Thursday, November 30, 2006

Retail Sales Roundup

The market has shaken off early weakness, and now is trading back in positive territory. Oil is hovering at $63, and the 10-year is at 4.47%. Measures of investor anxiety are only at average levels so far today.

In terms of some of the individual retail sales reports, here is a quick rundown:
  • GES (+12.1% vs. +6.7% consensus)
  • TGT (+5.9% vs. +5.7%)
  • ZUMZ (+12.1% vs. +7.3%)
  • ANF (-3.0% vs. +3.4%)
  • ARO (+1.0% vs. +2.0%)
  • AEOS (+14.0% vs. +15.0%)
  • BEBE (+5.6% vs. +8.6%)
  • CHS (-0.4% vs. +0.4%)
  • CTRN (+1.8% vs. +2.5%)
  • COST (+5.0% vs. +5.6%)
  • KSS (+3.7% vs. +5.0%)
  • JWN (+5.4% vs. +6.3%)

long CHS

Disappointing Economic Data Weighs on Market

The market has come under just a bit of pressure in early trading. The bulk of the retailiers reported November sales this morning, and for the most part the reports were a little disappointing (more on that in a later post).

The Chicago PMI was weak at 49.9, which further weighed on the market. This sign of economic weakness is also pushing bond yields lower, with the 10-year back at 4.48%.

If weakness in the manufacturing sector persists, it could pressure the Fed to cut rates sooner rather than later. Before today, the fed funds futures were predicting roughly a 50% chance of a rate cut by March.

Oil is higher again today, briefly touching the $63 level. This is likely also keeping a lid on the rest of the market, save for the energy stocks.

I would prefer to see the market chop around in a sideways fashion for a little while, before another push higher into year-end.

In other news and notes:
  • Clothing retailers mentioned negatively in Barron's
  • Asian markets up strongly overnight
  • TIVO downgraded to Sell at Oppenheimer
  • NVLS downgraded to Sell at Stifel
  • Needham raises AAPL tgt to $115
  • TGT Nov. sales increase +5.9% (vs. +5.7%)
  • DGIN up +16%, to be acquired by INTU
  • SNPS raises guidance; stock higher
  • Cingular announces availability of BlackBerry Pearl (RIMM)
  • SCSS lowers guidance; gaps lower
  • Algerian oil minister says OPEC likely to decide to cut output in December
  • OFHEO says US house prices +7.7% in Q3 vs. year-ago

long AAPL

Wednesday, November 29, 2006

Standout Stocks

My Stock of the Day is MEMC Electronics (WFR).
This stock has been consolidating nicely recently. Moreover, it has held up extremely well during this weeks correction.
I think the valuation of this stock is pretty compelling, and that it will also benefit from P/E multiple expansion over the coming months. The company has locked in solid solar contracts to provide PV wafers, and should have good visibility.
Other stocks making notable, high-volume moves include:
  • DWSN
  • ARO
  • TIE
  • MTW
  • RBC
  • MICC
  • AAP
  • COGN
  • NYX
  • PDCO
  • AAPL

long AAPL, WFR

Surging Oil Taking Toll on Rest of the Market

Oil prices are rising again today, with crude topping $62. This is helping the energy stocks rally hard, but at the expense of the rest of the market.

The NDX was up 16 points this morning, but is now struggling to stay in positive territory. Moreover, a number of market leading stocks are lower on the day. I am seeing profit taking in financials and semis as money rotates into energy. I expect this rotation to be realtively short-lived.

As for investor sentiment, the put/call ratios are only running at average levels, and dont' seem like they will help put a bid under stocks into the close.

Stronger GDP Supports Soft Landing Thesis

The market is getting a big boost in early trading from the upwardly revised GDP report. Q3 GDP was revised to +2.2%, from previous estimates of +1.6%. Additionally, the inflation component of the report was steady at +1.8%.

This provided a big boost to stocks, and also caused bond yields to fall again, due to the benign inflation data. The yield on the 10-year dipped to 4.48%. I still believe the inflation hawks are fighting yesterday's battle.

After yesterday's up day in the market, the bears have to be wondering, "Is that all there is?". It would be fitting for this market to only offer a one-day, sharp correction, and then resume its steady uptrend. I am not saying that is how it will surely play out, but it wouldn't surprise me.

In other news and notes:
  • CHS does not offer guidance, but stock goes up
  • San Diego votes to ban Wal-Mart supercenters
  • Asian stocks climb to 6-month highs
  • Bear raises tgt on AAPL to $100
  • 2 firms bullish on NTRI after analyst day
  • Ford says 38k have opted for buyouts
  • COMS buys out JV partner in China

long AAPL, CHS

Tuesday, November 28, 2006

Stock of the Day

My Stock of the Day is Peabody Energy (BTU).

This stock has continued to consolidate nicely after breaking above its 50-day average last month. Since then, it has found good support along this key moving average.

I believe that this type of tight consolidation sets up the stock for another continuation move higher. Oil is rising over the last couple of days, nearing $61. This should help sentiment towards the coal group. Additionally, there is continued chatter that the coal companies could be takeover targets of the large, integrated oil players.

Other stocks making notable, high-volume moves include:
  • DIGE
  • CSCO
  • DWSN
  • AAPL
  • FMCN
  • OMRI
  • PNTR
  • DCI
  • WBMD
  • FRO
  • CWTR
  • LFC
  • BWLD
  • UARM

long AAPL, BTU

More Thoughts On Housing

Last week, I posted some comments from the NAR metro home sales report that offered what I believe are datapoints supportive of the soft landing thesis.

I don't believe it is useful to cite any one specific location as a tell for the overall housing industry. After all, as I noted in my post last Monday, there were several areas that are still posting double-digit price increases. Rather, I personally track 5 large cities that I feel give me a good representation of conditions in various parts of the country.

After updating my data after last week's NAR report, here is what I came away with:
  • Prices in Los Angeles are still at all-time highs, even though the rate of appreciation has slowed
  • Ditto for San Francisco, where prices are less than 1% from all-time peak
  • Prices in New York remain at all-time highs as well
  • Prices in Chicago are at all-time highs, even as appreciation slows
  • Prices in Miami have fallen -6.6% from all-time peak in Q405, a modest decline given the runup

I believe we will see further modest declines, but nothing like the capital destruction that resulted from the tech bubble. I think the housing industry will bounce along a bottoming formation, with weakness in one area offset by strength in another.

Bernanke Comments Cause Market to Dip

The market sold off on comments from Bernanke just now. I thought the comments were constructive, but the market is still looking for a reason to sell off further.

Here is a summary of his comments:
  • Further Fed action dependant on inflation outlook
  • Q4 GDP growth likely in-line with Q2, Q3
  • Econ. slowdown reflects cooler housing
  • Slow home construction pace likely to be drag next year
  • US core inflation remains "uncomfortably high", but likely to moderate
  • Most other parts of economy growing solidly

More Weakness At The Open

The market has opened under selling pressure this morning, but found some footing relatively early after a stronger than expected housing report.

Existing home sales hit 6.24M vs. 6.14M consensus. Since the housing sector is seen as the weakest link in the economy, any positive news helps to improve sentiment.

Earlier this morning, the durable goods report came in weaker than expected. This was hurting the market before the open, and also driving bond yields to new lows. The 10-year yield broke below recent support, falling all the way to 4.49%.

