My incentives are a bit out of whack, and I don’t want your portfolio to pay the price.

One of the main reasons investing is so hard is that all of us suffer from cognitive biases. Anchoring bias, optimism bias, loss aversion, the availability heuristic: these are the bugaboos of any investor.

On top of these handicaps, investors who follow another’s advice are exposed to the well-known “agency problem.” This describes the potential conflict between the obligation of one party in a financial relationship to act in the interest of another and its naked self-interest.

The agency problem can exist in the most innocent of contexts. For example, if asked for a stock tip, I might naturally be tempted to supply one that could make me look smartest if everything pans out, not the one with the best risk-adjusted profile, since I won’t be taking any of the risks.

Generally speaking, my incentives as a newsletter writer are well aligned with your results: the more  useful the advice the more readers, potentially. Conversely, bad calls lead to canceled subscriptions. But our interests aren’t exactly the same simply because we’re different people. And knowing the potential biases of the people whose advice we follow is every bit as important as understanding our own.

For example, while I certainly enjoy the financial rewards of my work, I also derive from it certain psychic benefits not necessarily related to our recommended portfolios’ performance. I love researching new investment ideas and seeing my recommendations turn into big winners, which has served us well over the last 16 months in this strong bull market.

But following a portfolio holding after it’s already made a big move is considerably less fun, and even more so for picks that preceded my tenure. Yet every portfolio recommendation comes with an open-ended research obligation that likely didn’t figure much in the original risk/reward calculus. Taken together, these add up. Given limited resources, every holding in a 20-stock portfolio will get considerably more attention than one in a 50-stock basket.

One side effect of identifying plenty of big winners since the start of 2013 is that is has bloated portfolio to a scope where the maintenance research requirements have gotten high. My psychic rewards aside, no one benefits if we pick so many stocks that we can’t follow them properly.

Consider the more tangible costs and benefits to me as well. Have you ever seen a newsletter marketed based on its timely sell recommendations? Me either. Big winners are the people’s choice, they’re what sells. Every time I recommend a stock I get a crack at long-term bragging rights. Every time I recommend a sale I mostly give myself a chance to hear from unhappy subscribers asking why I’m trashing a stock they still like and own.

Now, I’d like to believe that these conflicts didn’t directly contribute to our portfolio’s current size, but you can only take  my word for it. And hopefully, looking back on the performance of our recommendations you will agree that the investing environment for much of last year presented (and I believe still presents) a number of uncommon opportunities that have already significantly profited subscribers, maintenance research requirements be damned.

Still, this seems like a good time to address the inevitable portfolio sprawl and maintenance research deficit. We’re going to do it in two ways: by cutting several portfolio holdings tangential to our key investment themes and in our eyes unworthy of a further time investment. In cases where the investment case remains solid notwithstanding those big-picture objections, we’ll so indicate.

The other cleanup task involves updating outdated buy maximums well below the current price of portfolio holdings. We’ve found a couple that warrant higher targets and others now confirmed as Holds in name as well as fact.

We believe  our objectives and imperatives are highly correlated with yours, and that subscribers will benefit from a well-monitored, conceptually focused portfolio even if it jettisons a position they wish to continue to hold. And we’ll be making more picks soon enough. But every garden needs some pruning and weeding from time to time, and this is that moment for us.

Out of Africa

London-listed, Africa-focused oil and gas explorer Afren (LSE: AFR) has returned 36 percent since its Aggressive Portfolio debut four years ago and 2 percent over the last 12 months, a decidedly subpar performance on a relative basis. The overall return was actually close to 70 percent at the beginning of the year, on enthusiasm about drilling results off the coast of Nigeria as well as in Iraqi Kurdistan.

But last month’s annual report and forecast proved disappointing, signaling higher costs and a possible year-over-year decline in net production.

The stock could head back to its recent highs at any time, and many London analysts have price targets well above those levels.

But Afren’s costly and politically shaky areas of operations simply do not offer economic returns that are competitive with those of the most efficient producers in the US shale basins. Meanwhile, political risk abounds and information on local operating conditions is scarce. This is a fundamentally sound company going through an apparent growth soft spot, and the immediate downside from current levels is likely modest. But better, safer and more transparent opportunities abound closer to home. AFR is a Sell.

Fuel on the Fire

Compressed natural gas fuel systems supplier Fuel Systems Solutions (Nasdaq: FSYS) is by far my worst call to date for this publication, losing nearly half its value since the September pick for the Aggressive Portfolio. The size of the deficit reminds me that I was far too slow to cut our losses on this name after the original investment thesis didn’t pan out.

