Why Your Portfolio May Be Due for a Trim (And 74 Ways You Can Do It)

I mentioned this last week, but October has been a simply spectacular month. As I write this, the Dow is up over 2% for the month while the S&P500 has rallied nearly 4.2%! Now that the budget gridlock has ended in Washington (for now) and Janet Yellen is all but elected to be next Fed chair, I expect money to continue pouring into the market through the end of the year.

But the rising tide won’t lift all boats, necessarily. The stock market is becoming increasingly selective, where a minority of stocks will likely continue to account for the vast majority of returns. The select few will be quality stocks that are characterized by strong sales and earnings growth. And as we progress through third-quarter earnings season, we’re seeing which stocks have what it takes to attract new money in this market.

Take Kimberly-Clark Corp. (KMB), for example. KMB shares have risen 8% since the consumer goods company reported estimate-topping sales and earnings growth for the third quarter. These strong quarterly results, compounded with the fact that a weak dollar will boost the company’s results going forward, compelled me to upgrade this stock to a B-rated buy over the weekend. KMB is just the kind of company I’d recommend for new money in this market.

And earnings season is also an important time to determine which of our holdings we should consider trimming. Sirius XM Radio (SIRI) certainly disappointed shareholders when it missed analyst’s earnings estimates by a penny. But what really sent shares down nearly 10% after the announcement was the fact that the company reduced its estimate for 2013 self-pay net subscriber growth. So I had little choice but to downgrade SIRI to a D-rated sell this weekend. So if you still have a position in SIRI, I’d recommend you find a good time to trim this position in favor of a stronger stock—perhaps B-rated Pandora Media Inc. (P).

The key takeaway from this is if one of your stocks takes off after earnings, take a close look at it. Run it through Portfolio Grader. If you see that the stock is getting Cs, Ds or Fs (especially for its Quantitative Grade, which indicates a stock’s risk-to-return ratio), you may want to consider taking partial profits or trimming it entirely. All too often, this month’s winners become next month’s laggards, so harvesting partial or full profits is recommended.

If you invest in a lot of blue chips, I’ve posted a guide below that should help get you started. After taking a close look at the latest data on institutional buying pressure and each company’s fundamental health, I decided to revise my Portfolio Grader recommendations for each of the 74 stocks listed below.

Upgrades

Last Week’s Holds, Now Buys

Symbol Company Name Quantitative Grade Fundamental Grade
ABB ABB Ltd. B C
ALL The Allstate Corporation B B
BBBY Bed Bath & Beyond Inc. B B
CLX The Clorox Company B C
CPB Campbell Soup Company B C
DD E. I. du Pont de Nemours and Company B B
DELL Dell Inc. B C
DHR Danaher Corporation B C
DISCA Discovery Communications, Inc. B C
FRX Forest Laboratories, Inc. B C
HUM Humana Inc. B B
KEY KeyCorp B C
KMB Kimberly-Clark Corporation B B
LO Lorillard, Inc. B C
LTD L Brands, Inc. B C
MJN Mead Johnson Nutrition Company B B
MSFT Microsoft Corporation C B
NEE NextEra Energy, Inc. B C
NLSN Nielsen Holdings N.V. B B
NVS Novartis AG B C
OMC Omnicom Group Inc B C
PNC The PNC Financial Services Group, Inc. C B
SHW The Sherwin-Williams Company B B
TJX The TJX Companies, Inc. B B
VFC V.F. Corporation B C
VLO Valero Energy Corporation B C
WDAY Workday, Inc. B C

Last Week’s Sells, Now Holds

Symbol Company Name Quantitative Grade Fundamental Grade
ALXN Alexion Pharmaceuticals, Inc. D B
AMZN Amazon.com, Inc. C C
AZN AstraZeneca PLC C C
CHK Chesapeake Energy Corporation C C
EPD Enterprise Products Partners L.P. C C
GS The Goldman Sachs Group, Inc. D B
HCN Health Care REIT, Inc. C C
HOT Starwood Hotels & Resorts Worldwide, Inc. C B
KSS Kohl’s Corporation D C
M Macy’s Inc D C
NSC Norfolk Southern Corporation C B
NU Northeast Utilitites D B
PEG Public Service Enterprise Group Incorporated D B
PPL PPL Corporation D B
SNY Sanofi C D
TD The Toronto-Dominion Bank C C
TS Tenaris S.A. C C
WFT Weatherford International Ltd. D C

Downgrades

Last Week’s Buys, Now Holds

Symbol Company Name Quantitative Grade Fundamental Grade
A Agilent Technologies, Inc. C C
ARMH ARM Holdings plc C C
AVGO Avago Technologies Limited C B
BMO Bank of Montreal C B
BX The Blackstone Group L.P. C C
CHKP Check Point Software Technologies Ltd. C B
CMI Cummins Inc. C C
EMN Eastman Chemical Company C B
GIB CGI Group Inc. C B
HOG Harley-Davidson, Inc. C C
KYO Kyocera Corporation C C
MCO Moody’s Corporation C B
MHFI McGraw Hill Financial, Inc. C B
NI NiSource Inc. B C
SJR Shaw Communications Inc. C C
SRCL Stericycle, Inc. C B
SYMC Symantec Corporation D B
UTX United Technologies Corporation C B
XLNX Xilinx, Inc. C C
YNDX Yandex NV C B
ZMH Zimmer Holdings, Inc. C C

Last Week’s Holds, Now Sells

Symbol Company Name Quantitative Grade Fundamental Grade
ABT Abbott Laboratories D B
CHL China Mobile Limited F B
CNP CenterPoint Energy, Inc. D C
DVA DaVita HealthCare Partners Inc. D B
MTB M&T Bank Corporation D B
PCAR PACCAR Inc D C
PRGO Perrigo Company D C
RCI Rogers Communications Inc. D C
SIRI Sirius XM Radio Inc. D D

Sincerely,

Louis Navellier

Louis Navellier

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