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Sector Detector: New “Grecian Formula” is making us all gray
by Sabrient - May 24th, 2012 2:14 am
Courtesy of Scott Martindale, Sabrient Systems and Gradient Analytics
Despite the fact that U.S. equities are well-positioned and well-supported to go up, once again it is the headlines out of Europe—especially Greece—that are scaring off investors. Some are saying that it is now likely (and even desirable) that Greece will default on all its sovereign debt, withdraw from the euro, and severely devalue its domestic currency (Drachma?). This will allow them to operate a balanced budget while pumping cash into growth initiatives, rather than suffer the ravages of Germany-mandated austerity.
Some say, so what? Greece makes up only about 2% of the Eurozone’s overall economy. Nevertheless, you might say that this new “Grecian Formula” is creating the opposite effect to the men’s hair product, i.e.., rather than losing the gray we are all getting grayer from the stress of it all—especially the banks holding all that Greek debt. The new Greek elections are set for June 17, which will tell us much about how this all resolves.
On Wednesday, Germany sold about $5.8 billion worth of 2-year zero coupon bonds with an effective yield of virtually zero. In other words, investors are buying them simply to preserve capital, i.e., a return of their principal rather than trying to seek any kind of return on their principal (and risk losing it). While Spain and Italy have to pay increasingly higher yields on their bonds, Germany’s stability allows them to receive free money from the investment community. And Greece, you might ask? Its 1-year bond is yielding over 1,100%.
As the euro continues to fall against the U.S. dollar, U.S. equities suffer, even though recent U.S. economic data continues to improve. Even housing is getting in on the upswing. And of course, although the latest stimulus program, Operation Twist, is set to end in June, the Fed has promised to stand ready to provide all liquidity required to keep the U.S. economy functioning. Nothing beats free money. But still, investor worry about global economic dominoes falling prevails.
Let me make a brief comment on the latest Wall Street boondoggle—also known as Facebook (FB). Of course, we all know that it is a terrific destination with a huge and rapidly growing following of loyal users. Surely there will be a way to continue growing revenues without chasing away their legions of fans. But the fact…
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DiggSabrient Risers – 5/24/2012
by Sabrient - May 24th, 2012 12:00 am
Top 5 Risers |
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| Stock | Rating | Analysis | ||
| WDC | STRONGBUY | Western Digital is one of the top candidates projected to achieve both higher than previously projected earnings in the short run and a higher earnings growth rate in the long run. | ||
| KRO | STRONGBUY | Kronos Worldwide is gaining higher expectations and its recent history of its earnings increases is significant. | ||
| AIG | BUY | An increasingly positive growth rate of past earnings, along with improving expectations for long term growth, make AIG a good prospect for high returns. | ||
| URI | BUY | Projected value continues to rise for United Rentals while long term increases in earnings growth are also becoming more widely expected. | ||
| NCS | BUY | NCI Building Systems has shown significant advances in achieving substantial earnings growth recently, and analysts also appear confident these higher earnings will continue to grow in the near future. | ||
Sabrient Divers – 05/23/2012
by Sabrient - May 23rd, 2012 12:00 am
Top 5 Divers |
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| Stock | Rating | Analysis | ||
| CYMI | SELL | Expectations for Cymer are decreasing along with projected valuation. | ||
| HCN | STRONGSELL | Analysts are becoming skeptical about the coming year for Health Care REIT, and it has been slipping down the ranks in historical earnings as well. | ||
| TAM | STRONGSELL | With projected value going down even more quickly than their recent historical earnings, TAM is not looking good. | ||
| TMP | SELL | We project an unfortunate decrease in value for Tompkins Trustco, and we’re not alone in this opinion as other analysts are also reducing expectations. | ||
| UGI | STRONGSELL | We project an unfortunate decrease in value for UGI, and we’re not alone in this opinion as other analysts are also reducing expectations. | ||
Sabrient Risers – 5/23/2012
by Sabrient - May 23rd, 2012 12:00 am
Top 5 Risers |
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| Stock | Rating | Analysis | ||
| WDC | STRONGBUY | Western Digital is one of the top candidates projected to achieve both higher than previously projected earnings in the short run and a higher earnings growth rate in the long run. | ||
