Signs of Strength for MEMC Electronics
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The market finished strong yesterday, and is getting another boost this morning. There was more M&A news, with Wachovia (WB) saying it will buy AG Edwards (AGE) for $6.8 billion. This is helping the broker index break out to new highs, a good sign.
The market opened under some selling pressure this morning, after a big plunge in Chinese stocks overnight. The Chinese govt. raised a tax on stock trading, and that caused the stock market there to fall -6.5%, a hefty decline.
One of the stock I recommended last week on TheStreet.com was Zumiez (ZUMZ).
The company reported earnings last week, so I cautioned that investors might want to only start a small position ahead of the report, in case there was an overreaction to earnings. And that is exactly what happened.
The company reported solid earnings, but the market only rewards a stock when the company handily beats estimates and raises guidance. Although ZUMZ did not do this, they still reported very solid growth. And that growth should continue.
My thesis did not depend on a single earnings report, but rather the attractive growth rates ahead at which I believe the company can continue to grow. There are not that many retailers growing at the rate of ZUMZ. As such, I think the stock can continue to garner a premium multiple in the market.
The company currently operates roughly 223 stores in 23 states. This leaves a lot of room for expansion as the company continues to rollout new stores and build out their national footprint. They cater to youngsters age 12-24, and focus on the alternative and extrmeme sports enthusiasts. I can relate to this demographic, as I used to be involved in these sports when I was growing up. But back then, instead of calling us "extreme" athletes, they just called my brother and me crazy.
Also, there are plenty of skeptics on the stock. The most recent short interest figures show that as a percent of float, short interest in the stock stood at a hefty 29%. That could result in a lot of short covering if and when the stock recovers and goes back to new highs.
A look at the chart above shows that the stock is now hitting some meaningful support. If this holds, I think the stock will begin to form a solid base from which it can then move higher.
Hope you had a good Memorial Day weekend. The market is getting an early bounce on more M&A news this morning.
The week started quietly. The focus was, as in recent weeks, on mergers and acquisitions.
The markets took a bit of a tumble yesterday, and there was really no big news to hang your hat on. It was just one of those profit-taking selloffs that come after a long stretch of gains.
The market opened relatively flat, but then got a big boost from better than expected housing data. New home sales rose +16.2% last month, the biggest jump in 14 years. While this number may be a one-off, it is still a good sign that the housing market is well into its bottoming process, and should be less of a drag on the economy going forward.
It looks like the bottom is in for Las Vegas Sands (LVS).
Yesterday, Kirk Kerkorian made headlines that he was interested in buying the Bellagio. This caused all of the Vegas gaming stocks to rally, as it signaled there is a lot more value in these properties than current valuations suggest.
Taking a look at one of my favs, LVS, we see that the stock vaulted higher yesterday, on surging volume. It was the highest volume since January 11, 2007. And the gap higher in the chart depicts how the buying pressure was overwhelming from the start of the session.
I believe LVS has broken the recent downtrend in which the stock has been mired. It still has more work ahead of it, but I think slowly but surely these overhead levels of resistance will be chipped away at.
The company has some major properties opening this summer, and that could give an additional boost to the stock. I think investors will start to get excited about LVS in anticipation of these openings.
I apologize for the lack of posts lately. I have been in and out of meetings, and busy with general office stuff.
The S&P 500 was poised to close at a new all-time high yesterday, but faded into the close to miss the mark. It needs to close above 1527 to achieve this feat, but it's all-time intraday high from March 2000 is actually 1553.
My Stock of the Day is NYSE Euronext (NYX).
The stock has been mired in a downtrend since peaking at 112 right before Thanksgiving. The stock had just enjoyed a nice run from 75, and was due for a rest. But since then, it has made a series of lower highs and lower lows, recently testing the 80 support level.
The stock vaulted +5% higher today, on little news. There was some recommendations made on TheStreet.com, but no big analyst upgrades or anything.
At 25x next year's earnings, I don't think the stock is expensive given its unprecented global brand and reach. The frenzy amongst exchange stocks makes it likely that NYX can not only maintain, but possibly expand its multiple. And it is entirely plausible that earnings estimates for next year prove too conservative once all of the cost cutting and merger synergies have time to come to fruition.
The stock still has some work to do, but today's volume surge is a good sign that there is more upside ahead. The stock broke above its overhead 200-day today, and I think it will also penetrate its overhead 50-day in the near future.
The market is opening on an up note again, with the usual Monday morning M&A activity.
Normally, you would expect to hear this M&A news on Monday, but a couple of reports this morning jumped the gun and helped boost stocks.
The markets are lower in early trading, but not by much. Fed Chairman Bernanke made a speech this morning about the subprime lending market. He said he does not expect significant spillovers to hurt the rest of the economy, but he does not want to see credit lending restricted by such an amount that it restrains our financial system.
ICICI Bank (IBN) is showing surprising strength. The company is a broadly diversified financial institution and bank in Inida, its 2nd largest. And growth has been on a torrid pace.