Yesterday's distribution day was pretty strong, with more than 90% downside volume. That should help to work off the overbought condition pretty quickly. I believe the market may bounce a little, then pull back again, and that would offer another good buying opportunity into year-end.

In other news and notes:
  • Did you watch The Bachelor last night? (I predicted Jen)
  • Heavy insider selling at CROX (Barron's)
  • GOOG inks YouTube partnership with Verizon Wireless
  • JTX misses EPS; stock down slightly
  • Jeffries starts WFR at Buy, $54 target
  • WR Hambrecht starts FMCN at Buy; $85 tgt
  • TIVO launches new product placement service
  • Oil breaks above $60 level; dollar down again vs. euro
  • FORM removed from Goldman's Conviction List
  • PALM lowers guidance; stock gaps down
  • UARM downgraded at Morgan
  • OXPS announces 24-hr futures trading

long GOOG, WFR

Monday, November 27, 2006

Closing Near The Lows

Despite the high levels of investor anxiety as reflected in the sentiment indicators, the market basically closed near its lows for the day.

Although volume was high enough to qualify for a distribution day, it did not seem so high as to indicate wholesale selling. It felt more lack a lack of buyers around today.

Down volume represented more tha 91% of the total volume on the Nasdaq, which experience its biggest daily decline since June 5th.

Given the lack of bounce today, I suspect we could see some additional weakness tomorrow. But I think bearish sentiment will rise quickly enough to stop the bleeding quickly, and help the markets bottom sooner rather than later.

Standout Stocks

My Stock of the Day is Intuitive Surgical (ISRG).
The stock got a strong initiation of coverage by Cowen this morning, which included a very bullish report. The stock has been strong all day, bucking the heavy selling pressure affecting the rest of the market.
The stock has been a laggard during the recent rally in the market. But I believe as it continues to recover, that it could be a good candidate to play catch-up.
Other stocks making notable, high-volume moves include:
  • LVS
  • FFIV
  • WFR
  • GROW
  • CWTR
  • PRSP
  • JCG
  • GEO
  • CLE
  • SRZ

long WFR

Investor Sentiment Check

How are investors reacting to today's sharp selloff? Investor anxiety is rising quickly, and this should help to limit the damage.

  • The ARMS index is elevated at 1.86
  • The CBOE put/call is high at 1.18
  • The ISEE has fallend -22% from the open (118)
  • The VXN has spiked nearly +20% in 2 days (17.81)

Although the dollar is down again today, I don't think this is the real catalyst for today's selloff. Rising energy prices are not helping, but it was likely a combination of WMT's poor same-store sales results and good old fashioned profit taking that is really to blame.

I would like to see a little short-covering into the close to mitigate some of the technical damage occurring today. We shall see...

Last Week's Comments on Investor Sentiment

The following is Part 3 from my Street Insight comments:

I promised to expand on my investor sentiment comments. Suffice it to say, that while sentiment has indeed grown more bullish as the indexes have rallied, we are still not at levels normally associated with market tops. Here are some of the indicators I track:
  • I track the bull/bear spreads in the investor sentiment surveys. The spread in the AAII survey actually fell last week to +16. Over the last few years, this spread has moved into the low 40s before the market topped. Moreover, this indicator registered a negative spread for 14 straight weeks into mid-August, the longest streak since the recession of 1990. So I believe there was quite a build-up of bearish sentiment that can still be unwound.
  • The Rydex Nova/Ursa ratio: tracks the flow of funds between bullishly and bearishly tilted funds. This ratio has risen recently from an all-time low of .07 to a recent reading of 0.168. It stood at 0.24 back in January, and 0.43 at the end of 2004. So still quite a bit of room for this ratio to run as well.
  • 10-day CBOE put/call ratio: This ratio has also moved back into neutral territory (0.82), after reaching an all-time high back in late May (1.22). So while some of those bearish bets have been unwound, this ratio could move down further before flashing sell signals, typical below 0.70.
  • The 10-day ISEE ratio: The chart below shows how this indicator hit all-time lows as recently as September (94). This ratio has a long way to run before it gets back to the highs where it stood in last December (210). That means we would have to see a ton of sustained call buying to revisit those levels, a scenario that would be accompanied by a prolonged rally in the market. Possibly even a MOASR (mother of all short covering rallies).

Position Update

The following is Part 2 in my series of comments from Street Insight:

We run a fairly concentrated model portfolio at our firm. I try to do most of my stock picking from a bottom-up standpoint, with a top-down analysis as an overlay. By that I mean that I try not to let any one sector become so overweight that it could really hurt me. I also usually try to maintain at least some exposure to all sectors, for diversification purposes.

As the market began to bottom in late summer, my portfolio moves had a bit of a common theme, and that was to decrease my exposure to energy and add to my weighting in technology (and growth in general).

Here are my current top five positions heading into year-end, and why I like them:

1. Google (GOOG). I made GOOG my biggest position (in several years) as it emerged from its correction in September. The move has paid off nicely, but I have yet to take any off of the table. I continue to believe that GOOG still has excellent growth prospects ahead, will continue to take market share in global search, and will be a beneficiary of multiple expansion of large-cap growth stocks. $500 is just a weigh station along the way.

2. Apple (AAPL). As the law of large numbers catches up with iPod growth, it seems reasonable to be concerned with AAPL's multiple. But I think what some failed to anticipate was the market share gains in PCs that AAPL would enjoy due to the halo effect. Mac sales have helped boost earnings, and more importantly, bridged the period until the company rolls out new and exciting products (iPhone, movie downloads, media center, etc). If the stock ran to $100 in the near term, I would likely lock in some profits.

3. Goldman Sachs (GS). I have a long-time love affair with GS, and recently wrote up my bullish thesis in the Long/Short Investor. Despite the strong run the shares have enjoyed lately, I believe the stock still sells for too low of a multiple. Last week, Bear Stearns took their estimates for 2007 up sharply to $19.50. I think more firms will follow suit shortly. That makes the stock even cheaper than it currently appears. I am looking for a quote well over $200 before I let any go.

4. International Securities Exchange (ISE). This is another stock that I laid out in the Long/Short Investor. The Global Exhange universe of stocks are on fire, and they were on fire even before the Nymex (NMX) IPO last week. ISE is one of the faster growers in the group, with excellent profitability, yet it sells at the lowest multiple. The speculation for consolidation in this group is likely to keep a bid underneath the stocks, and help them maintain their premium multiples. I will probably look to lighten up in the mid- to upper-50s, if and when.

5. B/E Aerospace (BEAV). The company that sells a wide range of aircraft products is benefiting from several trends, including the surging demand in air travel, especially internationally; the trend towards wide-body planes from narrow-body; and the push to retrofit older cabins. Its backlog recently hit $1.6 billion, up +60% from last year. And the CEO expects revenues to grow at least 25% annually through 2009. Talk about visibility. BEAV still has not returned to its spring highs. Nonetheless, I think it will make news highs and be a nice holding for years.


Comments from Street Insight

This is Part 1 of my commentary from last week on Street Insight. I filled in for Doug Kass on the site last Monday, and wanted to repost some of my comments from that day:

It is nice to be back in The Edge this morning, filling in for Professor "K." I should say right up front, if you haven't seen my posts in Market Insight, that I do not share the ursine views of my colleague. I am very bullish on the market, both for the remainder of this year and also next year. While we could obviously get a pullback at any time, I continue to believe the environment is conducive for higher equity valuations.

