We have two changes to the Growth & Income Portfolio.
SanDisk Corporation (SNDK) I’m selling SNDK from the Growth & Income Portfolio. The stock is up 26% since joining the portfolio, because of a buyout offer from Western Digital (WDC). There’s more upside to the stock, as I expect it to climb to the approximate buyout value of 84-86 between now and the third quarter of 2016. But for portfolio purposes, I’ve maxed out my near-term profit goals. It could easily take many months for the stock to rise closer to the buyout price.
Keep the stock for slow gains if you like, but use stop-loss orders to protect your downside in case the merger fails to receive government approval and falls through.
Congratulations on your spectacular short-term capital gains with SNDK!
Rating: Sell.
Union Pacific Corporation (UNP) I’m selling UNP from the Growth & Income Portfolio. Last week, I told investors that Union Pacific’s 2016 consensus earnings estimates have been ratcheting downward in recent weeks. The number fell again last week. The stock is now overvalued based on 2015 and 2016 earnings expectations.
If I noticed this change in UNP’s valuation, so did all the institutional investors. Since there’s no longer an earnings catalyst to push the stock price upward, let’s sell UNP, and move on to an undervalued growth stock, to increase our chances of achieving near-term capital gains.
Rating: Sell.
Tomorrow, I’ll introduce a new stock in the monthly issue of Smart Investing in Turbulent Times.