Portfolio Spring-Cleaning Buys and Sells

MILLBURN, N.J. (Stockpickr) -- The snow is melting, the days are longer, oil prices are rising, Apple unveiled the second generation iPad, and exogenous events at opposite ends of the world -- Japan and Libya -- are rocking the world, literally and figuratively. For me, this signals an opportunity for some portfolio spring cleaning.

Don't get me wrong. I do not believe that the market is "rolling over" or is overvalued or that the bull market has come to an end. My research indicates that the equity markets are in the beginning of a multiyear bull market. Those exogenous events will be resolved, and the world will not come to an end.

But as famed economist John Maynard Keyes is attributed to have said, "When the facts change, I change my mind. What do you do, sir?"

Related: Two Pair Trades to Play It Safe

In managing a portfolio of 30 to 40 stocks, fundamentals will always change. Events, either micro to a company or macro to an economy or sector, will impact some of those stocks. Hence, I have sold some stocks. Conversely, opportunities have appeared for other stocks and sectors.

As a result, I have made several portfolio changes over the past two weeks. Here is a listing of the transactions that I have initiated and the reasoning behind my actions.

Ulta Salon

Last year I included Ulta Salon ( ULTA) in my list of fad stocks. At the time, I wrote: "Right now Ulta Salon and Sally Beauty Holdings ( SBH) are in a favorable industry in an economy that is turning around. That too shall end, but until then, these stocks could be a 'pretty' investment."

Ulta Salon has consistently delivered excellent earnings and recently raised its guidance. The company is growing earnings at a rate of 25% to 30%. However, with the stock selling at 30 times current year's earnings estimates and having a 65% gain in my holdings, I thought that it would be prudent to take profits.

Ulta, which showed up on a recent list of five stocks hitting highs even amid turmoil, is one of TheStreet Ratings' top-rated specialty retail stocks.

Wynn Resorts

When I first bought Wynn Resorts ( WYNN), my impetus for the investment was the ever-growing income stream from overseas operations such as in Macau. The company issued a special $8 dividend last November, and earnings have been excellent. However, I am concerned over the impact of the events in Japan as regional economic activity may be more focused on rebuilding Japan rather than travel or gaming.

Furthermore, the gaming industry can be quite volatile. A company could roll a snake eyes anytime without warning.

Finally, it appears that Wynn's big rival, Las Vegas Sands ( LVS), may offer a more attractive investment, selling at 24 times current year's earnings estimates vs. a 40 multiple for Wynn. With about a 23% total return, I thought that it was prudent to take profits on this high-multiple stock. I will look to take position in Las Vegas Sands when the time is right.

Wynn was recently featured in the Stockpickr article " 3 Online Gambling Stocks With Upside."

Urban Outfitters

I held Urban Outfitters ( URBN) for over a year and a half. The stock was a growth machine and a darling amongst the teen/tween/young adult shopping demographic. However, we have to recognize that this consumer can be fickle.

That turned out to be the case when Urban Outfitters reported its most recent quarterly earnings. The company missed Wall Street estimates by 7 cents a share. This came after the company sent some warnings signs in reporting its third-quarter 2010 results in October.

Earnings and growth estimates are contracting for Urban Outfitters. What was once a large gain in my position shriveled down to a small gain of about 6% after the stock sold off as a result of its most recent earnings report. I did not want gains to turn to losses. The facts have changed for Urban Outfitters, so I decided to change my wardrobe and sell the stock.

Urban Outfitters, which is one of the top holdings of Lee Ainslie's Maverick Capital as of the most-recently-reported period, is one of the 10 Worst-Performing S&P 500 Stocks of 2011.

LDK Solar

I bought LDK Solar ( LDK) after the company recently sold stock in a secondary offering. The stock was sold at a discount to the then current market price. This company, which is engaged in the solar energy industry, was selling at less than 5 times earnings.

It is logical to think that as crude oil prices began to spike and after a solid earnings report in which the company earned $1.09 a share vs. estimates of 92 cents, LDK Solar would rise. That did not occur. The stock dropped 13% from my purchase price. Something did not seem right. I decided that it was best to stop myself out and take losses.

LDK shows up on recent lists of 10 Solar Stocks That Analysts Favor and 12 Small-Cap Internationals Gaining Traction.