Strong Markets Trade Sideways While Working Off Overbought Condition
There is no denying that after the advance the market has enjoyed since late summer, that we are now overbought and in need of a pause. But strong markets often merely trade sideways while working off their overbought condition, and don't offer a perfect window for underinvested managers to get in. Moreover, each and every time the market makes a new high and then pulls back, there seems to be a large cohort that immediately calls it a major top, only to later claim that their call is just "early."

Preparing for the Mother of All Short Covering Rallies
I believe the market will finish the year higher than we stand today. And I see the markets putting in another double-digit performance next year as well. My pal Gary "D" has coined the term MOASR (mother of all short-covering rallies), and I agree that before the current bull cycle ends, it will likely experience just such a scenario.

The Four Legs of the Market I like to look at the market like as a four-legged stool: fundamentals, technicals, sentiment and macro/ structural. So let's take a brief look at each and I'll offer some color on my bullish views:

Fundamentals: Profit growth was supposed to slow starting in Q306 (or before), but instead the latest figures from Standard & Poor's show that earnings growth will top +20% in the current period. So much for the slowdown. Earnings revisions continue to creep higher, and as such I don't feel that analysts have stretched at all to come up with 2007 forecasts. Valuation is still cheap, with the S&P 500 trading at a little over 15x forward estimates. With moderate growth, slowing inflation, and money coming out of energy and housing, I think we could easily see multiple expansion next year.

Technicals: The technical backdrop of the market has vastly improved, short-term overbought levels notwithstanding. The market is now trading comfortably above both its 50-day and 200-day moving averages, both of which continue to exhibit a positive slope. Money flow has supported the market, such that the ratio of accumulation days to distribution days has favored the former. And new leadership in the market has shifted from energy and materials stocks back to good ol' growth stocks. From my perch, this is another bullish development.

Sentiment: There were quite a few indicators that registered record levels of bearishness this summer. While some of these have moved back towards bullish levels, they are by no means flashing extreme bullishness yet. I believe there is still sufficient skepticism associated with the U.S. stock market that the 'wall of worry' remains firmly in place, even if it doesn't stand as tall as it did this summer. In a subsequent post, I will expand on some of the indicators that I follow, as I believe they still have room to run before a full migration to the bullish camp occurs.

Macro/Structural: The biggest factor here is the Fed, which I believe is firmly on the sidelines. This removes a considerable overhang from the market. Moreover, when they do get back into the market, I believe it will be to lower rates, not raise them. That is what the 10-year yield has been signaling for some time now. And with oil, the CRB, the PPI, and other inflation indicators beginning to roll over in earnest, lower inflation will allow the Fed to become less restrictive. Additionally, I think the Fed will inject more liquidity into the system, and the increased money supply will bolster higher equity prices.

So that's my general overview of the market. In my next post, I will touch on some specific investments (stocks) that I favor. And at some point I will work in an additional post on investor sentiment, just to expand on the comments I made above.

Monday Morning Musings

The market has opened under fairly heavy selling pressure this morning. I think this is more profit taking, but I prefer to see the weakness show up early, as opposed to at the end of the trading session. This sets up the possibility that the markets strengthens into the close.

Bearish sentiment rose again last week, with the CBOE put/call closing above 1.0 on Friday. Additionally, the bull/bear spread on AAII narrowed to dead even (42% bulls, 42% bears). That is a big jump in the number of bears.

Oil is still trading below $60, and the 10-year yield is still low at 4.58%. Early reports of retail sales over the holiday weekend showed strong trends. A couple of days of correction would likely just serve to lessen the overbought condition of the market.

In other news and notes:
  • GOOG mentioned as overvalued in Barron's
  • WMT reports SSS fell -0.1% in November
  • MGM profiled in IBD
  • AAPL tgt upped to $110 at ThinkEquity
  • SIRF chips selected by Bushnell Outdoor Products
  • JCG drops after CIBC downgrade
  • Abby Joseph Cohen sees SPX 1460 by Sep 2007
  • LVS gaps higher after Jeffries raises target price ($124)
  • Radioactive traces found in London


Friday, November 24, 2006

Stock of the Day

My Stock of the Day is Rambus (RMBS).
Two weeks ago, the stock spiked higher in a huge surge in volume. The news at the time was that RMBS would receive a favorable ruling from the FTC in a legal matter pertaining to some of its patents.
Last week I took a long position in the stock, anticipating some follow-thru strength. Today, the stock is rising another +6%, on strong volume. Resistance comes into play around the 200-day moving average, currently near 24.38. But there could be more upside after that.
Other stocks making notable, high-volume moves include:
  • JCG
  • LFC
  • SSRI
  • AEM
  • CPA
  • ICE
  • SPTN
  • AKH
  • MWRK
  • GROW
  • LNET
  • IAAC
  • SNP

long RMBS

Investor Sentiment Check

The volatility indexes (VIX/VXN) are popping this morning, up about +5%.

The CBOE put/call is running a bit above average at 0.94.

The ISEE is well below average, down to 98. And the ARMS index is high at 1.08.

This likely helped the markets find some footing this morning, and should continue to support the market into the close.

Is The Market Stuffed?

I am still feeling stuffed this morning, after a big Turkey Day feast. I think the market may be feeling a bit of the same, as it opens under some selling pressure this morning. You will likely hear a lot of reasons why, but it is what it is - mostly profit taking.

The dollar is breaking to a new low vs. the euro. This is likely giving a boost to commodities, as gold and oil are both higher. The hawks will say this is not good for inflation, but the 10-year says otherwise, breaking down to a recent low itself, now at 4.54%.

Energy is the only sector clearly in positive territory. Semis are down the most, along with brokers. But its still early.

In other news and notes:
  • Nikkei sheds -1.1% overnight; Eurpoe weak also
  • STLD profiled in IBD
  • 4.5 maginitude hits Hawaii's Big Island
  • RedHerring says YouTube legal woes overblown
  • Qatar Oil minister says demand for oil in winter is low

Wednesday, November 22, 2006

Bullish Seasonal Period Ahead

From the good folks at Birinyi Associates, above are some stats on how the market has performed historically on the day after Thanksgiving, as well as through year-end.

Investor Sentiment Check

Feels like a slow day in the market. The indexes are hovering in positive territory, barely. Semis are the strongest group (+1.1%), while energy stocks are the weakest (-0.8%).

Bond yields are drifting lower at 4.57%.

As for investor sentiment, the ARMS index is about average at 0.92. The CBOE put/call is slightly elevated, running at 0.91. And the ISEE is lower, at 111, a subdued reading (reflecting skepticism).

If they can't knock the market down, we could see some additional short covering into the close. Friday is a half day in the market, and is historically an up day in the market.

I don't have too many superstitions, but I do have a tradition of growing a goatee for the week of Thanksgiving. I wasn't sure if it would help this week, but I did it anyway, and true to form we have had an up week so far.

Bearish Sentiment Rose Yesterday

The market opened on a strong note, but is fading quickly. I wouldn't be surprised to see a mixed day today, as it is very difficult to sustain the kind of momentum we have seen lately.

