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Well, it’s certainly not been an easy three months, but at least it’s not been a losing three months. And, there’s some solace in the fact that we’ve beaten the S&P 500’s loss of 4.5% since early June; the ‘Sandbox’ portfolio is right around a break-even for that period. Take a look.

As for individual holdings, take a look at  the table below, as it’s the last time you’ll see it with this particular group of holdings; it’s time to shed and add some new names to see if we can squeeze a little more performance out of the market.

What’s going? We’re selling…

• Core Mark Holding (CORE) – Strictly a defensive exit; we’re slipping too deep into the red to just ignore the daily losses. It’s unfortunate too, since the value was and is still there.
• Scientific Learning (SCIL) – Another defensive exit. SCIL is just now starting to slip significantly into the red, but we have a chance here to nip it in the bud.

On the chopping block…

SeaChange (SEAC) – Earnings will be out on the 2nd, and we may have a better idea of why this cable TV company stock has been struggling of late. Yes, it may be too late to pull the plug then, but overall we see enough cash flow and earnings to suggest the volatility-risk here isn’t in staying in, but in getting out.

And the newest additions are….

Open Text (OTEX) - The past twelve months isn’t anything to write home about, but the next twelve – and 2011’s projected P/E of 10.53 – is looking quite compelling,. The stock’s got plenty of momentum as well, yet the rally is well-paced.

The investment-worthy nature of this business isn’t a new one to Micro Cap Press readers. Open Text is essentially a Software-as-a-Service (SaaS) provider, which means recurring revenue and high-margin business. Best of all, it’s still mostly unknown and under-appreciated.

CenturyLink (CTL) - It’s tough to make out on the chart, but the bulls are re-emerging here with CTL. The buying volume has been solid, and we can see a bullish divergence of the moving averages again. If the $36.55 mark can be cleared, the fireworks will really start. The technical foundation for CenturyLink is solid enough as is though.

And, the underlying fundamental are even better. The top and bottom lines are growing like crazy, margins remain strong, and the sub-12 P/E measures (past and projected) are attractive. Plus, CenturyLink is a pretty reliable earnings ‘beat’.

Just as a reminder, we’re allocating 5% of the total hypothetical portfolio to each trade, which h gives us a capacity of up to 20 stocks at a time.

As for recent news (that matters)….

• LaBarge (LB) – Look for its prior quarter’s financial results before the market opens on September 2nd. The stock’s been edging higher over the last two weeks, perhaps indicative of solid numbers. We’re4 concerned either way though; ‘buy the rumor, sell the news’.
• SeaChange (SEAC) - Will also be posting last quarter’s numbers on September 2nd, but after the market closes.
• Triangle Capital (TCAP) - declared a $0.41 dividend a few days ago…. one of the reasons we got into the venture capital holding in the first place. The date of record is September 8th, though we plan on holding TCAP in the sandbox portfolio much longer than that.

That’s it for now, and maybe through September all the way until October. It looks like we’re going to see stocks driven lower per the usual September slump, which almost always ends in the third week of October.

Self-fulfilling prophecy? Probably, but it doesn’t matter…. it’s happening anyway. You need to tread lightly in your ‘real’ portfolios as well.

And just for perspective, the sandbox portfolio positions are largely longer-term holdings that were meant to be held through such a rough patch (even if we try and play the pullback with a quick trade).

Regards,

Don