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2006-10-13 :: Cyclicals On The Move

In good news for our portfolios, the cyclicals have started to move up nicely from the summer lows.  People are transitioning out of the defensive names and moving into the names that grow with the economy. 

Additionally, energy stocks are moving up again and are back to where they were prior to the big sell-off in mid-September.  We’ve been selling energy during the move up and investing in the cyclicals (United Technology, Expeditors Internatinal, Ingersol-Rand, Foster-Wheeler, URS, JB Hunt, Spartech Regal-Beloit, ), Technolocy, Financials, Home Builders and related companies. 

We’ve increased  our technology positions, particularly in the consumer device area (Garmin, Satayam Computer, Silicon Motion, Cree, Silicon Image, THQ, Sandisk)  and business applications/services (Infosys, Adobe, BMC Software).

We’ve added some banks which should benefit from increased margins of falling interest rates, once the Fed starts cutting (Carolina Bank Holdings, Wachovia Bank, Commerce NJ, City Bank, Heritage Commerce).

The home builders group and their related industries, which sold off significantly in anticipation of a drop in the housing market, put in a bottom and have started to retrace some of their losses.  We’ve been buying Centex, Beazer Homes, Brookfield Homes, and Fastenal because this group will rally higher in anticipation of the housing market firming up.

Finally, we’ve started to add positions in the consumer discretionary area that should benefit from lower rates as well.  These stocks will move up on the anticipation of lower rates, and many will benefit from the coming Christmas season.  So far, we’ve only added American Eagle Outfitters, but will add others in due course.

More later!

Mark