To sell or not to sell? That is the question.

It is a question that stole some of my sleep this weekend as I fretted about what to do with the two semiconductor-related stocks in our portfolio. They are solid companies with reliable operating models and conservative debt levels. And they are both quite cheap on a P/E basis and still growing.

Yet I know how harshly treated cyclical stocks are when the cycle slows. Each stock market has its own personality and the current one seems to have little appetite for cheap stocks when estimates are dropping.

The rate of change in estimates is often more important than the year over year change in those numbers. If estimates peg a company growing earnings 20% this year, the stock might sell at a P/E anywhere from 18-21. However, if that growth rate is lowered so that estimates now assume just 18% earnings growth, the P/E may compress dramatically to 14-16. This value trap has ensnared me before and I’m trying to learn from experience.

Overall, the market was pretty messy last week. Tech slumped due to excessive weakness in Facebook (NSDQ: FB) and the aforementioned chip stocks. With stocks moving so fast on news (tangible or intangible), I’m watching and waiting as I attempt to find the best entry points for our next trades.

Around the Portfolio:

AGCO Corp (NYSE: AGCO) and Caterpillar (NYSE: CAT) resumed with Buy ratings at Deutsche Bank. After being down a few points earlier in the week, put position stock AGCO regained some ground. Based on the data I read regarding the tenuous financial position of U.S. farmers, I believe AGCO should trade lower but am closely watching these puts.

Semiconductor equipment stocks fell hard last week. The group has been bouncing around as investors decide whether the slowdown in orders for wafer making equipment is a pause or the start of a longer trend.

Unfortunately based on an update from KLA-Tencor (NSDQ: KLAC) last week, the chances for a one-quarter pause shrunk considerably. Although the stocks look cheap, I am selling Entegris (NSDQ: ENTG) and Ichor Systems (NSDQ: ICHR). Neither company counts KLAC as a large customer but I fear a faster than expected deceleration in all semiconductor investment.

I like that both of these companies are reducing their dependence on the semiconductor build cycle but neither is immune to a draconian shift. I am keeping them on my watch list for future purchase.

At the Citi Global Technology conference, Bren Higgins, CFO of KLA-Tencor, warned that he is less optimistic for the strength of a December snap back in demand. He gave a “modestly weaker” view of his expectations for a rebound. Higgins now expects that shipments could be “flat to down a few single digits or so,” versus a prior projection of flat to up by low single digits.

Ford (NYSE F) announced a recall on seat belts in its F-150 trucks. The bark (headline) seems worse than the bite (financial implications). The company sees the cost of F-150 recall of about $140 million. For comparison’s sake, this charge equals about 1% of the company’s total operating expenses in the past twelve months. The company backed its original earnings guidance.

Some potential good news regarding General Motors (NYSE: GM) came via comments from Morgan Stanley regarding the possible spin-out of GM’s autonomous vehicle unit  Morgan Stanley analyst Adam Jonas said many investors believe GM’s valuation could be enhanced by a separation of its tech asset from the auto asset but does not know of firm plans for the company to do so. Both of these news events were drowned out by further delays in a NAFTA agreement. My expectation is that a resolution of this trade pact will lift these stocks.

Trucking stocks diverged last week with Old Dominion (NSDQ: ODFL) trading up 10% on robust shipping news. Although SAIA’s (NSDQ: SAIA) data was not as strong, it was still positive but did not inspire buyers.

Old Dominion reported double-digit increases in August shipments. LTL (less-than-truckload) tons per day increased 9.7% with shipments +10% with weight -0.3%; quarter-to-date LTL revenue per hundredweight +12%.

Shipments would have been higher if not for the company’s decision to reduce the number of heavy-weighted shipments, which have been a drag on earnings. Management noted that rates remain firm and demand remains buoyant.

Saia said that LTL shipment and tonnage increased 6.7% and LTL tonnage per workday increased 10.3% compared to July 2017. In August 2018, LTL shipments per workday increased 6.6% and LTL tonnage per workday increased 8.7% compared to August 2017.