Market Beating Stocks - Weekly Recap

Retirement Portfolio: Kapstone Paper Recovers Jumping 7%!

Our Retirement Portfolio only treaded water last week but remains in line with the market YTD return. Most of our stocks did well with all showing gains for the week expect Humana and Five Star Quality Care. Kapstone was the highlight, rising nearly 7% for the week as the stock is begins to recover from selling pressure during the recent market meltdown. Unfortunately, our portfolio gains were negated by the precipitous drop on Five Star Quality stock. Five star announced disappointing earnings that failed to meet expectations and the stock price fell sharply, 15% for the week. That left us in the red and we decided to sell to limit our loss to 11%. When companies fail to meet expectations, the selling pressure can be intense, which often means sharp price changes particularly on thinly traded and low dollar price stocks like Five Star. The stock may bounce back over time, but frankly we were looking to get out of this one even before their earnings release as the stock price had been trailing market performance over the past two months. Unfortunately, the stock price moved sharply down much too fast to get out at more reasonably loss levels. Stocks are always most vulnerable whenever big news is released such as earnings announcements. The market will often move too fast, which challenges investors ability to limit losses. This is a very real risk with trading stocks and highlights the importance of diversifying investments across many stocks to reduce the overall impact on the portfolio. For example, if we hold 10% of our funds in a stock that drops 15%, the overall impact on our portfolio is limited to a loss of 1.5%. This is a key strategy we employ towards managing risk across our portfolios. With the recent sale of Five Star, we are currently 70% invested in this portfolio. We do plan to make additional portfolio investments as the market is showing signs of stabilizing. Our goal is to become fully invested over the next few weeks.

Growth Portfolio: Odyssey Healthcare Leaps 15%!

The Growth portfolio had a very strong week for the second week in a row after rising nearly 4%. All stocks saw price increases except one. We are at a minor loss YTD, but we still expect the portfolio to recover quickly over the near term. The big winner was Odyssey Healthcare which rose 15% after announcing earnings that exceeded expectations. We have held this stock now for two months and expect to continue holding through their next earnings release. Bucyrus, HealthSouth, and Decker also had strong weeks rising more than 6% for the week. We are still trading on margin and will likely continue over the near term unless the market has an unexpected meltdown. Volatility has softened considerably, and that should reduce the negative impact that implies for using margin. As the market recovers, we should continue to get a strong bounce from our stocks and the additional leverage in play. One stock that remains on our sell watch is Valmont Industries. The stock rose 1% last week bringing our overall gain to 7.7%, but we are looking to take our profits and move on to an opportunity that shows stronger recent momentum. Our plan was to hold Valmont through its latest earnings report in hopes of a stronger bounce, but the report failed to move the stock in a major way. We will likely sell this stock next week.