes to the portfolio for the coming week.

A snapshot of the portfolio is as follows: