Selling on valuation

This hasn't made much of a dent in the portfolio's cash position. In 2013 to date I've made six buys and executed five sells.

I've continued to sell on valuation -- out with Westpac Banking (WBK) and Akamai Technologies (AKAM) in recent weeks -- as stocks hit my valuations and I can't think of sound reasons for resetting them higher. (You can find a list of recent sells at the Jubak's Picks website.)

I've looked for relatively low-risk opportunities -- you might call them special situations -- to add to the portfolio. These are occasions where fundamentals or global cash flows or temporary market overreactions to news give me a reasonable confidence that the risk/reward ratio is slanted in my favor. My recent additions of Toyota Motor (TM) and Mitsubishi UFJ Financial (MTU) fall into that category. In the short-term, say one to three months, I think the weak yen policy of the Bank of Japan puts a strong macro wind at the back of Japanese stocks. The risk/reward ratio in that market is slanted in investors' favor.

I continue to worry about the economic and political trends in the eurozone. I think we can look for one more big crisis in the eurozone before the German election in September. That makes me extremely reluctant to buy in Europe, even though I think stocks such as Danone (DANOY), which trades as BN.FP in Paris, are extremely attractive in the long run.

I continue to worry about overinflated expectations for economic growth in China. To me it looks as if the Chinese government has decided NOT to go for a return to 9% annual growth, but to stick with 7.5% to 8% growth. (Read "How to profit from China's slowdown.) That will be a disappointment -- and, to a degree, it already has been -- for investors in companies, such as commodity producers that have put capital plans in place predicated on that kind of acceleration.

At the same time I recognize that these fears -- and the very real, very slow growth in Japan and the eurozone -- make it likely that the United States will outperform most of the world's stock markets again this year. The most recent stage of the U.S. rally has been driven by dividend-paying, consumer blue chips. McDonald's (MCD) was up 15.25% for 2013 as of April 26, and Abbott Laboratories (ABT) was up 17.23%, for example.

Seeking special situations

I'm hoping that recent additions to Jubak's Picks of diabetes specialist DaVita Healthcare Partners (DVA) and electronic payments leader eBay (EBAY) will get the same kind of boost, so I was willing to buy them on temporary, stock-specific drops.

I'm not willing to chase dividend-paying blue chips here because they are already relatively expensive against historical norms. But I am likely to hold onto them longer than I might otherwise in recognition of the extra value this market is putting on dividends and predictability.

In the U.S. market, I think one of the strongest trends is the way that the natural gas and oil from shale boom is transforming swaths of U.S. industry and infrastructure. I've got a pick or two from that trend in mind for the coming weeks -- especially if I can get the stocks in question on dips.

Another special situation that I'm looking to buy is what I call improving-balance-sheet plays. These are companies where the supply of cheap money and decent economic growth are combining to lift their credit ratings from junk to investment grade. That improvement by itself gives these stocks a considerable edge even if growth slows modestly, since improved balance sheets should push enough cash to the bottom line of the income statements to provide an insurance policy against slower growth. I'll have a pick or two from this category in the next couple of weeks.

At the same time, though, I anticipate that I'll be making a sell or two or three to reduce the potential risk in the portfolio.

That's likely to leave Jubak's Picks pretty much where it is now, at about 30% cash.

Unless, of course, we do get a summer slump in the U.S. or a big sell-off somewhere else that presents me with exactly the kind of bargains I've been waiting for.

Updates to Jubak's picks

These recent blog posts contain updates to the stocks in Jubak's market-beating portfolios.

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At the time of publication, Jim Jubak did not own or control shares of any company mentioned in this post in his personal portfolio. When in 2010 he started the mutual fund he manages, Jubak Global Equity Fund (JUBAX), he liquidated all his individual stock holdings and put the money into the fund. The fund did own positions in McDonald's, Mitsubishi Financial UFJ and Toyota Motor as of the end of March.

Jim Jubak's column has run on MSN Money since 1997. He is the author of the book "The Jubak Picks," based on his market-beating Jubak's Picks portfolio; the writer of the Jubak's Picks blog; and the senior markets editor at MoneyShow.com. Get a free 60-day trial subscription to JAM, his premium investment letter, by using this code: MSN60 when you register at the Jubak Asset Management website.

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