| KRO | STRONGBUY | Kronos Worldwide is gaining higher expectations and its recent history of its earnings increases is significant. | ||
| URI | BUY | Projected value continues to rise for United Rentals while long term increases in earnings growth are also becoming more widely expected. | ||
| SWHC | BUY | An increasingly attractive expected long term growth rate and a significantly higher projected valuation from just a few weeks ago make Smith and Wesson Holding a company to watch. | ||
| AIG | BUY | An increasingly positive growth rate of past earnings, along with improving expectations for long term growth, make AIG a good prospect for high returns. | ||
Sabrient Divers – 05/22/2012
by Sabrient - May 22nd, 2012 12:00 am
Top 5 Divers |
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| Stock | Rating | Analysis | ||
| CYMI | SELL | Expectations for Cymer are decreasing along with projected valuation. | ||
| HCN | STRONGSELL | Analysts are becoming skeptical about the coming year for Health Care REIT, and it has been slipping down the ranks in historical earnings as well. | ||
| TAM | STRONGSELL | With projected value going down even more quickly than their recent historical earnings, TAM is not looking good. | ||
| TMP | SELL | Expectations for Tompkins Trustco are decreasing along with projected valuation. | ||
| NRGY | SELL | A double whammy of reduced long-term expectations and recent significant declines in historical earnings result in Inergy showing up on our Divers list. | ||
Sabrient Risers – 5/22/2012
by Sabrient - May 22nd, 2012 12:00 am
Top 5 Risers |
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| Stock | Rating | Analysis | ||
| AIG | BUY | An increasingly positive growth rate of past earnings, along with improving expectations for long term growth, make AIG a good prospect for high returns. | ||
| KRO | STRONGBUY | Kronos Worldwide has been gaining recognition from analysts as a good canditate for achieving higher than expected earnings along with higher overall projected valuation. | ||
| WDC | STRONGBUY | Western Digital is one of the top candidates projected to achieve both higher than previously projected earnings in the short run and a higher earnings growth rate in the long run. | ||
| NCS | BUY | NCI Building Systems has shown significant advances in achieving substantial earnings growth recently, and analysts also appear confident these higher earnings will continue to grow in the near future. | ||
| SAIA | STRONGBUY | Saia has shown a remarkable increase in projected value recently, with the majority of analysts expecting higher than previously expected earnings. | ||
What the Market Wants: Turnabout
by Sabrient - May 21st, 2012 7:05 pm
Courtesy of David Brown, Chief Market Strategist, Sabrient
Last week was horrible, while today was quite good, albeit on low volume. What happened? Let’s review the facts.
Last week, the S&P 500 dropped over -4% to close Friday at the key support at 1295, off nearly -8% from its April high. Mid-cap Growth was the worst style/cap, down -6.2%. The best was Large-cap Value, off -4.3%.
One of today’s stimulants was the developing consensus that European nations will do what they must to keep the Eurozone intact. That’s one looming problem that, hopefully, has been resolved. Additionally, China gave indications that it might moderate its policies due to slower growth–another positive. Options expired on Friday, so that creator of volatility is out of the way for another month.
Economic Releases. Most of last week’s economic reports were a little below expectations, although the most important in our view, Industrial Production, was sharply up from a loss of -0.6% to an unexpected gain of +1.1%. This week is sparsely populated with corporate and economic reports. We do get several housing reports along the Durable Goods Orders and the Final Michigan Sentiment. These releases could continue to hint at small but steady improvements in domestic growth which have kept the market in a positive direction since last fall, not counting the recent six weeks of flat behavior followed by the sharp nearly -8% drop of the past two weeks.
In other words, the support at 1295 could hold due to a continuation of steady but modest growth in the domestic economy, further bolstered by an improving attitude towards Europe and China.
Market Stats. Among the sectors, last week was clearly a classic “flight-to-safety” week led by Utilities, Non-Cyclicals, and Healthcare. Today was a complete turnabout with the dollar and gold down, oil up, and treasuries down. Basic Materials led the way today among sectors (up more than +3%) followed by classic growth sectors: Technology (led by AAPL’s +6% gain) and Energy. Financials were dismal last week and didn’t fare much better today as JP Morgan’s (JPM) woes continued to push financials away from leadership. Facebook (FB) surprised millions of investors by losing more than 11% of their Friday market debut on huge volume.