Oil had a big day yesterday, spiking more than $1 to get back above the $60 level. Bond yields have been steady to lower, with the 10-year yield currently hovering around 4.58%.

And despite the mild gains yesterday, investor sentiment was pretty bearish. The CBOE put/call ratio finished above 1.0 for the first time in a while. And the ISEE dropped -19% to a level of 132. This is a good sign, as we want to see skepticism toward the market remain elevated.

The bond market closes early today, 2pm EST, fyi.

In other news and notes:
  • Asian markets rise by more than +1.0%
  • LMT awarded $1B Air Force contract
  • CIBC says buy CWTR on weakness
  • DELL reports solid earnings; stock gaps up
  • CROX to launch Disney line of footwear
  • China announces plans to build world's biggest solar plant
  • Michigan Sentiment 92.0 vs. 93.0 consensus
  • Dollar hits 5 1/2 month low vs. Euro

long CWTR

Tuesday, November 21, 2006

Standout Stocks

My Stock of the Day is Focus Media (FMCN). Actually, this was my stock of the day from last Friday, but I thought it was worth highlighting again today.

The company beat estimates by 6 cents last night. Gross margins also improved nicely to 65.3% in Q3. And the CEO said, "We continue to see strong leverage in our business model."

This has the stock gapping some +12% higher today, on surging volume. With the earnings report out of the way, I could see this stock making new highs ($70) soon.

Other stocks making notable, high-volume moves include:
  • MWRK
  • PVH
  • JWN
  • IAAC
  • GROW
  • FMD
  • DY
  • CROX
  • GHCI
  • EYE
  • ZOLL
  • CENT

Google Breaks Free From $500 Level

The market is pretty firm at the open. Oil and gas are slightly higher, which is lifting the energy stocks. Financials are strong also. The 10-year yield is steady at 4.60%. Most other sectors are mixed.

Google (GOOG) broke above the $500 level, which is more a key psychological level than anything. I still believe it has more room to run.

DELL is expected to give its delayed earnings report after teh clsoe today.

In other news and notes:
  • BA gets $5.5 billion order from Korean Air
  • Insider buying reported at HLX
  • CIBC ups tgt on GS to $250
  • UNFI reports in-line earnings; stock up
  • TRID resolves options issue; stock gaps higher
  • FFIV profiled in IBD
  • DLTR authorizes $500M share buyback
  • GME lowers guidance; stock reverses higher
  • FMCN beats EPS; stock gaps higher
  • PEP agrees to buy Naked Juice


Monday, November 20, 2006

Standout Stocks

My Stock of the Day is Supertex (SUPX).
This stock was a recent pick of mine for The company makes specialty chips that go into cell phones, MRI equipment, and LCD TVs.
The stock is vaulting to another new high today on solid volume. It has now surpassed its January high, completing a 10-month consolidation.
Other stocks making notable, high-volume moves include:
  • OS
  • PD
  • ZOLL
  • CNS
  • IAAC
  • DAKT
  • HCC
  • OMG
  • ZMH
  • CHA
  • FMCN
  • ICE

Metropolitan Homes Sales Report

The NAR released its metro home sales report this morning for Q3.

Overall, it shows the average price of existing home sales fell -1.2% in the U.S. Considering the gains over the last five years, the data still supports a soft landing in housing.

Notably, some of the hottest markets that many feared would show the largest, and most precipitous drops have not.

To wit, red hot Las Vegas cooled to +1.6%; Los Angeles, after a record string of double-digit gains, slowed to +5.2%. Not bad; Phoenix, with seemed to be brimming with oversupply, fell -0.6%; and Miami prices slipped -5.6%.

Some notable increases were: Portland (+12.3%), Virginia Beach (+16.9%), and Salt Lake City (+19.2%). The Northwest was the strongest region.

long one LA residence

Monday Morning Musings

Good Monday Morning. It sure was a busy weekend for deal making.

Freeport-McMoRan (FCX) announced it will acquire Phelps Dodge (PD) for $25.9 billion in cash and stock. That equates to roughly $126.50 per share, a 33% premium to Friday's close. Amazing, considering recent trends in copper prices.

Equity Office Properties (EOP) agrees to be acquired by The Blackstone Group for $36 billion. This equates to roughly $48.50 per share, 8% above Friday's close. What does this say about Sam Zell's view of real estate?

Evraz Group will acquire Oregon Steel (OS) for $63.25, a slight 7% premium to Friday's close. And BofA will acquire Schwab's U.S. Trust division for $3.3 billion.

These deals make it tough to stay short stocks over the weekend. I nearly took a short position in PD recently, but didn't. Better to be lucky than good sometimes.

In other news and notes:
  • Demand for AAPL's new iPod Shuffle is soaring
  • Merrill ups RIMM tgt. to $165
  • VAR authorizes another 4.5M share buyback
  • Large insider selling by CEO of MSTR
  • FDA approves sale of silicone gel implants (AGN, MNT)
  • LOW beats EPS, lowers guidance
  • Japan's stock market falls -2.3%, most in 10 weeks

long AAPL, VAR

Friday, November 17, 2006

Standout Stocks

My Stock of the Day is Focus Media (FMCN).

If you look thru my archives, you can see I have owned shares and commented on this stock before. I was shaken out of my most recent position after my stop-loss was hit during the last correction.

Today, the stock is spiking higher on strong volume, ahead of its earnings report on Monday. I have no idea how the stock will react to that report, but the company is growing very fast and still has the 2008 Olympics in Beijing ahead of it. My guess is it still has more upside.

Here is a list of other notable stocks making moves on above-average volume:

  • NMX
  • CTRN
  • CHDX
  • ICE
  • GMKT
  • X
  • ISE
  • CHAP
  • RAVN
  • URGI
  • PPG
  • INTU
  • SBUX

long ISE;
Note: I took profits on GMKT today due to the strong spike higher.

Quote of the Day

"It's not what you look at that matters. It's what you see."
-- Henry David Thoreau

TGIF and Numbing Drops

Trying to get in gear here, after a late start. Everyone in my house is sick, and my toddler and baby both have ear infections. So I was up most of the night with the baby. The doc gave us these numbing drops, which of course were useless.

If you have kids, you're probably laughing at my woes. If you don't, you're probably glad. But enough complaining, now back to your regularly scheduled programming.

The market is opening under a bit of pressure this morning. This should surprise no one, as the market has been up for several days straight, and is now back at overbought levels. Of course, since the market is overbought and due for a rest, the bears will be out in full force calling another market top. Don't buy in.

Oil prices are down again, falling below $56. The energy complex was under heavy selling pressure yesterday as a result. But the Canadian Royalty trusts look to have finally bottomed.

Housing starts plunged -14.6% in October, the lowest level since July 2000. While this is a very weak number, I think the sector is close to bottoming out, and I don't see it having a profound effect on the economy.

I was considering buying some of the new Nymex IPO (NMX), if it didn't trade higher than say $75 (it priced at $59). But the stock is already at $140, +130%. That's crazy. I think I'll hold off.

Thursday, November 16, 2006

Standout Stocks

My Stock of the Day is Gmarket Inc. (GMKT).

The company is the #1 eBay competitor in Korea. Asian tech stocks have been running on specualtion lately, and GMKT seems to be getting a bid in the fray.

