Market Beating Stocks Blog

Broad Market Drops 1.7% As Commodities Get Hammered!

2011-05-08T10:53:00.001-04:00

The big story last week was Commodities which got hammered shedding 9% off of the CRB index. Crude tumbled 14%, but it was silver that took top honors plummeting 27%. The volatility and selling pressure in commodities brought down equities. No doubt in our minds that this was an over correction in the commodities sector. As is typical in the market, moves get over extended to the upside and downside and that is what happened with commodities. We fully expect commodities to bounce back and now is a great time to pick up energy stocks and other commodities including silver. The US economy is showing clear signs of strength, in fact the jobs reports last week were very encouraging. The global economic growth story also seems very much on track. Commodities and equities are poised to continue their bullish runs, so take advantage and buy assets that have experienced sharp pull backs. Earnings season is winding down, and it is clear that corporate profits are very strong, another sign of an economy very much on the mend. We like to sit mostly on the sidelines during the three heaviest weeks of quarterly earnings reporting, but now are ready to get more aggressive with market trading. We have significant cash levels in our options portfolio and growth portfolios to invest, and plan more stock rotation out of our retirement portfolio. The market could remain choppy through the summer months, but we think it is worth the risk to buy ahead of what we think will be a strong fourth quarter.

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

What Stock Tips do we have? Our complete list of stocks is available on our web site. We now have nine stocks on our watch list, all for purchase, in addition to the stocks we already own. Five of the nine stocks are carryovers from our prior week list, and all remain attractively priced after the recent market pullback. We added four new stocks including Synalloy (SYNL), Credit Acceptance Corp (CACC), Altera (ALTR), and Caterpillar (CAT). Synalloy operates in two segments, metals and specialty chemicals. SYNL is a smaller company and the stock is more thinly traded, but the company has been putting up very good growth numbers. CACC is a provider of auto loans to consumers and is experiencing loan growth and improving credit quality as the economy continues to rebound. Altera designs, manufactures, and market programmable logic devices and integrated circuits. Altera 1Q performance was outstanding with EPS increasing 46%, and the company revised their revenue forecast upward for 2Q. The semiconductor sector has been beaten up as of late, but Altera has weathered the storm better than most. Caterpillar (CAT) is a well known company engaged in the manufacture of construction and mining equipment. CAT is a quality company and really is a play on the growing global economy and increasing demands for infrastructure around the world. Long term we think this is a great stock, but would prefer to buy on a larger pullback. The stock lost 4% last week in the commodities selloff, another 4 or 5% decline would make the stock very attractive to us. In summary, we plan to get more aggressive buying stocks and options now that 1ST Quarter earnings season is winding down.

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Market Continues Recovery As Volatility Drops Sharply

2011-03-27T11:55:00.002-04:00

An encouraging sign as the market posted strong gains for the week despite the negative news that dominated the headlines. Concerns in Japan, while still high, subsided as nuclear issues appear more under control. Tensions in the Middle East continue, but avoided the major escalations that would threaten market confidence here. All of our portfolios responded nicely, with weekly gains that exceeded the market rebound. Our options portfolio saw the biggest delta, rising more than 14%, an exceptional turnaround which gets us back to a YTD return of 8.6%. This portfolio is the most volatile due to the nature of shorter term option trades, but has also been the most rewarding. For the options portfolio, we use the same stock section strategy used for stock portfolios, but instead of buying the stock outright, place options trades where pricing is reasonable. The other big event this week was the sharp decline in volatility (VIX). Generally speaking options prices become cheaper when the VIX falls, and that makes this a good time to buy long positions, both calls and puts. We plan to increase our long option positions over the next week or two. In addition, when volatility falls, that makes buying protection more affordable, a strategy that can be put in place through buying puts or long put spreads. We like to use a proxy for the market index when buying protection, for instance put options against the SPY or SPX. Our timing was perfect when we sold our protection the prior week for big profits and we may consider buying the protection once again given the recent sharp drop in volatility. We did not execute any stock transactions last week, but are looking to buy a stock or two if the market can hold the current uptrend. We remain cautious over the near term, bullish long term and encourage aggressive buying when the market comes under selling pressure. As the market finds its footing and trends upward, we plan to become more aggressive rotating out of laggards and buying those with stocks that are outperforming the market.

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

What Stock Tips do we have? Our complete list of watch list stocks can be found on our website (see link below). We have seven stocks on our watch list for purchase, in addition to the stocks we already own. For this week, we are adding one new stock to our watch list, Impax Laboratories (IPXL). Impax is a specialty pharmaceutical company that is focused on development and commercialization generic pharmaceuticals, as well as branded products. The long term story of an aging population under the microscope of government cost controls should help the generic industry expand across all competitors. As for Impax, they have grown sales and earnings at triple digit growth rates, yet the PE remains very attractive for a company experiencing strong growth. The share price has outperformed the market over the past 3, 6, and 12 months. Most recently the stock has been consolidating over the past 10 days between $24 and $25 as stock accumulation continues to climb. We think now is an excellent time to buy and could see this stock moving up 30% over the remainder of this year. Overall, as we mentioned before, we are still cautious near term, but would view additional market declines as a great buying opportunity. Generally speaking, we are not selling this market, and given the performance last week, are seeing signs of a stabilizing market. We now plan to begin gradually putting our sideline cash back into the market.

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Volatile Week As Japan and Libya Drive Headlines!

2011-03-20T11:48:00.001-04:00

It was a very volatile week of trading as the devastation in Japan and the turmoil in Libya remained front and center. The S&P lost 1.9% for the week, all in all a good recovery after having been down nearly 5% through Wednesday. For the year, the S&P is now up only 1.7% after several weeks of selling pressure, most recently driven by the headlines from Japan and Libya. The devastation from the earthquake and subsequent tsunami has been huge in Japan. Now the Japan crisis is centered on a potential nuclear meltdown that could further trouble this country and the world with longer term economic and energy impacts. The crisis in Libya is escalating as the UN enforces a no fly zone and bombs the country with missiles. Clearly the turmoil in the Middle East creates concern not just in that region, but all over the world. With so much bad news, it is a wonder the market did not fall further. We take some solace in the fact that the market held up fairly well all things con sidered. However, clearly there is significant risk that the market could falter given selling pressures from these external events. We remain bullish for the year, but cautious over the near term and suggest letting the market stabilize before getting aggressive and investing cash from the sidelines. We bought protection in February due to the heightened risks we saw at that time. We sold that protection for a profit this week which helps offset the overall losses we experienced in long positions that fell in sympathy with the market. The value of buying protection can best be seen in our Growth Portfolio where our YTD return has remained steady at February highs despite the sharp selloff in the market since. In fact, the NASDAQ index drop 2.71% for the week, while our Growth portfolio rose 1.5%, a positive delta over 4% in just 5 days. For protection, we bought the Mar 132 SPY Put and sold the Mar 128 SPY Put to reduce the cost of this protection. This protection w orked out perfectly as the SPY index dropped from 132 to 128 just as our position was about to expire. This example shows the value of buying protection, but remember, buy protection when you can at reasonable prices, not when you have to after market volatility explodes.

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 with our commentary. We have six stocks on our watch list for purchase, in addition to the stocks we already own. For this week, we are adding one new stock to our watch list, Leucadia National. Leucadia (LUK) is a diversified holding company engaged in a variety of business including manufacturing, oil and gas, gaming, real estate, and medical product development. What investors are really buying is a strong management team that knows how to invest and manage profitable enterprises. Price growth over the past 3 months has been 20% and the stock price has held up especially well over the past few weeks as the market has sold off. The PE registers at just 4.5, extremely low for a company that grew earnings and sales at 251% and 129% respectively over the past 12 months. We should note however that the earnings trend over a longer horizon has been volatile, but would add that the low PE wi ll provide the stock with some downside protection. As a testament to management effectiveness, Return on Equity has been outstanding at 33%! Overall, as we mentioned before, we are still cautious near term, but would view additional declines as a great buying opportunity. Generally speaking, we are not selling this market, but do plan to wait for the market to stabilize before investing all of the cash sitting on our sideline.

Get Daily Updates On Breakout Stocks From: http://www.marketbeatingstocks.com

Market Ends Flat Under Weight Of Middle East Turmoil!

2011-03-06T12:07:00.001-05:00

The market ended the week flat under the weight of ongoing turmoil in the Middle East. Libya remains front and center as the growing unrest becomes more violent. Oil prices moved higher as a result of that regional tension and fears over supply constraints. However, the US economy is the silver lining. Reports indicate money flows are showing a reversal from emerging markets which was king to US based investments. We have mentioned the importance of watching money flows in the past, and this is another bullish sign for the US stock market as increasing demand will driver prices higher. The other good news was unemployment, as private employers added more jobs than expected, helping to lower the overall unemployment rate. Economic indicators continue to support the premise that the US economy is slowly on the mend. Rising oil prices do put pressure on consumers, but we think a far greater rise is required before those effects dampen the economic recovery. As we said l ast week, we think the market could struggle over the near term with sideways trading or a small correction, but longer term we remain bullish for the rest of this year. Now is not the time to run to cash, but taking some profits is practical and smart. Reinvest your cash over time to let the market work through the current fears and establish support levels. We put some cash to work last week with the purchase of ConocoPhillips stock. Rising oil prices will juice performance for Conoco, but we think the stock can do well even if oil prices level off. The stock trades at a PE of just 10 which offers some downside protection, a great value in light of 30% sales growth over the past 12 months. Conoco is a quality company with an outstanding Return on Equity that is currently selling at a discount. We also took some profits last week after selling our positions in Amerisource Bergen (35% gain) and EBIX Systems (15.7% gain). We still like Amerisource as a long term play, but we only look to hold stocks for 1 year or less. The shorter holding period allows us to maximize portfolio returns by focusing only on those stocks that are showing the strongest momentum over 3 and 6 month periods. We had been looking to sell EBIX stock for some time and were happy to get out with a 15.7% gain. EBIX had been far more volatile than expected over our holding period and just not worth the additional risk.

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

What Stock Tips do we have? Our complete list of watch list stocks can be found on our website, see the link below. This week we are adding two new stocks, Novellus Systems (NVLS, Semiconductors) and Teradyne (TER, Semiconductors). Both are semiconductor stocks, so be careful with allocations to ensure proper diversification across your portfolio. We try to limit our industry exposure to 20% or less for the stocks we own across our portfolios. Teradyne is a supplier of automatic test equipment that supports the testing of complex electronics across the automotive, computing, telecommunications and defense industries. TER is up strong over the past three months, but has been consolidating the past two weeks as the overall market has struggled. The stock trades at a PE of 11, despite triple digit growth in sales and earnings. Industrial demand is picking up and that will translate into incremental demand for Terady ne products. Novellus develops and sells equipment used in the fabrication of integrated circuits. The semiconductor space is one of the fastest growing sectors right now and that bodes well for Novellus. The stock price has been on a steady upward trajectory and sports a PE of 15 with triple digit growth rates. There is more room to run on this one in light of what we see as steadily increasing industrial demand. We plan to look at options as another way to play our bullish outlook on Novellus. Overall, we are still cautious over the near term in terms of a correction, but would view that as a great buying opportunity if that unfolds. We do plan invest more of our cash in the coming weeks.

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Middle East Turmoil Breaks Trend And Drives Market Lower!

2011-02-27T11:24:00.001-05:00

The market reversed trend with a 1.7% weekly loss, the first in a month. Concerns over the Middle East turmoil took its toll as investors sold some profits and reduced risk. Egypt and now Libya have heightened concerns over Middle East stability and the obvious impact that could have on oil supply and prices. Energy companies have been the winners, while those companies heavily dependent on oil have suffered. It is interesting to note that Treasury prices rose significantly, clearly indicating a flight to safety amongst investors. The defensive posture that we now see is not surprising as we have been concerned over the possibility a small correction for a few weeks now. Volatility rose sharply, another sign of growing fear in the marketplace. The protection we purchased the prior week came just in time as those positions will help offset potential market losses. We think the market could struggle over the near term with sideways trading or a small correction, but lon ger term we remain bullish for the rest of this year. Now is not the time to run to cash, but taking some profits is practical and smart. Reinvest your cash over time to let the market work through the current fears and establish support levels. Last week we sold our Georesources stock for a 50% gain in just three short months. This oil and gas operator will likely move higher in coming weeks due to rising energy prices, but we wanted to take profits and avoid that urge to be greedy. We also recently purchased Raymond James and Corning, stocks that were added to our buy list the prior week. Both stocks lost ground as the market sold off, but we expect both to do very well over the coming six months. We plan to rotate out of a few more stocks over the next few weeks and will gradually reinvest our cash as the market stabilizes.

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

What Stock Tips do we have? Our complete list of watch list stocks can be found through the link below. We have seven stocks on our watch list for purchase. Six of the seven are returning stars from the prior week. This week we are adding ConocoPhillips which closed on Friday at $77.28. Conoco is a large international energy company that will benefit from rising energy prices. Oil has already risen significantly, so there is risk that prices could fall sharply when the Middle East crisis abates. Investors should be careful not to get overexposed to the energy sector. However, Conoco trades at a very reasonable multiple, a PE of just 10 despite sales growth of 30% over the past 12 months. Earnings growth has been even more eye popping at 158%. Earnings growth like that is not sustainable long term, but that risk is mitigated with such a compelling valuation. Conoco gives investors an opportunity to play the near term panic in the Middle East, as well as provide long t erm growth potential. We bought two stocks last week and plan to pick up the pace with our investment purchases as the market stabilizes. If we do get a correction, we will buy aggressively to position ourselves for the anticipated rebound over the remainder of the year.

Get Daily Updates On Breakout Stocks From: http://www.marketbeatingstocks.com

Market Rises 1.4% As Mubarak Steps Down!

2011-02-13T09:57:00.001-05:00

The market rose 1.4% in another positive showing bringing its YTD return to 5.7%. Egypt was again in the news as Mubarak bowed to pressure and finally stepped down. The quick changes that came about in Egypt may put additional pressures on other countries in the region. Those developments are probably good long term, but there is risk of greater instability over the short term. The market continues to shrug off these developments largely off the strength of corporate earnings and improving economic conditions. Earnings reports remain overwhelmling positive, although some big names have disappointed most notably Cisco last week. We also had good news over a better than expected weekly job claims report which suggests the employment picture is indeed improving. We like the strength we see in both the stock market and economy and remain long term bulls. However, as we said last week, we would not be surprised to see a minor correction of 5% or so. Volatility fell again to very low levels (15.7), and that along with falling short interest, suggest the market may move lower. When volatility and short interest are low, that means too many investors are bullish and perhaps even complacent, and that is when the market often corrects. We expect the market to move sideways or down over the near term which is why we are sitting on more cash in our portfolios. In addition, there is always more uncertainty and risk during the few weeks of each quarterly reporting season, another reason we like to go a little slower when buying stocks over this period. With volatility this low, now is a great time buy some protection using options against the VIX Index or the SPY ETF. We purchased a VIX call spread for protection last week and may try to create a hedge this week using the SPY ETF.

Broad Based Rally Pushes Market Up 4.2% YTD!

2011-02-06T12:15:00.000-05:00

The market made most of its gain on Tuesday and held on through the rest of the week despite the turmoil in Egypt and growing Middle East concerns. Strong earnings reports have provided the market sustenance as the vast majority of reporting companies have exceeded both earnings and revenue expectations. Even retailers reported better-than-expected monthly sales in January supporting the notion that consumer spending is improving. Jobs growth also showed increases last week, but were below projections as hiring remains sticky. By most measures, the economy is showing improvement and moving in the right direction; although some sectors remain stubbornly slow to respond. The FED is providing an accommodative stance and we see no signs of that changing in the near future. The stock market advance since September has foreshadowed the improving economy. However, for perspective the broad market has risen sharply since September last year to now over 25%. That is a big move , and a minor correction would not be surprising. Many pundits are calling for a 5% correction, and that too seems reasonable to us as the market will not go up in a straight line. Volatility also fell sharply last week, perhaps a sign that investors are becoming more complacent as stocks move higher. We are sitting on some cash in our portfolios and plan to sit mostly on the sidelines again this week given the market uncertainty and are concern that a minor correction may be near. We may take some profits where we can and buy some protection given low volatility over the near term. However, this is certainly not a time to exit the market or sell stocks that you want to keep even under concerns of a looming correction. This is a longer term bull market and investors should be buying on pullbacks. We are just sitting on our cash a little longer and being slower to invest since we think there is a decent chance the market might correct in February.

Market Down .5% For Second Down Week In Row!

2011-01-30T11:54:00.000-05:00

The market dropped sharply on Friday as investors sold stocks in the wake of unrest in Egypt. The flight to safety came as concerns that upheaval in Egypt might spread across the Middle East creating more world tension and uncertainty. In particular, Oil prices rose sharply as the risk of supply concerns grew. We think the Headline risk from Egypt will cause only a temporary, but needed pause in the market. The bigger story is the recovery of the US economy, where reports last week showed that GDP growth rose a solid 3.2%. Some analysts suggest the recovery was even stronger than those numbers suggest after adjusting for inventories built up from prior quarters. In addition, to date quarterly earnings reports have been overwhelmingly positive. There are still many more companies left to report over the next two weeks, but the consensus is that we will see more of the same positive reports. Interest rates remain low and we even had reports of growth in New and Existing Home sales. All in all, the data shows the US economy is recovering and that consumer confidence is improving. The US recovery is the bigger story that will drive the stock market higher longer term. However, given the uncertainty in the world and the volatility surrounding earnings season, we think the best strategy near term is to show patience and minimize trading activity. In our own trading, we sold Herbalife (HLF) last week for a 2% gain. Herbalife has had disappointing stock performance after trailing the market the past three months and we were happy getting out with a small gain. We plan to sit on the sidelines this week given the market uncertainty and the onslaught of earnings reports, but will remain opportunistic with our trading as conditions warrant. We were opportunistic last week with the purchase of our Walter Energy call spread and have already seen our position soar from a net entry cost of 47 cents to $4.15 per share! Sometimes the best trading opportunities arise when volatility spikes and investors overreact.

Volatility Rises As Market Takes Pause

2011-01-23T11:52:00.000-05:00

Volatility rose sharply, 19% to end the week at 18.47. We wrote last week that the market had become somewhat complacent, particularly in light of the already strong market run since September 2010. We saw that trend reverse somewhat as fears and nervousness rose, particularly in stocks that have had the strongest recent performance. We saw the biggest weekly losses in the High Alpha Momentum stocks, some of which we carry in our own portfolios. In addition, the Russell 2000 fell 4.3% for the week, while the S&P dropped only .8%. We would not be surprised to see a bit of a correction or at least range bound trading over near term. Frankly that would be healthy for the market by helping to establish support levels from which the market can later rally. However, as we mentioned last week, the right approach is to stay fully invested and to ride out any short term fluctuations in what we believe will be another strong year. A market pullback would be an excellent time to buy and load up on quality stocks. Market news last week was mostly positive yet the market still fell, a sign of nervousness, although some notable companies did miss earnings estimates. Next week will bring an onslaught of more earnings reports and the market appears uncertain of where it will go. The better strategy may be to show patience and not make too many moves until after this quarterly earnings season is complete. The next two weeks should be telling for the near term direction of the market. Of course, we would be major buyers if we get an unexpected and major correction. As for trading, we purchased Jabil Circuit from our watch list, a stock that has come under recent selling pressure, but one that we think will recover nicely. We also purchased an opportunistic call spread against Walter Energy, after the energy sector sold off last week. We really like the risk return tradeoff on our WLT position as we purchased the option position for just 47 cents per share, but have the chance to make a whopping $20 per share if the underlying stock can return to previous highs from just a few weeks ago by June of this year. We also closed our short TCK put position for a 95% gain.

Get Daily Updates On Breakout Stocks From: http://www.marketbeatingstocks.com

Market Up 2.8% In First Two Weeks!

2011-01-16T11:51:00.002-05:00

A strong start to the New Year has the market up 2.8% in just the first two weeks. Last week, quarterly earnings season began with Alcoa, JP Morgan, and Intel, all of which exceeded expectations. Earnings announcements will gain speed over the next few weeks and the early consensus is that the majority will show growth, although perhaps not the heady growth levels shown in 2010. We also saw acquisition activity from Duke Energy and DuPont, the latter a stock that we own in our portfolio. Buyouts are a sign that corporate America is feeling more confident in the economy and the recovery. The other significant development is market volatility which has dropped to very low levels as measured by the VIX at 15.5. That means fear in the marketplace has subsided as investors become more confident and take on more risk. Some will argue that low volatility suggests complacency which can set the stage for a correction. Frankly, the market has made a strong run since September 2010 and a small correction would not be surprising. However, we think the right approach is to stay fully invested and to ride out any short term fluctuations in what we believe is a longer term bull market. The other positive of low volatility is that option prices are relatively cheaper and that makes buying long positions far less expensive, whether that be for speculation or protection. As for trading, we sold one stock last week, Humana for a nice 27% gain. Humana is a quality company, but we think we can reinvest these proceeds into a stock that has better prospects for six month price appreciation. We are now 90% invested in both equity funds and plan to look for additional stocks to buy.

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

What Stock Tips do we have? Our complete list of watch list stocks can be found on our website, along with our commentary, see the link below. We have twelve stocks on our watch list representing nine potential buys and three potential shorts. We have several semiconductor stocks on our watch list and would caution investors to avoid buying too many stocks in the same industry. Frankly, we try to limit our investment holdings to no more than 20% from any one industry, but generally try to stay closer to 10%. Getting this allocation right is important as stocks in the same industry tend to move in the same direction, which reduces diversification and increases risk. Also, we have three stocks as candidates for short selling, but would caution that short selling in a rising market can be very risky. These three stocks are all overpriced and have seen recent selling pressure, but a rising market overall can help provide support to these stocks. A less risky play would be buy puts or put spreads to play a downward move instead of shorting these stocks outright.

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New Year Spurt Leads Market To 1.1% Rise!

2011-01-09T11:00:00.000-05:00

The market started the New Year with a spurt leading to a 1.1% weekly rise. That is a good start to what we think will be another excellent year. If right, 2011 will be the third straight year of double digit gains, something that has not happened for quite some time. The news last week was light but did include job reports and retail sales figures. The jobs report was mixed and retail sales were lower than expected, but both of these areas still showed improvement. The recovery appears very much on track, but it is clear this recovery will take time. Corporate Earnings reporting begins next week and will gather speed throughout the next month. These earnings reports will drive market direction and we expect the positive momentum to continue. The stage is set for growth as corporate balance sheets are healthy and supported by a FED pursuing friendly monetary policies. We also expect money flows into stocks to rise in the coming year as the investor appetite for risk expands and money moves away from safe assets. We expect interest rates to slowly rise in 2011 and that means bonds funds could begin to lose value. If that happens, investors will begin to move some of that money back into stocks, and that will help drive the stock market higher. All in all, we are bullish for 2011 and plan to stay fully invested. Of course, the market will not go straight up and will likely remain bumpy from pent up fear that prevails from the recent market turmoil. In that light, we plan to stay fully invested, but will hedge occasionally to provide protection from those corrections when the market moves too fast. Volatility remains extremely low, which makes buying protection through options much cheaper. As for trading, we sold one stock last week for an excellent return, HealthSpring, a 55% gain. Long term we still like HealthSpring, but felt it was better to take these profits and move the money into another stock with even greater appreciatio n potential over the coming year. As we mentioned last week, take action now and reduce bond allocations and move that money into stocks and commodities to benefit from the next anticipated leg up of what is likely a longer term bull market.

Market Finishes 2010 With Strong 12.8% Gain

2011-01-02T11:22:00.000-05:00

It was like two years rolled into one. The first half of 2010 was not pretty as the market dropped 9%. Fears regarding overvaluation, European Debt crisis, Flash Crash, and the BP oil spill all contributed to the market malaise. However, in July the market began an incredible run rising 23% over the next six months to finish the year 12.8% higher. Corporate earnings growth, monetary stimulus, and low interest rates helped reverse the trend propelling the market higher. Corporate balance sheets are flush with cash which has fueled the return of M&A activity. Strong earnings growth makes market valuations reasonable, particularly in light of low rates. The final push higher came following the change to Republican House control and the extension of the Bush Tax cuts. We believe many of the key factors that drove the market higher in the second half of the year will remain in place for 2011. Most economists have raised their GDP estimates, corporate earnings are projecte d to increase over 2010 levels, monetary policy will support market growth, and the tax measures foster economic growth. We also expect M&A activity to gain momentum and expect investor and consumer confidence to improve with the growing economy. All of these factors make us bullish for 2011 and we expect the market to end the year higher between 10 and 15%, maybe more. Of course, the ride is not likely to be smooth as we suspect 2011 will be bumpy, much like 2010. That means we could see another correction to cool down a bullish sentiment that is showing some signs of overheating. There are also other headwinds that will test market resilience including continued concerns over the European debt crisis, restrained Asian growth due to inflation concerns, double dip or stagnant Housing Market, financial regulatory changes, and global unrest in places like Korea and the Middle East. Despite the headwinds, Volatility has fallen sharply over the past few months and that mak es it cheaper to buy portfolio protection through the options markets. We think this is an excellent time to be fully invested in stocks, but to mitigate some of that risk through option protection. We were more conservative in 2010 and for the new year plan to take on more risk by being fully invested in our equity portfolios, although at times will hedge with option protection. We also plan to be more aggressive with our options trading. We had a tough year trading options as we got caught on the wrong side of the market just before the summer correction last year. However, despite these losses, we have earned a 30% compounded annual growth rate in our options portfolio since January 1, 2007. That is a tremendous return that is worth the additional risk, a remarkable result given the difficult investing environment over this time period. Our two equity portfolios beat the market averages again this year, keeping our unblemished record intact. We earned 16% on both stock portfolios versus a market performance of 12.8%. We think we can do even better relative to the market in 2011, as we were only 75% invested during much of 2010. Our oldest stock fund (tracked since Jan 1, 2006) has earned a 22% annualized growth rate over the past five years (versus .1% S&P). That is an excellent return, a rate that ensures our portfolio will more grow more than 2.5 times every five years! All in all, our portfolios, along with the market, should do well in 2011 as net money inflows into stocks gains momentum signaling investor demand and propelling stock prices higher. Take action now and reduce bond allocations and move that money into stocks and commodities to benefit from the next anticipated leg up of what is likely a longer term bull market.

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 with our commentary. To our watch list, we added one new stock to buy. Walter Energy is a producer and exporter of coal for the global steel industry and power industries. The stock has already has strong 6 month run rising more than 100%. That might seem a bit overdone now that the PE has reached 21, but valuation seems reasonable given the company has grown EPS 63% and Sales 30% over the past twelve months. Short Interest is high at 9%, but we view that as a bullish sign as those investors have already sold and will rush to cover if the stock makes new highs. We expect industrial demand growth in 2011 and that should propel Walter Energy stock higher. However, given the already sharp rise, we think the better play is to buy options instead of the stock. With options we can manage risk better and reduce the downside risk if the stock moves sharply against us. For Walter, we like the J un 125 and 140 call spread as that provides plenty of time for the underlying stock to move. The options are expensive, but the net cost is sharply reduced by selling the higher call price and possibly even a put. We recently purchased watch list stocks ARW and TRW for our portfolios, so those two stocks were removed. We also closed our TCK call spread and earned a whopping 333% gain from this position in our Aggressive portfolio. Overall, we are now fully invested in both stock portfolios and we plan to sharply increase allocations in our options portfolio over the next few months. As we mentioned above, we are bullish for 2011 and think this will be another good year for stocks and commodities.

Get Daily Updates On Breakout Stocks From: http://www.marketbeatingstocks.com

Market Grinds Out Small Gain on Mixed News!

2010-12-19T12:29:00.001-05:00

It was an up and down week as the Market grinded out a small of .3%. However, it could have been worse had the market chosen to embrace all of the bad news. European debt concerns weighed on the market, while FedEx, a barometer for shipping, delivered a negative earnings surprise. Best Buy also delivered disappointing earnings, although the overall retail sales report was the exception with results that were much better than expected. There was enough bad news this week to drive the market lower, particularly in light of the strong run the market has had since September. The fact that the market was able to close with even a slight gain is testament to the strength and resiliency of the current market. Another sign of investor confidence was volatility, as measured by the VIX, which fell sharply as the quadruple witching hour came to a close with the quarterly and yearly expirations of options and futures. The year 2010 has been a good year for stocks and we expect 2011 to be even better as economists raise their 2011 GDP guidance and Americans enjoy extensions of their tax cuts. However, in our view, the key driver to watch is the money flows into stocks. We are seeing increases in net money stock flows and expect that trend to accelerate in 2011, driving stock prices higher. Corporations are in the best financial shape they have been in quite some time and that too provides excellent support for stocks. We continue to beat the market in both equity portfolios and expect to finish the year strong despite not being fully invested. We added to our stock positions last week with the purchase of Westlake (WLK, Chemicals), a manufacturer of basic chemicals, vinyls, polymers, and fabricated products. The stock has had a strong 6 month price run, but the stock remains cheap with a PE of just 18 relative to sales growth of 31%. Westlake has terrific operating margins relative to competitors and that will keep earnings growth very high. In our equity portfolios, we plan to increase our stock allocations over the coming weeks in an effort to be fully invested in 2011. In our options portfolio, we also purchased a Mar Call spread in OM Group (OMG, Chemical Manufacturing), a provider of specialty chemicals, advanced materials, and electrochemical energy storage solutions. Industrial demand is expected to gain momentum and that will help propel OMG stock higher. We bought the call spread instead the stock to take advantage of attractive option prices. We bought the $40 Mar call and sold the $45 with the same expiration to create the call spread. We make money if the stock rises by just 6.5% by Mar expiration and can make as much as 200% on our position if the underlying stock rises by just 15%, an excellent risk return tradeoff. With volatility dropping to low levels, this is also a good time to buy portfolio protection since lower premium prices makes buying this insurance much cheaper. We did just that last week by purchasing a Feb put spread against S&P Index (SPY). We bought the $118 Feb SPY put and sold the $112 Feb SPY put for what was only 96 cents per share. In short, we bought enough options to fully protect our portfolio if the S&P index drops between 5 and 10% by February expiration. We do not expect a price drop, but bought the insurance since option premiums were low. Remember, this is insurance and we do not expect to make money on this position. All in all, now is a good time for year-end portfolio housecleaning and to get fully invested for next year.

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

What Stock Tips do we have? To our watch list, we added three new stocks to buy and one new stock to short. Arrow Electronics (ARW, Electronic Instruments) provides products, services, and solutions to industrial and commercial component manufacturers. The stock is cheap with a PE just above 10 and carries sales and earnings growth more than double that valuation. Entegris (ENTG, Capital Goods) manufactures and supplies materials for the semiconductor and high technology industries. Entegris is a low priced stock at just $7.33, so investors could see outsized percentage gains when this stock takes off. The semiconductor cycle is beginning to rebound and Entegris is well positioned to benefit with likely strong price appreciation. TRW Automotive (TRW, Auto & Truck Parts) is the last new buy stock we added and is a diversified supplier of automotive systems and components to the original equipment manufacturers and aftermarkets. The Auto & Truck Parts sector has been one of the best performing sectors over the past 6 months, a trend that we expect to continue as valuations remain compelling. TRW trades at a PE of just 8.6 versus sales growth of 27% and triple digit earnings growth. We do not expect the company to maintain that torrid pace of earnings growth, but do expect EPS growth in the 20 to 30% range. That is still tremendous growth for a stock trading having a PE under nine! We also added one new stock to short, Focus Media Holdings (FMCN, Advertising). The stock is trading at $21.92 after dropping nearly 10% over the past month. The next support level for the stock is $17.50, so the stock could easily drop another $4 per share. Fundamentally, this stock is overvalued with an astronomical PE over 100. Any little thing could go wrong which could cause this stock to plummet further. Shorting the stock outright or buying put options is the way to position this stock. For our complete list of breakout stocks see below. Overall, the market remains strong and represents an excellent time to get fully invested.

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Renewed Strength Pushes Market Higher!

2010-12-05T12:38:00.000-05:00

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.

Get Daily Updates On Breakout Stocks From: http://www.marketbeatingstocks.com

Flat Week As Market Consolidates

2010-11-21T12:02:00.000-05:00

The market ended the week essentially flat as Tuesday's sharp declines were offset by Thursday's recovery. The market is showing signs of consolidation following a strong 10 week surge. Near term pullbacks and consolidations are good as it gives market participants time to pause and allows time for demand to build for that next bull market leg. Market nervousness grew over European debt concerns and fear over China raising interest rates in order to slow growth. On the domestic front, housing starts remain anemic and job growth remains stubbornly slow. However, corporations appear healthy as profits are rising behind strong balance sheets. Merger and Acquisition activity is heating up and those are signs that investment opportunities are attractive. Trading will be light over the upcoming holiday week which could bring higher volatility. Over the next week or so, we look for the market to continue consolidating, but would not be surprised if the market experienced sma ll declines. Longer term we remain bullish and expect the market to have a strong year in 2011. Our plan is to become fully invested in stocks after the Thanksgiving holiday. For options, we also plan to get more aggressive with trades after the next week or so. Last week we entered a call spread position in Teck Resources, a Canadian mining company. In short, we bought the $43 call and sold the $50 call and the $40 put to offset our entry cost. In just one week we have gained 85% on our position after the underlying stock made a sharp move to $50. That puts our position significantly in the money, a trade we plan to ride for now given there is still a lot of upside with a maximum gain potential of 365%.

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

What Stock Tips do we have? For this week, we reshuffled our buy list to take advantage of new market leaders. For example the Auto Parts Industry has had a great run this year, but that story appears to be getting a bit long in the tooth. It will likely continue to do well, but what subsequent growth is experienced will be much more expensive. In that light, we dropped Dorman Products and TRW Automotive from our buy list. TRW in particular has had a strong run and the company remains sound and reasonably value. We still like the stock and would not sell, but we also do not want to buy at these levels. We also dropped TPC Group and LJ International (JADE) as volatility in both stocks drove prices sharply lower. In our prior newsletter, we mentioned the risk in owning JADE and sure enough saw sharp declines last week. We now have nine stocks on our buy list including Clearwater Paper (CLW, Paper Products), Erie Insurance (ERIE, Insurance), Sapient Corp (SAPE, Software ), Georesources (GEOI, Oil & Gas), Quaker Chemical (KWR, Chemical Manufacturing), Measurement Specialties (MEAS, Scientific Instruments), Triquint Semiconductor (TQNT, Semiconductors), Texas Instruments (TXN, Semiconductors), and Viropharma (VPHM, Biotechnology). Clearwater and Erie have the longest tenure on our watch list as both were added in September and have risen steadily since. Our newest additions this week were GEOI, KWR, MEAS, and TXN. Rising oil prices and industrial activity over the next few months is expected and that will help GEOI oil production and the industrial demand for KWR products. MEAS develops and manufactures sensors and sensor based systems for equipment manufacturers and is also showing strong growth due to rising industrial demand. Texas Instruments (TXN) is widely known for calculators, but has a significant business in designing and making semiconductors for equipment manufacturers across several segments. It is that diversification whic h has helped TXN show more price stability over the past two years relative to other companies in the semiconductor space.

Get Daily Updates On Breakout Stocks From: http://www.marketbeatingstocks.com

Market Stumbles to -2.2% Loss!

2010-11-14T13:05:00.001-05:00

In our last newsletter we issued near term warnings that the market could stumble. We may have seen the beginning of that stumble as the market fell -2.2%, the first losing week in the last five. Cisco, the technology titan, issued downward guidance next year and that caused their stock to plunge 17%. The nervousness over the Cisco outlook, along with fears that China may raise interest rates, encouraged investors to sell stocks and commodities driving prices lower. Reports on jobless claims and hiring trends were more encouraging, but failed to measurably soften the selling pressure. Long term we remain very bullish on stocks as recent corporate performance has been overwhelmingly good. In addition, we have a FED that is determined to lift this economy and stocks higher. However the market has seen an incredible two month run of double digit gains and we know the trend is never straight up. In that light, a small stumble is not a bad thing. Next week should be telli ng in terms of direction, but do not be surprised if we lose another 3% over the next two weeks given the already strong advance. As we mentioned last week, we would like to see the market consolidate and take a pause from its recent run. Use these pullbacks and consolidation periods as great buying opportunities. Volatility spiked a little bit last week, but remains below average for this time of year. Option premiums will rise somewhat with volatility, but now is still a good time to buy protection through long puts or put spread positions. We may sell a stock or two next week and if we do will sit on that cash as another way to manage the near term risk. In a longer view, all of our portfolios continue to perform very well over time. The best performance measure is the return since inception with the target to beat the market over that same period. We have not only beaten the market averages, but have done so by extremely large margins. As an example, one stock fu nd has achieved a 148% return since January 2006 versus a -4% market loss over that same time period!

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

What Stock Tips do we have? For this week, we added one new stock to our watch list after having dropped InterDigital and EBIX due to recent purchases. Of course, InterDigital is also a stock to consider buying particularly after the pullback last week. The nine stocks on our buy list are Dorman Products (DORM, Auto Parts), Clearwater Paper (CLW, Paper Products), TRW Automotive (TRW, Auto Parts), Erie Insurance (ERIE, Insurance), Sapient Corp (SAPE, Software), TPC Group (TPCG, Chemical Manufacturing), and our new addition LJ Intl (JADE, Jewelry). Most stocks declined last week, not surprising given the market selloff. All of our buy list stocks have shown strong price momentum over the past three months (that is why they are on our list in the first place), and they often take greater hits when the market stumbles. That is normal and most will also recover faster than the overall market. We wrote about TRW last week, a stock that has had a strong run and continues to t rend higher. We like TRW but at these levels would only buy on a pullback. DORM is in the same industry as TRW and has rocketed to a 22% gain in just two weeks. DORM is another stock to buy on a pullback or longer consolidation period. One of our favorites is Erie Insurance as the stock continues to march steadily higher. We added LJ Intl (JADE), a company that designs and distributes fine jewelry through its retail channels in China and through US wholesalers. This is a low priced riskier stock and represents an aggressive play towards price appreciation. It trades at only $5 and triple digit gains are possible if the stock really takes off, but do not ignore the risk. Jewelry sales are growing in China and the long term trend is up as standards of living rise. The stock trades at a PE of only twelve despite exceptional earnings growth and potential. We like the story on JADE and the favorable risk reward tradeoff. Overall, given the recent market stumble, now is the time to be cautious and patient. Sit on your cash a little longer and buy only on pullbacks over the next week or so until the recent market stumble runs its course.

Get Daily Updates On Breakout Stocks From: http://www.marketbeatingstocks.com

Don't Fight The FED, Market Jumps 3.6%

2010-11-07T11:24:00.001-05:00

The FED is determined to lift the economy out of the doldrums after announcing another round of quantitative easing with purchases of $600 billion in treasury securities. That will help keep interest rates low and ensure adequate liquidity in the marketplace. Equity markets responded favorably and smart investors will follow the FED lead and increase their risk exposure. In other big news the Republicans regained House control and added senate seats in hotly contested mid-term elections. Equity markets viewed the election results favorably. The FED had been signaling their intentions for a few weeks with plans on spreading the purchasing over several months. We just hope that the FED does not stoke the fire too much and as a result drive inflation to much higher levels. Frankly, the economy needs time to heal and to unwind years of easy money. Some pain is good to ensure more sustainable long term economic health. Private payrolls have been increasing now for four straight months, a sign the economy is stabilizing. No doubt there is a long way to go before unemployment is back to normal levels, but the trend is positive. Third quarter earnings season is winding down and generally speaking, corporate performance was excellent. The stock market has responded driving the broad market index to two year highs and a 9.9% YTD return. Long term we remain very bullish on stocks for all of the reasons discussed above. However, there is risk near term that the market could stumble, particularly following an incredible two month run of double digit gains since September. Frankly, we would like to see the market consolidate and take a bit of a pause from its recent run. If we get a pullback or longer consolidation period, consider that a great time to buy. With volatility at very low levels, now is also a good time to buy insurance for your portfolio through options. We took some gains last week by selling our position in Maidenform Brands (MFB) after a 29% gain. We also sold a call spread option position in Altera for a 95% gain. We are now 70% invested in our stock portfolios and plan to gradually increase that allocation over the next few weeks with new stock purchases. We also plan to get more aggressive with options trading over the coming months.

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

What Stock Tips do we have? For this week, we added two new stocks and dropped two which leaves our buy list with ten stocks. The returning stars are Dorman Products (DORM, Auto Parts), Clearwater Paper (CLW, Paper Products), TRW Automotive (TRW, Auto Parts), EBIX (Software & Programming), Erie Insurance (ERIE, Insurance), Sapient Corp (SAPE, Software), InterDigital (IDCC, Communications Equipment) and TPC Group (TPCG, Chemical Manufacturing). TRW is already up 32% since we first added to our list on Sep 17. We like TRW but at these levels would only buy on a pullback. DORM is in the same industry as TRW and has rocketed to a 22% gain in just two weeks. DORM is another stock to buy on a pullback or longer consolidation period. Sapient Corp released earnings last week that exceeded estimates and even raised their forecast and the stock subsequently dropped 6%. The decline in SAPE does not make sense, another sign of an irrational market, and represents a good buying opportunity. We lost patience with Medicis Pharmaceutical and dropped this one from our buy list. MRX has remained flat for nearly two months despite the strong market rally and we try to avoid stocks that underperform the market. We also dropped Nanometrics as this stock has not only underperformed the market, but has lost ground. NANO is a stock that will likely do well, but the recent volatility just does not warrant the risk. Triquint Semiconductor (TQNT, Semiconductors) offers RF products in three markets including handsets, networks, and military systems. We decided to add TQNT to our buy list after the company exceeded recent earnings estimates. The stock is cheap with a PE of 10.5 and revenue growth of 34%. Smart phones will continue to be a hot market as technology expands into functionality once dominated by laptops, GPS navigation devices, and even the book readers. TQNT will benefit from these trends. We also added Viropharma (VPHM, Biotechnology), a company dedicated to the development and commercialization of products that address serious diseases. The company is small and currently markets only two products, but earnings growth is gaining momentum and the company surprised on the upside recent earnings by 44%. We think analyst estimates on future earnings estimates are also low and the company could see sharp price gains. Of course, volatility can be significant on small price stocks that have lower trading volumes, so invest with those risks in mind.

Get Daily Updates On Breakout Stocks From:
http://www.marketbeatingstocks.com

Earnings Remain Strong, But Unable To Move Market!

2010-10-31T13:15:00.000-04:00

The S&P Index finished the week unchanged despite another positive round of earnings announcements. According to reports, 180 S&P 500 companies reported earnings with 80% topping EPS estimates. The Corporate world is clearly demonstrating earnings power and balance sheets remain overwhelmingly strong. In other news, GDP estimates were in line with the consensus of 2%. That may not be fantastic growth, but the trend is up following the 1.7% second quarter growth. Positive reports also came from existing home sales and initial jobless claims, both reporting results that were better than expected. With all this good news, how come the market failed to moved higher? Several big events are scheduled for next week, and we suspect the market is just taking a pause in advance of that news. The FED is expected to make an announcement on plans for quantitative easing. In addition, midterm elections are next week. Both events are potentially market moving catalysts that could influence the longer term market trend. We remain bullish long term and frankly suggest the market needs a breather after the strong run from September. The market could suffer a bit of a pullback if there is a major surprise next week, but that represents a good buying opportunity if that happens. Volatility rose somewhat last week, but option premiums remain low and are an excellent way to buy protection for your portfolio over the short term. We mentioned last week that we have been mostly on the sidelines relative to trading activity throughout the third quarter earnings season and will remain so for another week or two. A case in point regarding the risk around earnings season is IMPAX Laboratories, a stock we own in our stock portfolios. IMPAX dropped 13% on Friday in the absence of any news, but in anticipation of the company earnings announcement on Monday next week. That is a really big move based on "whispers", and the stock may have been oversold. Our plan is to hold at least through the earnings announcement and then gauge company prospects. When a stock makes big irrational moves like that in the absence of information, investors have little choice but to wait out the news. All in all, we remain optimistic on the broad market and plan to increase our call buying activity in the coming weeks. Now is still a good time to take profits in stocks that have had strong runs. We continue to beat the market in both stock portfolios and in our best performing portfolio, have earned a YTD return that is double that of the market.

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

What Stock Tips do we have? For this week, we added one new stock to our buy list which brings our total to ten stocks. The returning stars are Dorman Products (DORM, Auto Parts), Clearwater Paper (CLW, Paper Products), TRW Automotive (TRW, Auto Parts), EBIX (Software & Programming), Medicis Pharmaceutical (MRX, Drugs), Nanometrics (NANO, Semiconductors), Erie Insurance (ERIE, Insurance), Sapient Corp (SAPE, Software), and TPC Group (TPCG, Chemical Manufacturing). We wrote about Nanometrics last week over concern from its recent price action. The stock recovered somewhat last week but the real test will come next week with their quarterly earnings report. We will not consider buying NANO until after the dust settles from that announcement. Clearwater Paper reported so-so earnings and investors may want to see how the stock responds over the next few weeks before jumping in. Our timing was excellent with Dorman Products as the company just released earnings that beat e xpectations just after we added to our buy list. DORM has already had a strong run, but there appears more left in the tank as the Auto Parts industry has really taken off. We added one new stock this week, InterDigital (IDCC, Communications Equipment). IDCC designs and develops advanced digital wireless technologies for use in digital cellular and wireless products and networks. InterDigital just announced an earnings and revenue surprise and the stock jumped the past two days. This stock is cheap at a PE of 9.6 in light of 34% revenue growth and an earnings growth rate in triple digits. The company will not sustain triple digit earnings growth over the long term, but double digits seems well within reach in a world that continues to moves wireless at an ever increasing rate. Institutions own only 55% of the outstanding stock and when institutions begin to jump on board, the stock will move much higher. Short interest was high at 15% in advance of their positive ear nings report, so the flight to cover should also push the IDCC stock higher over the near term. Overall, we are positive on the market, although there is risk we could see a dip over the near term. On a pullback, look to buy the stocks in our portfolios or watch list and take some profits where you can.

Get Daily Updates On Breakout Stocks From: http://www.marketbeatingstocks.com

Only Small Gains as Market Sells Earnings News!

2010-10-24T11:36:00.000-04:00

Only small gains for the broad market as the S&P rose .6% despite what were overwhelmingly good third quarter earnings reports. The vast majority of companies reporting earnings last week exceeded estimates and more than half exceeded top line revenue growth. Traders appeared to sell the news as stocks ended the week with only small gains. Some stocks even lost ground as selling pressure overwhelmed the good news. Despite the mixed results, the fear gauge as measured by the VIX index remained at low levels particularly for this time of year. Overall, that is a good sign as investors appear more comfortable with current market levels. Earnings season continues in full force next week as more than 70% of companies have yet to report. Expectations are more of the same with announcements likely following the patterns seen over the past week. QE2 is still on the horizon, but the FED offered no additional guidance last week. The market appears reasonably priced, but volatility could still spike at any time. Now is a great time to take some profits. In addition, volatility (VIX) is relatively low which makes options less expensive. This is a good time to use options and buy some protection for your portfolio. We may also sell some retail stocks as they have come under recent pressure after what has been a pretty good 6 month run. Spending will likely improve over the next few months, but will remain at very subdued levels. Long term we remain bullish on stocks, but we will remain mostly on the sidelines for the next two weeks as third quarter earnings season winds down. We will become much more active buyers once the dust settles from latest quarter. We did buy one stock last week, Herbalife (HLF) which had been on our buy list for a two weeks. Herbalife is due to report earnings Nov 1 and the stock has moved sharply in past earnings announcements. We do not normally take long stock positions in companies leading up to earnings announcements as there is risk that if the company disappoints, losses could be sharp. However, long term the stock potential is excellent given a 16 PE and earnings growth over 30%. The Stock has been consolidating over the past two weeks, so now is a good buying opportunity and we save the extra premium we would pay by waiting if the company exceeds estimates. We also had two covered call positions where we rolled up the exercise price. In essence, both HS and HUM stock have moved sharply higher and both represent stocks that we would like to keep a little longer. Rolling up the covered call strike prices provides opportunity to capture more gains from stock appreciation for minimal cost. On the options side, we plan to become more active buying call options in the next few weeks if volatility remains low, which makes premium prices more affordable.

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

What Stock Tips do we have? For this week, we again have nine stocks on our buy list, eight of which returned from the prior week with one new addition and one deletion. The returning stars are Clearwater Paper (CLW, Paper Products), TRW Automotive (TRW, Auto Parts), EBIX (Software & Programming), Medicis Pharmaceutical, Nanometrics (NANO, Semiconductors), Erie Insurance (ERIE, Insurance), Sapient Corp (SAPE, Software), and TPC Group (TPCG, Chemical Manufacturing). However, we would add caution regarding Nanometrics which dropped significantly after coming under selling pressure last week. Earnings are not due on the stock until Nov 2, which makes us concerned that the whispers coming out early on the stock are not good. We plan to watch this stock for now with no plans to buy until after the price finds support and if there is a positive earnings report. We also dropped Herbalife from our watch list as we purchased that stock last week in light of what we consider excellent long term prospects. We added one new stock to our watch list, Dorman Products (DORM, Auto Parts). The stock has had a strong run, up nearly 50% over the past three months as the Auto Parts industry has taken off. Consumers are holding on to cars longer during these frugal times and that means more profits for companies that make after-market parts. Despite the recent price rise, the stock remains attractive at a PE of 16. Return on Equity is outstanding and growth should remain strong for the foreseeable future. One final note, third quarter earnings announcements will continue for the next two weeks, so there could be significant volatility across specific stocks. Look to buy the stocks in our portfolios or watch list on pullbacks over the next few weeks and take some profits where you can.

Get Daily Updates On Breakout Stocks From:
http://www.marketbeatingstocks.com

Market Near Trading Range Highs

2010-09-19T12:50:00.001-04:00

Another strong week as the broad market rose 1.5% driving the YTD return into positive territory. The market is at the upper end of its trading range from the past few months and continues to show resilience in the face of significant headwinds. Corporate earnings reports were mostly good as Best Buy, Oracle, and Research In Motion all reported better than expected earnings. However, FedE, another bellwether, missed estimates and issued downward guidance. Tech stocks rallied, a good sign, as many stocks in this sector have been beaten down. We continue to believe in the global recovery, while assigning only a small probability to double dip concerns. Corporate America remains flush with cash which provides continued support for the growing M&A activity underway. We are bullish for stocks, although caution that near term risk is higher given current trading range highs and the fact that the calendar at this time of year has not been kind in past markets. Now is not the time to divest from stocks, but taking some profits would be in good order. We are cautiously optimistic near term, but more importantly, expect the market to finish the year strong. Buy quality stocks any time there is a pullback. As for options, income strategies and trades that take advantage of the current trading range remain good bets. The timing for buying call options is becoming more interesting as volatility and premiums continue to drop. However, buying protection may be more prudent given lower premiums and third quarter uncertainty. Our Equity portfolios are beating the market YTD and we expect both portfolios to finish the year strong. Our options portfolio has struggled this year, but we think the worst is over as out of the money call options expire this month and next. The value of those call options all tanked quickly during the surprise summer correction.

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

What Stock Tips do we have? For this week, we made changes to the stocks carried on our buy list. We have eight stocks on our watch list of which six are returning stars from last week including Clearwater Paper (CLW, Paper Products), Solarfun Power (SOLF, Semiconductors), TRW Automotive (TRW, Auto Parts), EBIX (Software & Programming), Credit Acceptance Corp (CACC, Financial Services), and Erie Insurance (ERIE, Insurance). We dropped MV Oil Trust (MVO, Misc Financial Services), and PAR Pharmaceutical (PRX, Biotechnology & Drugs) from our list as short term momentum has begun to slow. These stocks may recover, but sitting on the sidelines may be prudent until demand interest drives their stock prices higher. We also purchased Alliance Partners (ARLP, Coal) last week, and removed from our watch list. We added two new stocks highlighted below. Freeport McMoran (FCX, Mining) specializes in mining Gold, Silver, and Copper across the globe. Commodity metals prices are tren ding higher and we think that will continue as the economic recovery drives global demand. FCX is a popular play among traders so there is plenty of liquidity. However, what we like is both the valuation and price momentum on the stock. The PE is only 10 for a company that has grown sales 30% over the past 12 months, the mark of a cheap stock. Furthermore, FCX earnings growth has been even greater than sales over the past year. FCX is a great way to play the uptrend in commodity prices, as well as global economic recovery. We also replaced PAR Pharmaceutical with a new pick, Medicis Pharmaceutical (MRX, Biotechnology & Drugs). Medicis is a specialty pharmaceutical company focused on helping patients attain a healthy and youthful appearance through the treatment of dermatological and aesthetic conditions. The long term prospects for this business are excellent given aging baby boomers and the vanity search to appear younger. Medicis is one of the best run companies in this space with a Return on Equity above 18%, one of the highest rates across the industry. Their PE is attractive at 14 in light of 36% sales growth. That is excellent sales growth, but earnings have been even better as the company operates at margins that exceed nearly all industry competitors. The prospects for long term price appreciation on Medicis stock are excellent.

Get Daily Updates On Breakout Stocks From: http://www.marketbeatingstocks.com

Strong Week As Fears Subside!

2010-09-05T14:20:00.000-04:00

The S&P Index rose 3.7% in a strong week as investor fears began to subside. Economic news was encouraging as employment reports, although just okay, came in better than expected. The ISM report was also better than expected and even July pending home sales showed increases. Retailers got a boost from better than expected August same store sales. In addition, merger activity continues to heat up and overseas markets also showed strength. All of this good news led to a sharp drop in the VIX index, commonly referred to as the fear gauge. With the market rise this week, the month of September is off to a great start. We too are encouraged, but caution that the market has not yet broken through the trading range established over the past few months. We are nearing the upper end of that range, around 1120 on the S&P, which is the resistance level to watch. September and October have traditionally been months of poor performance and high volatility, so caution should remai n in force. We could easily see a minor market pullback, but do think the market will continue to hold the 1050 support level. All in all, we continue to believe the worst is over and remain optimistic the market will finish in positive territory by year end. We have a hedge in place on our largest stock portfolio to provide protection through November expiration. We make take that hedge off sooner if the market can break through and hold above the current trading range high of 1120. Investors that buy on the dips will be rewarded over the long haul as equities today are at valuation levels not seen in quite some time. Established companies paying strong dividends remains an excellent strategy particular for more risk averse investors. The best sign for us last week was the drop in volatility as measured by the VIX index. We had taken a short position expecting a drop in volatility and have profited handsomely, but more important is that this signal may prompt invest ors to begin taking more risk. As confidence grows, investors will move money back into stocks, away from the safety of cash and treasuries. Treasury yields moved up last week, another sign that demand for treasuries may begin to decline. Our largest stock portfolio is doing very well with nearly a 12% YTD return versus market loss of -.9% over the first eight months of the year. The hedge we have in place should help maintain that excess return over the market that we currently enjoy.

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

What Stock Tips do we have? Our stock buy list typically grows as the market shows strength and we added three new stocks for this week. Clearwater Paper (CLW, Paper Products), Solarfun Power (SOLF, Semiconductors), and TRW Automotive (TRW, Auto Parts) all represent good buys. Clearwater showed a lot of price strength during the August swoon and has now begun to run with the September optimism. The PE is only 7.4 and the stock appears poised for more upside given EPS growth of 24%. Solarfun sells photovoltaic cells and modules primarily in international markets. The stock carries more volatility and like other semiconductor stocks took a beating in August. The stock has recovered near its one year highs, a testament to demand given the difficult summer correction. The PE remains modest at 8.8 for a company likely to experience high double digit growth. This is one of those stocks that carries higher reward, but also high risk in terms of volatility. TRW Automotive s upplies automotive systems and components to OEMs and related aftermarkets. TRW had a rocky August like many stocks but appears to have consolidated at recent levels and may be poised for a strong run over the next 12 months. The auto industry is expected to sell a record number of cars in 2011 as the economy continues to recover and consumers replace older cars held longer than usual. TRW is attractive at a PE of 7.6 in light of sales growth reaching 19%. The company recently released second quarter earnings that far exceeded analyst estimates. We think earnings will continue to surprise and the stock could really take off. We also carried over a number of stocks from our watch list last week. EBIX (Software & Programming), Credit Acceptance Corp (CACC, Financial Services), Erie Insurance (ERIE, Insurance), MV Oil Trust (MVO, Misc Financial Services), Alliance Partners (ARLP, Coal), and PAR Pharmaceutical (PRX, Biotechnology & Drugs) remain excellent picks. We dropp ed Full House Resorts as the stock appears stuck in a trading range that has been established over the past few months. In addition, Full House recently released earnings that missed estimates, not a good practice for any company. We also dropped Buckeye Holdings which is in Oil Well Services. We still like the company and consider the stock attractive, but we just like MVO as a better alternative, another pick on our watch. Last week was a great week for stocks as the market moved sharply higher. However, we have been at these levels before, and we have yet to break through the current trading range. While we remain bullish long term, we could see a pullback over the near term and now may be a good time to buy some protection.

Get Daily Updates On Breakout Stocks From: http://www.marketbeatingstocks.com

Modest Decline Following Friday Recovery!

2010-08-29T11:15:00.001-04:00

The market lost ground again last week, but thanks to the Friday recovery, ended with only a modest .7% decline. Concerns over housing and the economy are providing the nourishment for investor fear. Housing is bad, and some economists do not expect prices to stop falling before 2nd quarter next year. The pace of declines has slowed, but housing is still falling due to rising foreclosures and lack of demand. The economy is very weak, but has begun to grow ever so slowly as the recent GDP figure released last week suggests. In fact, it was the GDP report and Bernanke comments that provided the market that much needed lift on Friday. We continue to believe that stocks are range bound and that we are trading at the low end of that range. Stocks could go lower, but we think there is support between 1030 and 1040 on the S&P that will provide a floor on just how low stocks go over the near term. No doubt buying stocks now is challenging for risk adverse investors, but if yo u plan to hold long term, prices today will seem cheap a few years from. The economy is undoubtedly on a slow path to recovery, but that can be good for stocks once marketplace fears subside. It is those fears and pessimism that create much of the volatility seen today. Merger mania has started to heat up and that is a positive sign for stocks and the economy. HP, Dell, BHP Billiton, among others were the big names making a splash last week. This activity will continue as companies flush with cash that have been sitting on the sidelines, take advantage of lower prices to buy growth into the future. This is another sign that corporate America is in good shape, and in the end, it is corporate earnings is what will drive the stock market higher.

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

What Stock Tips do we have? We have a full list of stocks on our buy list with every stock a carryover from the prior week. EBIX (Software & Programming), Credit Acceptance Corp (CACC, Financial Services), Erie Insurance (ERIE, Insurance), Full House Resorts (FLL, Casinos & Gaming), and PAR Pharmaceutical (PRX, Biotechnology & Drugs) are all carryovers from our buy list for three weeks now. Buckeye Holdings (BGH, Oil Well Services), MV Oil Trust (MVO, Misc Financial Services), and Alliance Partners (ARLP, Coal) also remain as excellent picks. We wrote last week that EBIX had already risen significantly so investors may want to wait for a consolidation period. However, EBIX has massive short interest, and that is usually a contrarian indicator suggesting the stock could go sharply higher if the short sellers have to quickly cover. EBIX just might be worth the risk, but could be volatile over the near term. We dropped Williams Partners from our buy list as momentum has d eclined and reports this week suggest that oversupply of natural gas and low prices will continue for some time. That would likely mean that Williams Partners would decline or best case represent dead money for the next few months. We have a large number of stocks to pick from, so look to an industry or sector for portfolio diversification and pick one of those stocks. For example, if you like the energy sector or need diversification there, pick ARLP, MVO, or BGH. The market remains range bound, so buy stock on the dips and use options to produce income across the trading range. Also, now is a good time to take advantage of low prices on quality companies paying high dividends.

Get Daily Updates On Breakout Stocks From: http://www.marketbeatingstocks.com

Market Up, Then Down, But Recovery Encouraging!

