After a week full of trying to exploit market volatility and heaping scorn at Twitter (TWTR), I finally have a chance to tell you about the remaining eight stocks in the portfolio I created for a new European client. As a refresher, I mentioned my first eight stocks in his Sweet 16 portfolio in this column. Those eight are:
Barrick Gold (ABX)
DHT Holdings (DHT)
Dupont Fabros Technology (DFT)
Goodrich Petroleum (GDP)
Magnum Hunter Resources (MHR)
MannKind (MNKD)
Newtek Business Services (NEWT)
Second Sight Medical Products (EYES)
Like that grouping, the second half of my Sweet 16 has some income plays, a little tech and some obscure names. I've already made one change to the initial 16-stock portfolio I created 10 days ago, and I'll detail that below. The second half of my Sweet 16 stock portfolio is composed of:
Acme United (ACU): Extremely steady consumer-products company with a great stable of brands and further opportunities for operational efficiency. The safest stock I own, bar none. Yield: 2.01%.
Armour Residential REIT (ARR): After years of mistiming the agency mortgage REIT market, ARR management finally reported an expectations-exceeding quarter this week. And after 4½ years of steadily decreasing payouts, ARR's August dividend will reflect a sequential increase. I believe an inflection has been reached, and the stock's 1-for-8 split (effective Monday) should increase liquidity. Yield: 17.4%.
Astrotech (ASTC) commercializing NASA technology for mass industrial markets. I believe ASTC's 1st Detect division's mass spectrometry technology will become a "killer app" on the chemical detection and analysis market with applications in many industry verticals.
Customers Bancorp (CUBI): Customers' shares plunged after its second-quarter earnings report and I had the opportunity to sit down privately with CFO Bob Wahlman in New York this week to discuss the quarter and CUBI's outlook. I'll cover CUBI in much more detail in my next post, but suffice it to say, I do not believe one (potentially) bad loan representing 0.13% of CUBI's loan book should tarnish an otherwise great regional banking story.
Navios Maritime Partners (NMM): More yield, this time through a mixture of dry-bulk and container ships wrapped into an MLP structure, but taxed as a C-corporation. So, no K-1's and a phenomenal -- and safe, as all NMM's boats are on long-term charters -- yield of 16.57%
OneHorizon Group (OHGI): The company's VOIP-to-mobile technology is tailor-made for a large emerging market like China. OHGI's Aishuo app already has been downloaded more than 6 million times through Chinese Android app stores including Baidu (BIDU), Tencent and Xiaomi and is also supported on iTunes in China. Aishuo now supports all of China's major mobile payment platforms -- UnionPay, Alipay, WeChat, Wallet -- so monetization is a current event, not a pipe dream for the future.
Pennant Park Investment (PNNT). A business development/regulated investment company whose shares have been hammered based on portfolio exposure to energy. Oil and gas only represented 8% of PNNT's portfolio as of March 31, and I expect June quarter results (to be reported Wednesday) will show solid growth and continued strong profitability. Yield: 13.97%.
And the replacement I made during Friday's trading:
Exxon Mobil (XOM) replacing YPF (YPF): I just couldn't resist an AAA-rated company yielding 3.51%, so I added XOM to my client's portfolio on the heels of the stock's swoon Friday. I like YPF's Vaca Muerta acreage in Argentina, but I love Exxon's ability to produce $8.8 billion in operating cash flow in a quarter that was disastrous for so many E&Ps.
So, that's my client's Sweet 16. Putting Exxon in the mix increases his current yield above 5% and I expect to ride the portfolio's dividend payments to a relative performance victory over a broad stock market that is overvalued, overhyped and, quite frankly, scares the hell out of me.