The company recently reported very strong growth, and is close to surpassing EBAY in market share in Korea. It also does not appear expensive in terms of valuation. Today's +13% spike is probably not sustainable, but there could be more upside after a pullback.

There are a handful of retail stocks getting schmeissed today. Here is a list of some stocks making notable, high-volume moves:

  • BIG

  • GMKT

  • HDB

  • MGM

  • CME

  • AXR

  • BIDU

  • PNSN

  • MW

  • ZUMZ

  • WSM

  • PTRY

  • GYMB

long GMKT

Why Is This Expiration Week Unlike All Others?

It sure looks like it is shaping up to be another solid day for the market. I thought options expiration this week would bring about the usual dose of volatility, but it has been all on the upside!

I thought there would have been at least one big down day, as usually happens during expiration week. But this is the never-ending rally, served up bear style. (The shorts hate it when I make comments like that)

Quick Sentiment Check

An early look at the investor sentiment indicators shows thigs are running right about average levels.
  • The ARMS Index is average at 0.85
  • The CBOE put/call is average at 0.80
  • The ISEE is average at 157

I have commented on the surprising lack of ISEE readings over 200 recently. Guess what the high reading was in November 2005? 295

More Benign Inflation Data

The market is getting another bounce in early trading. The SPX crossed the 1400 level this morning, for the first time since...get this...November 2000. Hard to believe its been 6 years since we have seen a 14-handle on the S&P.

We also got more benign inflation data, as the core CPI came in below expectations (+0.1% vs. +0.2%), while the overall CPI actuall fell. This is good news for all of the inflation worrywarts, and helped push bond yields lower. The 10-year yield is at 4.60%.

After the close yesterday, S&P announced that BTU would be added to the S&P 500 Index.

In other news and notes:
  • WSJ reports that the Las Vegas locals market has slowed
  • KBR IPO begins trading
  • BEAV profiled in IBD
  • Hambrecht puts a $130 tgt on BIDU
  • BEAS reports weak results; stock down -15%
  • DELL delays earning report
  • PTRY lowers guidance; stock lower
  • UBS raises RIMM tgt to $160
  • INTC raises qtrly dividend 12%
  • Did it really take Cramer to make the CanRoys bounce?


Wednesday, November 15, 2006

Another Accumulation Day For The Nazz

Sorry for the lack of posts today. It was one of those hectic days at the office.

The market posted another solid session, its fourth up day in a row. Volume eased on the NYSE, but expanded on the Nasdaq. That makes for a third straight accumulation day, and the 6th in the last 8 sessions! That is an amazing streak.

Moreover, breadth improved noticeably today, at least in terms of new highs. There were 362 new highs on the NYSE and 320 on the Nasdaq. And the Hi/Lo index for the Nasdaq hit +270 today, its highest level since April.

Small-caps and growth stocks again outperformed. The SPX is now +12% ytd, while the Russell 2000 is almost +18%.

Oil was up on the day, though still trading below $60. Bond yields also moved higher, with the 10-year finishing at 4.61%. This is still well below the fed funds and T-bill rates, and indicative that the Fed needs to be less restrictive. I think it will show up in the money supply.

In after-hours trading, there was a handful of retailers reporting earnings. A few of them did not match expectations, and the stocks are trading down. These include: GYMB, MW, ZUMZ

Tsunami In Japan? Or Is It In Google?

The market is getting a bounce in early trading, continuing the strength we saw into yesterday's close. Oil is trading slightly higher, and bond yields are also up a bit, with the 10-year yield at 4.60%.

Last night, a Japanese agency warned of a tsunami, although they called it off this morning. It is still unclear if they were talking about GOOG and the U.S. stock market...

In other news and notes:
  • ILMN technology selected by Johns Hopkins Univ.
  • TYC beats estimates; stock up
  • 8.1 magintued earthquake hits north of Japan
  • GME profiled in IBD
  • Credit Suisse puts $600 tgt on GOOG
  • HAL delays KNR IPO due to British security concerns
  • NY State Empire Index 26.7 vs. 14.0 consensus
  • DAKT beats EPS, raises guidance; stock gaps higher
  • CPA beats earnings; stock up
  • US Air makes a bid for Delta
  • JCI expects another record year in 2007


Tuesday, November 14, 2006

Late Day Momentum Makes An Appearance

The market put in another very solid day. The housing sector led the way (+3.5%), followed by semis (+2.8%) and retail (+2.4%). Tech overall fared very well, as growth stocks outperformed.

Volume levels rose today, making for an accumulation day on both the SPX and the Nasdaq, the 2nd in a row for the Nazz. Moreover, the Nazz has posted signs of accumulation in 5 of the last 7 sessions! Glad I put more money to work when I did.

Despite the run to new highs, the ISEE actually fell 7% to 135. I would have expected to see a much higher reading. Breadth was also strong today, with more than +1500 net advancers on the NYSE, and 325 new highs.

Oil and bond yields were both lower on the day, which should continue to help boost stocks. This week is options expiration week, which could bring some volatility. But next week is Thanksgiving, which is often a bullish period for the market.

Standout Stocks

My Stock of the Day is MEMC Electronics (WFR).

The stock is up nicely today, and is just breaking back above its 50-day moving average. This stock sold off following its recent upbeat earnings report. I thought it was an overreaction to results, and that any dip would be brief.

The stock remains cheap based on a forward P/E basis, and fundamentals appear solid.

Other stocks making notable, high-volume moves include:
  • DKS
  • LVS
  • AXR
  • ICE
  • CTSH
  • RKT
  • TWGP
  • NICE
  • CCRN
  • BKD
  • WTS
  • VOLC
  • NSC

long WFR

CERA Refutes Peak Oil Theory

In a new report out today by Cambridge Energy Research Assoc. (CERA), the organization disputes the widely held belief that the world has seen the peak in oil production.

CERA states that the globe has oil resources closer to 3.74 trillion barrels, three times as large as the number estimated by the oil bears. They also go on to refute the peak oil theory on a number of points, and say that the argument is based on faulty analysis.

This is the fifth time that the claim has been made that the world is running out of oil. While CERA's view is not one of abundant supply, they say that production will likely not peak before 2030, and then it will more likely plateau rather than decline precipitously.

Interesting work.

Plunge in PPI Takes Bond Yields To Recent Lows

The market is roughly flat at the open, after getting a nice bounce after the PPI data. Oil and gas are up a little bit, which is helping the energy complex.

But the big news this morning was the dramatic drop in the Producer Price Index (PPI). The PPI fell -1.6% vs. -0.5% consensus. This was the largest drop in years, and yet another indicator that inflation pressures are easing, and the peak in inflation is behind us.

The news sent bond yields to new monthly lows, with the yield on the 10-year note down 5 basis points to 4.56%. Most interest-rate sensitive securities are up across the board.

Retail sales were mixed this morning, with some strong reports from specialty retailers and weak reports from the housing-related retailers.

In other news and notes:
  • The Nikkei gains +1.7% overnight
  • WMT beats earnings. guides in-line
  • Fidelity slashes stake in YHOO over last 4 months
  • AEOS beats EPS, raises guidance
  • ESRX raises FY07 guidance; stock up
  • TGT beats EPS by 4 cents
  • New study says stents don't cut heart attack risk

Monday, November 13, 2006

Standout Stocks

My Stock of the Day is SanDisk (SNDK).