But the stock has been volatile recently. This is because rates are going up in India, and the perception is that this would weigh on financials. I spoke with my best India contact, and he told me that just because rates are moving higher doesn't mean that credit demand won't continue among India's burgeoning consumer base.
I was worried about my position a little last week, but what a difference a week makes. Today, the stock is vaulting more than 6% higher on a huge spike in volume. The stock is also hitting a new 52-week high. The volume confirmation is encouraging, and indicates more new highs to come.
The market is getting a bounce at the open, reversing yesterday's weak finish. Large-cap stocks are leading the way, after it was disclosed that Warren Buffet doubled his stake in JNJ, Eddie Lampert bought an $800 million stake in Citigroup (C), and George Sorors doubled his investment in MSFT.
One of my long positions is Crocs (CROX). Although, to be honest, I have traded around this position and didn't fully take advantage of the recent spike.
The market is getting a boost at the open, on the heels of a better-than-expected inflation report. The year/year core CPI rate fell to +2.3% in April from +2.5% in March. This is within the Fed's "comfort zone", and improves the outlook for inflation expectations.
The market is getting a bit of a bounce in early trading, following Friday's strong and surprising showing on the heels of that benign inflation report.
I'm getting a late start blogging this morning, but the markets are bouncing back from yesterday's drubbing in a big way.
The market finally experienced its overdue selloff today. Large-caps fell -1.36%, while small-caps are down -1.92%. Semis, biotechs, and homebuilders are all down more than -2.0% on the day.
Whole Foods (WFMI) reported weak earnings last night. The CEO made a comment that the company's products are no longer as differentiated as they used to be, implying the competition has caught up.
This makes it tough for the company to continue charging premium pricing for its products. I still shop at WFMI, as I like the offerings they have. My local Ralph's doesn't have a big organic section. But I'm curious, if you buy organic/natural foods regularly, where do you shop?
I am beginning to sound like a broken record talking about the item of the day that is weighing on the market in early trading, only to see it fade by the end of the day and for the market to recover its losses. Of course, one of these days a weak open will stick, as we are overdue for at least a small pullback.
The FOMC announced this morning that they were keeping rates steady at 5.25%. Here are some of the highlights from their accompanying statement:
I am hearing lots of talk about the sequel to 1987's 'Wall Street', where Michael Douglas played the infamous Gordon Gekko.
Someone pointed out this article to me, reprinted from China Daily. You have to read this:
The market is opening under a bit of weakness, but it seems like lately every time we see this, the market recovers by the end of the trading session. Today, the FOMC meets, and while it is widely expected to hold rates steady for the 7th consecutive meeting, it will be interesting to see if they change their directive (comments) about the economy and inflation.
Investor sentiment guages have been running at elevated levels today, which is probably one of the reasons that the market made its low very early, and has been bouncing. The Nasdaq 100 has climbed all the way back into positive territory.
I think most people saw this morning's weakness and assumed it would continue for the remainder of the session. Days like today continue to be very frustrating for the bears, who just cannot gain any traction.
Here are some stocks making notable, high-volume moves:
The Dow closed higher yesterday, making it the 24th up session out of the last 27. That's quite a streak, and has not occurred since 1927. But the market is not heavily overbought. So while it could certainly pullback at any time, the pullback could again be short and shallow.
AH, SYNL, SFLY, NVEC, FSLR, CHE, GSOL, ATK, CROX, BWLD
HANS, GROW, OMX, TS, NILE, SPWR, ATVI, LVS, MGM, MBLX
One of my short selling colleagues said Sisyphus had it easier than the short-sellers do today. The S&P 500 rose 0.77% last week, making it the 5th consecutive week of gains for the senior index. The Nasdaq 100 gained only 0.25%, also for the 5th straight week.
After AMZN experienced that 2-day mega spike higher, I took a nice sized short position in the stock. My goal was just for a short-term trade, as I felt the outsized move was unjustified and overdone.
The market is getting another boost in early trading, despite a weaker than expected jobs report. The payrolls report before the open showed a gain of 88,000 jobs, the weakest in 2 years. Moreover, it was the first time in 11 months that the prior month's figures were revised lower.
You're going to hear all day about how the SPX hit the 1500 level. So let's get it out of the way. Like the Dow hitting 13,000, it's just a round number. The SPX really needs to get above 1550 to surpass its all-time highs from the year 2000. That would be a much more meaningful headline.
MEMC Electronic (WFR) has experienced a sharp pullback since reporting earnings last week. After 2 years of beating estimates, I think investors were hoping for another big beat. The company still reported verys solid results, but I think a lot of momentum investors had become involved, and simply sold on the news.
Lots of crosscurrents in the market this morning. Some weak earnings reports from LIZ, CC, and UA are really weighing on the retail stocks. Centex (CTX) also said its results were disappointing, and that they are facing one of the most difficult markets in 25 years.