This is a brief update of my recent portfolio changes as we enter a new year. I have recently liquidated two large positions, GTLS and LABL, at gains of 85% and 55% respectively over a period of about 6 months. GTLS is a maker of natural gas processing equipment which I have written up before. The investment thesis was basically that natural gas will have a much larger role in the energy ecosystem in the future, and that the valuation in GTLS did not take into account that possibility. Since my original entry point at around $18 per share, GTLS has issued several news items to the effect that it has begun supplying gas equipment for both China and the Middle East, and the stock has gone stratospheric. In fact, as I am writing this, it is currently up another 7% and change for the day, and has reached a PE of over 40. I sold because I am concerned that GTLS is now very exposed to a downturn in the commodity cycle, and the stock is priced for perfection. As for LABL, I did not write it up before (it was during a busy phase of my life), but it was very cheap given its solid business of printing labels for consumer sundries like Tide detergent bottles. However, the stock is now much less cheap, and the elevation of a new CEO which is making acquisitions to expand the business has made me uneasy, and thus the sale. Both GTLS and LABL can of course run even higher from here, but have exited value territory and then some, and I am rotating my portfolio to more depressed and hence safer stocks while the market is generally bullish.
And on that note, I’ll just briefly recap a few positions I have recently entered into. My favorite stock is now HRB, which was written up here, and is now my largest position. Other positions I like include ARRS and ETM. And I have also acquired a small position in a cheap medical staffing company in the UK called AHCI, which I will do a write up on in the near future. The last position is a rather speculative one given the upheaval that is currently going on the in the UK public sector, but I believe that the risk is over-hyped, and the stock does present some diversification from the US market.
For the year 2010, my portfolio gained approximately 40%, compared to a 12% gain in the S&P 500 index. I am generally satisfied with this performance, and hope that the coming year will be similarly kind to me.