The stock is down today on an analyst downgrade by UBS. The analyst's thesis is that NAND oversupply is coming, and that will hurt SNDK EPS. He also states that demand from new products that use flash memory is decelerating.

I disagree with his thesis. The company said on their last conference call that the upcoming holiday season would be strong. I also think that the stock is oversold here, and this downgrade is coming too late. At 16x forward earnings, I am closer to adding to my positions than selling.

Other stocks moving on above-average volume include:

  • LQDT
  • CPA
  • GLYT
  • BIDU
  • WTS
  • CHDX
  • ALOG
  • ILMN
  • ITG
  • GDP
  • PCU
  • TCK

long ILMN

Investor Sentiment Check

If you've heard all the market commentators saying how bullish investor sentiment has become, you're probably wondering how the current indicators are lined up versus previous market tops.

So let's take a look at some recent readings of the indicators I follow:
  • The Investor's Intelligence and AAII surveys are showing bull/bear spreads of +26 and +24, respectively. Over the last few years, both of these surverys often show spreads in the low to mid 40s prior to market tops. So we are not there yet.
  • The Rydex Nova/Ursa ratio is still toward the low end of its range at 0.158. That means there is still a ton of money in short-biased funds. This ratio hit 0.43 at the end of 2004.
  • The 10-day ISEE is still low at 143. This indicator hit 179 in May, and was well over 200 in December 2005. So we still have plenty of room for options investors to become more bullish.

Until these indicators reach prior peak levels, I continue to believe that pullbacks may be sharp, but minor in terms of time. When everyone gets complacent with the pullbacks, and stops trying to call the top, then I will get more concerned.

As the economy reaches a soft landing, and inflation pressures subside, I expect growth stocks to get more multiple expansion and outperform the broader market.

Monday Morning Musings

The market is getting a little bounce in early trading, with the Nasdaq leading the way. Oil is trading lower, falling below $59. The 10-year yield is up a bit to 4.61%.

In the latest salvo of the options backdating scandal, the CEO of KB Homes (Bruce Karatz) is being forced to step down and return millions of dollars. I think the penalties should be much, much bigger for these executives.

As far as the economic calendar this week - On Tuesday we get October data on retail sales and PPI, along with September business inventories. The November New York Fed Empire State manufacturing survey will be released on Wednesday. Thursday may be the most important day of the week as we get CPI and industrial production, both for October. We also get the Philadelphia Fed survey for November on Thursday. Housing starts and building permits for October will be released on Friday.

In other news and notes:
  • WYNN declares $6 special cash dividend
  • UBS downgrades SNDK due to NAND oversupply fears
  • Goldman adds HUM to Conviction List, removes AET
  • KNOT beats by a penny; stock up
  • RDY profiled in IBD
  • Asian markets down slightly overnight
  • ILMN to acquire SLXA for $14
  • Samsung says DRAM demand for Q107 "very strong"
  • WFMI mentioned positively in Barron's

I heard many market commentators calling for the market to pull back following last Thursday's decline. But the last few times the market looked poised for decline, it came right back and rallied. I would be more worried if all of these market mavens were saying not to worry about the declines. But this is not the case, and the 'wall of worry' still looks to be in place - good for the market.


Friday, November 10, 2006

Standout Stocks

My Stock of the Day is Energy Conversion Devices (ENER).

The stock is up nicely today after reported slightly better-than-expected earnings. Solar revenues were strong, and the company was able to add 4 new customers, which are likely paying higher ASPs. Management was also upbeat on its NiMH battery segment.

The stock is breaking higher on strong volume, and is again challenging its overhead 200-day. I expect after some further consolidation that the stock will break through this resistance.

Other stocks moving on above-average volume include:

  • NYX
  • MSTR
  • LVS
  • ISE
  • CROX
  • AKAM
  • PD
  • SCSC
  • FLS
  • EZPW
  • MDTL
  • HOLD

long ENER

Bond Yields Moving Lower Still

The market is trading slightly higher in early trading. Biotech is still trading down, but most other sectors are getting a bit of a bounce.

Bond yields are moving lower again this morning, with the 10-year yield falling to 4.60%. More inversion. No rate hikes. Oil is trading down a bit, but still north of $60. The dollar is also lower again today.

I don't expect a lot of fireworks today, ahead of the weekend. Volume will likely come in lighter than yesterday's heavy levels. And I expect the markets to close mixed to slightly lower.

In other news and notes:
  • PTR profiled in BusinessWeek
  • IEA predicts tighter oil markets in Q4
  • HANS removed from Conviction List at Goldman
  • KSS beats estimates; stock lower
  • URBN gets more upgrades, target raises
  • AmTech raises RIMM target to $160
  • CVS removed from Focus 1 list at Merrill
  • TNOX to be acquired by DNA
  • How bad is The O.C. this year?

long GS, URBN

Thursday, November 09, 2006

Selloff Looks To Have Some Teeth

Today's selloff looks like it might last a bit longer than recent pullbacks. Volume picked up noticeably today, and many financial stocks look to be breaking down from their uptrends.

Healthcare stocks took it on the chin today, in what looks like a delayed reaction of the Dems winning Congress. They want Medicare to negotiate lower prices, so any stocks with reimbursement exposure were sold off fairly aggressively.

The DRG fell -2.6%, biotechs were off -2.3%, brokers were down -2.2%, and semis fell -1.9%. The only stocks that closed higher today were energy and materials. Gold and commodity stocks got a boost from the falling dollar.

Bond yields finished flat, with the 10-year at 4.63%. Oil closed $1.33 higher at around $61.05. Natural gas was also higher, closing just below $8. I took a new position in a coal stock today (more on that tomorrow).


My Stock of the Day today is Urban Outfitters (URBN).

The stock gained nearly +15% after reporting earnings. There was nothing great about the report, other than a sense that the worst is now behind URBN, and growth going forward still looks good.

I have been saying that I felt the stock was washed out since early August, before the company reported Q2. The stock is up fully 50% since then. But I am not selling any.

Comp sales look to have bottomed, and actually improved each month last quarter. Profit margins also improved this quarter. Management indicated their goals to return to revenue growth of 20% or better, operating margins above 20%, and new website launches for Urban and Antrho in early 2007.

The stock is currently trading around 23x forward estimates, which is still the lowest multiple for the stock in the last few years. I plan to trade around my position, and think the stock can still be bought on pullbacks.

Investor Sentiment Checkup

I am hearing more and more how bullish everyone is. Today, the CBOE put/call ratio is running slightly below average at 0.80. The ISEE also is hitting bullish levels, hitting 237 at the open. This is the first reading over 200 in quite awhile.

Interestingly, the most recent Investor's Intelligence poll showed the bull/bear spread increased only slightly to +26 (52% bulls, 26% bears). That's only a moderately bullish reading.

At the end of last year, the spread was +39. And over the last few years, it has hit readings above +40 before the market has topped. So we are certainly not there yet, at least for this indicator. And you can make the same case for the AAII survey.

So I continue to feel that pullbacks will be mild, and are okay to be bought until we truly reach levels that show excessive optimism again. I think the reason why it is taking so long to reach said levels is merely due to the fact that bearishness had grown so pervasive, reaching all-time records by some accounts.

