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Spring Cleaning Time For The Growth & Momentum Portfolio

By Robert Freedland

The Growth & Momentum portfolio that I have managed on Covestor since April 15, 2009 had a positive performance in May.

This model was recently renamed to "Growth and Momentum" from "Buy and Hold, Value" to more accurately reflect my actual management strategy. I have been anxious to try to limit losses and try to sell weak stocks quickly and to sell portions of appreciating stocks slowly.

In my opinion, many of the new holdings in this model are truly momentum stocks with growing earnings and associated stock appreciation chance.

During the month of May, 2013, I sold my position in ARM Holdings (ARMH) stock after it had accrued a small loss. By the end of the month ARMH closed out even lower than my sale price. The other position that was closed out was Fiserv (FISV), a financial services technology company, that was sold early in May also after accruing a small loss.

FISV closed out the month a little higher than my sale price so I believe my record for the month is 50% in making wise decisions, at least for the month.

Both of these sales were due to my own desire to try to limit losses to the lowest level possible, and also to part company with investments if their own price performance from my perspective is less that satisfactory.

Two of my holdings in this portfolio have been doing very well and I sold small portions of these holdings to 'lock in' some of the capital appreciation as well as to essentially rebalance the portfolio so that the holdings would be relatively evenly weighted.

These sales go along with my long-standing practice of selling my losing stocks 'quickly and completely' and my gaining stocks 'slowly and partially.' For that reason, I sold a portion of FleetCor Technologies (FLT), a transportation technology company, early in May to lock my gains and keep position evenly weighted.

The other company that I sold a portion of for a gain was Lumber Liquidators (LL). Neither of these stocks were sold because I thought they were doing poorly. Rather, as part of a disciplined management of the portfolio, I chose to sell a portion of two holdings to keep my positions balanced and diversified.

The two new holdings in the portfolio as of the end of May were J.M. Smucker company (SJM), best known for its JIF peanut butter brand and its many quality Jams and Jellies among other consumer stocks.

In addition, I purchased shares of Financial Engines (FNGN), which I view more of a momentum investment with a richly priced trailing price-to-earning ratio. The company has been growing quickly in the business of advising many employees how to diversify their investments in their retirement accounts among other services.

The company reported strong results on May 7, 2013 with adjusted earnings climbing 50%, revenue increasing 29.5%. The company beat expectations of both earnings and revenue reported.

Looking forward in this model, I shall strive to limit losses to small amounts and work hard to step aside should any of these holdings weaken. Currently, Church & Dwight (CHD), Financial Engines (FNGN), and Smucker (SJM) have small losses and will be closely watched for possible sale. On the other hand, Barrett Business Services (BBSI), FleetCor (FLT), and Lumber Liquidators (LL) sport some gains since acquisition.

Thank you to Covestor for your continued trust and to those of you who have stayed with me the past few years, I also thank you and shall continue to strive to perform at a satisfactory level to earn your continued participation in this model.

The investments discussed are held in client accounts as of May 31, 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable.
Robert Freedland

Robert Freedland

Robert has over 40 years of investment experience and is a full-time optical surgeon. He uses his expertise in the

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