It’s been a while since I reviewed the portfolio. I have had a few people tell me that Armageddon in the financial world is imminent, and that we won’t see a 12,000 DOW again ever. Take the profit and run.

My model assumes that there are apt to be a few shocks relative to the situation in Europe, not another melt-down.  The downgrade of the 15 banks last week was already priced in. Corporate profits remain at all-time highs.  I do not see a lot of cash-strapped companies, or a market near as over-heated as we had in 2008/2009.

As we approached the Great Recession, you may recall that I wrote to you that my “window” on the stock world had hit an amazing new low. Stocks were so overvalued that only a small handful, three or four, were in view. After the sharp correction there were nearly 300.  Today’s “window” features an average number of companies, about 39-49 suggesting that the market is not greatly over or under valued.

We’ve profited on discipline and patience. This is not a time to change that course, in my opinion. This is the way of value investing. If you buy a stock at a 17% or better discount to fair valuem you watch the tree, not the forest of the DOW.  We make money in up markets, down markets, and every one in between because companies with intrinsic value may sink for days, weeks, months or even years, as has been the case with the banks, but these dogs have their day.  We will always have “crops” growing and those ready to harvest.

If you avoid high flash stocks like GOOGLE, Apple or Facebook, which are darlings one minute and run out of the next, you can find profitable, reliable, and more shock-proof securities in grungy, “must have” lines of work.  Pipelines and big staple companies like Proctor & Gamble were places of refuge for many an investor not wanting to get hosed on the sale of flash stocks and then run into an equal screwing in near-zero Treasury instruments.

Here are my review of certain stocks, with an eye towards having cash to buy as the micro-corrections of Europe’s Greece mess roll out.

SELL:

Home Depot (HD) – I’ve run about a 64.98% profit plus dividends to a 73% gain, which factors to about 14.72% per year.  In another year or two, it could be more, if the housing market picks up. On the other hand, we can’t complain about the gain, and the possible bounces of the market could jeopardize a tidy profit. If it runs away, it was a constructive relationship. If it drops again, we might pick it up on the next rebuild.

Raytheon (RTN)  & Lockheed Martin (LMT) – Up 21% to 23% there is a bit more ride in these, and a very nice dividend, but once reality hopefully seeps into the Congress, and a holistic approach to the budget takes hold, defense contractors can expect to see some contraction in their business forecasts.  The Pentagon isn’t pushing for things that their paid spokespeople on Capitol Hill are pushing for, and that is going to be the wedge that limits upside, in my opinion.  Wars are on the decline, and governments are cash-strapped as it is. Sell.

Pembina Pipeline (PBA) – Me, sell a pipeline?  Pembina pays a 6.1% dividend, but we made a 37.52% gain on it, and indications were that it will slide down a bit for a while.  It’s Canadian, so we don’t pick up the tax benefits of a Kinder Morgan (KMP).  It’s small, so it doesn’t have the scale of larger carriers like Trans-Canada (TCP).  It also had a spill in Alberta, which is causing Canadian regulators to look at them again.  Nothing has been done to them yet, but I’d rather watch this from the sidelines. When it drops again we may revisit it and take the ride again.

American Express (AXP) – American Express has a great model, but its rep with small and medium merchants has risen to fairly awful levels.  They’re trying to repair that damage, but their pricey merchant fees have stunted forward growth.  It’s slightly above where we bought it a couple of years ago. The pale dividend of 3% at the price we purchased it was not enticing enough to wait it out. It’s also in the financial services sector, for better or worse, which also could add extra anchor to its growth potential. SELL.

DIAGEO (DEO) – The spirit maker moved into an intoxicating 15% average gain.  I see it as slightly overvalued, about $8.00 over fair market. The 2.1% dividend isn’t enough to hold it in an over-valued situation. We toast its benefits.  If there was a sharp correction, I’d be back for another round.

Analog Devices (ADI) – An 18.21% profit on this chipmaker and a 5.6% dividend based on the price that we acquired it were pretty good. The company is well run, and I might have held on to it save the fact that chips are vulnerable to macro economic conditions like large market corrections. Europe’s potential gridlock put it on the sidelines until we see how things play out.  I’d definitely be back into this stock if the price and the market conditions are right for long-term opportunities.

Illinois Toolworks (ITW) – A 27% gain and a 4.2% dividend at time of purchase made this an unusually short love affair.  It’s fair market value has become more of a question mark. I get a lot of disagreement from the different services I research.  We’ll take the lock on the gain, and see if there is another opportunity for it again later.

Double Eagle Petroleum (DBLEP) – A small preferred with a 9%+ dividend, I bought it to hold through some bumpy months last year as a cash cow. It was about flat where we bought it in terms of the share price last year, but it still returned about 8.8% on our money for a year, which sure beats the bank, a CD or a savings account.  We’ll keep it in mind in future if we need parking space again.