As we announced last week, all of our Systematic Wealth subscribers will become full subscribers to the Profit Amplifier trading service published by Profitable Trading starting this week.

For that reason, new trade recommendations will now come from Profit Amplifier so we will not be making any new additions to the Systematic Wealth portfolio. Instead, we are providing the guidance below for the open positions remaining in our portfolio. Also, I will be available to respond to Stock Talk questions on this site until it is taken down.

Open Trades

There are eight open equity positions in the SW portfolio as shown below:

Of those, three of them are now past their original “due dates” in February. However, I did not sell them since the stock market was in recovery mode. The rally appears to have stalled out over the past week so at this point that is no longer a reason to hang on to any of them for that reason alone.

Yesterday, Western Union (WU) announced the sale of its Speedpay unit for $750 million in cash. At the same time, the company said it would add $1 billion to its share repurchase program (which represents more than 10% of WU’s market cap of $8 billion). From a short-term perspective, it appears WU is stuck in a trading range near $18. However, I believe these moves will push its share price above $20 later this year.

I still believe Western Digital (WDC) became grossly oversold last year and should continue to rebound. After bottoming out below $35 on December 24, WDC climbed back above $50 earlier this week. At that price WDC is valued at less than nine times forward earnings less than one times sales, so it still appears undervalued to me. I think it will hit $60 later this year which is 20% above its current level.

We have seen a similar pattern by General Electric (GE), which dipped below $7 in December and then spiked above $11 a few days ago after the company announced the sale of its BioPharma business. I believe there will be more news of this sort coming out of the company later this year that will push its share price above $15 as I explain in this article.

There hasn’t been much movement out of International Paper (IP) since the company released its Q4 results a month ago. I expect IP to gradually rise until it hits technical resistance near $51, and then trade sideways over the remainder of the year.

Considering we bought Johnson Controls International (JCI) in late August, it is encouraging that we already have a 10%+ gain it with two months left in our target holding period. That is primarily due to a stronger than expected quarterly report issued a month ago that included optimistic guidance for 2019. I expect JCI to continue to rise until bumping up against resistance near $39, in which case there may be another 10% of gain left in the stock.

I cannot say the same for Patterson Companies (PDCO), which released Q3 results yesterday that failed to impress the market. At the same time, the company narrowed its EPS guidance for 2019 so at this point the stock appears locked into a trading range of $20 – 25. However, it does pay a dividend yield of 4.7% so income investors may want to hang onto it for that reason.

Our timing turned out to be pretty good on Target (TGT), which is up nearly 10% since we bought it on January 7. Although we still have five months left in our target hold period, we’ll get a good idea of how TGT should perform over the remainder of the year after the company releases Q4 results on next week.

We’re still in the red with Signet Jewelers (SIG) after the company reported disappointing holiday sales and reduced guidance in January. However, that may change on April 3 when the company releases its Q4 results. SIG has been trending upward over the past month and its RSI (relative strength indicator) has recently risen above 50 for the first time since the announcement.

Options

There are six open options positions in the SW portfolio as shown below:

Of those, five of them are long call options on companies described above so I will not repeat my opinion of them here. At this point, my advice is told each of these options until expiration unless they reach their Target Value (shown in far right column) prior to their Expire Date.

As for our long call option on AbbVie (ABBV), it does not expire until May 17 so there is still time for it to gain intrinsic value. Its share price dropped on Q4 results released in late January. However, if its Q1 results for 2019 confirm the company’s guidance for a 10% gain in EPS this year then ABBV should get back above $80 before this option expires.

Final Thoughts

It has been my privilege to manage Systematic Wealth over the past three years. I trust you found this service useful in making informed investment decisions and hope that you were able to profit from it. I appreciate all of the kind words from many of you over the years and know you will be in good hands with Amber Hestla at Profit Amplifier. Thank you.

Jim Pearce