The Buy Side

So what did I do with the cash that I raised? First of all, I began to put money into Japanese stocks, ideas I introduced in a recent article, " 6 Japn Stocks, ETFs to Watch. In particular, I have purchased full positions in Kubota ( KUB) and Hitachi ( HIT). To a lesser extent, I have purchased positions in the Japan Smaller Capitalization Fund ( JOF) and the iShares MSCI Japan ETF ( EWJ).

Closer to home, I purchased an investment position in Cummins ( CMI). Thematically, I like the prospects for the truck and diesel engine manufacturing industries. There is increased demand for trucks -- the fleet in the U.S. is aging, demand is expanding in the emerging markets, and the more-fuel-efficient engines are globally desired.

I looked at Paccar ( PCAR), Navistar ( NAV) and Cummins. I preferred the growth prospects of Navistar and Cummins to those of Paccar. I always have a preference for companies with stronger balance sheets, which was the case for Cummins. Furthermore, Cummins' stock price had pulled back nicely in the recent market correction and in the process has consolidated its gains from the past few months. Therefore, I decided to commit investment capital to Cummins.

Cummins is also one of Jim Cramer's Japan Rebuild Stocks, and it showed up on recent lists of 4 Machinery Stocks With Upside and stocks on Goldman's 'Buy' list to consider.

-- Written by Scott Rothbort in Millburn, N.J.

RELATED LINKS:



Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, Rothbort was long KUB, HIT, JOF, CMI and AAPL stock and long EWJ and AAPL calls, although positions can change at any time.

Scott Rothbort has over 25 years of experience in the financial services industry. He is the Founder and President of LakeView Asset Management, a registered investment advisor specializing in customized separate account management for high net worth individuals. In addition, he is the founder of TheFinanceProfessor.com, an educational social networking site; and, publisher of The LakeView Restaurant & Food Chain Report. Rothbort is also a Term Professor of Finance at Seton Hall University's Stillman School of Business, where he teaches courses in finance and economics. He is the Chief Market Strategist for The Stillman School of Business and the co-supervisor of the Center for Securities Trading and Analysis.

Mr. Rothbort is a regular contributor to TheStreet.com's RealMoney Silver website and has frequently appeared as a professional guest on Bloomberg Radio, Bloomberg Television, Fox Business Network, CNBC Television, TheStreet.com TV and local television. As an expert in the field of derivatives and exchange-traded funds (ETFs), he frequently speaks at industry conferences. He is an ETF advisory board member for the Information Management Network, a global organizer of institutional finance and investment conferences. In addition, he is widely quoted in interviews in the printed press and on the internet.

Mr. Rothbort founded LakeView Asset Management in 2002. Prior to that, since 1991, he worked at Merrill Lynch, where he held a wide variety of senior-level management positions, including Business Director for the Global Equity Derivative Department, Global Director for Equity Swaps Trading and Risk Management, and Director for secured funding and collateral management for the Global Capital Markets Group and Corporate Treasury. Prior to working at Merrill Lynch, within the financial services industry, he worked for County Nat West Securities and Morgan Stanley, where he had international assignments in Tokyo, Hong Kong and London. He began his career working at Price Waterhouse from 1982 to 1984.

Mr. Rothbort received an M.B.A., majoring in Finance and International Business from the Stern School of Business, New York University, in 1992, and a B.Sc. in Economics, majoring in Accounting, from the Wharton School of Business, University of Pennsylvania, in 1982. He is also a graduate of the prestigious Stuyvesant High School in New York City. Mr. Rothbort is married to Layni Horowitz Rothbort, a real estate attorney, and together they have five children.

More from Investing

The Stock Market Has Every Reason to See a Fresh Rally

The Stock Market Has Every Reason to See a Fresh Rally

3 Simple Tips on Investing From TheStreet's Jim Cramer

3 Simple Tips on Investing From TheStreet's Jim Cramer

Tesla's Supercharger Network Is Booming -- Here's Why That's a Concern

Tesla's Supercharger Network Is Booming -- Here's Why That's a Concern

After PayPal Buys iZettle, Pay-Tech Firms Could Process These Deals

After PayPal Buys iZettle, Pay-Tech Firms Could Process These Deals

Attention 60 Minutes: Google Isn't the Only Big-Tech Monopoly

Attention 60 Minutes: Google Isn't the Only Big-Tech Monopoly