The following commentary originally was sent to Stocks Under $10 subscribers on June 10, 2016, at 4:50 p.m. ET.
For the second straight week, U.S. stocks stumbled into the close Friday, but still managed to move higher for a fourth straight week. We used the strength to trim back our position in Ballantyne Strong (BTN) and lowered our rating to Two from One. We also sold half of our stake in Cott (COT) and raised our price target to $17.
Looking ahead to next week, all eyes will be on the Federal Open Market Committee, which is expected to announce its next interest rate decision on June 15. Fed funds futures are currently pricing in just a 2% chance of a rate increase this month and 23% by July.
Also on the economic front, we'll get a look at advanced retail sales on Tuesday, followed by producer prices on Wednesday. Thursday offers data on consumer prices, followed by housing starts on Friday.
Despite a brief pullback, we remain near all-time highs and the broader market averages are overbought on several traditional metrics. As a result, we are comfortable with holding nearly 30% of the model portfolio in cash and having just two One-rated names.
The Fed and upcoming BREXIT vote aside, we believe that trading will be relatively quiet in the next three weeks. We will use this opportunity to research potential new names for the model portfolio and our bullpen. As always, any new name we add will need to fit in the context of a diversified overall portfolio.