Home Portfolio Management Sharek’s 2012 Q2 Review

Sharek’s 2012 Q2 Review

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The second quarter of 2012 saw us give back half the gains we made in the first quarter.

The Growth Portfolio is up 15% year-to-date through the second quarter of 2012, compared to the S&P 500’s gain of 8%.

During the same period, the Aggressive Growth Portfolio gained 17% for the year, more than double the S&P’s return of 8%.

I’m disappointed as we were up more than 30% through the first quarter of the year (the S&P was up 12%). I’ve given back half the gains and the market has given back one-third of its gains.

What Went Right

The bright spot for Q2 was that the investment of Michael Kors (KORS) proved to be solid. I got us in at $45 and the stock is trading today at $53. Although the gain isn’t much, the stock’s behavior and fundamental outlook is solid. I think I will own this stock for years to come.

Mistakes Made

During the quarter I invested in Joy Global (JOY), then proceeded to sell it for a 22% loss. I often avoid stocks related to commodities (Joy makes coal digging machinery) but felt JOY had the most upside of any growth stock I didn’t already own. Still, it was a mistake as there is no certainty in Energy stocks.

We really got hit in the beginning of the quarter as a handful of companies lowered their outlooks and had their stocks tank on the news. These stocks include Green Mountain Coffee (GMCR), Nu Skin (NUS), Body Central (BODY), Herbalife (HLF) and Cognizant Technology Solutions (CTSH). Most of these stocks have been sold since. This is what really hurt my returns in Q2.

Where to Invest Now

I feel the market is a little high for this point in time. I don’t see us making much headway until November. Some companies have lowered profit estimates in the face of this poor news. That’s swimming upstream.  November through January should prove to be fruitful for stock market investors, as the market will be looking ahead to better profits in 2013.

Stocks on my radar include Ulta Salon (ULTA), Web.com (WWW), Altisource Portfolio Solutions (ASPS) and Francescas Holdings (FRAN).

David Sharek David Sharek is stock portfolio manager and CEO of DavidSharek.com. David believes a company's profits ultimately drive the price of its stock. His book The School of Hard Stocks can be found on Amazon.com.