Rebalancing July 30 and August 5: Selling Solar A/S and McKesson Corp; Buying Alpek SA and Smith & Wesson Brands
Today, I will write about the latest two position rebalancings in one post. Due to a planned vacation, the latest position rebalancing was performed slightly earlier than usual. In that way, I can fully concentrate on sightseeing, binges and the spa next week.
For a frequently updated portfolio list, check this link:
https://docs.google.com/spreadsheets/d/e/2PACX-1vSn_7YGRDRtFSBTT-mThrwOhMGAQdddITQm1l-u1GoJYTZhVmpQq64MvrbELf8mQtzGkPFp7nIbWHkX/pub?output=pdf
I sold Danish “Solar A/S” for 111% pre-tax total return (Oct20, 2020 - Jul30, 2021) and “McKesson Corp” for 10% pre-tax total return (Nov16, 2020 - Aug05, 2021). While solar stocks generally had a good 2020, the medical distribution story was less exciting. Both stocks were in a nice uptend over the recent year. Unfortunately, I bought McKesson after the big jump in November. Both stocks are still rather cheap on most metrics. However, McKesson reported a trailing 12month net loss, making it unattractive for me right now. My main issue with Solar A/S is that it shows mediocre cashflow yields in comparison to my stock universe, which also impacts the accruals ranks.
Source: gurufocus.com
The two stocks I bought as a replacement were “Alpek SA” and “Smith & Wesson Brands Inc”.
The Mexican company Alpek SA generates most of its revenue from manufacturing and selling polyester fibers and PET products for food and beverage packaging. Furthermore, they sell polypropylene, Styrofoam, and specialty chemicals. Customers are consumer goods, food and beverage packaging, automotive, agriculture, oil and gas, and pharmaceutical industries.
Smith & Wesson Brands Inc is a U.S. firearm manufacturer. Products include handguns, long guns, sporting rifles, shooting gear, and suppressor products. Main brands are Smith and Wesson, M&P, Thompson/Center Arms, Performance Center, and Gemtech. The products are used for defense, law enforcement, hunting, and sporting purposes. The company operates internationally, with the majority of income generated by the U.S. market from its handgun products.
The different factor ranks in comparison to the replaced positions are shown in the following table:
The Alpek stock was basically flat over last 8+ years, despite constant improvement of the earnings per share, as shown in the Peter-Lynch chart:
Source: gurufocus.com
For Smith & Wesson, the path was a bit more choppy in this regard:
Source: gurufocus.com
Both stocks show very cheap multiples and strong recent momentum as well as strong Piotrosky F-score (Alpek = 9, Smith & Wesson = 8). Furthermore, both stocks show good quality ranks and no major red flags according to my system.
Source: gurufocus.com
The last 6 months were all about Canada, China and Eastern Europe. It is nice to see some North American stocks again ranking at the top of my investing universe. There are some weird rotations going on in the markets right now. Mr. Market almost seems to be a bit confused lately. The COVID distortions, leading to extrem movements in stock prices and business earnings, are not fully dissipated yet. Hopefully, my system navigates through this period savely without critical mistakes.
Yours sincerely,
Non-Prophet.