2010-08-22T11:11:00.000-04:00

The market fell slightly, .7% for the week, a much better result than the 3.8% prior week decline. Despite the flat finish, it was another volatile week with the market up, then down, before an encouraging run to get back to even. The market was up the first two trading days largely on the strength of positive earnings reports and renewed M&A activity before turning down due to weakness in jobless claims and a survey on business outlook that failed to meet expectations. The market remains trading range bound a difficult market for long investors to make money. This is a traders market where you need to trade frequently, buying at the highs of the range and selling at the lows. But there are signs that the market could break out soon from this trading range. One, the bearish floor of the trading range appears to be rising. Many of the equity sellers have already left the market and that reduces the likelihood of the sharp selloffs we saw in 2008 and with most recent market correction. Two, corporate earnings and balance sheets are very strong, and companies have the capital to invest that will flow once the economy regains its footing. In fact, Merger and Acquisition activity began to hit up this week and that will likely continue as a way for companies to put capital to work. Three, there is a bond bubble right now, particularly with the flight to safety over the demand for treasuries. Money has flowed from stocks to bonds in big numbers that has pushed bond yields to extremely low levels, rates that are simply not sustainable. That bubble will eventually burst, and money will flow back into stocks driving up demand as investors regain their appetite for risk. The economy is improving, although at an anemic pace, but remember that is much better than the alternative, a much hyped double dip recession. How soon will the market break out of this trading range? No one knows, that could be months or to even a year or more. Our forecast is that the market will break out later this year, most likely November and December. Right now, investors can get great buys on many quality companies paying dividends of 4% or more. Those dividends also help protect on the downside. Buy stocks on the dips at the lower end of the trading range. Now is also a good time to trade options using income strategies to take advantage of the range bound trading. Watch the net money inflows into stocks for when that measure begins to increase significantly, stock prices will rise sharply and quickly.

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

What Stock Tips do we have? EBIX (Software & Programming), Credit Acceptance Corp (CACC, Financial Services), Erie Insurance (ERIE, Insurance), Full House Resorts (FLL, Casinos & Gaming), and PAR Pharmaceutical (PRX, Biotechnology & Drugs) are all carryovers from our buy list for two weeks now. EBIX has already risen more than 12% since our recommendation, so investors may want to wait on a consolidation period or pullback before jumping in. We have also kept the four of the new stocks added last week on our buy list including Buckeye Holdings (BGH, Oil Well Services), MV Oil Trust (MVO, Misc Financial Services), Williams Partners (WPZ, Natural Gas Utilities), and Alliance Partners (ARLP, Coal). Lubrizol and Eli Lilly were taken off our buy list as we purchased both stocks for our portfolios last week. Both stocks represent excellent buys as well. We added one new stock to the list this week. TRW Automotive Holdings (TRW, Auto Parts) is a diversified supplier of automotive systems, modules, and components to original equipment manufacturers and related aftermarkets. The auto parts industry has really heated up and we currently are in the money on AutoZone options, another industry player. TRW stock has shown strong momentum and accumulation over the past three months and we think that can continue. Valuation is still very strong with a PE of just 7.25 relative to sales growth of 19%. Return on equity is exceptional at 47% which is near the top of the industry. Some predict that 2011 will be the biggest year ever in terms of autos sold, so get in now to make the most of the opportunity. The market is range bound, so buy stock on the dips and use options to produce income across the trading range. Also, now is a good time to take advantage of low prices on quality companies paying high dividends.

Corporate Earnings Drives Market Higher!

2010-07-25T11:02:00.002-04:00

The fears that rose the prior week subsided as corporate earnings stole the show. Last week saw the start of a strong 2nd quarter corporate earnings season that lifted the market 3.5% higher. Quarterly earnings releases will continue for the next two or three weeks, but early signs suggest the majority of reports will continue to beat expectations. The market rallied this week on the strength of those reports. Corporate earnings are the best barometer for how the economy is doing and what to expect from the recovery. Despite all of the negative press from recent weeks, corporate earnings indicate that the market and economy are showing signs of recovery. Jobs growth, which has been the Achilles heel of consumer confidence, will remain sticky, but there are signs that too will begin to improve. The stock market remains tenuous, as short term technical trading drives the market creating higher volatility than is normal for summer months. Trading volumes have been very light which magnifies to the market gyrations. Money flows into stocks improved this month, but remain at low levels. As a result of these headwinds, we expect the market to continue range bound trading over the near term (between 1040 and 1120). Longer term the market will move higher as corporate earnings clearly point to an improving business climate.

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

What Stock Tips do we have? We added a number of new stocks to our buy list in light of the recent market strength due to the resurgence of street beating corporate earnings. Rolls Royce (RYCEY, Aerospace), Xilinx Inc (XLNX, Semiconductors), Altera Corp (ALTR, Semiconductors), EBIX (Software & Programming), and Credit Acceptance Corp (CACC, Financial Services) were all added this week. Erie Insurance (ERIE, Insurance), Full House Resorts (FLL, Casinos & Gaming), PAR Pharmaceutical (PRX, Biotechnology & Drugs), and Kulicke & Soffa (KLIC, Semiconductors) remain on our buy list from the prior week. The number of stocks carried on our buy list grows as the market shows more momentum. Semiconductor companies make up the highest numbers of stocks on the watch list and our favorite is Altera. Xilinz and Kulicke are also very good choices in the semiconductor space, but these two stocks tend to show more volatility. We also like Full House Resorts, a casino operator that carries more risk, but has the potential for a big payout. Full House Resorts operates several gaming facilities including one near my home roots in Harrington Delaware. All in all, look for range bound trading in the market over the near term. This is a good time to buy stocks for the long term, but be mindful that we could still experience short term volatility. We still expect the market to finish the year with positive gains. Now is also an excellent time to employ income producing strategies in the options market.

Get Daily Updates On Breakout Stocks From:
http://www.marketbeatingstocks.com/

Market Spooked By Drop in Consumer Sentiment!

2010-07-18T11:50:00.000-04:00

A volatile week with the S&P dropping 2.9% on Friday as investors got spooked by a sharp drop in Consumer Sentiment. The market finished the week with a loss of 1.2%, that on the heels of the relief rally from the prior week. Consumer Sentiment for July plunged to levels much lower than expected which does bring some cause for concern. Adding to the malaise was economic reports suggesting that the recovery may be slower than expected. Frankly neither of these two factors is a big surprise, nor should be cause for panic. Consumers will not get confident until the employment picture improves and the economy regains its footing. The economy will improve, but that recovery will be slow given how deep this recession has been. However, the market largely ignored more positive signs that for us hold more weight in predicting how the stock market will perform longer term. Second quarter earnings seasons has only just begun, but to date, the vast majority of companies reported earnings that beat expectations. Ultimately the stock market will reflect the health of corporate earnings and we see strength in this area. No doubt the bar has been lowered on expectations, but companies are delivering nonetheless. In addition to the earnings story, three other persistent overhands in the market were met with positive developments. One, BP was successful in halting the spill of oil into the gulf. This disaster has added to the negative sentiment across the country, which should now improve. Two, the Euro has begun to show strength as the markets stabilize overseas. This too has been an overhang for the market, for which encouraging signs now appear. Third, Goldman Sachs reached a financial settlement with the SEC, a positive development for Goldman, but also for financial stocks. Overall, we think the fundamentals that will drive the market higher long term are improving and moving in the right direction. The market just got spooked last week following huge prior week gains and the unexpected and disappointing consumer sentiment numbers. We do not see a double dip recession, but caution that there are still significant headwinds for the market over the near term. We think the market will continue range bound trading until the money flow into stocks begins to rise in force. Over the near term, we look for the market to continue trading between 1020 and 1100 on the S&P. We plan to be buyers on the low end and sellers at the high end, at least until the market breaks through the top of that range.

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

What Stock Tips do we have? We purchased a number of new stocks last week so have dropped those from our buy list. Those purchased including Cyberonics (CYBX, Medical Equipment), Coca Cola (KOF, Beverages), and Astrazeneca (AZN, Biotechnology & Drugs). All three stocks are still excellent buys particularly after the market pullback last week. . Erie Insurance (ERIE, Insurance), Full House Resorts (FLL, Casinos & Gaming), and PAR Pharmaceutical remain on our buy list from the prior week. Each of these stocks retreated in sympathy with the market, so investors can get now get even better prices. Kulicke & Soffa was another stock we had listed. Kulicke took a significant hit last week as semiconductors came under significant pressure with this stock hit harder than most given its sharp rise over the past few months. We like Kulicke, but plan to wait and watch the stock for a bit before considering jumping in. Frankly if the stock can consolidate and create a support level at these lower prices that would represent an excellent buying opportunity. Remember, this is a volatile stock and patience is critical towards getting in at a good price. All in all, look for range bound trading in the market over the near term. Stock selection will become more important in this market. This is also a good opportunity to employ income producing strategies in the options market.

Get Daily Updates On Breakout Stocks From:
http://www.marketbeatingstocks.com

Market Beating Foresight: Market Rebounds Rising 5.4%!

2010-07-11T10:48:00.000-04:00

Wow, what a difference a week makes. The market rebounded last week rising 5.4% for the best weekly gain in a very long time. What were the catalysts for such a large move? We find this performance very interesting as the economic fundamentals changed very little from the week before. Furthermore, 2nd quarter earnings season does not start until next week, so corporate news could not be the catalyst. Retailers did report June same store results, but frankly those results were mixed and the retail sector overall did not participate in the rally. Unemployment claims declined, but only slightly so that too could not account for the advance. The IMF revised upward their forecast of 2010 world growth to 4.6%, an encouraging sign but probably not the major driver. Our conclusion, the market was simply rebounding from extreme pessimism and oversold conditions. By the end of the prior week, pessimism and fears over a double dip recession drove the market down to oversold lev els. Once the market caught its breath and began to rise, the many shorts got squeezed which helped accelerate the rally. We do not expect a double dip recession; in fact those occurrences are extremely rare over our long history. Instead we see a return to stability, although the recovery could be slower than what we have experienced in past recessions particularly given the sluggish recovery in housing and what will likely be anemic job growth over the near term. Nonetheless, this is a good time to buy stocks as most valuation measures remain attractive. Since the start of the recession, there has been a massive flight to safety which frankly has caused a bubble in US Treasuries with yields moving nearly to zero. This bubble and flight to safety will not last as all bubbles come to an end. At some point, money will flow back into equities and those flows will accelerate as the investor appetite for risk grows. We think the market is establishing support at the curr ent levels and expect the market to finish higher by year end. However, some caution is in order over the near term given the strong market surge last week. We could get a pullback next week, but if we do, treat that as a good buying opportunity. Buying on dips should be the mantra for the remainder of the year.

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

What Stock Tips do we have? For this week, we added several stocks to our Breakout list. We now have seven new stocks on our watch list. The market is changing sentiment and direction and with that we are looking for new leadership. The seven new stocks are Erie Insurance (ERIE, Insurance), Cyberonics (CYBX, Medical Equipment), Coca Cola (KOF, Beverages), Astrazeneca (AZN, Biotechnology & Drugs), Full House Resorts (FLL, Casinos & Gaming), PAR Pharmaceutical (PRX, Biotechnology & Drugs), and Kulicke & Soffa (KLIC, Semiconductors). We like the potential in all these stocks and we like the industry diversity that is showing on our stock screens. That means the stocks advancing have been across the board and that breadth provides conviction to the strength of the market advance. KLIC and PRX have already advanced 11% and 7% respectively since we added to our buy list during the week. Investors may want to wait for a pullback or longer consolidation period before jumping in on these two stocks. We really like KLIC, but do not want to chase it, and plan to jump in when there is temporary pricing weakness.

Get Daily Updates On Breakout Stocks From: http://www.marketbeatingstocks.com

Indices Tumble As Sentiment Weakens!

2010-06-27T16:50:00.000-04:00

The S&P dropped 3.7% for the week and once again is in negative territory for the year. The S&P is now down -3.5% for the year and is down 12% from April 23 highs. Trading sentiment was not positive and news last week was mostly negative. The biggest downer was Housing as both existing and new home sales were sharply down in May. Some fear that we are entering a double dip decline in housing, a situation that is exacerbated by a lack of buyers given an unemployment rate around 10%. Furthermore, mortgage rates are already at extremely low levels, an incentive that has not been able to jump start the housing market. We are not optimistic regarding the housing outlook over the near term, and expect that recovery to take years. The market feels a bit iffy right now, so patience is the call of the day. We think this is still a good time to invest long term in stocks, but would encourage investors to invest new money gradually, while holding current positions. One positive was financial reform as the conference committee reached agreement. As a result, there was a relief rally amongst financial firms on Friday. The clarity the bill brings will provide more stability to the financial markets, despite the fact that many of the details still need to be worked out. We expect financial firms to gain ground over coming months assuming passage of the bill next week, and particularly like the prospects for Bank of America.

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

What Stock Tips do we have? For this week, we added a few stocks to our Breakout list. We now have seven stocks on our watch list that include the three repeaters Amerigroup (AGP, Healthcare Facilities), LaCrosse Footwear (BOOT, Footwear), and Clearwater Paper (CLW, Paper Products). We added four new stocks including HealthStream (HSTM, Computer Services), Seracare Life Sciences (SRLS, Biotechnology & Drugs), Kulicke & Soffa Inds (KLIC, Semiconductors), and AutoZone (AZO, Retail (Specialty). We bought a long call spread against AutoZone last week, but also like the stock. The auto parts retailer has held up well despite broad market declines and we think the business of replacement parts will continue to grow as frugal customers continue to delay new car purchases. HealthStream is a play on the training and education needs of the healthcare industry which continues to grow along with the demographic driven demand for healthcare. Seracare has the potential to be a big winner although there is higher risk. The company serves the global life sciences industry by providing vital products and services to facilitate discovery, development, and production of human and animal therapeutics. The momentum and fundamentals look good, well worth the potential risk. Our last addition is Kulicke which designs, manufactures, and sells capital equipment and tools used to assemble semiconductor devices. The company also services and maintains its equipment for its customers, semiconductor device manufacturers. The stock can be volatile, but the potential is there for big gains. EPS and Sales growth are gaining speed as semiconductor demands grow among business users and consumers. At a price of only $7.50, percentage price gains could be significant. The broad market volatility did rise last week as investors are growing more nervous with selling pressure. Second quarter earnings will be released over the next three to four weeks, and that will likely be a catalyst for the next market move. We still think now is a good time to buy stocks, but think patience is in order and would suggest being more selective on those stocks that are purchased. Our plan is to rotate out of weaker performances and to replace those with stocks from our breakout list.

SanDisk Call Rises to 93% Gain!

2010-06-20T12:06:00.001-04:00

Our options portfolio lost a little ground last week as two options hit June expirations. Our June call option on Paragon Shipping expired out of the money. The company, in the international water transportation business, just never got its stock moving in the right direction. This is still a company with good potential; we were just too early in our expectation of a business recovery. HealthSpring made a modest recovery late in the week just in time prior to our call expiration. The call was exercised and we now hold the stock. We do not expect to hold the stock for long and will sell if we can get a near term bounce in the stock. Amerigroup (AGP, Healthcare Facilities) and Clearwater Paper (CLW, Paper Products) are currently on our buy list. We have written before about our interest in purchasing an AGP Dec call spread with exercise prices of $35 and $40. We would buy the $35 and sell the $40 for a net debit. The option is already in the money and we would have six months to realize additional price appreciation. Healthcare has been an underperformer the past six months, and we expect that to change providing additional lift to Amerigroup. Clearwater Paper is also on our buy list and we may look to play a similar option structure but with January 2011 expiration. Option premiums have declined from recent highs, but remain elevated. We may dip our toes back in the water and evaluate near term VIX short positions to cash in on elevated premiums. We remain very optimistic that our portfolio will bounce back sharply and finish the year much higher than the market averages. Over the longer term, this continues to be our best performing portfolio.

Portfolio Details Available Online At:
http://www.marketbeatingstocks.com

Second Straight Weekly Gain!

2010-06-20T12:04:00.000-04:00

The market ended the week 2.4% higher for its second straight weekly gain. All in all it was a quiet week with the exception of the Tuesday rally. Economic news was light and trading volatility was subdued. The pundits are pretty divided on whether there will be a sustained uptrend following the recent correction or whether this will be just another sucker’s rally. Europe certainly put a scare into the market over the past month, but those fears appear to have been absorbed by the market. The ongoing oil spill is causing heartache and perhaps is acting as a distraction from the other concerns. In our view, the economy is improving ever so slowly. We expect the market to finish with positive returns at the end of the year, but do not expect huge gains. A return to slower market growth over the next six months would be a good thing allowing the economy to catch up and valuations to stay reasonable. We continue to believe that this is a good time to buy stocks. In other words, our expectation is a sustained uptrend to finish the year in positive territory. Volatility will remain at higher than normal levels, but absent those inevitable spikes, will trend downward from current levels through the remainder of the year.

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

What Stock Tips do we have? For this week, we have cut our Breakout list to four stocks. Amerigroup (AGP, Healthcare Facilities), LaCrosse Footwear (BOOT, Footwear), Clearwater Paper (CLW, Paper Products), and APAC Customer Services (APAC, Business Services) remain on our list from the prior week. We wrote about APAC in our last newsletter. Since that writing the stock has come under selling pressure, and now represents an opportunity for investors to get in at a discount. APAC should do well as the business environment begins to heat up. We dropped Delta Apparel from our list as the stock has declined sharply over the past two weeks. Retail stocks in general have been hit pretty hard, but Delta was down more than most. No need to buy stocks that are losing momentum, when there are plenty of other stocks moving in the right direction. Volatility has been sharply higher over the past month but is showing signs of declining. Our stock screen is sensitive to sharp stock price declines that have occurred over the prior 4 weeks. That means fewer stocks will make the cut and appear on our screen until stock prices begin to stabilize. We believe the turning point is near and our screen should begin to show more stock buying opportunities. We designed our screen to leave some money on the table and buy after stocks begin to move back up, rather than buy too early and experience more set back. Overall, we think the market is beginning to establish the required support levels. The pressures from overseas markets and technical trading appear to be moderating. We think this is an excellent time to buy equities.

Relief – Thursday Recovery Yields Weekly Gain!

2010-06-13T16:35:00.000-04:00

A sigh of relief as a strong recovery on Thursday helped ensure a weekly market gain. The market has been on a roller coaster the last few weeks with sharp rises in volatility as the correction passed through. Hopefully the strength shown last week will provide the support level needed for the market to begin another upward rise. The recovery late in the week is encouraging, but caution is in order as overall trading volumes were light so conviction is difficult to judge. The positives last week included optimistic reports on China trade and other international markets. The Euro decline still dominates overseas news, but the currency did strengthen last week providing additional support to equity markets. The biggest negative surprise was retail sales, which dropped unexpectedly in May. The encouraging sign is that the equity market took the news in stride and still finished the week with 2.5% gains. The market has been very rocky over the past month, although volatility appears to be declining slowly. We suspect it will take another month or so before the market settles down and resumes its advance. We remain optimistic that the market will finish the year higher. Now is an excellent time to buy stocks.

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

What Stock Tips do we have? For this week, we have five stocks on our Breakout list. Amerigroup (AGP, Healthcare Facilities), Delta Apparel (DLA, Apparel/Accessories), LaCrosse Footwear (BOOT, Footwear), and Clearwater Paper (CLW, Paper Products) remain on our list from the prior week. Delta Apparel declined last week in sympathy on reports of declining May Retail Sales. We have kept Delta on our buy list, now is a good time to take advantage of the discounted price due to the recent selling pressure. We also added one new stock this week, APAC Customer Services (APAC, Business Services). APAC provides customer care services and solutions to companies across several industries through 15 domestic and offshore centers. The stock is up 13% over the past three months despite the broad market decline of 5% over the same time period. The company has been profitable since second quarter 2008, and EPS and Sales growth are both much higher than the company PE of just 6.5. Return on Equity is outstanding and industry trends are positive as customer care outsourcing continues to gain traction. Institutional Ownership is only 43%, so the stock could get a really big boost if big market players begin to buy in. The stock is a low priced, currently $6.50, so percentage price changes could be large. However, the stock price can be rocky, so patient investors should be prepared to give the stock plenty of leeway while waiting for price appreciation. Overall, we think the market is beginning to establish the required support levels. The pressures from overseas markets and technical trading appear to be moderating. Overall, we think this is an excellent time to buy equities.

Get Daily Updates On Breakout Stocks From:
http://www.marketbeatingstocks.com

Another Roller Coaster Week Ending Worst Month Over a Year!

2010-05-30T12:21:00.000-04:00

Another roller coaster week as the market fell 4% before recovering to finish flat for the week. Concerns over Europe continue to drive fear in the markets as volatility has nearly tripled in the span of a month. Technical trading has caused wide price swings compounding the nervousness amongst investors. The selling pressures have forced a May market drop of more than 8%, the worst monthly performance in quite some time. We expect volatility to remain elevated over the near term and expect range based trading on the Market Index until these fears begin to subside. We remain optimistic that the market will finish the year higher and consider this correction an excellent time to buy.

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

What Stock Tips do we have? For this week, we have four stocks on our Breakout list. Amerigroup (AGP, Healthcare Facilities) and Delta Apparel (DLA, Apparel/Accessories) remain on our list from the prior week. We have added two new stocks, LaCrosse Footwear (BOOT, Footwear) and Clearwater Paper (CLW, Paper Products). LaCrosse is a developer and marketer of footwear for work and outdoor use. The company distributes products domestically, as well as internationally in Asia, Europe, and Canada. The stock price has been on a tear for the past year and momentum remains strong. Consumer spending continues to rise and that provides a lift to retailers. The stock is starting to get a little pricey, but we think there is more money to make over the next 6 months. Clearwater Paper produces tissue and paperboard products in the US. This is more of a defensive play as the company makes basic products that consumers need regardless of the state of the economy. Valuation is strong with a low PE, around 4. Return on Equity has been exceptional at 60% and we expect the strong cash flows to continue. The stock has been a bit rocky lately, so patient investors can get a discount if they wait for a 5% pullback. We still consider Industrial SVCS (IDSA, Waste Management) a buy, but have removed from our breakout list given our purchase last week. All in all, we think the recent correction provides an excellent buying opportunity for both stocks and options.

Volatility Spikes Again, Official Correction Is Registered

2010-05-23T15:07:00.002-04:00

Another volatile week as selling pressure drove the market significantly lower to a weekly loss of 4.2%. Volatility (VIX Index) rose sharply hitting highs over 45, levels not seen in quite some time. The stock market has officially fallen more than 10% from highs hit in April, a measure that is widely considered an official correction. The question on the minds of many is whether this is a correction in a bull market or just the resurgence of a long running bear market. Let’s look at the fundamental drivers for clues to that question. The near term panic is over the debt concerns in Europe and the drop in the Euro. There are also concerns at home over pending financial regulation that could adversely affect the financial markets. Near term, we think the market will get answers that address the uncertainty over Europe and financial regulation. Progress has already been made in government efforts to address financial legislation with the goal to resolve by July 4. Clarity over the slowdown in Europe should become more clear over time as information is absorbed and foreign governments have time to respond. Slower growth in Europe may weigh on overall world growth, but we do not expect Europe to restrict the US market advance. Likewise, we expect the uncertainty over financial regulation to be resolved soon and frankly do not expect that to dampen market back either. Instead, the fundamentals that we think will drive the market long term are corporate earnings, consumer spending, consumer confidence, and jobs. We have started to show signs of improvements across all of these fundamentals, and while improvement may be slow we are trending in the right direction. For example, the first quarter reporting season is nearly over and this week 25 out of 26 Fortune 500 companies reported better than expected earnings. That is a clear sign corporate performance has turned the corner. Consumer spending and consumer confidence has also shown improvement. Jobs growth continues to be sticky and as a lagging indicator will be slower to respond, but it appears the worst may be over. All in all, these fundamentals suggest that the 10% loss just experienced is indeed a correction and not a return to a bear market. Corrections in bull markets happen frequently and more often than not the market resumes its advance with even more fervor. We think the market has the strength to end the year with positive gains at least in the 10%-15% range. That makes this correction an excellent time to buy stocks!

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

What Stock Tips do we have? For this week, we have three stocks on our Breakout list. Amerigroup (AGP, Healthcare Facilities) and Industrial SVCS (IDSA, Waste Management) remain on our list from the prior week. Momentum on Amerigroup stock has not moved much over the past 8-10 weeks. That is a bit of concern and we would look for a strong move up before investing. On the other hand, Industrial SVCS stock has move sharply down over the past few weeks, much more than overall market. We think this stock has excellent fundamentals and recently released exceptional earnings. The stock has simply become way oversold and short interest speculation is still a bit high. We like Industrial SVCS prospects despite the recent correction and plan to buy as we expect the stock to bounce sharply over coming months. We added one new stock to our buy list, Delta Apparel (DLA, Apparel/Accessories). We have traded DLA successfully before, and the stock once again shows on our Momentum and Value stock screen. The stock has weathered the recent meltdown well and has sustained a long uptrend since October of last year. The stock price rally may be starting to get a bit long in the tooth, but investors could still benefit from momentum over the short term. We bought Providence SVC Corp (PRSC) and IMPAX Laboratories last week so we removed those from our buy list. However, investors should still consider both stocks buying opportunities. We dropped Rosetta Stone given concerns over pending litigation costs in its suit with Google, along with the fact that the stock price has not moved over the past two months. We may add this one back once there is more clarity over this litigation and earnings potential. The market has been showing very high levels of volatility and that makes this a difficult time to invest. However, with the official correction measured last week, now is an excellent time to buy long stock positions. The market could still drift lower, but it is fruitless to wait and try to buy at that elusive bottom. Buy now when stocks are low, as the recovery could also be swift. We still expect the market to finish well into positive territory by the end of the year.

Get Daily Updates On Breakout Stocks From:
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Another Volatile Week Despite Weekly Gain!

2010-05-16T12:10:00.000-04:00

The market managed a respectable weekly gain of 2.2%, but it was far from easy. Volatility spiked once again late in the week due to market declines on Thursday and Friday. The market had gained as much as 5.5% in a strong recovery before declines set in on the final two trading days. The European bailout package was announced over the weekend and the market initially responded well. However, by Thursday concerns began to grow and nervousness set in. The spike in volatility seems a bit overdone. There appears to be a great deal of speculative trading over the short term which is causing significant market swings. Those swings add to the volatility and fear in the marketplace. On this side of the Atlantic, the economy has been slowing improving, a market that is undeserving of the volatility currently experienced. We expect current fears and nervousness to subside once we get through the near term panics over Europe. In addition, money flows from mutual funds to stocks has grown over the past few months, a trend that we expect to gain steam over coming months. Long term, those inflows to stocks will drive the market higher. In that light, the dips we see from current market swings represent excellent buying opportunities.

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

What Stock Tips do we have? For this week, we have five stocks on our Breakout list. We wrote about Providence SVC Corp (PRSC, Personal Services) and Industrial SVCS (IDSA, Waste Management) in our newsletter last week. We cautioned that investors should wait for the May 10 earnings report on IDSA before investing. That turned out to be a great tip as the stock dropped 12% for the week despite meeting earnings expectations. No doubt that the skittish markets played some part in that decline. However, we have kept IDSA on our watch list as we think the pullback from last week creates a buying opportunity. Two others, Rosetta Stone (RST, Software) and Amerigroup (AGP, Healthcare Facilities) have been on our watch list for some time. We also added one new stock, IMPAX Laboratories (IPXL, Biotechnology & Drugs). IPXL is a specialty pharmaceutical company that is focused on the development and commercialization of generic and brand-name pharmaceuticals. The company blew the lid off their recent quarterly earnings announcement and Return on Equity comes in at an astronomical 68%. Growth rates are outstanding and valuation remains excellent with a PE of just 7. The stock can be a little rocky, but the rewards could be outstanding for those that can ride out the bumps. We also still consider Sturm Ruger a strong buy, but have removed that one from the breakout list since our purchase last week. The market has been showing a lot of volatility lately and that creates buying opportunities. Long term the market will finish higher so take advantage of market dips and buy, buy, buy.

Fear Rips Through Market As S&P Drops 6.4%!

2010-05-09T09:37:00.000-04:00

This was truly a tough week in the market, the worst we have since in quite some time. Investor fear ripped through trading as the broad market fell 6.4% for the week. The strong market gains YTD have now evaporated. That is a big turnaround in just two short weeks. What is driving the market? The company line is concern over European fiscal conditions, most notably Greece. That is believed to be the most significant factor on why volatility rose so sharply last week on heavy trading volumes. We wrote last week that this was just market noise in light of all the positive domestic developments. Unfortunately, nervous investors and technical trading are turning what should be noise into something much more feared. As volatility rises, so do selling pressures, and the trend feeds the fear brigade the sustenance needed to escalate losses. All of a sudden what should be noise becomes a fully blown correction. Technical trading does not help matters. In fact, on Thursday, a “fat finger” was blamed for a mammoth 1000 point drop in the Dow over just 20 short minutes. Reports were that a trader inadvertently entered a sell order for 1 billion shares instead of a million. This event clearly spooked investors, something that I have never experienced before. We mentioned last week the market needed a pullback and we certainly got that and more. Despite the fears, we look at the recent pullback as a buying opportunity and fully expect the market to end the year at higher levels than where we sit today. Now is not the time to sell positions as the market could bounce upward over the next few weeks as the fear eases over the European debt situation. There is also the overhang of potential Wall Street regulation, but that will likely take Washington much longer to figure out. The bigger picture to keep in view is corporate earnings, GDP growth, consumer confidence, and low interest rates. The trend for each of these factors is positive and far outweighs any potential long term impact over debt concerns in Europe. Even the US jobs picture is showing clear signs of improving as upwardly revised increases have been reported for the past four months. It is difficult to gauge and predict the ebb and flow of investor fear, but at some point these fears will subside and the stock market will resume its advance. Now is the time to be a buyer and not a seller!

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

What Stock Tips do we have? Just two stocks remain buys from our Breakout list published last week. Rosetta Stone (RST, Software) and Amerigroup (AGP, Healthcare Facilities) performed relatively well despite the market meltdown last week. Both lost ground, but lost much less than the overall market. We had been watching OneBeacon Insurance Group, but recently dropped that from our list. We introduced this company to subscribers the prior week but cautioned investors to wait on buying until after quarterly earnings were released. That was a good call as their earnings report was a disappointment and that, along with the market chaos caused a big drop in their stock. We added three new stocks to our watch list including Providence SVC Corp (PRSC, Personal Services), Sturm Ruger (RGR, Recreational Products), and Industrial SVCS (IDSA, Waste Management). Providence provides government sponsored social services and transportation services to health care providers. Providence just reported record first quarter earnings and appears positioned for strong future growth. Valuation remains attractive and the stock price has held up well over the past two weeks despite the meltdown. Sturm Ruger is engaged the design, manufacture, and sale of firearms. The company works has a production backlog, exceptional operating margins and carries a Return on Equity that is one of the highest in the industry. The stock price has had a good run over the past few months, but we think there is more room to run in light of a PE just over 10. Industrial SVCS is the last new addition to our breakout list and operates in recycling and waste services. IDSA is due to report quarterly earnings May 10, so waiting until after those reports is most prudent. IDSA will get the green light to buy if it can exceed earnings estimates.

Last week was an extremely volatile week which saw the largest weekly drop in two years. Investors are nervous and technical trading has put a lot of selling pressure on the market. We cannot predict when the market will rebound over the short term, no one can. However, we do believe that the long term trend is positive as the economic and business fundamentals continue to improve. The market will recover from the meltdown last week once investors realize current fears are overblown. Now is the time for investors to be patient and resist the urge to sell holdings. It is more prudent for investors to ride out the current volatility and reevaluate once the market begins to stabilize. We actually think now is a good time to buy as the overall market is now back to where it started the year. Investors that missed out on the first quarter run can now get into the game on equal footing. We are not surprised at the recent pullback as the market had been experiencing a strong run, but were surprised at the sharpness of the declines. Nonetheless, we do expect the market to bounce back significantly since in our view the market became oversold. The key to successful investment is to stay invested for the long haul and by doing that investors will be in the game to participate in the next market recovery.

Selling Pressure Drops Market 2.5%!

2010-05-02T20:23:00.000-04:00

It was a volatile week for the stock market in light of significant news activity. By the end of the week, the selling pressure overwhelmed the bulls and the market dropped 2.5%. The market may have needed a sell off as the rise has been a bit fast over the first four months of the year. What was the catalyst? The selling pressure appears to have come mostly from fears over a European debt crisis and concerns over Goldman’s legal troubles. Frankly we think both of these catalysts are just noise in the market. The more important factors to consider are corporate earnings, GDP growth, consumer confidence, and interest rates, all of which delivered positive news. The vast majority of first quarter earnings reports have been positive with many reports also topping revenue expectations. GDP figures showed growth for the third straight quarter as the economy continues to improve. Consumer confidence rose to its highest level since August 2008 and the CaseShiller index reported its first year over year increase since 2006. These are strong signs that the bull market that has begun will indeed have the legs to continue. Furthermore, the FED reconfirmed its commitment to keep interest rates low to ensure that the recovery is not hampered. No doubt last week investors got spooked and sold to cash in on gains. The market has risen sharply already this year, and probably needed a pullback. However, we view this pullback as a buying opportunity and fully expect the market to end the year at higher levels than where we sit today.

Quarterly Earnings Drives Market Higher

2010-04-25T12:54:00.001-04:00

The market resumed its advance last week increasing 2.1%. Small stocks as measured by the Russell 2000 enjoyed an even greater bump rising 3.8%. Quarterly earnings were the big driver as many companies reported results that exceeded estimates. In fact, the vast majority of companies not only beat on earnings, but exceeded top line estimates as well. Those are strong signs that economic conditions are improving and trending in the right direction. That economic strength will provide the sustenance the market needs to keep growing. Earnings reports will continue for the next few weeks as the 1st quarter reporting season winds down. We expect these reports to remain positive and provide more support for upward market growth. However, the market trend is never straight up and at any time bad news could cause a market jolt. Although, all in all, we remain optimistic on the market direction and have been aggressively moving towards full investment across all portfolios.

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

What Stock Tips do we have? Universal American (UAM, Insurance), SYMS Corp (SYMS, Apparel), Rosetta Stone (RST, Software & Programming), and Renhuang Pharmaceuticals (RHGP, Biotechnology & Drugs) remain buys from our Breakout list published last week. We have added two new stocks to our buy list this week including OneBeacon Insurance Group (OB, Insurance, Prop. & Casualty) and Amerigroup (AGP, Healthcare Facilities). OneBeacon is a property and casualty insurance writer with excellent fundamentals and a stock price that has been gaining momentum over the past three months. The company is due to report earnings on April 29, so cautious investors may want to wait for positive news before plunging in. Amerigroup is a managed healthcare company with a focus on people who receive publicly sponsored healthcare benefits. AGP valuation appears a little on the high side as expectations have risen sharply since the company blew the lid off their latest quarterly earnings report. The next quarterly earnings report is due this week, April 30 and the risk is higher now that expectations are greater. We plan to wait and evaluate the next report before investing. Frankly, this may be an opportunity to pick up a quality company if the share price dips following the announcement. We also went on a buying spree last week and purchased CPI Aerostructures, NYMAGIC, and American Equity Life from our Buy List. All of these stocks were on our buy list but were removed following our purchase. These stocks represent excellent buys and their prices remain reasonable for purchase. When investors look for stocks to buy, we suggest reviewing our buy list as well as the stocks we currently hold in our portfolios. When evaluating stocks that Market Beating Stocks already owns, review the stocks purchased within the last four weeks whose current price is still within 5% of our purchase price. Longer term, we remain optimistic that the bullish trend will continue and are moving aggressively to become fully invested in all portfolios.

Uptrend Continues in Anticipation of Quarterly Earnings

2010-04-11T12:47:00.000-04:00

The market continued its advance rising 1.4% last week. Year to Date, the S&P Index is now up 7.1%, a very good showing for the first three months of the year. We have been a bit cautious over the past few weeks knowing that a short term correction was a possibility. That cautiousness has kept us in more cash than what we would typically hold. We are growing less cautious and remain optimistic that 2010 will be an up year. We are now looking at first quarter earnings as the big driver that will influence the short and long term market direction. Generally speaking, if the majority of earnings reports are positive, the market will likely continue its strong advance. We plan to become fully invested over this period assuming that earnings season is not a disappointment. Another big driver, is the cash sitting on the sidelines. Overall trading volume remains low despite the market advance this year. That is unusual as higher trading volumes usually correspond with market advances. We think lower trading volumes suggest that significant cash is sitting on the sidelines or in investments other than stocks. At some point, some of this money will return to the stock market as investors search for higher yields and their appetites for risk grow over time. We think the volume on new money coming into the market will grow significantly over time, and with that will come big market returns.

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

What Stock Tips do we have? Delta Apparel (DLA, Apparel), Universal American (UAM, Insurance), PHH Corp (PHH, Consumer Finance), SYMS Corp (SYMS, Apparel), American Eqty Invt Life (AEL, Insurance) and Rosetta Stone (RST, Software & Programming) remain buys from our Breakout list published last week. We purchased stock in Maidenform Brands and Summer Infant last week so we have removed them from our breakout lists of stocks to buy. For investors that do not already own stocks, now is an excellent time to buy. We have added one stock to our breakout list, Del Monte Foods (DLM, Food Processing). Del Monte stock is now showing again on our buy screens. Some of our subscribers may remember that we bought and sold Del Monte stock last year for large gains. Buying stocks that we have sold in the past is not unusual, and is just a sign that momentum has recently returned to the stock. Del Monte is a good case in point. Momentum has taken DLM up more than 30% over just the past three months. The stock remains reasonably valued and operating margins are sound. Clearly interest in the stock is pushing up the price, and now may be another good time to buy Del Monte stock. Our overall strategy is to look for stocks to buy that show strong momentum and value. Momentum is the timing indicator that helps identify when to buy stocks. We look to for stocks that are already moving up in price as opposed to those that have not yet started to move. It can take several months or even longer for a stock to begin rising from a narrow trading range or support level. That time sitting represents dead money, and is why our strategy of buying momentum really earns in weight in gold! In short, our goal is to buy high and sell higher, a strategy that has been very successful for us as our results bear out.

Another Week Of Gains Amidst Growing Nervousness!

2010-03-21T12:26:00.001-04:00

Another week of gains as the S&P rose .9% for the week. However, the market fell slightly Friday, the first down day in the past nine. Investors seem a bit nervous at these levels and the market may be getting a little ahead of itself. Frankly, a short consolidation period could be just the ticket to calm fears, particularly with all the uncertainty this weekend around Healthcare legislation. All in all, the economy continues to show positive signs as inflation remains low and jobless claims left few surprises. In addition, the FED kept interest rates low and suggested they would follow that course over the near term. However, there are signs that foreign governments may begin raising rates, and in fact India just took that course. If foreign interest rates begin to rise that will further pressure the FED to raise rates sooner than later creating market headwinds. The long term fundamentals for a rising market are good, although the market has been very hot since hitting those January lows. Investors should not be surprised if there is a pullback over the near term. However, we would consider a pullback a buying opportunity, a time for the market to catch a breath. A prudent approach right now might be to take some money off the table as we did last week with the sale of two positions. We may be a little slower to reinvest to allow the market more time to consolidate over the near term. We enforce that discipline by just being more selective over the opportunities available for reinvestment. Next week could be interesting for the market, particularly as the outcome of Healthcare legislations becomes more clear.

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

What Stock Tips do we have? Delta Apparel (DLA, Apparel), Universal American (UAM, Insurance), City Telecom Hong Kong (CTEL, Communication Services), PHH Corp (PHH, Consumer Finance), and Maidenform Brands (MFB, Apparel) remain buys from our Breakout list published last week. Last week we also uncovered an attractive buying opportunity on Aeropostale (on our buy list last week). We chose to buy a call spread instead of buying the Aeropostale stock outright which we describe in more detail later. We kept CTEL on our list, but would caution that investors may want to wait for a consolidation period before jumping in since the stock rocketed 15% on Friday alone. We also added Rosetta Stone (RST, Software & Programming), a provider of language learning solutions. The stock price has been on a tear since their February earnings release, rising more than 50% over the past month. We do not plan to chase this one, but may buy on a pullback if the stock comes under pressure from rising too fast. The market may be getting a bit overheated, so we took some money off the table last week by selling two positions. Frankly we are not in a hurry to buy unless market conditions change or we find a compelling opportunity. However, while the odds are good for a minor pullback, we also do not expect a major correction. A longer consolidation period or a minor pullback would be a healthy sign for the market.

Get Daily Updates On Breakout Stocks From:
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Modest Gains In Quiet Trading Week!

2010-03-14T15:23:00.004-04:00

The S&P rose 1%, a modest gain in what was a quiet week in terms of economic news. The market indexes continue to trade at or near 52 week highs. The market is showing strength at current levels, however trading volumes were relatively light, so conviction is difficult to assess. It is also interesting that volatility rose slightly, not overly significant in itself, but perhaps indicative of a growing nervousness amongst investors at these levels. We still consider the market reasonably valued. There is still a great deal of money on the sidelines in safe investments. We expect that money to enter the stock market over time as the investor's appetite for risk increases. The hunt for higher yielding investments will eventually bring investors back to equities. We remain optimistic for the remainder of the year, but also expect to have a few bumps along the way. Next week will represent a better barometer for market strength as more economic news will be in play.

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

What Stock Tips do we have? Delta Apparel (DLA, Apparel), Universal American (UAM, Insurance), and City Telecom Hong Kong (CTEL, Communication Services) remain buys from our Breakout list from last week. We have written before that China based stocks have taken a beating and CTEL in kind lost more ground last week. We still think the stock represents a very good buying opportunity, but investors should be cautious given the current weakness in these stocks. CTEL should do well long term despite the short term malaise. We also added three new stocks to our buy list this week to include PHH Corp (PHH, Consumer Finance), Maidenform Brands (MFB, Apparel/Accessories), and Aeropostale (ARO, Apparel). PHH provides mortgage and fleet management services and the company is showing strong growth in sales and earnings despite the difficult lending environment. As credit markets begin to thaw, we expect this company and the stock price to really take off. Maidenform Brands and Aeropostale are both in the apparel business. Maidenform Brands designs and markets intimate apparel products including bras, panties, and shapewear. Aeropostale is a popular mall-based specialty retailer of casual apparel and accessories. Both stocks have spiked sharply over the past month as reports show that the retail industry is doing much better than expected. We expect that trend to continue as consumers are becoming more confident, willing, and able to spend. Frankly, buying these stocks on their recent spike makes us a little nervous as we usually like to buy during consolidation periods. However, these two stocks look very strong and waiting for consolidation could mean paying 10 to 15% more for the stock. The fundamentals look good for Maidenform and Aeropostale, with Aeropostale having a slightly lower PE ratio, but higher short interest. Options trade on both stocks so we may choose to buy stock on one and an option on the other depending on pricing next week. We do not plan to chase these stocks, but would be willing to buy at current levels rather than wait for a longer consolidation period. Overall, we remain optimistic that the market will trend upward through the remainder of the year. There will surely be some bumps along the way, but we plan to remain aggressive and fully invested in stocks.

Remember, you can access daily updates on Hot Stocks to Buy directly from our web site At: http://www.marketbeatingstocks.com

Market Beating Stocks: Joes Jeans Skyrockets 26% For Week!

Our two stock portfolios, Growth and Retirement both gained ground last week. The big winner was Growth which rose 3% to bring its YTD return to 6.2%. That is quite a turnaround from the challenges experienced earlier in the year. Spurts like these are not unusual and that is why we try to stay fully invested most of the time to ensure we take advantage. Our retirement portfolio has had phenomenal performance since inception, 133% return versus an -8% loss on the S&P over the same time period. We trail the market slightly YTD, but know that this portfolio will have its spurts and in the end produce market beating returns. Our Retirement portfolio has beaten the market return every year and we do not expect this year to be any different.

Portfolio Details and Stock Positions Available Online At: http://www.marketbeatingstocks.com

Strong Week Pushes Market Into Positive Territory YTD

2010-03-07T14:27:00.002-05:00

A strong week in the market as the S&P rose 3.1% pushing the broad market in positive territory YTD. The market gained momentum from positive developments on Greece and a better than expected employment report. Jobs overall are still being lost, but those losses declined at a slower rate than anticipated. We still expect the unemployment rate to rise over the coming months as job creation continues to fall short of job losses. However, the economy can still improve despite rising unemployment over the near term. In other economic news, the latest ISM services index topped expectations while the ISM manufacturing index fell slightly short, but still registered improvement. Market volatility also fell significantly no surprise given the market resurgence, and represents another sign that investor fear is starting to subside. Lower volatility will surely bring new money into stock market as investor appetites for risk grow and move money from lower yielding money market and bonds funds. We are encouraged with the market behavior this week and continue to have a positive outlook for the rest of this year. We mentioned last week that we had bought protection for our portfolios to better manage risk in case the market had a meltdown. We decided to close those positions on Friday given the strong week and favorable economic reports. We will occasionally buy protection when the market becomes overheated or during times of rising uncertainty around significant events. Buying protection is like paying insurance premiums, most of the time we expect to lose small amounts for that protection in order to offset losses on long positions during a time of crisis. We view the market as reasonably value, as stocks have become less cheap. There is no need to chase stocks, now is a good time to patient and buy on dips.

Momentum And Value Screen: Breakout Stocks To Buy!

What Stock Tips do we have? Delta Apparel (DLA, Apparel) and Universal American (UAL, Insurance) remain buys from our Breakout stocks watch list from last week. We also added one new stock, City Telecom Hong Kong (CTEL, Communication Services) to our buy list. China based stocks have taken some hits lately due to concerns that growth in China may slow. Slower growth might happen, but China will still grow faster than any of the larger countries including the U.S. Telecom services and infrastructure will continue to be in demand as China grows and CTEL is well positioned to capitalize on those prospects. Over the past year CTEL share price has moved up handsomely over the past year, but we think there is more room to run given the prospects for future earnings growth. As a percentage, Institutional ownership is also very low which could jumpstart the stock to even larger gains if institutions join the party. Breitburn Energy (BBEP, Oil & Gas), Universal Corp (UVV, Tobacco), and Joes Jeans (JOEZ, Apparel) were on our buy list last week, and these stocks all remain attractive buy opportunities. We purchased each of these stocks last week for our own portfolios, which is why we removed them from our current watch list. We also dropped American Italian Pasta from our buy list as momentum has slowed while the stock has been consolidating over the past few weeks. We still like this stock and if we already owned, would definitely continue holding. For new purchases, we just think there are better buying opportunities with other stocks that are showing stronger momentum and value. Overall, we remain optimistic that the market will trend upward through the remainder of the year. There will surely be some bumps along the way, but we plan to remain aggressive and fully invested in stocks.

Remember, you can access daily updates on Hot Stocks to Buy directly from our web site At: http://www.marketbeatingstocks.com

Market Beating Stocks Monthly Update

2010-02-28T16:46:00.001-05:00

Flat Finish Masks Up & Down Week!

The broad market moved slightly down for the week dropping .4%. A flat finish to be sure, but those results masked the market volatility experienced during the week. We saw two sharp down moves, but were fortunate to also experience the rebounds. Consumer confidence figures came in significantly lower than expected and the rise in the dollar caused equity prices to fall. Bernanke came to the rescue by assuring investors that rates will remain low for some time. The economic recovery, while improving, is still very tenuous. In particular, the housing market continues to struggle as January existing home sales came in lower than expected. With all the uncertainty, we are encouraged that the market has been able to hold current levels. Overall, we do expect volatility to trend downwards and the market to rise albeit slowly over time. Occasional corrections will still occur, and when they do we will be buying. We recently bought protection for each of our portfolios and we will continue to do that whenever the market gets a bit overheated. We do not expect a major correction, but rather just felt it was prudent to protect some of our unrealized gains and long positions. Having some protection is an excellent way to manage and reduce overall portfolio risk without sacrificing the potential for big gains.

Momentum And Value Screen: Breakout Stocks To Buy!

What Stock Tips do we have? American Italian Pasta (AIPC, Food Processing), Delta Apparel (DLA, Apparel), Universal American (UAL, Insurance), Breitburn Energy (BBEP, Oil & Gas), Universal Corp (UVV, Tobacco), and Joes Jeans (JOEZ, Apparel) are the stocks currently on our buy list. Three of the stocks on our list were just added this weekend. Universal American offers health insurance and managed care products primarily to the senior market. The company recently announced quarterly earnings that significantly exceeded estimates. However, what really got us excited was the company exceeded top line revenue estimates and offered higher guidance on 2010 prospects. The stock price has moved up, but still represents an attractive buying opportunity. We also added Breitburn Energy to our buy list. The company has shown strong price momentum over the past three months and valuations remain attractive. The rise in oil prices has helped the company outlook, but we think the stock price can continue to move up even if oil prices come under pressure. We do not currently own oil and gas, so buying Breitburn represents good diversification for our portfolio. Universal Corp rounds out our buy list additions for this week. UVV is a tobacco merchant and processor headquartered in Virginia. UVV profit margins and earnings growth have remained strong despite the challenges with increasing revenue in the declining tobacco industry. However, tobacco companies have shown over many years how resistant they are in difficult economic times. This would not be a long term play for us, but we do see opportunity for taking advantage of stock price momentum for the next six months. We dropped two stocks from our buy list that included Amerisource Bergen and Lihua International. We think Amerisource is still a good company to buy in an industry with strong prospects. In fact, we just purchased Amerisource for one of our portfolios, and that is the reason we dropped the stock from our buy watch list. We also dropped Lihua International. China based stocks have struggled over the past few weeks, and that recent loss of momentum has dropped this stock from buy consideration. Overall, we remain optimistic that the market will trend upward through the remainder of the year. There will surely be some bumps along the way, but we plan to remain aggressive and fully invested in stocks.

Remember, you can access daily updates on Momentum Stocks to Buy directly from our web site At: http://www.marketbeatingstocks.com

Bought QID for Protection

2010-02-25T18:59:00.002-05:00

We bought the QID ETF for one of our stock portfolio's. This ETF is based off of the NASDAQ and will move twice the inverse of the index. We took a 10% position just to help offset any portfolio losses in case the NASDAQ market moves sharply down. We only plan to hold short term, with the intent to manage risk as the market finds it footing. If we lose money, that will be okay as that will likely mean our overall portfolio return is moving up in tandem with the rising market. Using inverse ETF's are an excellent way to diversify stock portfolios as they move in opposite directions to the market.

Great Time To Buy AmerisourceBergen

2010-02-24T20:30:00.002-05:00

We bought AmerisourceBergen (ABC) stock today. We added this one to our Market Beating Stocks Watch List over the weekend and decided to jump in after seeing signs that momentum is starting to return. Now is a good time to buy as valuations are as good as they have been in quite some time for drug companies. The stock trades at a PE of only 15 which is at a discount to the market. Traditionally, pharmaceutical companies typically trade at a premium to the overall market but have been depressed over the last year due to concerns with potential healthcare legislation. The odds of legislation passing have dwindled somewhat, but even if that happens we think the market has already more than priced in any negative impact into stock prices. The short and skinny, now is a good time to buy pharmaceuticals particularly since momentum is now starting to return.

Market Beating Stocks - Weekly Recap

2010-02-21T14:04:00.001-05:00

Retirement Portfolio: Kapstone Paper Recovers Jumping 7%!

Our Retirement Portfolio only treaded water last week but remains in line with the market YTD return. Most of our stocks did well with all showing gains for the week expect Humana and Five Star Quality Care. Kapstone was the highlight, rising nearly 7% for the week as the stock is begins to recover from selling pressure during the recent market meltdown. Unfortunately, our portfolio gains were negated by the precipitous drop on Five Star Quality stock. Five star announced disappointing earnings that failed to meet expectations and the stock price fell sharply, 15% for the week. That left us in the red and we decided to sell to limit our loss to 11%. When companies fail to meet expectations, the selling pressure can be intense, which often means sharp price changes particularly on thinly traded and low dollar price stocks like Five Star. The stock may bounce back over time, but frankly we were looking to get out of this one even before their earnings release as the stock price had been trailing market performance over the past two months. Unfortunately, the stock price moved sharply down much too fast to get out at more reasonably loss levels. Stocks are always most vulnerable whenever big news is released such as earnings announcements. The market will often move too fast, which challenges investors ability to limit losses. This is a very real risk with trading stocks and highlights the importance of diversifying investments across many stocks to reduce the overall impact on the portfolio. For example, if we hold 10% of our funds in a stock that drops 15%, the overall impact on our portfolio is limited to a loss of 1.5%. This is a key strategy we employ towards managing risk across our portfolios. With the recent sale of Five Star, we are currently 70% invested in this portfolio. We do plan to make additional portfolio investments as the market is showing signs of stabilizing. Our goal is to become fully invested over the next few weeks.

Growth Portfolio: Odyssey Healthcare Leaps 15%!

The Growth portfolio had a very strong week for the second week in a row after rising nearly 4%. All stocks saw price increases except one. We are at a minor loss YTD, but we still expect the portfolio to recover quickly over the near term. The big winner was Odyssey Healthcare which rose 15% after announcing earnings that exceeded expectations. We have held this stock now for two months and expect to continue holding through their next earnings release. Bucyrus, HealthSouth, and Decker also had strong weeks rising more than 6% for the week. We are still trading on margin and will likely continue over the near term unless the market has an unexpected meltdown. Volatility has softened considerably, and that should reduce the negative impact that implies for using margin. As the market recovers, we should continue to get a strong bounce from our stocks and the additional leverage in play. One stock that remains on our sell watch is Valmont Industries. The stock rose 1% last week bringing our overall gain to 7.7%, but we are looking to take our profits and move on to an opportunity that shows stronger recent momentum. Our plan was to hold Valmont through its latest earnings report in hopes of a stronger bounce, but the report failed to move the stock in a major way. We will likely sell this stock next week.

Market Beating Foresight: Fears Drive Selling Pressure As Volatility Sky Rockets!

2010-02-07T13:49:00.002-05:00

The stock market fell again last week with YTD performance dropping to -4.4%. Investor fear over world economic troubles and the US employment situation intensified selling pressures as volatility skyrocketed! Trading on Thursday and Friday exemplified that volatility as changes up and down on the VIX index were as great as we have seen in many months. What are investors to do with fear and panic so prevalent? We plan to sit tight, now is not the time to be selling. The economic fundamentals are clearly starting to improve as corporate earnings have been overwhelmingly positive, GDP is showing growth, manufacturing and productivity indexes are improving, and consumer confidence has been rising. Yes, unemployment is still high and that will remain so for quite some time. As we have said before, unemployment is a lagging indicator that will not show significant improvement until the economy is well on the path to recovery. Fundamentally, the economy is in recovery and eventually the current market fears will subside and volatility will decrease. Just sit tight and buy when there are extreme dips during the trading week.

Momentum And Value Screen: Hot Stocks To Buy

What Stock Tips do we have? VSE Corp (VSEC, Business Services), American Italian Pasta (AIPC, Food Processing), Ezcorp (EZPW, Consumer Financial Services), Delta Apparel (DLA, Apparel/Accessories), Lihua International (LIWA, Misc. Fabricated Products), and Amerisource Bergen Corp (ABC, Biotechnology & Drugs) are the stocks currently on our buy list. Last week we took a bullish position on Ezcorp by buying a call option and at the same time selling a put option to offset our entry cost. All in all, Ezcorp held up pretty well in the meltdown last week and we expect the stock to continue moving upward. We added Amerisource during the week as soon as it hit our stock screen. Amerisource fundamentals are very strong and now, is a great time to buy this quality company. American Italian Pasta announced excellent earnings last week and the stock promptly moved up 10%. In our view the stock is still attractive following this rise, but patient investors may want to wait a few days to make sure the stock holds these new highs. We dropped International Power from our watch list as the stock dropped significantly last week. The concerns over the strength of world economies helped contribute to company woes. We made add International Power to our watch list again, but right now, just do not see the company as worth the additional risk. As for the market, volatility increased sharply last week, despite further signs that the economy has regained its footing and is starting to show improvement. We think now is a good time to look for buying opportunities, particularly following those times when the market has moved sharply down. Frankly, we think the market got oversold last week, particularly on Thursday and Friday, although there was a recovery in the last hour of weekly trading. When volatility rises sharply, that presents excellent buying opportunities. Our strategy is to identify the stocks we want to buy, and then jump in when the overall market falls and drives the stock price down. Now is the time to take the contrarian view and buy on the dips, instead of following the majority of investors that now are just selling the news.

Remember, you can access daily updates on Hot Stocks to Buy directly from our web site At: http://www.marketbeatingstocks.com

Market Beating Foresight: January Disappoints, But Creates Buying Opportunity!

2010-01-31T17:39:00.001-05:00

January came to an end with the market moving lower for a third consecutive week. The YTD market performance dropped to a loss of -3.7%. Some prognosticators suggest that as January goes so does the rest of the year. That pessimistic view would mean the S&P would finish lower than current levels by the year end. But we do not think that is what will unfold. We see recent declines as reflecting very short term uncertainties and nervousness. We do not think these factors will restrain the market from advancing over the long term. In short, investor's fretted over the Bernanke reappointment, financial industry reform, and the state of the ruin (as Leno would say). These issues were given far too much weight when measured against the overwhelmingly positive story in the economy. So far, 76% of companies have exceeded their quarterly earnings estimates, and another 8% met expectations. Those are excellent performance numbers from many companies across industries. In add ition, very strong fourth quarter GDP growth figures were announced this week. In our minds, the economy is beginning to improve despite the continued rise in foreclosures and the unemployment rate, both of which are lagging indicators that will continue to rise this year despite an improving economy. Make no mistake, we expect only a very modest improvement in the economy and the stock market for the year, but still consider the market declines over recent weeks as a buying opportunity. As Thomas Lee from JP Morgan says, take advantage of the Washington concerns today and use that as a buying opportunity. Overall, the market has gotten a bit oversold, we see a return to previous highs hit in January over the near term, but would caution that volatility could remain high over the next week or so.

Momentum And Value Screen: Hot Stocks To Buy

What Stock Tips do we have? VSE Corp (VSEC, Business Services), Continucare (CNU, Healthcare Facilities), American Italian Pasta (AIPC, Food Processing), International Power PLC (IPRPY, Electric Utilities), and Lihua International (LIWA, Misc. Fabricated Products) are all carryovers from our buy list last week. VSE Corp, Continucare, and American Italian Pasta will each announce quarterly earnings next week and we plan to wait until after those reports before making buying decisions. Continucare and American Italian Pasta have held up well so far, and buy signs will flash if their stock prices continue to consolidate or start to move upward next week. Lihua stock has dropped significantly as China based stocks came under significant selling pressure last week. Speculation out of China was that the government would operate to restrain growth over newfound fears of inflation. That speculation intensified the selling pressure on these stocks and Lihua stock fell sharply in sympathy. We consider the drop in Lihua an excellent buying opportunity and will try to buy in at a good price next week. We think the market reaction to the Chinese restraint overblown, as China will continue to be one of the strongest economies this year. We also added two new stocks to our buy list including Ezcorp (EZPW, Consumer Financial Services) and Delta Apparel (DLA, Apparel/Accessories). Ezcorp lends or provides credit services to individuals who do not have cash resources or access to credit to meet short-term cash needs. The company also operates pawn stores in the United States and Mexico. Some investors may be a little queasy with this industry which can be fraught with consumer fraud. But the fact is this company creates very strong cash flow and the management team has been very successful over time. We think the company is worth the risk and the investment. We also added Delta Apparel to our buy watch, a company that manages a portfolio of branded and private label active wear apparel and headwear. The company is doing a lot of things right as the stock price has advanced sharply over the past 6 months. However, despite that rise the stock price is still a long way from highs hit in late 2007 which leaves plenty of room to run. Delta stock is still reasonably priced at a PE of 12 and analyst support is strong. Overall, the broad market has been losing ground over the last three weeks and we think now is an excellent buying opportunity. The economic fundamentals are beginning to improve and valuations are reasonable. Buying opportunities are created when selling pressures intensify and oversold conditions are created, which is what we have seen over the past few weeks. Yes, there are concerns over China and government reform, but we do not think those factors will depress stock prices over the longer term.

Remember, you can access daily updates on Hot Stocks to Buy directly from our web site At: http://www.marketbeatingstocks.com

Volatility Rises Sharply As Selling Intensifies!

2010-01-24T17:05:00.001-05:00

We predicted last week would see a rise in volatility and sure enough the VIX skyrocketed to 28. Investors got spooked and sold whatever news there was, good or bad. By the end of the week, the market experienced its second straight weekly decline, a market drop of -3.9%. That is the largest weekly decline since March of last year. What happened? Certainly, some of the volatility can be attributed to concerns over the anticipated onslaught of quarterly earnings reports, now in full swing. But the surprising result was that the vast majority of earnings reports released were positive! Our data indicates that 47 out of 60 companies reported upside results – that is an overwhelming success rate that does not explain market declines. Other the other hand, perhaps investors were spooked by concerns over additional financial regulation proposed by Obama and questions over whether Bernanke would be confirmed for a second term as Fed Chairman. There were also concerns that China may begin tightening monetary policy which could reduce US investment and growth. All in all, the sell off appears a little overblown. In terms of the longer term view, we give the most weight and credibility to the strength of quarterly earnings reports and that has been overwhelmingly positive. However, we need to add caution here. Markets move down much faster than they go up, and fear can drive the market wildly over short periods. In other words, we think the market will return to previous levels, but the next week or so could be very volatile.

Momentum And Value Screen: Hot Stocks To Buy

What Stock Tips do we have? VSE Corp (VSEC, Business Services) and Continucare (CNU, Healthcare Facilities) are still on our watch list even though both are up significantly since added, at 43% and 20% respectively. We plan to wait for the quarterly earnings report from each company before we consider investing. VSEC earnings are due out next week and CNU the week after, February 1. We added American Italian Pasta (AIPC, Food Processing) to our list last week and we still like this one particularly for diversification purposes. AIPC stock ended the recent week essentially flat, a great showing in light of the -3.9% market downturn. We dropped CNC from our watch list after the company announced plans for a stock offering that would be dilutive to existing shareholders. That could pressure CNC stock price performance for some time to come and we would rather turn our attention to better investment alternatives. We have two new stock additions for our watch list that include International Power PLC (IPRPY, Electric Utilities) and Lihua International (LIWA, Misc. Fabricated Products). International Power is engaged in the generation of electricity and provision of electrical capacity in 21 countries. IPRPY stock has been on a steady uptrend since July 2009 and we think that momentum will continue. It operates across a number of countries and should benefit from increasing demand as economies begin to improve. Lihua is a copper clad aluminum magnet wire producer in China. The company sells its products mostly in China and the magnet wire is a basic building block for a range of motorized appliances. The game here is that strong growth in industrial and consumer demand in China will continue at a pace likely faster than most other countries, driving profitability for the company. The price appreciation on LIWA could get an added boost as more institutional investors uncover it, as institutional ownerships is currently very low under 11%. As for the market, volatility increased remarkably in just three days as the market fell -3.9% for the week. That is a big change in sentiment, and a little scary considering that the earnings news from last week was significantly more positive than negative. We think market fears became exaggerated, but would add it is difficult to guess when those fears will subside. Markets go down faster than they rise and we plan to be prudent and sit tight for a few days to see whether the sharp declines continue or whether the market bounces back. We remain cautiously optimistic over the long term. However, the volatility increase will provide trading opportunities for options. In fact, we made several trades last week which we discuss in our Aggressive Portfolio update. Option premiums will rise with volatility and that makes income producing strategies more appealing.

Remember, you can access daily updates on Hot Stocks to Buy directly from our web site At: http://www.marketbeatingstocks.com

Market Beating Foresight: Solid Start To The New Year

2010-01-10T10:53:00.000-05:00

The first week of January trading got off to a solid start with the broad market rising 2.7%. The increase was a very good sign as trading volumes returned to normal following the holiday. Economic news was mixed, but the market found a way to rise anyway. The biggest market drag was the slip in payrolls which saw an unexpected decline. That news came on Friday, but the market was able to shrug it off and end the week with strong gains. Unemployment continues to be very sticky and significant improvements in those numbers do not appear near on the horizon. However, we do see improvements coming in quarterly earnings reports. Companies will begin announcing results for the most recent quarter end beginning next week. We believe the majority of reports will show improvement due to company cost reduction efforts, as well as opportunistic year over year comparisons. Bottom line earnings growth should be improve, although top line revenue growth may remain elusive for many companies. All in all, we believe the next quarterly earnings cycle will continue to support current market levels and should even help propel stock prices modestly higher. Many pundits believe that performance over the month of January is a very good barometer for how the year will finish. Meaning, if we can show a monthly gain in January, the market will end the year in positive territory. January performance certainly got off to a good start with the solid performance this week!

Momentum And Value Screen: Hot Stocks To Buy

What Stock Tips do we have? We have kept VSE Corp (VSEC, Business Services) and Continucare (CNU, Healthcare Facilities) on our stock watch list through the first week of the New Year. VSE Corp continues to show strong momentum rising almost 6% over the first week of January. The company is scheduled to release their most recent quarterly earnings report on January 18. That report may provide the stock a jolt one way or the other as the price has been stuck in a fairly narrow range since November. We are not going to consider buying until release of that earnings report. Continucare lost a little ground this week as the stock price continues to consolidate in a pattern established over the past three weeks. We still think this is an excellent time to buy stock as the company track record with delivering earnings growth has been very good. The stock price has had a strong run over the past year, so the recent consolidation period suggests there is price support for the stock at recent levels. We may consider buying this one next week. As we mentioned last week, we think 2010 will be a positive year, but the stock market will likely remain bumpy particularly over the first six months. All in all, we think there will be plenty of opportunity to make money in stocks and options in the New Year, particularly those investors that show patience and wait for attractive entry points!

Remember, you can access daily updates on Hot Stocks to Buy directly from our web site At: http://www.marketbeatingstocks.com

Year End Review

2010-01-02T11:37:00.002-05:00

Market Beating Stocks: 2009 Performance Was Truly Exceptional

What a difference a year makes! Market performance in 2009 was second best in the decade with the broad market turning in a 23% return. That is a big improvement over a 2008 market performance that lost -38%. This past year, we saw a strong stock market recovery, a sigh of relief over the panic that swept through in 2008. While the stock market has shown the beginnings of a strong recovery, the economy on the other hand, continues to lag. Yes the recession is over and the economy is beginning to stabilize, but growth has been anemic and may remain so for some time. As for our portfolio performance, 2009 was truly exceptional. Our Retirement portfolio led all portfolios with a whopping 61% gain for the year. The Aggressive portfolio also had a big year with a 43% return, increasing its cumulative return since inception to 400% in just three short years. Our Growth portfolio also had a good year increasing its cumulative return since inception to 29% versus a -21% loss on the S&P Index over that same time period. These are truly exceptional returns, particularly in light of the 2008 market declines that we all suffered, which for many of us were the worst ever experienced. Just eeking out positive gains would have been a major accomplishment for investors over this time period. However, our strategy has delivery exceptional results, and we know we can beat the market returns in both good and bad times. We look forward to the New Year and remain confident that our strategy will again deliver market beating results in 2010. But what results do we expect for the New Year? It is anybody’s guess, but we suspect 2010 will end with a modest positive return, but the advance will likely not be as strong as what we saw in 2009. The stock market will need to take a breather after the latest 9 month run in 2009. The stock market will need time for the economy to show more strength and growth. We suspect 2010 will be very similar to the 2004 stock market, which also happened to be the second year following the end of a major bear market. However, while we think the market will end the New Year with a modest return, we also would expect a bumpy ride with market pullbacks possible of 10% or more.

Momentum And Value Screen: Hot Stocks To Buy

What Stock Tips do we have? We have kept VSE Corp (VSEC, Business Services) on our watch list and this week added Continucare (CNU, Healthcare Facilities). Continucare provides primary care physician services through a network of 18 medical centers. Their stock price momentum has been through the roof, particularly over the past month. That adds risk to purchasing right now as profit taking could put undue selling pressure on the stock price. However, if the stock price can consolidate and hold current levels over the next few weeks, that could signal an excellent time to buy. We also had HealthSpring and Nash Finch on our watch list, but have since removed as we purchased both stocks last week. As for our portfolios, we expect to become fully invested early next year, assuming the market continues to advance or hold current levels. We sold a number of positions last week to take advantage of tax rules as the year came to an end. Now that we are in the New Tax Year, we plan to sell stocks where we have positive gains but that have been underperforming relative to the market. This housecleaning will provide opportunity to find and buy new investments that are showing greater demand and interest. Overall, we think 2010 will be a positive year, but the stock market will likely remain bumpy particularly over the first six months. One of our 2010 goals will be to demonstrate patience when buying, that is, resist the urge to chase stocks and to instead buy on dips, market pullbacks, and consolidation periods. All in all, we think there will be plenty of opportunity to make money in stocks and options in the New Year!

Remember, you can access daily updates on Hot Stocks to Buy directly from our web site At: http://www.marketbeatingstocks.com

Market Beating Foresight: Another Flat Week As Consolidation Continues

2009-12-20T11:25:00.000-05:00

The broad market ended flat again as the consolidation continued last week. The NASDAQ on the other hand ended the week up 1% as technology stocks got a big boost in light of positive earnings surprises from Research In Motion and Oracle. Economic measures were mixed with Producer Prices higher than expected, although the Consumer Price Index remained in line. Industrial productivity beat expectations, but jobless claims rose again last week. We view the consolidation action in the market as a plus. The market simply needs time to catch a breath following the tremendous climb since March. The economy is showing signs of improvement and we expect that to continue, although likely at a very slow pace. The market so far has established a resistance level around 1100 on the S&P Index. We expect more of the same over the next few weeks as we move through the holiday season. Trading volumes are usually much lighter over the holiday, which can cause more volatility at times particularly for smaller stocks.

Momentum And Value Screen: Hot Stocks To Buy

What Stock Tips do we have? We have kept VSE Corp (VSEC, Business Services), HealthSpring (HS, Accident & Health), and Nash Finch Company (NAFC, Grocery) on our watch list from last week. We bought stock in both World Accep Corp and Gulf Resources last week so those stocks were removed from our watch. We are adding one new stock to the list this week and that is Odyssey Healthcare (ODSY, Healthcare Facilities). Odyssey is a provider of hospice care in the US. The stock price has been moving up strong since May and over the last three months is up 18%. That is pretty strong price appreciation particularly relative to the overall market. Earnings and sales growth has been steady, and ODSY management has a good track record in exceeding earnings estimates. We like company fundamentals, as well as the industry prospects, and think those factors will help the stock continue to rise. As for our portfolios, we expect to become fully invested early next year, assuming the ma rket continues to hold current resistance levels. However, we do plan to take advantage of tax rules and sell those stocks in loss positions from our taxable portfolios before year end.

Remember, you can access daily updates on Hot Stocks to Buy directly from our web site At: http://www.marketbeatingstocks.com

Flat Week As Consolidation Continues

2009-12-13T15:53:00.001-05:00

The broad market ended the week flat in a quiet week of economic and business news. The broad market has been consolidating over the past few weeks, which we view as a positive sign. The stock market has simply had an astounding run since March of this year. Frankly, the market could use a breather, otherwise risk of a major pullback or meltdown will grow. How long will this consolidation period last? Another month or most of 2010? We recently reviewed the 10 year chart on the S&P Index and found the price action eerily similar between the last two market cycles. For example, in 2003 like 2009, stock market performance was exceptional. The year 2003 marked the beginning of the next bull market, just like how we believe 2009 will come to be viewed. In 2004, the stock market was mostly flat as the market consolidated for most of the year. We suspect 2010 will be very similar to 2004. Next year may bring positive gains, but we think those returns will be far lower over all than what we saw in 2009. That is not a bad thing, remember it sure beats a down market. The economy, while showing small signs of life, still has a long way to go before strong growth begins. We think this market consolidation period will likely extend well into 2010 given the weak economy and how far the stock market recovery has already moved. However, we know our stock selection strategy can do very well even when the broad market shows slower growth. Our strategy is always focused on those companies that show the strongest momentum, and there will always be a few stocks moving well even in a slower market. We look at consolidation periods as an excellent time to invest selectively in just those stocks.

Momentum And Value Screen: Hot Stocks To Buy

What Stock Tips do we have? We have kept VSE Corp (VSEC, Business Services), Gulf Resources (GFRE, Chemical Manufacturing) and HealthSpring (HS, Accident & Health) on our watch list. But pickings were pretty slim from our stock screen this week as the market has been consolidating recently. From our screen, we identified two more stocks that we find interesting. World Accep Corp (WRLD, Financial Services) has had a strong run since late October. The fundamentals look very good as this stock got hammered in the financial meltdown and is just now starting to recover. We like the upside potential on World as there is plenty of room to rise before the stock comes close to pre-meltdown highs. The downside risk is that the financial industry may come under pricing pressure over the near term from stock dilutions as more financial companies follow Bank of America's lead to raise capital for TARP repayment. Our other new addition is Nash Finch Company (NAFC, Grocery), a food distributor for retail grocery and military commissaries. The stock price has been consolidating over the past few weeks and is up about 20% over the past three months. The big story was the latest quarterly earnings that were released on November 12 that exceeded expectations by 76%, a big surprise. We think the company is positioned for a repeat performance in the next quarter.

Remember, you can access daily updates on Hot Stocks to Buy directly from our web site At: http://www.marketbeatingstocks.com

Employment Figures Lift Market

2009-12-06T13:28:00.002-05:00

The broad market hit new highs as the S&P climbed 1.3% higher for the week. It was a positive week which got a jump start when fears over Dubai’s credit situation subsided. The Dubai crisis started last week and frankly we felt got way overblown, a stance that the market softened this week with more encouraging news from Dubai. But the bigger player last week was the employment report which came in better than expected, with fewer jobs being lost than expected. Furthermore, prior month employment figures were revised to show smaller drops as well. The end result was an unemployment rate that fell from 10.2% to 10%. Now before we get out the party favors, it is important to recognize that the economy is still losing more jobs than are being created. But the good news is that the jobs reports lends additional support to the position that the economy is not getting worse. The other big news was Bank of America and their plan to fully repay the government TARP money by year end. B of A plans to sell stock to raise the necessary capital. We would expect more banks to follow suit and that is a sign that capital and liquidity positions have been improving at financial institutions. We watched Michael Milken of the Milken foundation speak recently and he quoted figures suggesting that more capital was raised in recent periods than in our entire corporate history. We translate that to mean that corporations have significantly improved their capital and liquidity positions, and that gives us more confidence that corporate America will weather this storm just fine. We still expect the economy recovery to be anemic for some time, as consumers, investors, and companies will be slow to use their pent up cash. But once the recovery gains momentum, it could be a strong one given all of this cash on the sidelines! All in all, we still consider current stock market levels reasonable and plan to stay invested.

Momentum And Value Screen: Hot Stocks To Buy

What Stock Tips do we have? We have kept VSE Corp (VSEC, Business Services) and have added two new stocks Gulf Resources (GFRE, Chemical Manufacturing) and HealthSpring (HS, Accident & Health). Last week we purchased Telenor (TELNY) and Bucyrus (BUCY) so we have removed those two stock from our watch list. HealthSpring is a managed care organization with a primary focus on Medicare. The stock has been on a tear recently and the fundamentals remain very strong. We actually are looking at buying a call option on HealthSpring if we can get in at an attractive premium. Gulf Resources is also an interesting play. The company manufactures and sells chemical products used in oil exploration, wastewater processing, and papermaking processes. The company sells their products in China, which is the country with the strongest growth prospects. On a percentage basis, the stock price has risen astronomically, nearly 1000% over the past year. However, that was from a very low stock price which sometimes can distort percentage gains. The stock still trades around $10 and we still think there is room to run. However, stock price volatility has risen sharply over the past three months, so we know buying this stock could be a very bumpy ride over the near term.

Retirement Portfolio up 58% YTD!

Market Hits 1100!

2009-11-22T17:17:00.001-05:00

Market Beating Foresight: Fresh New Highs Before Ending Flat

The broad market hit a fresh new high early before ending the week flat. The S&P broke through the 1100 level but finished the week slightly off those highs. Not a bad showing in light of a slow week in terms of market moving news. Third quarter earnings season is now mostly over. This week retailers were in the news with most reporting earnings that met or exceeded expectations. Dell was a disappointment which may have fanned the selling pressure late in the week. It was also a light week on news from the economic front. An influential banking analyst recently came out suggesting they were as bearish as they have been in a long time and that we would experience a double dip recession next year. Surely the strong market advance since March is fueling much of the bearish sentiment, but the market has also shown resiliency. We still view the 1100 level on the S&P as a very significant resistant level. If the market can hold this level near term, we plan to become more aggressive with our call option trading. As for stocks, we plan to stay mostly fully invested, but also do not have as great an urgency to replace stocks that have been sold. In other words, we will be more selective on the stocks we do buy, even if that means we sit on cash a little longer.

Momentum And Value Screen: Hot Stocks To Buy

What Stock Tips do we have? We have kept VSE Corp (VSEC, Business Services), Telenor (TELNY, Telecommunications), Conseco (CNO, Insurance), and Bucyrus International (BUCY, Const. & Agric. Machinery). We added two new stocks to our watch list including Paragon Shipping (PRGN, Water Transportation) and Patriot Coal (PCX, Coal). Paragon is a stock that was severely beaten down over the past two years but has been making a recovery over the past six months. On a valuation basis the stock is really cheap, but the near term economic outlook still pressures company prospects. However, the company is well positioned long term and continues to expand its long term contracts. Once shipping volumes begin to grow, Paragon should do very well. Patriot Coal was also newly added to our watch list, a company that has been on our list before. Patriot is not in a flashy industry, but its stock has done very well over the past year despite what should have been a difficult year. The company is very attractively valued with a stock price that continues to move up steadily. Patriot Coal stock does show volatility, so patient investors may get the best price when buying on dips. We have dropped Kapstone Paper due to increased levels of volatility that have pressured the stock price downward, a little too sharply for us. Overall we still like this market and would encourage investors to continue buying on dips. The stock market will likely remain very bumpy, particularly until the market can demonstrate strong resistence at the 1100 level on the S&P.

Remember, you can access daily updates on Hot Stocks to Buy directly from our web site At: http://www.marketbeatingstocks.com

Weekly Stock Market Update

2009-11-15T14:36:00.001-05:00

Market Beating Foresight: Broad Market Reaches 52 Week High

The broad market hit a 52 week high on Wednesday and finished the week 2.3% higher. The market strength shown over the past two weeks is encouraging, although the S&P still has not broken that sticky 1100 level. Declines in the dollar and positive corporate earnings remain the big drivers of the market. Consumer confidence levels came in lower than expected, but the market was able to shrug off those concerns. Third quarter earnings report are mostly complete and generally speaking have been better than expected. However, we would note one recent statistic that suggests only 27% of companies were able to increase revenue year to year. Cost cuts and reduced spending has helped companies short term, but over time more companies will have to show top line revenue gains to ensure sustainable long term growth. We believe that a slow recovery will continue to challenge and pressure revenue growth into next year. For us, the 1100 mark on the S&P is a very significant resistant level. We will be more comfortable with current market highs once the market breaks through and holds that 1100 level.

Momentum And Value Screen: Hot Stocks To Buy

What Stock Tips do we have? We have kept Kapstone Paper & Packaging (KPPC, Paper Products), VSE Corp (VSEC, Business Services), Telenor (TELNY, Telecommunications), Conseco (CNO, Insurance), and Bucyrus International (BUCY, Const. & Agric. Machinery). We added one new stock to our watch list and that is Par Pharmaceutical. This company develops, manufactures, and distributes generic and branded drugs in the United States. Par has had strong growth rates over the past year and the stock price has reflected that in the price momentum shown over the past six months. The PE is a little higher than what we look for at 22, but we think the higher price is worth the risk given prospects for company growth. Overall we still like this market and would encourage investors to continue buying on dips. The stock market will likely remain very bumpy, until investor and consumer confidence reach higher levels. Show patience on down days and take some profits when the market moves up sharply. We will become even more bullish once the market breaks and holds the 1100 level on the S&P Index.

