Last week, we added $5,000 to UPRO on the precipitous decline to the low 60’s, and started new positions in Splunk (SPLK) & Celgene (CELG).
LABU has taken it on the chin over the last few trading sessions, but thankfully we booked some profits before the drop.
In order to help offset some of our underperformance in Biotech, we added a best of breed on sale to the portfolio, Celgene (CELG).
Please see chart of Celgene (at support of $100 area, oversold on RSI, 25% off its highs, and is a best of breed biotech company).
Celgene trades at around 50x earnings (high), but its 2nd leading drug, Pomalyst, is growing sales by over 50% (good PEG for CELG). This tells me CELG is still cheap despite its PE multiple.
CELG also has other nice products in the pipeline (Revlimid, Abraxane, & Thalomid etc).
Splunk (SPLK) & Western Digital
Adding another tech name to the portfolio (SPLK) in order to spread the risk from Western Digital (WDC).
We just started our position in WDC, but after it fell a quick 10%, I decided that adding to it now would be more like catching a falling knife, rather than simply “buying the dip”.
I am still a big believer in WDC, so I will just wait until the dust settles before adding more (while I get paid a 3% dividend to wait).
Now over to Splunk. SPLK is a pure-play on the “big data” tech theme, and is forming a good setup on its chart. Short term, the stock could be susceptible to volatility. But long term, SPLK is at a nice buy point.
“SPLK is a provider of software products that allow organizations to gain real-time operational intelligence by harnessing the value of their data (Etrade.com)”.
For more on SPLK, visit their success stories/client list here http://www.splunk.com/en_us/customers.html
Buying half of a position here in CELG & SPLK, and the other halfves on a pullback.
The addition of those two holdings now gives us 8 positions, which should achieve diversification (theoretically, you need 8-12 for proper diversification).
Consumer Discrectionary (Ford)
Biotech/healthcare (LABU & CELG)
Technology (WDC) (SPLK)
The S&P 500: Our biggest holding (UPRO)
No financials (we like but are expensive)
Housing (we like but expensive)
Military Defense (we like but expensive)
All in all, I think we are positioned nicely for the long term, since all of our exposure is in high-quality, beaten down sectors.
If we get a pullback in UPRO to the $60 level again (old resistance), I will look to add another 5K, and possibly more to our other positions if the market looks to have bottomed.
In the meantime, we will rebalance shares of UPRO into the strength today (selling $1,000 since we are up $1,000 on the day), which resets our position back to $30,000.
11/17/15 11:30 A.M.
Selling Celgene for the quick 5% gain in two days.
I still am a believer in this one, so don’t sell just because I did (I only did so to not have two of a kind in biotech).
Also, LABU looks like it has stabilized around $20.00, so I am content with just keeping it as my core biotech holding.
11/18/15 11:45 A.M.
Re-entering Celgene, the stock is just too cheap.
Also, we are using the proceeds from our Morgan Stanley sale (got a break-even) to upgrade to a higher-quality company in Blackrock (BLK).
BLK is a better quality company, and is cheaper than MS at 18x earnings vs MS’s 20x earnings. Plus, BLK’s dividend yields more than twice as much.
Updates to follow.