Sell Johnson Controls
The company is a good source of cash for emerging market opportunities.
I’m selling Johnson Controls (JCI) out of my to raise cash in the current market, because 1) I think I can do better than the 12.9% return to my target price, and
2) because I think the uncertainty in that target has gotten higher recently.
Getting to my $42.40 target price was contingent on fairly decent second half 2013 auto sales from European automakers -- and that looks less likely with the most optimistic projections now putting off economic growth in the eurozone into 2014 -- and a pick up in orders in the company’s building energy unit. That too seems less likely as interest rates start to tick up, creating a drag on commercial construction.
I don’t think that either of these doubts rises to the level of major headwind, but I think the sell off in emerging markets will give me a better opportunity to put cash to work sometime in the next three to six months. In other words, at the moment I think Johnson Controls is a good source of cash. For more on this logic, see my post, What stock picks to sell to raise cash for an emerging markets rally?
I have a 48.97% gain in this position since I added to the portfolio in September 2009.
Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund, I liquidated all my individual stock holdings and put the money into the fund. The fund did own shares of Johnson Controls as of the end of March. For a full list of the stocks in the fund as of the end of March see the fund’s portfolio.
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