Scrambling To Play Catch-Up

Is there anything worse than running out of the house at 5:30am, in the pitch black, only to find your new car is DEAD. Huh? How can that be? It seems the valet last night moved the settings on my headlights so that they didn't automatically turn off. Ugh. So after waiting for a jump, I didn't even make it to the office before the open.

A quick scan tells me that CSCO is getting a nice boost, and pulling some other stocks like BRCM along with it. Energy stocks are all higher as crude lifts above $60. Financials look mostly weak.

I have to jump in a bit to get on the URBN conference call, but the reaction in the stock fits in with what I have been saying that the stock is already pricing in all of the negatives, and will soon begin to discount the growth and profitability still ahead for the company in 2007 and beyond. With the stock up +10% this morning, the process has already begun.

In other news and notes:
  • MMM to sell its pharma business
  • URBN reports in-line EPS; stock gaps higher
  • HANS delays earnings due to options investigation
  • BWLD profiled in IBD
  • VIA CFO to leave at end of 2006
  • QCOM being investigated in Japan
  • TWX prices debt offering
  • Trade balance comes in lower than expected (-$64.3B)


Wednesday, November 08, 2006

More Heatburn For The Bears

For some reason, people hate when I make those sort of headlines. But today had to really hurt the spirits of the bears. I mean, the short-sellers were out telling us how if the Dems captures Congress, it would be terrible for the market and we would see stocks plunge.

Only stocks rallied into the election. Worse, after a breif selloff this morning due to the headlines about the elections, the market slowly recovered all day and actually finished solidly in positive territory.

Energy stocks gained the most, while semis declined. Small-caps also led the way vs. their large-cap bretheren. Breadth was solid, and improved from yesterday. More importantly, volume levels rose, making for a third straight accumulation day on the Nasdaq.

This is very bullish, and is likely exacerbating the performance anxiety among many professional investment managers.

After the close, CSCO reported solid results, and the stock is up +7% after-hours. There are a lot of suppliers whose stocks do well when CSCO says good things. So this could help stocks again tomorrow at the open.

See you bright and early!

Standout Stocks

My Stock of the Day is Apple Computer (AAPL). While AAPL's strength is not surprising to most who have followed the company's success, the fact that the company continues to extend its product lines and grow at above-average rates is impressive.

Today, an Apple executive said that interest for the new iPod Shuffle is "extremely high". He continued to say that the product shipped on time and that the company is optimistic about holiday sales.

The stock is very near to breaking above its October highs currently. This would be a good step towards the stock making a run at its 52-week high of $86.

Here is a partial list of other stocks making notable, high-volume moves:

  • SPI
  • GDP
  • BIDU
  • LXK
  • ANDE
  • LVS
  • KMX
  • TRLG
  • HSP
  • MOH
  • HUM
  • OXPS
  • EAGL

long AAPL

Market Opens Weak After Dems Win House

The market has opened under a bit of pressure, as political uncertainty arises surrounding the Democrats taking the house (for the first time since 1994), and the still pending Sentate races in Montana and Virginia.

Of course, the market has been rallying strong of late, without much of a pullback. So while any decline in the market will certainly be pinned on the elections, it is not much of a stretch to make that call. That is, the market was likely due for some consolidation anyway. I expect the market to continue moving higher in short order.

Healthcare and biotechs are down the most, while retail and financials are in the green. I expect tech to bounce back soon also, as it should avoid any political fray.

In other news and notes:
  • Nikkei down -1.1% overnight
  • FWLT handily beats estimates; stock up
  • WFMI rises on increased stock buyback ($100M)
  • SIRI reports in-line results; stock up
  • GOOG angling to beef up radio ad-sales business (WSJ)
  • WYNN reports earnings; stock up on Macau prospects
  • URBN gets several upgrades ahead of earnings
  • CVS added to Conviction List at Goldman
  • TRLG misses EPS; stock down -23%


Tuesday, November 07, 2006

"Y'All Ain't Even Ready"

The title to this post was the response given by Kevin Federline when an interviewer asked him about his upcoming new album release.

Apparently, Britney wasn't ready either. The pop star filed for divorce yesterday in Los Angeles Superior Court, citing irreconcilable differences. The split comes despite recently giving birth to their second baby.

There goes the gravy train, Kevin.

Standout Stocks

My stock of the day is Crocs (CROX). The stock is extending its recent parabolic move, in what appears to be a pretty mean short squeeze.

I say that because as of last month, the short interest in CROX increased 12% to an astronomical 51% of float. That is amazing. You would think the bears must have known something. But when earnings came in okay, the stock began to rally.

That likely caused some waves of short covering, which seems to be exacerbated today. This looks like a typical exhaustion move, and I don't believe it will last much longer.

Here are some other stocks making notable moves on above-average volume:
  • OMRI
  • FTEK
  • AXR
  • NCR
  • PMTI
  • BIDU
  • PLMD
  • HW
  • DF
  • IGT

Small Bounce At The Open

The market is fairly flat at the open. After a two day spike in yields, the 10-year is trading down sharply again, falling 5 basis points to 4.65%.

Semis are leading the way, and financials are strong again also. Oil is trading slightly lower, just below $60. Energy and utility stocks are the weakest groups so far.

In other news and notes:
  • MSFT to offer movies, tv downloads to Xbox gamers
  • URBN sales come in light; stock rallies
  • EMR beats revs, EPS; 2:1 stock split
  • VTIV beats and raises; stock +6%
  • IGT beats by a penny; stock slips
  • SIRF settles patent suit with u-Nav
  • Roth ups NEW to buy; $47 target
  • HANS forming committee to review options
  • EXPD reports in-line qtr; stock slides
  • BRCM holds analyst day; stock strong
  • Lehman raises targets on oil companies

long EMR, URBN

Monday, November 06, 2006

Solid Rally Ahead Of Elections

The market put in a very solid day. I was worried that the early strength might fade, but the markets were able to hang on and essentially close near their highs for the day.

Volume levels increased slighltly on both the NYSE and Nasdaq, making for an accumulation day. Today's rally likely caught many off guard, as it comes on the eve of the elections, normally a period of uncertainty.

Breadth was very strong, and the Hi/Lo indexes expanded nicely. The 10-year yield finished slightly lower at 4.71%. All of the major sectors rallied, despite a pop in oil back near $60. The put/call ratios finished at average levels.

Follow-up on OVTI

Last week, I said I would post my thesis on OmniVision Tech (OVTI). Today, my editor at summarized my case for the stock. Here are his comments:

Late last week, Jordan Kahn laid out the bull case for OmniVision Technologies (OVTI) in The Long/Short Investor. OVTI makes camera chips used in toys, cell phones, digital cameras and security devices, and is benefiting from robust demand. Jordan doubled his money in OmniVision back in 2003, and here are five reasons why he's bullish now:

  • Growth -- Revenue and profits have surged in recent quarters on booming demand for video chips.

  • Finances -- OmniVision has no debt, high returns on capital, and it generates strong free cash flow.

  • Valuation -- The stock sells for less than 12x forward earnings on an adjusted basis.

  • Technicals -- After a 50% drop from the spring through summer, OVTI shares have consolidated nicely above the 50-day moving average.

  • Sentiment -- Short interest is now 34% of the float, setting the stage for a short-covering rally.

