I’ve made some significant portfolio changes this week, here’s a summary:
Last weekend the Momentum system I follow switched out of long-term bonds (EDV) and into stocks – the Brazil ETF (EWZ). I owned EWZ last summer/fall as a Momentum trade, and made a nice 26% profit, so I have good memories owning this fund. Given my view of the market environment, I’m not that confident in the trade this time, and committed only 30% of the portfolio to it (I usually commit 40%). The momentum system is a mechanical investing method, and I check it weekly for trades.
But in checking the ‘Cash Signal’ I use, it is within a hairs breadth of making a “Go to cash” signal. Could happen any day. If it did, I would sell out of EWZ and hold a large portion of the portfolio in cash until it clears.
Monday of this week I purchased the following stocks:
1) ITT Educational Services (ESI), with 3% of portfolio, purchased at $81.70
(Wished I had waited a week on this one)
Some for-profit colleges encouraged fraud
(Then again, Insider don’t seem to mind)
Top Nine Insider Buys From August 2-4
ESI became a Magic Formula stock last October, when it was around $100 per share. It’s now 25% cheaper.
2) PetMed Express (PETS), with 3% of portfolio, purchased at $15.93
Why We’re Buying PetMed Express
PETS is another Magic Formula stock.
3) Trimeris Inc. (TRMS), with 3% of portfolio, bought at $2.40
TRMS is an unusual pick for me. It’s a micro-cap stock, and a biopharmaceutical company with only one primary drug product. The Company engages in the commercialization of fusion inhibitors for antiviral drug treatments. The companys fusion inhibitors prevent viral fusion, a complex process by which viruses attach to, penetrate, and infect host cells. It offers FUZEON, a human immunodeficiency virus (HIV) inhibitor under a collaboration with F. Hoffmann-La Roche Ltd. It also holds TRI-1144, a next generation fusion inhibitor candidate that completed Phase I clinical trials. The company was founded in 1993.
TRMS began making a profit in 2006 and has been growing free cash flow nicely since. What I like is that it’s selling at 93% of the cash on its books, with no debt, so you’re basically getting the whole company for free. TRMS is also a current Magic Formula stock.
Technically, I’ve decided I was wrong
to purchase WDC last week. It’s still a great value, but I spent this past weekend further reading and studying Tom Demark trading signals. I believe I’ve come up with a better trading system than his TD-REI I described in that post. I’m back to using his TD-Setup/Sequential and have found a simpler way to follow it. Using this system WDC is still a “falling knife” stock and should have remained a Hold for now – not a Buy. I think I’ll hold onto WDC for another week or so before deciding whether to sell. One thing that concerns me is that the last Bear market lows for WDC is way down at $12 per share.
I can’t stand indecisive trading, but apparently this is a schizophrenic market.