Compressed natural gas has made surprisingly modest inroads as a US transportation fuel, despite its cost advantage and broader adoption elsewhere, notably in Asia. Meanwhile, the loss of two contracts for fuel conversion kits in that region suggests the business is increasingly becoming commoditized, a worrisome trend the company has acknowledged in complaining about competitive pricing pressures.

I hate to give up on this one with the stock trading below its tangible book value, and so soon after recommending a Hold on that basis. But I also want to recommend the leading and most successful energy companies, or else diamonds in the ruff with strong near term prospects, and FSYS is none of those things. It share price could certainly fetch book value again down the road, but not for us. We’ll try to profit instead from the lesson re-learned. FSYS is a Sell.

Paddling Upstream

Mid-Con Energy Partners (Nasdaq: MCEP) is a small-cap, upstream master limited partnership, an MLP sub-sector that gives me pause. Like other oil and gas producers among MLPs, MCEP pays a generous distribution, currently yielding 9.4 percent.

But almost none of it is a return from operations. Instead, of the roughly $56 million in cash generated from its operations last year, Mid-Con spent $50 million on capital expenditures, including $28 million on purchases of production interests and $22 million on drilling and other development activities. That left some $6 million to be applied toward the $40 million in paid out distributions, the rest made up with borrowed money.

Borrowing to finance growth is not a sin. But the bottom line here is that numerous much more efficient and prolific producers in our portfolios finance a much smaller portion of their capital spend with debt. On an Enterprise Value/EBITDA basis, MCEP is roughly twice as expensive as Whiting Petroleum (NYSE: WLL) and three times pricier than Jones Energy (NYSE: JONE), both of which are delivering stronger organic growth.

Yes, the MLP tax status has additional value, but for most taxpayers the benefits are surprisingly modest. This is another case of a marginal player that doesn’t belong among the industry’s best and most undervalued. MCEP returned 27 percent during its 26 months in the Growth Portfolio, but only 3 percent over the last year. Sell MCEP.

Pipe Dreams

Globally diversified pipe supplier Tenaris (NYSE: TS) has returned 69 percent since joining the Aggressive Portfolio in October 2011, and 10 percent over the last 12 months. Revenue slipped last year amid a surprising downturn in demand from the North American energy sector, and the considerably less surprising inroads by low-cost exports targeting Tenaris’ fat margins.

The pricing pressure looks set to continue after the US Commerce Department opted to leave out of its preliminary dumping case Tenaris’ fiercest South Korean rivals. The stock could jump from current levels if the final finding extends the countervailing duties to South Korea. But otherwise little growth is likely again this year even as Tenaris invests in the construction of a flagship US plant.

The Argentina-born company, now headquartered in Luxembourg, still depends on volatile Latin America for nearly a quarter of its revenue and more than half the workforce. The valuation at 10 times trailing EBITDA is fair given the limited growth vistas. But the company is likely to suffer greatly in the next industry downturn. We prefer to invest in energy infrastructure construction via Chicago Bridge & Iron (NYSE: CBI), whose engineering and construction technologies cannot be duplicated on the cheap. Sell TS.

Golly Gee It’s LNG

No stock in any of our portfolios has fared better in 2014 than GasLog (NYSE: GLOG), which is up 46 percent since the end of December. The LNG tanker operator’s stock has returned 102 percent over the last 12 months and 135 percent over its two years in the Aggressive Portfolio.

Investor expectations for anything connected with the expected boom in exports of liquefied natural gas have been sky-high. GasLog, the Monaco-based creation of a Greek tycoon, has a strong growth profile thanks to its strong relationship with leading LNG trader BG Group (LSE: BG, OTC: BRGYY). The pending IPO of a sponsored MLP has also generated some excitement.

The trouble is, GLOG is at this point been bid up to 29 times its EBITDA in enterprise value. That’s an unforgiving multiple that assumes further growth beyond the full deployment of the half of GasLog’s fleet that remains under construction, and rules out the very real possibility that LNG demand will eventually vain, while returns will be reduced by a lots of competing capacity that remains on order in anticipation of the same LNG boom that GasLog is eyeing.

Shipping remains a highly cyclical industry, even in the high-value niche like LNG, and GasLog enjoys nowhere near the built in advantages of a, say, Microsoft (NYSE: MSFT), which is three times cheaper on a cash flow basis and nowhere near as risky. GasLog’s growth has made it expensive even by the standards of MLPs, with Conservative Portfolio recommendation Teekay LNG Partners (NYSE: TGP) priced at 20 times EV/EBITDA and offering a significantly higher yield to boot. Of course, it’s not growing like GasLog. But GasLog’s growth is not guaranteed forever either.