Jordan also notes that the put/call ratio is very high. This bullish contrarian signal was confirmed today by Jay Shartsis, following up the surge in put volume he noted on Oct. 18.

To summarize, all the pieces are in place for OmniVision: Rapid growth, strong finances, low valuation, solid technicals and contrarian sentiment indicators. Jordan sees the stock back near $20 in the near term, though the stock could rise into the mid-$20s if earnings exceed expectations.

Jordan's using a 15% stop loss, so he'd get out if the stock trades below $14.

For my video on OmniVision, please click here.

long OVTI

Barron's Article Raises Concerns On SIRF

Over the weekend, a Barron's article highlighted the competition in the GPS chip market, and said that investors in SIRF should be weary of an up and coming competitor - Global Locate.

I think these fears are overblown, and that the stock is already more than factoring in the competitive landscape. But I don't think investors are giving the stock enough credit for the growth in the upcoming location-based services (LBS) being rolled out by wireless service providers.

The company is well represented in this area, and is being designed into many new products. SIRF is already 85% booked for Q4, according to Deutsche Bank.

The stock has started to recover from this year's swoon, but it is still trading below its 200-day and well off its 52-week high. I believe the stock will continue to build on its recent gains, and still offers solid upside.

long SIRF

Mutual Fund Monthly

I normally try to post this on the first day of the new month, but I was travelling late last week so it's a little late. As such, the figures below are as of the end of last week (11/3).

Below are the top and bottom five funds in our mutual fund program:

Top 5 -
  • DREGX: +28.9%
  • TREMX: +21.9%
  • WASAX: +14.3%
  • TAVIX: +12.2%
  • BPTRX: +11.8%

Bottom 5 -

  • MFOCX: +1.3%
  • TMGFX: +1.9%
  • QUAGX: +2.8%
  • PRNHX: +3.2%
  • RYPRX: +3.9%

Also, although I did so last month, I would again like to give a shout out to Loomis Sayles' bond fund (LSBRX), which continues to outpace more than half of the equity funds I follow. The fund is up +9.7% ytd. Way to go, Dan Fuss!

long all funds mentioned

Monday Morning Musings

The market is ramping in early trading, with the Nazz already up more than 1%. I am normally skeptical of strong rallies that come early, so hopefully this strength won't fade into the close.

The Nasdaq reached moderate oversold levels on Friday, while the NYSE is still not oversold.

One of the things likely boosting stocks is the flurry of mergers and acquisitions announced this morning, and most of them are at significant premiums. This indicates that buyers still see value in the market, and these buyouts also put more cash in the hands of investors.

In other news and notes:
  • ASEI misses EPS and revs; stock -8%
  • BofA cuts estimates on HD and LOW
  • LEND misses EPS; stock up
  • Semi Industry cut to Mkt. Weight at Bernstein
  • SWFT receives buyout proposal; stock +25%
  • KOSP to be acquired by ABT; stock +53%!
  • CHK making lots of trading bets on nat gas; 59% hedged
  • PSTI beats EPS; stock +12%
  • HWCC beats EPS and revs; stock +12%
  • TRFC to be acquired by NVT; stock +29%
  • OSTK misses EPS, may need cash; stock -16%
  • FS receives buyout proposal to go private for $82; stock +31%

Thursday, November 02, 2006

Heading Out Early

My stock of the day is OVTI. This was a recent pick of mine for, and I will follow-up next week with my thesis for why I like the stock.

I am leaving my post while the market is still open, something I hate doing. But it is my father's 65th birthday, so sometimes you have to be willing to make exceptions, especially when it comes to family. My brother and I are driving to Vegas to surprise him, although I think my brother leaked it. Big mouth.

As such, this will be my last post for a bit. Happy trading, and enjoy your weekend.

Mixed Bag For Retail Sales Reports

The market opened under a bit of pressure this morning, extending yesterday's weakness. But I think the market will find its footing today and we will not see a repeat of yesterday's relentless selling.

The retail sales reports this morning were mixed. And at first blush, it looks like even those companies that beat expectations saw little positive reaction in their stock prices.

The 10-year yield is getting a bounce today, rising to 4.60%. Oil and gas are trading down, weighing on the energy stocks. Tech looks to be mostly higher so far.

In other news and notes:
  • Monster Employment Index unchanged in October (172)
  • CTSH beats EPS, raises guidance
  • STN misses EPS, guides lower
  • JCP raises Q3 guidance
  • GRMN wins Deutsche lawsuit vs. TomTom
  • MA target upped to $100 at Pru
  • BofA defending pullback in INTC
  • China says no evidence of new bird flu strain
  • Ads on social networking sites booming (Red Herring)
  • Factory orders weaker than expected (+2.1% vs. +3.6%)

long INTC

Wednesday, November 01, 2006

Are We In For A Correction?

The market continued to pull back throughout the day, closing near its lows.

Volume levels rose on the session, making for a distribution day. I'll admit the market feels a little heavy here. Many leading growth stocks were sold-off rather hard today. But I think some of the selling was likely due to mutual funds who finished their fiscal years on 10/31, and now can sell some of their winners.

The SPX is only off about -1.5% from its highs. I maintain that I doubth this correction will go much beyond 2-3% before buyers step in and take the market back up. The Russell 1000, S&P 400, and Nasdaq are only up mid-single digits on the year, and I think they make a run at double-digits into year-end.

More Signs of Slowing Inflation

I have been commenting for a while now that I think the peak for inflation is behind us, at least for this cycle. This shouldn't be surprising, as inflation is a lagging indicator. By that I mean that it usually peaks after the economy has already peaked, and this time appears no different.

The first sign that I felt inflation was subsiding was the top in bond yields, as the 10-year is an astute indicator of future inflation. The the commodity indexes began to rollover, including oil, gas, gold, etc.

Today, the "prices paid" component of the ISM Index came in at just 47.0, a big monthly decline from 61 and well below expectations. This shows an actual decline in prices paid, and is another good indicator that inflation is no longer the primary danger to the economic expansion.

What Is The Canadian Government Thinking?

The markets are getting a small bounce at the open. Semis, biotech, financials are all higher while retail stocks are mostly lower.

Bond yields are also lower again today, with the 10-year falling another 4 basis points to 4.57%. This yield has fallen 27 basis points in roughly a week, and is now back down to its September lows. It is also causing the inversion in the yield curve to steepen. I believe this will put further pressure on the Fed to cut rates next year.

But the big news this morning, even if it did occur north of the border, is the news that the Canadian government announced plans to tax their Canadian Royalty Trusts like a regular corporation.

This is a stupid idea. The Canadian markets were seeing a flood of foregn investment due to the attraction of investments such as these. Taxing them will drive foreign capital from the market, and cause a larger drain on revenues for the country than they stand to benefit from raising the taxes. Never underestimate the idiocy of government to go against the grain of the markets.

In other news and notes:
  • GRMN reports solid quarter; stock gaps down
  • Canadian Royalty Trusts fall -10% on new tax push
  • OII beats estimates, raises guidance; stock gaps higher
  • NY Times says CVS in talks to buy CMX
  • TWX reports in-line quarter
  • Goldman adds CAH to Conviction List, removes SYMC
  • CTXS authorizes new $300M buyback
  • MA crushes estimates; stock gaps higher
  • ISM Index 51.2 vs. 53.0 consensus

long GS