The past year has been good to Corning shareholders, with the stock appreciating over 45%. While I believe the company has great long-term potential, with a well-known and enduring brand name over 100 years old, I have decided to trim my position by 2/3rd in order to increase my cash holdings. The initial undervaluation thesis appears to have largely played out, and I do not see any big catalysts on the horizon. I am keeping about 3.5% of my total portfolio invested in the stock for the long-term. I believe the trend towards a touch-screen world still has a lot of room to run, but after a 65% gain in my initial investment in the firm at $10.70/share in mid-2012, I believe it may be time to take some gains and reallocate capital.
I have also increased my position in Smith & Wesson (NASDAQ:SWHC). SWHC currently represents 6% of total holdings. The story of an under-appreciated management team continues to play out. Recently, a poor earnings release by competitor Ruger made shareholders nervous enough to sell this great company before its own earnings report a few weeks later. The stock rocketed up over 10% when SWHC’s most recent report came out. I believe SWHC possesses a superior management team, is materially undervalued, and will continue to yield superior cash flow over the next few years.
Anytime the market starts hitting new highs, I tend to get a bit nervous and increase what I perceive to be undervalued stocks such as SWHC and BP. I have been watching a few Biotech companies with some interest, and believe that as the shine comes off the sector, a few good investment opportunities are presenting themselves.