Troubles with the Grandpa Portfolio
- Posted by Greg Harmon
- on February 19th, 2013
You say that you don’t know about the Grandpa portfolio? It is made up of food stocks that sell food you would not serve to your family if you had a choice, but that your Grandpa would eat everyday 3 times a day. General Mill’s ($GIS) Cheerios, Campbell’s Soup ($CPB) (from the can) and Heinz ($HNZ)(or Campbell’s) baked beans. Need anymore proof that this is the Grandpa portfolio? Well, Warren Buffett is buying Heinz. If that is not enough proof then I don’t know what to tell you. But that is also the problem with this portfolio. Take a look at the chart for Heinz below.
The big gap higher on the Buffett bid which created a very overbought Relative Strength Index (RSI) and a big spike in volume. Since the deal announcement the volume has also tailed off. This is all fine and good for Heinz. It is being bought. But the charts for Campbell’s Soup and General Mills look the same. Last I read Warren was only buying one of these companies. The same overbought RSI and declining volume on parabolic moves higher. If you are in these stocks it is time to protect your gains with a tighter stop, some downside puts, a collar, or just by selling the stock. If you have been looking to become a Grandpa Portfolio holder, then look for a pullback to enter, don’t chase them up here.
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Gregory W. Harmon CMT, CFA, has traded since 1986 and held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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