In my February letter to investors I explained why I was increasing my position in JC Penny (JCP). Since that post, the stock has continued to be very volatile in 2014 with double-digit gains and drops depending on the day. This is always the case when companies are having trouble, and in the short term this volatility mostly benefits speculators and day traders. My belief is that if you actually do your homework and stick to your guns, in the long term these types of “beaten” stocks can frequently be very rewarding. An investor just needs the right measures of calm and patience in order to protect against the desire to sell in a panic. Most of the time this also requires an investor to ignore the media and “professional recommendations” to buy or sell.
Despite the fact that JC Penny is under performing the S&P 500 thus far in 2014 (-3.83% vs 1.62% of the S&P 500), the company is on the right track for recovery. They are working toward recovery in ways that have historically been successful for other companies in similar situations – renegotiating debt, cutting expenses, stopping dividends, and increasing productivity. My tip this time is to disregard any short-term price fluctuations that JC Penny (JCP) may have, and to be patient. This stock will rise again and stabilize, but as I’ve said before it isn’t going to happen overnight. The global economy, individual companies, and frequently human beings all work the same way. Most everything goes through cycles with periods of abundance and spending, followed by periods of austerity and re-adjustment. As the old adages go, nothing stays up forever, and nothing is ever really as bad as it looks.
Summary Portfolio Performance
Since inception (01/19/12), the model is up 43.5%, versus the S&P 500 50.7%. The return of the S&P 500 in April 2014 was 0.62%, compared with -0.69% for my Dividend Paying Large Caps portfolio. Year to date my portfolio is up 1.11% compared with 0.52% of the S&P 500.
In April, Apple (AAPL) and Intel (INTL) performed very well. They were up 9.9% and 3.4% respectively. As I expected, Ecopetrol (EC) and JC Penny (JCP), which went up more than 18% in March, both saw a big correction of -8.1% and -7.8% respectively in April. The remainder of my positions were more or less in line with the performance of the S&P 500.
Acquisitions in April 2014
In April 2014, I didn’t add any new position to my portfolio, and didn’t increase or decrease any of my holdings. Looking ahead, I plan to liquidate some of my positions later this year, and have already identified other opportunities in the stock market that are more attractive and may give a little boost to my portfolio. Details on these investments will be shared in my next communication to shareholders.