PBG Dampens Relief Rally at Portfolio A1

Last week provided a relief rally for most equities, but Portfolio A1 was barely able to eke out a gain, largely due to a poor earnings report from Pepsi Bottling Group (PBG). Tuesday’s report of flat case growth, increasing costs and guidance well below analysts’ expectations led to widespread dumping of the shares. Despite a rally in the markets, the bottler lost 9.1% for the full week.

In spite of PBG’s woes, Portfolio A1 is still up 6.8% for the 50 weeks since inception, as compared to a 4.1% loss in the SPX over the same period.

Not surprisingly, PBG has been dropped from the portfolio, along with LG Philips LCD Co. (LPL), a pick I was scratching my head about two weeks ago.

An interesting new addition to the portfolio is Chattem (CHTT), a consumer products company whose brands include many products advertised on late night TV (Dexatrim, Garlique, Gold Bond, Selsun Blue, pHisoderm, Kaopectate, etc.) The brands may not be sexy, but the stock has been on a tear. Back in 2000 the stock traded as low as 2.37; Friday it closed at 79.73. The other new addition is W&T Offshore (WTI), a Houston-based oil and gas exploration and production company, with geographical focus on the Gulf of Mexico.

There are no other changes to the portfolio this week.

A snapshot of Portfolio A1 is as follows:

Portfolio A1 Falls as Mosaic’s Run Comes to an End

It was fun while it lasted, but it had to come to an end eventually. The Mosaic Company (MOS), which had run up an eye opening 176% in the first five months it was in Portfolio A1, is now gone from stable, victim of a rule that automatically culls any stock that falls 20% from the high recorded during the holding period. Also shown the door as a result of a 20% drop is Brazil Telecom Participacoes (BRP).

Replacing MOS and BRP are LG Philips LCD Co. (LPL) and Terra Industries (TRA). LG Philips LCD Co. is a Seoul-based $16 billion joint venture in the display business between two global giants, LG Electronics and Royal Philips Electronics. TRA, a nitrogen fertilizer company, demonstrates how some portfolio ‘rules’ can backfire, as this company is a direct competitor of Mosaic in the fertilizer business and at only 10% of Mosaic’s market capitalization is actually a much riskier play in this sector. Nevertheless, the stock ranker has spoken and TRA should do well if this week turns out to be a bottom. As far as the wisdom of holding an LCD manufacturer at a point where consumer demand appears to be drying up, I am skeptical, but this remains a 100% mechanical portfolio, where my perspective does not matter.

After falling 11.4% last week, Portfolio A1 is still sporting a 5% gain since the February 16, 2007 inception, considerably better than the 9% loss in the benchmark S&P 500 index during the same period.

There no other changes to the portfolio this week.

A snapshot of the Portfolio A1 is as follows: