Renewed Strength Pushes Market Higher!

The market rallied 3% on renewed strength, overcoming a weak start. Initially the market was driven lower due to the European debt malaise, concerns that by Friday had subsided. Europe appears ready to take the necessary measures to support the debt crisis so that market risk has been reduced. Domestically, retail reports from holiday shoppers were better than expected and consumer confidence followed suit by rising sharply. The only downer was an employment report that came in below expectations, but at least showed small job increases, not declines. The unemployment rate remains quite sticky, and will likely remain high for most of 2011. All in all, we like where the market is, up nearly 10% Year to Date. We were hoping that the market would take a breather and consolidate from the sharp rise experienced since September. The 3% gain this week essentially brought the market even over the past four trading weeks as the market consolidated. As a sign of renewed streng th, bad news (Employment Report) is now seen as less bad or a glass half full instead of empty. Investor confidence in equities is growing, as evidenced by net money inflows into stocks. We expect consumer and investor confidence to continue trending upward in 2011 and that should set the tone for another good year in stocks. We plan to become fully invested in our stock portfolios over the next few weeks. We made some recent sales to accommodate year-end portfolio housekeeping. We sold the drug company AZN, Bio pharmaceutical provider IPXL, and retailer SUMR, as all three stocks have underperformed the market as well as their peers. We also purchased an Oil company stock, GEOI, and bought a call option on Texas instruments, companies that we added to our watch list last week. We plan to make additional buys in all stock and option portfolios in the coming weeks. Our stock screen is uncovering more and more stocks, a sign that overall market momentum is trending high er. Look for changes to our watch list as well stock alerts as our stock selection screen is providing ample investment opportunities. One last point, volatility (VIX) fell sharply last week to 18, a very low level over recent history. That means option prices will be lower relatively speaking, so now is a good time to buy cheap protection (puts) and to speculate (calls) on the market moving higher.

Momentum And Value (MAV Screen): Breakout Stocks To Buy!

What Stock Tips do we have? Our complete list of watch list stocks is below along our commentary. We added two new stocks this week, Altera (ALTR, Semiconductors) and Avnet (AVT, Electronic Instruments). Altera designs and manufactures programmable logic devices, a business arena that is already showing signs of growing demand in the economic recovery. The stock is up 40% over the past three months, that is strong momentum, but there is plenty of upside left. Stock accumulation is up sharply another sign that the stock is moving higher. The stock trades at a PE of 17.7, a reasonable value for stocks in this sector, particularly in light of 54% sales growth over the past twelve months. This is also a stock where buying calls and call spreads can make sense in lieu of buying the stock outright. The second new stock is Avnet, an industrial distributer of electronic components and computer products. Avnet is just getting back to the price highs that were hit in May befor e the big market correction. The PE ratio is just 10, despite a 16% Return on Equity that tops most competitors. The stock is an excellent buy as sales have grown 30% over the past twelve months. We dropped Georesources (GEOI stock) and Texas Instruments (TXN call) from our watch list as we took long positions in both companies last week. We also dropped Clearwater Paper (CLW) as the stock has begun to underperform a market flush with high performers. As overall market momentum gains speed, our screen is uncovering more stocks, which means we can be more selective in the investment opportunities we pick.

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