Risk remains high until the financial problems of European sovereign debt are resolved, China has clear direction, and our own government’s debt…
ETF Periscope: More Signs of an Orderly Greek Default
by Sabrient - May 21st, 2012 10:43 am
Courtesy of Daniel Sckolnik, ETF Periscope
“For me, it is far better to grasp the Universe as it really is than to persist in delusion, however satisfying and reassuring.” — Carl Sagan
Wall Street is generally cognizant of the fact that if something walks like a duck, swims like a duck and quacks like a duck, it is reasonable to call it a duck. In terms of Greece, Spain, and the Eurozone’s escalating sovereign debt crisis, however, investors may be acting more like an ostrich up to it neck in sand than a winged waterfowl.
True, the market has been experiencing a serious slide since the clock struck May 1, the Dow Jones Industrial Average (DJIA) has dropped about 1000 points in the last 13 sessions while the S&P 500 Index (SPX) has shed over 100 points over the same time frame, leaving both indexes off about 7%. Not quite an “official” correction, but certainly a cause of concern for those who failed to heed the old admonishment “Sell in May and go away.”
But the question is this: Does a 7% sell-off accurately reflect the price that the equity market should now be sitting at if, in fact, the Eurozone is really amidst the throes of unraveling?
That of course depends on how you quantify the exposure of the S&P 500 companies to the Eurozone’s banking and debt crisis. (Figures vary on this account from the low to the high teens.) It also depends on how much impact on the global economy one would expect from the hit that China would take if a leading trading partner like the Eurozone deteriorates into a prolonged recession. Finally, the volume of flight-from-risk would have to be factored into the equation, as investors would be confronted with the dilemma of where to put their money should sentiment on equities turn strongly negative.
With Moody’s downgrading Spain, the recent G-8 meeting appearing to offer little more than the usual statements of concern that lack clear solutions, and officials of the European Union tossing out statements of the need for contingency plans in the event of a Greek default on their debts, it would not be foolish to at least consider the sharp drop in the market that would inevitably result in a recognition by Wall Street that the Eurozone may be downsizing.
Break out your risk-management tools from the toolbox,…
Sabrient Risers – 5/21/2012
by Sabrient - May 21st, 2012 12:00 am
Top 5 Risers |
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| Stock | Rating | Analysis | ||
| AIG | BUY | An increasingly positive growth rate of past earnings, along with improving expectations for long term growth, make AIG a good prospect for high returns. | ||
| KRO | STRONGBUY | Kronos Worldwide has been gaining recognition from analysts as a good canditate for achieving higher than expected earnings along with higher overall projected valuation. | ||
| WDC | STRONGBUY | Western Digital is one of the top candidates projected to achieve both higher than previously projected earnings in the short run and a higher earnings growth rate in the long run. | ||
| NCS | BUY | NCI Building Systems has shown significant advances in achieving substantial earnings growth recently, and analysts also appear confident these higher earnings will continue to grow in the near future. | ||
| SAIA | STRONGBUY | Saia has shown a remarkable increase in projected value recently, with the majority of analysts expecting higher than previously expected earnings. | ||
Sabrient Risers – 5/20/2012
by Sabrient - May 20th, 2012 12:00 am
Top 5 Risers |
||||
| Stock | Rating | Analysis | ||
| AIG | BUY | An increasingly positive growth rate of past earnings, along with improving expectations for long term growth, make AIG a good prospect for high returns. | ||
| KRO | STRONGBUY | Kronos Worldwide has been gaining recognition from analysts as a good canditate for achieving higher than expected earnings along with higher overall projected valuation. | ||
| WDC | STRONGBUY | Western Digital is one of the top candidates projected to achieve both higher than previously projected earnings in the short run and a higher earnings growth rate in the long run. | ||
| NCS | BUY | NCI Building Systems has shown significant advances in achieving substantial earnings growth recently, and analysts also appear confident these higher earnings will continue to grow in the near future. | ||
| SAIA | STRONGBUY | Saia has shown a remarkable increase in projected value recently, with the majority of analysts expecting higher than previously expected earnings. | ||
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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