Wall Street has been almost universally bullish on the name, and we’re curious how far current momentum might extend if  the sponsored MLP goes public at an especially ritzy valuation. Momentum is the main reason we’re recommending that you sell half of your initial position in GLOG, rather than disposing of this highflyer altogether.

Moving On Up In the Marcellus   

Fast-growing Marcellus gas shipper EQT Midstream (NYSE: EQM) has been another big portfolio winner, advancing 22 percent year-to-date and returning 59 percent since the Aug. 14 recommendation. That’s left the unit price more than $20 above the original buy limit, which is now being moved up to let subscribers buy EQM on dips below $70.

The MLP sponsored by leading Marcellus driller and Growth Portfolio Best Buy EQT (NYSE: EQT) has grown rapidly alongside its parent without taking on any long-term debt. Gas transmission under long-term fixed-fee contracts accounts for the bulk of current revenue, but numerous nearby EQT gathering systems present lots of attractive dropdown opportunities. The distribution increased 31 percent last year and is forecast to jump another 29 percent in 2014. EQT continues to own more than 42 percent of EQM’s limited partner units, giving it  a big stake in the MLP’s success.

Gathering a Gas for Western

Gas gatherer and processor Western Gas Partners (NYSE: WES) is another growth MLP benefiting from the sponsorship by a fast expanding producer, in its case Anadarko Petroleum (NYSE: APC).  WES has returned 19 percent over the last 12 months and 66 percent since joining the Conservative Portfolio in June 2012. At this point, it’s trading 37 percent above its outdated price target.

Source: partnership presentation

The valuation is not cheap at roughly 20 times trailing EV/EBITDA, but not out of line for a fast-growing MLP with long-term, fixed-fee contracts accounting for three quarters of the revenue. Per-unit distributions have grown a bit faster than 15 percent annually for the last four years, a pace the partnership expects to keep in 2014. The current yield of 3.6 percent reflects the expectations for continued steady growth as WES ramps up investments in the Denver Julesburg and Marcellus basins.

The price action since the end of January has been strong, pushing the unit price to a record high last week before a pullback. Buy WES on dips below the increased maximum of $64.

Waiting for a Sale at Core

Reservoir survey and management specialist Core Laboratories (NYSR: CLB) has returned 137 percent since joining the Growth Portfolio in late 2010, including 46 percent over the last 12 months, and roughly that since we moved up the price target to $150 not quite a year ago. True to our prediction at the time, CLB has been a solid value, capitalizing on strong demand for its services and a shareholder-friendly approach by management.  

Revenue grew more than 9 percent in 2013, while the operating margin expanded to a record 31 percent and free cash flow – net cash from operations less capital spending – jumped 28 percent to $263 million. Yet Core Labs still added to its negligible debt load to repurchase $227 million of its shares, in addition to paying out another $59 million in dividends.

The combined trailing yield on dividends and buybacks works out to about 3.2 percent at the current price, and while more growth is in the cards in 2014, it will be hard pressed to justify a valuation now grown to 26 times EV/EBITDA. Patient investors should find better entry points down the road. CLB is a Hold at current levels.

More Gains for Helmerich & Payne

Land drilling rig supplier Helmerich & Payne (NYSE: HP) is up a powerful 27 percent so far in 2014, and has returned 68 percent since joining the Growth Portfolio 13 months ago. H&P has been a big beneficiary of the domestic shale drilling boom, because its world-leading technology allows the company to lease out precision-guided rigs at a premium over competitors, yet still save clients money based on the speed and quality of well completions.

Source: company presentation

Demand for its advanced AC Drive rigs remains strong, steadily boosting HP’s market share. Two –thirds of the company’s recently contracted 295 rigs are deployed in the booming Eagle Ford, Permian and Bakken basins, and shale drilling overseas offers another avenue for growth, with Argentina’s YPF (NYSE: YPF) recently contracting 10 advanced rigs to drill in the Vaca Muerta shale play on its home turf.

Risks to the story include aggressive pricing by numerous competitors and the retirement of the longtime CEO from the founding family.

Analysts  expect revenue growth of 8 percent for the fiscal year ending in September, along with earnings per share growth of 10 percent. The stock’s 2.3 percent current dividend yield could be quintupled out of current earnings, and it’s impossible not to like this long-term outperformer at a valuation of just 8 times its EBITDA, especially given the debt-free balance sheet. We’re raising the buy limit on HP to $112.