Is it Time to Sell These 2 Portfolio Holdings?

When it comes to picking stocks, it's not just your analysis of a company's fundamentals that counts. It's also your analysis of how other analysts and investors are looking at the current market events, a sort of "meta-analysis," if you will.

And I thought I had things figured out when I decided to buy Goodyear Tire (NYSE: GT ) . I predicted that the company would soon benefit from falling raw material costs, and I thought investors would react by pushing shares up sharply.

Well, second-quarter numbers are out and indeed the cost picture for Goodyear is good --and getting better. Still, I can't help but be disappointed by the fact that shares rose just 8% on the news. Shares would have really soared had it not been for the fact that European tire sales will likely remain in a deep slump for at least the rest of 2012.

This is a company poised for falling costs now, rising sales (perhaps in 2013 though more assuredly in 2014), and a stock price that is remarkably cheap right now. If shares can't rally much higher in the face of these trends, then it may be a while before this stock reaches the considerable upside that I have anticipated for it, as I described in this article .

The fact that shares are up more than 10% since I announced plans to buy them on June 6 (though up a more modest level since I couldn't buy shares until 48 hours after my announcement -- after the stock made a nice move) is only of modest comfort. Frankly, in my assessment, of "what's working in this market," I thought a stock like Goodyear, with a projected drop in expenses, was the perfect stock for these times.

I still think this stock will be considerably higher down the road. But after Tuesday's modest gain, further upside may take quite some time to appreciate.

Action to Take --> As such, I'm selling my 600-share position at a modest gain, two trading days after you read this. The silver lining: this sale, along with my recent sale of aluminum producer Alcoa (NYSE: AA ) , gives me ample free cash to apply toward other, more timely picks.

MDC Partners: Solid results, yet little reaction

Also, I'd like to point out the solid quarterly results -- and outlook -- for portfolio pick, MDC Partners (Nasdaq: MDCA ) . Note that the ad agency's recent acquisition spree was pursued to establish a broader set of offerings that can help fuel solid organic growth as MDC becomes a " one-stop shop " for clients. So it's notable that organic sales grew 8.3% in the second quarter, ahead of the 6% consensus forecast and ahead of the organic growth rates noted by larger rivals Interpublic (NYSE: IPG ) and Omnicom (NYSE: OMC ) . MDC has picked up $80 million in new business this year, roughly 70% higher than the level seen in the first half of 2011.

Equally important, MDC stuck by guidance of $110 to $115 million in EBITDA this year, ahead of the $104 million consensus estimate. Looking ahead to 2013, this figure should exceed $125 million even if sales fail to rise as the economy slows. That's because current investments are dampening EBITDA a bit this year, but should tail off by year's end. I still think this stock could eventually trade up to seven times projected 2013 EBITDA, or in the $16 to $17 range. Recent transactions in this space imply much greater upside than that -- toward the $30 mark, but I am not assuming MDC will be acquired.

Action to Take --> Still, shares failed to respond to the solid quarterly results, highlighting the fact that this remains an "off the radar" play, for now. Unlike the situation with Goodyear, where investors are fully aware of the operating fundamentals, it's the wallflower aspect of MDC's results that have me staying in this name. Eventually, stocks catch a ride on the Wall Street treadmill, and MDC looks poised and ready for more attention, and it's precisely why I'm holding on to this stock.

-- David Sterman

David Sterman does not personally hold positions in any securities mentioned in this article. StreetAuthority LLC owns shares of MDCA, GT, in one or more if its "real money" portfolios.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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