Now that the vast majority of larger-cap companies have announced earnings and shared with us forecasts for the balance of the year, we can take the opportunity, perhaps over the weekend, to assess our portfolios to see if any housekeeping needs to be done.
After every quarter, it's a good time to see if any pruning, or planting, or watering, or dumping of garbage -- any adds, holds, trims, sells, changes to the watch list -- need to be implemented.
Take the opportunity to revisit and/or revise trading plans, risk/reward ranges and price targets. I try to resist the urge to trade around earnings announcements until earnings news settles -- the volatility is just too great. If we had a winner, there's usually a good chance the stock continues to work into the post-earnings-season period.
Conversely, if a company's stock suffered because of weak fundamentals, it's always a good idea to let the stock settle anyway. Emotional decisions need to be controlled. Of course, if there was a binary event that prompts immediate exit, in the purest something-changed fashion, try to think rationally and clearly while making that decision. Try not to throw the baby out with the bathwater (so cliché, I know).
Not sure we learned a lot of new things this season. I would say, it was a confirmatory period here in the second quarter.
Things remain stable in some cyclically exposed areas, but with a downward skew.
The housing supply chain is on the full side - as suppliers didn't raise guidance that much -- so we need to continue to see new and existing home sales churn slowly higher. Rates are favorable for this to likely continue.
We confirmed that capital spending and inventory in the oil and gas industry is still erratic and being ratcheted down.
We saw that strategic M&A is happening, at solid premiums, in technology, consumer and industrials. I find this intriguing.
This will likely continue as companies that want to look forward, continue to look forward.
The recent share moves higher in defensive consumer staples issues was actually confirmed by solid earnings. Multiples have expanded on small growth. M&A is a trend here as well. Let's watch Hershey (HSY) and Mondelez (MDLZ) . Who buys Colgate-Palmolive (CL) ?
Multiples have expanded on this confirmation.
So, what now?
Look at portfolios name by name, maybe shave the froth off of some on highs and redistribute to ones at the lows -- a rebalance of sorts. Without beating a dead horse, I think National Oilwell Varco NOV is one tool to use for this process.