Looking at a chart of the S&P 500 Index for the month of April reminds me of those hideous V-neck sweater vests I used to wear during my early days as a stockbroker. And just as I could never get both sides of the V to line up precisely, in this case the right half of the month tilted higher than the left half, meaning the stock market ended the month to the upside after getting off to a rough start.

The stock market bottomed out on April 13 after losing 1.4% over the first two weeks of the month, but then did an about-face and ran up 2.4% from there for a net gain of nearly 1%. Whether that was due to the “mother of all bombs” being dropped on the same day the stock market began its ascent, or as a result of President Trump’s promise to enact the mother of all income tax cuts the following week, investors discovered a new gear to drive stock prices higher.

That was great news for our portfolio, which recorded a couple of big wins last month. On April 25 we closed out our position in Advanced Energy Industries (AEIS) for a gain of 15% over seven weeks, and three days later we sold Sturm, Ruger & Co. (RGR) for a 14% gain over six months for annualized returns of 100% and 31%, respectively. And based on the Stock Talk comments regarding those recommendations, it appears some of our options traders did far better than that!

In last month’s update, I made this observation regarding Trump’s newfound pragmatism: “If that means in the months ahead that we will see a more targeted approach to governing, then stocks should resume trading based on their individual merits and not as part of a much larger paradigm.” I believe that is now the case and bodes well for our fundamental approach to identifying undervalued stocks as evidenced by the lift in most of our portfolio holdings, as described below.

NOTE

At last month’s Investing Daily Wealth Summit, a member of the audience asked if I would update the “3TL” recommendations made thus far since they are not tracked by our portfolio, so I have done so at the end of this article. We appreciate all positive feedback and constructive criticism to help us improve your experience with Systematic Wealth, so please take a few minutes to provide input for us to use to make your Systematic Wealth experience even better: https://goo.gl/forms/qHPI0sBsLcoQOBls1

PORTFOLIO UPDATE

We added Argan, Inc. (AGX) to the portfolio less than two weeks ago, and already it is off to a solid start with a 1.2% gain in only seven trading days. Of course, some of that can be attributed to the overall rise of the stock market, but AGX is beginning to show some technical strength that should push it higher in May, especially if the oil prices make a move back above $50/barrel.

After spinning its wheels in March, Carbonite (CARB) got moving in April by posting a nifty 6% gain despite no major news to explain its sudden popularity. However, the company is scheduled to report quarterly results after the market close this Thursday so we may see strong price movement on Friday’s open.

The price chart for Cisco Systems (CSCO) in April nearly duplicates that of the index, posting a slight gain for the month after spending the first two weeks drifting lower. The company may prefer to believe that its sudden reversal was the result of a press release issued three weeks ago regarding a new suite of storage devices, which hopefully will influence its forward guidance when it releases quarterly earnings later this month.

Our target holding period for CVS Health (CVS) expires on May 21, so it is beginning to look doubtful that we will reach our target price of $92 with the stock closing out April closer to $82. But we have a 4% gain in it thus far, not bad after being underwater in this trade until a few weeks ago. But that may all change Tuesday when the company reports earnings before the opening, and I will issue an update if the stock price reacts strongly.

We’ve only owned Facebook (FB) for three weeks, and already we have racked up an 8% gain thanks to growing interest in its expanding VR/AR (virtual reality/augmented reality) functionality. We may get a better sense of what that may equate to in terms of future earnings when the company releases quarterly results after the market close this Wednesday. The stock hit an all-time high today and now has a market cap of $441 billion making it fourth most valuable publicly traded company in the world and worth more than energy giant Exxon Mobil.

It appears no one is quite sure what to make of Ford Motor (F), including its management team which lately has made a habit of issuing ambivalent statements regarding its near-term prospects. The company reported earnings last week, which on the whole were pretty much in line with expectations. But the company reiterated its dim outlook for sales over the remainder of this year, dampening what little enthusiasm investors may have for the stock by the time our target holding period expires on the last day of this month.

Just the opposite is the case for Hanesbrands (HBI), which will be releasing its first-quarter results Tuesday after the close. HBI rose 5% in April, due in part to positive statements from its management team regarding expected performance this year that should be reflected in the earnings report. We now have a nearly 10% gain in this holding with two months left in our target holding period, so we are right on track to achieve our target return.

I wish I could say the same for Kohl’s Corp. (KSS), which has been unable to get on track despite a mild recovery in the retail sector recently. The company named a new Chief Marketing Officer last month, but that won’t move the stock before our target holding period expires on May 11. The stock now has a dividend yield of well over 5%, making it one of the highest-yielding stocks in the S&P 500 so income investors may start moving into it soon if the company can stabilize its earnings.

We got a nice lift out of STMicroelectronics (STM) heading into its quarterly earnings report, which was released last week and came in a little below expectations but the stock reacted positively anyway. In fact, its share price is up 10% since bottoming out ten days ago and appears to be gaining momentum. This trade is now in positive territory, and with six weeks to go there is still plenty of time to achieve our target return if the company continues to deliver good news.

Also moving up strongly over the past two weeks is Taiwan Semiconductor (TSM), which is now in positive territory after taking a quick dive within days of being added to our portfolio on April 5. But one week later the company released its quarterly results and the stock quickly reversed direction on the strength of its 14.9% increase in annual revenue and 35.3% jump in EPS (diluted earnings per share).

3TL RECAP

Thus far I have issued four “3TL” (3 Time Loser) alerts, which are for stocks that I think are about to hit the skids. These are not official portfolio positions, and no specific trade advice is provided other than some sort of short sale or long put type of position that would profit if the stock price goes down.

The first one was for Cintas (CTAS) on December 12. Quite frankly, that one couldn’t have worked out much better from a short-term perspective, with the stock taking a quick hit the following week after issuing a disappointing earnings report. One of our subscribers reported taking an 84% profit in just 11 days (using put options), while another described this trade as “some of the fastest/easiest money I think I’ve ever made anywhere in my life!”

Feeling emboldened by the success of our first 3TL trade, I immediately issued a new 3TL recommendation for Advance Auto Parts (AAP) on December 28. However, I noted in the alert that “the timing on this trade may be a bit longer” (than for CTS) and that turned out to be the case. Eventually, we did get the big downward move I was expecting and today AAP is priced 17% lower than the day I issued that alert.

My next 3TL alert was for Scripps Networks (SNI) on February 13, and at first it looked like I got it wrong when it jumped the following week but it has since given all of that gain up, and then some. SNI is now priced about 5% less than its value on the date the alert was issued despite the overall stock market heading up.

Just last week I issued a fourth 3TL alert for Chipotle Mexican Grill (CMG), but it is too soon to say how this one will turn out. The day after I issued the alert on April 27 its share price dipped 1.5%, which is a nice start but not enough to cash in yet. However, there may be bad news on the horizon; a law firm is conducting an investigation into a recently reported breach of Chipotle’s payment processing system, and if it deems the company to have been negligent then a class-action lawsuit is likely forthcoming.

Overall, my general sense of the 3TL trades is that our system has done a good job of identifying overvalued stocks, but from a timing perspective they are not all going to pay off immediately. Although we do not provide specific trade advice with these alerts since they are not official portfolio positions, I suggest options traders avoid entering into contracts that expire within a month and/or are more than a few percentage points out of the money.