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Why I'm Selling Johnson Controls
06/18/2013 5:00 am EST
There are simply better uses for the cash in more value-oriented plays for the next few months, and the case for Johnson Controls' success isn't quite as strong as it used to be, writes MoneyShow's Jim Jubak, also of Jubak's Picks.
- I think I can do better than the 12.9% return to my target price.
- I think the uncertainty in that target has gotten higher recently.
Getting to my $42.40 target price was contingent on fairly decent sales from European automakers in the second half of 2013—but that now looks less likely, with the most optimistic projections now putting off economic growth in the Eurozone into 2014—as well as a pickup 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.)
I have a 48.97% gain in this position since I added it 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 here.