Remember, you can access daily updates on Hot Stocks to Buy directly from our web site At: http://www.marketbeatingstocks.com

Weekly Stocks Market Recap

2009-11-08T15:40:00.001-05:00

Market Beating Foresight: Strong Recovery From Prior Week

The broad market made a strong recovery from the prior week rising 3.2% as the advanced quelled some recent fears over a looming market meltdown. The stock market as a whole has stayed pretty resilient despite the strong advance since March. We still expect the market to remain very bumpy, but do not expect another big meltdown. In fact we took a couple of short positions against the market index when fears ran high to take advantage of what we thought was an overcorrection. All in all, most economic measures and corporate earnings reports have been better than expected. Recent productivity measures released last week marked the highest gains since 2003. The ISM Manufacturing index for October also cam in better than expected. Several large companies announced positive earnings surprises. The primary negative has been unemployment which has now reached the highest levels since 1983. But remember the unemployment rate is a lagging indicator and that will not improve until later as the economic advance gains more traction. In fact, we think the unemployment rate will continue to rise well in 2010 as a sign of how slow the recovery will be. However, the good news is that other economic factors have begun to show improvement which should provided continued support for the stock market.

Momentum And Value Screen: Hot Stocks To Buy

What Stock Tips do we have? We have kept Kapstone Paper & Packaging (KPPC, Paper Products), VSE Corp (VSEC, Business Services), Telenor (TELNY, Telecommunications), Conseco (CNO, Insurance), and Bucyrus International (BUCY, Const. & Agric. Machinery). We added one new stock to our watch list and that is Decker Outdoor Corp (DECK, Footwear). Decker is engaged in designing, producing, and managing footwear and other accessories including handbags, headwear, and outerwear. Decker recently released quarterly earnings that exceeded estimates and even went so far as to raise their outlook for 2010. We view that as a very positive statement in light of ongoing recessionary pressures. The fundamentals look good and its PE remains one of the lowest in the industry. Chart action has also been good as the stock has been consolidating recently at a price level high enough that leaves no overhead over the past year. Remember, we look for stocks trading near highs that we expect to go higher and Decker fits the bill. The one concern is that short interest on the stock is very high near 18% which suggest investors expect the price to fall. However, we view that as a contrarian indicator, meaning the higher it is, the more likely the price will go up. Why is that? Investors that have already sold the stock (short position) will eventually have to buy the stock back, and that demand forces prices to rise. In fact, if the price continues to rise, these short sellers will likely force the stock sharply higher as they rush in to cover their positions. Overall we still like this market and would encourage investors to continue buying on dips. The stock market will likely remain very bumpy, until investor and consumer confidence reach higher levels. Show patience on down days and take some profits when the market moves up sharply. Remember, little pigs get fat, while hogs get slaughtered!

Remember, you can access daily updates on Hot Stocks to Buy directly from our web site At: http://www.marketbeatingstocks.com

Weekly Stock Market Update

2009-10-18T17:17:00.001-04:00

Market Beating Foresight: 3rd Quarter Reporting in Full Swing

Third quarter reporting is now in full swing with the results to date somewhat mixed. Despite mixed results the broad market was able to rise 1.5% for the week. Financial services got a boost from JP Morgan, Goldman Sachs, and Citigroup all of which reported better than expected results. Bank of America on the other hand was a major disappointment as losses widen greater than expected. The soon to be retirement of CEO Ken Lewis also played into the selling pressure on B of A stock. Overall, results were mixed at reports on both IBM and GE added to the selling pressure. Third quarter reports will continue for a few more weeks and we expect more of the same. That is, mixed results, with the majority of companies struggling to meet top line revenue targets. We hope the market can carry current price levels through the end of the year, and frankly do not expect another big market rise. However, we also do not expect a big market downturn unless upcoming third quarter reporting deteriorates significantly. We expect fourth quarter reports show more favorable trends and would expect the market to have another bounce early next year as a result. We plan to buy on dips to be invested in the market in advance of that anticipated price rise.

Momentum And Value Screen: Hot Stocks To Buy

What Stock Tips do we have? Our Momentum and Value stock screen has uncovered several Hot Stocks. The Breakout Stocks on our list that remain from last week include Kapstone Paper & Packaging (KPPC, Paper Products), Walter Energy (WLT, Coal), VSE Corp (VSEC, Business Services), and Hi-Tech Pharmacal (HITK, Biotechnology & Drugs). Newly added to our watch list this week are Breitburn Energy Partners (BBEP, Oil & Gas) and KMG Chemicals (KMGB, Chemical Manufacturing). Breitburn is an independent oil and gas partnership focused on acquisition, exploitation, and development of oil and gas properties. The BBEP stock price has been on a tear, but we consider the stock valuation still very reasonable. However, oil and gas stocks have been rocky over the past year, so investors need to be prepared for that volatility when choosing to buy. KMG Chemicals is the other new stock we added, a company that manufactures, formulates, and distributes specialty chemicals. We really like this stock and may buy early next week. The KMGB price chart is very strong and the stock valuation is very reasonable in light of past earnings and sales growth. Furthermore, institutional ownership remains low, so additional buying interest could really propel the stock higher. We think this stock could be poised for big gains given all these factors, and of course will only benefit further as the economy rebounds.

Remember, you can access daily updates on Hot Stocks to Buy directly from our web site At: http://www.marketbeatingstocks.com

Labor Day Outlook

2009-09-07T10:01:00.001-04:00

Market Beating Foresight: Is Sentiment Changing

The stock market lost ground last week as the S&P dropped -1.2%. The week started with declines, but did recover some of those losses by the end of the week. Economic data was mixed as the Manufacturing Indexes showed improvement along with pending home sales. Payroll data was released on Friday and those numbers too were better than expected. But the market seemed spooked by an unemployment rate that rose more than expected. We sense that market sentiment is becoming more pessimistic with traders selling good news while bad news carrys more weight than it did just a few short weeks ago. September is traditionally the worst performing month and that too may be adding to the caution. The economy is still in declining although the pace of the declines has decreased. The worst may be over, but it will take time before consumer confidence returns and that is an essential ingredient for economic growth. We expect the unemployment rate to continue rising into next year, and those job losses will dampen any recovery. All signs still suggest that the recovery will be slow and could take several years as consumers regain confidence, rebuild wealth and reduce debt loads. Over the short term we expect the market to remain very bumpy, in range bound trading. We can make money in such a market by taking gains more quickly and turning over stocks more frequently. If volatility stays low, we know our trading strategy will exploit current market conditions, allowing expansion of our performance lead over competitors, as well as the broad market index.

Momentum And Value Screen: Hot Stocks To Buy

What Stock Tips do we have? Our Momentum and Value stock screen has uncovered several Hot Stocks. The Breakout Stocks on our list include Credit Accep Corp (CACC, Consumer Financial Services), Allion Healthcare (ALLI, Healthcare), World Accep Corp (WRLD, Consumer Financial Services), Kapstone Paper & Packaging (KPPC, Paper Products), Del Monte Foods (DLM, Food Processing), and Walter Energy (WLT, Coal). CACC, ALLI, and WRLD are carryovers from our buy list last week. We are adding three new stocks to our buy list for this week. Kapstone Paper has had strong price action over the past six months, but remains very reasonably priced. Institutional ownership is on the light side which could provide additional pop to the stock price if they join the party. This one does have a very high amount of short interest 32%, meaning investors expect the price to drop which adds risk to a buy. However, we sometimes view high levels of short interest as a contrarian play in that if the stock price rises, short sellers will have to buy to cover, propelling the stock even higher. We also added Del Monte Foods to our buy list. We have traded DLM before for profit, so we already know this company. The stock price has been on a steady trend upward now since December of last year. Prospects for the company look decent as commodity prices have been improving which lowers costs and increases margins. Walter Energy was our last addition for the week. WLT produces coal primarily for the steel industry. Stock prices have been rising recently from very depressed levels due to economic conditions. The economy will temper industrial demand and company growth, but this company has been very profitable despite the difficult economic times. At some point the economy will begin to slowly turn and that will give an added boost to Walter Energy. We purchased Five Star Quality and Satyam for our portfolio last week and as is our practice, we removed them from our current buy list. We also dropped Bucyrus and American Equity Life from our buy list as both came significant selling pressure. Overall we think the market is reasonably price and expect a narrow trading range over the near term. The market is still weak and trying to find its legs, so the ride could still be quite bumpy for the remainder of the year. This is a good time to take some gains if you have them and reinvest into new stocks.

Remember, you can access daily updates on Hot Stocks to Buy directly from our web site At: http://www.marketbeatingstocks.com

53% Gain on Sale of Sepracor

2009-09-02T20:41:00.002-04:00

We just sold our position in Sepracor for a 53% gain in just four months. Takeover rumors were rampant which prompted the exchange to put trading on hold before the market closed for the day. Fortunately we were able to get out just in time. There could be more upside if the takeover becomes real, but with gains like what we had, it's just not worth the risk to hold. Better to take the gains when you have them.

Portfolio Return Highest Among US Stock Funds

2009-08-30T14:19:00.003-04:00

Market Beating Stocks Lives Up to Name; Leaves Stock Funds In Dust

So how do our returns compare? Recent reports on stock fund rankings and S&P Index losses make our 12.9% annualized return look exceptional! The September 2009 edition of Kiplinger Personal Finance magazine ranks the performance of the 450 biggest and best performing stock based funds. The article, Stock Fund Rankings, further separates the stock funds into funds that invest primarily in US stocks and those that represent more of an International flavor. Kiplinger highlights the 3 year annualized return across all 450 funds for the period June 2006 to June 2009. For comparison, we calculated a 12.9% annualized return over that same 3 year period on our portfolio. At first glance, that might not seem so great, but remember that period covers the worst recessionary period since the Great Depression. For a market comparison, Kiplinger highlights that the S&P 500 Stock Index carried an annualized loss of -8.2% over the same time period.

Clearly, we beat the market by a large margin, but how did our portfolio compare against the professional fund managers? Fortunately, the Kiplinger article provides a basis for which to compare. Kiplinger identified 450 funds for which 322 were US based stock funds. Of those 322 funds, NOT ONE beat our results! That is right, our Retirement Portfolio beat ALL 322 stock funds in performance over the most recent three year period! That is truly exceptional. You might also ask, how did we do against all 450 professionally managed funds reported in this article, which includes the internationally based stock funds? Our performance was better than all 450 funds with only four exceptions! All four exceptions represented China based funds, no surprise given the strength of that economy and market over this difficult period. So all in all, we outperformed all 322 US based stock funds, as well as 446 out of the total 450 funds that were presented by Kiplinger magazine. Needless to say we are extremely happy with our performance. Furthermore, we are very confident in how well our stock selection and portfolio management strategy stacks up in the marketplace!

Weekly Stock Market Recap

2009-08-23T11:57:00.001-04:00

Market Beating Foresight: Market Hits Fresh New Highs

Volatility returned as the Stock Market hits fresh new highs for 2009. For the week the broad market (S&P) ended 2.2% higher, a strong turnaround from earlier in the week. For the most part economic data was poor with jobless claims rising more than expected and housing data failing to meet consensus estimates. The stock market was able to shrug off the bad news and rise further. By the end of the week, better than expected home sales were released which helped the market realize a weekly gain. A lot more economic data is due for release next week, which we expect will confirm an economy that is slowly beginning to stabilize. Most key measures are still declining, but the pace of decline has certainly slowed. We think the worst is over, but acknowledge that the recovery will likely be weak and slow. We just do not see a quick return to the high flying days of the past few years. The de-leveraging underway amongst consumers and businesses will temper spending and economic growth. That said, we think the stock market is still an excellent place to invest. We are very optimistic that our stock selection strategy and portfolio management approach will significantly outperform the market indexes in this environment. Frankly, we would welcome a stock market with lower volatility, even if that means somewhat slower market appreciation. We know our strategy can far exceed market returns in just such an environment.

Momentum And Value Screen: Hot Stocks To Buy

What Stock Tips do we have? Our Momentum and Value stock screen has uncovered several Hot Stocks. The Breakout Stocks on our list include Babcock & Brown (FLY, Rental & Leasing), Innophos Holdings (IPHS, Chemical Manufacturing), Core Mark Holding (CORE, Retail Grocery, Bucyrus Intl (BUCY, Constr. & Agric Machinery), Credit Accep Corp (CACC, Consumer Financial Services), and World Accep Corp (WRLD, Consumer Financial Services). Babcock & Brown stock price is now up 22% since we first added to our buy list. We still like the company prospects although price momentum has slowed recently. Innophos has also been on our list for a while and is up 16% from our initial buy list price. We just purchased a call option on Innophos for our Aggressive Portfolio last week. Core Mark Holdings has been steady in August and is up 5% from our buy price. Bucyrus Intl was just added last week and we have not yet decided on whether to buy the stock or a call option. This week we are also adding two new stocks in Credit Accep Corp and World Accep Corp. Both companies are in the consumer finance space and are showing very strong momentum. Financial stocks in general have shown much strength over the past few months from what were very oversold levels. We dropped Incredimail, Joy Global, and NRG Energy from our buy list. Incredimal is already up nearly 40% since we first recommended and we do not want to chase the stock. Company prospects remain very strong, its just that the stock is now not as cheap as it once was. We recently purchased both Joy Global and NRG Energy for our stock portfolios, and our practice is to remove stocks we buy from our buy list. Subscribers that are looking for ideas on stocks to buy should always check our buy list as well as stocks we have recently purchased for our portfolios. All in all, we remain optimistic long term and would encourage investors to stay invested and not risk missing out on the next big move. However, it is always prudent to take some gains off the table when there is a big advance, just as we recently did with our 75% gain on Boise stock over just two short weeks. Volatility did rise last week and that is a trend that may continue as the market marches forward. As a result of that volatility, stock prices could swing in wider ranges over coming weeks. In that light, we suggest using that volatility as an advantage by investing in opportunities whenever the market moves sharply down.

Remember, you can access daily updates on Hot Stocks to Buy directly from our web site At: http://www.marketbeatingstocks.com

Weekly Stock Recap

2009-07-12T13:59:00.001-04:00

Market Beating Foresight: Summer Swoon Stokes Anxiety

The market lost ground for the fourth straight week as the summer swoon stoked more anxiety amongst investors. The market has been in the doldrums as concerns rise over the progress and outlook for an economic recovery. There was not a lot of economic news or quarterly earnings reports last week, but what was shared was not good. Oil led the market lower as concerns over declining oil demand from a faltering economy drove prices sharply down. The most recent ISM Services report showed economic contraction and jobless claims continue to rise. On a positive note, U.S. Treasury yields dropped significantly as investor demand drove prices higher which lowered yields. Smaller yields are good for Mortgage Rates as they trend closely the yield direction on longer term treasuries. To us, the market decline over the past four weeks is not all that surprising. We view recent performance as a correction and consolidation from the big run-up that started in March. The market had simply moved too far too fast and needed to catch its breath. Hopefully, four weeks of decline is all that is needed! The calendar next week will bring a heavy dose of economic data on inflation, production, retail sales, housing and jobless claims. In addition, reporting for second quarter earnings will be in full swing and will continue over the next few weeks. We believe the developments over the next few weeks have the potential to swing the market in a major way. Those developments could have a significant impact on the trend and direction that the stock market takes for the remainder of the year. We still view the stock market as reasonably priced, but caution that trading could become very volatile over the next few weeks. At the annual halfway point, the broad market is now down -2.7%. We still expect the market to finish with a positive annual return, that is as long as we avoid another market meltdown. We do have concerns that the market could test the lows hit earlier this year, but do not think that scenario is likely. We plan to stay fully invested in our stock portfolios and also plan to increase investment allocations in our options portfolio. The recent downturn in the oil industry has really pressured the stocks that we own related to that industry. We plan to carefully review these holdings over the near term and will make investment decisions based on future outlooks and price momentum.

Weekly Stock Market Recap

2009-07-05T16:14:00.001-04:00

Market Beating Foresight: Rocky Week Dampens Enthusiasm

The market started last week sharply lower, then recovered in the middle of the week only to drop 3% on Thursday. It was certainly an up and down week as investors searched for market direction and a near term trend. The weekly news was more negative than positive and the lighter trading volumes due to the holiday week combined to make for a rocky trading. The biggest news was jobs data and consumer confidence, both of which came in with a negative bias. Job losses continue to mount and results have been worse than expected. But frankly this remains no big surprise to us as we expect job losses and unemployment to rise through the rest of this year. Even if we hit an economic bottom in the fourth quarter, it will take time before businesses to show an interest and willingness to expand payrolls. Unemployment may not improve until well into 2010! Investors were also startled at greater than expected declines in June consumer confidence. Consumers will likely continue to hoard cash and reduce spending which will restrict growth in demand for goods and services. Furthermore, oil prices fell over 4% last week in large part due to falling expectations of global demand due to weakening economic conditions. That negative bias, along with lower trading volumes, made for a rocky week of trading. In the end the bears won and the market ended with another weekly loss. As we have said before the economy is not good, and its recovery will likely be slow and weak. Quarter two earnings releases will begin in full force through the month of July and that will have the potential to move the market in a big way. We plan to closely monitor those earnings releases over the coming month. The market could be in for a major bump if companies fail to meet earnings expectations or if their future outlooks deteriorate. However, we still view the stock market as reasonably priced at the 900 level (S&P) and we plan to buy stocks and options long when we can at those levels. Volatility has been trending down, but could spike once again if investors get spooked with earnings news. At the 2009 halfway point, we are fully invested in our stock portfolios, but do plan to increase investment allocations in our options portfolio. In addition, over the near term we plan to prune laggards from our stock portfolios and replace with stocks that show stronger investor demand. We fully expect our portfolios to outperform the market for the remainder of the year.

Remember, our complete list of stocks is Available Online At: http://www.marketbeatingstocks.com

Stock Market Recap

2009-06-21T12:27:00.001-04:00

Market Beating Foresight – Profit Taking Rules

Profit taking on low trading volume was the theme last week. Investors were selling early in the week and cashing in on profits from the strong market run since March 9. The good news is that trading volumes were low which suggest that conviction on the sell side was lacking. Profit taking seemed to be the biggest driver as the overall market news and trading was relatively light. On the economic front, housing starts were better than expected, however that was offset by greater than expected declines in industrial production. The rate of economic decline has slowed considerably, but it has not yet reversed course. We think the market has fully baked into current stock prices the improving outlook. We also think the market is currently trading in a reasonable range given the current market and economic outlook. It will likely take more significant and upbeat news on the corporate and economic fronts before the market goes on its next big advance. That advance will happen and we plan to stay fully invested to make sure we do not miss out. However, we think that market prices could remain trade range bound over the near term, at least until those big market moving events unfold. We plan to increase our investment allocation in long term call options as we do think the market will continue the advance over the next six months. We will also begin pruning our stock portfolios for stocks that are currently lagging the market returns. Our goal is to pick winners – stocks that perform better than the market benchmark - in seven out of ten stocks we purchase. However, that also means that we expect to pick at least three losers. In other words, 30% of our stocks will fail to beat the market. That is why portfolio pruning is necessary, with the intent to replace laggards with better performing alternatives. Replacing laggards with better performing alternatives is one of the key principles in our portfolio management strategy and investment approach. This approach has been a big factor in our success and helps ensure that we remain unemotionally attached to any one stock. We would also add that as a goal, a 70% success ratio represents an extremely high bar. Most investors would be lucky to achieve a success ratio of 50% over the relatively short trading periods we follow. In fact, the data would suggest that the majority of investors fail to consistently beat the market and that includes professional money managers!

Weekly Stock Recap

2009-05-31T18:39:00.000-04:00

Light Trading But Positive Week

Last week the S&P index ended 3.6% higher in light trading due to the holiday shortened week. The Year To date return for the broad market is now in positive territory at 1.8% after what was a pretty slow week in terms of news and corporate developments. One important news item was the consumer confidence reading which came in much better than expected. Those readings helped the market off to a good start for the week. But perspective and caution is important here relative to consumer confidence. We like the up tick in consumer confidence readings and the fact that results were better than expected, but readings remain at very low levels. We will breathe a sigh of relief once these readings show a sustained uptrend. On a different note, Long term bond yields fluctuated significantly last week which caused a market stumble when yields rose. Initial jobless claims slowed again last week which suggests the pace of layoffs is indeed slowing. However, continuing claims continue to grow which indicates that the economy is still not generating enough jobs to compensate for even a slowing pace of job loss. That is a trend we do not expect to see reversed any time soon. General Motors was the big corporate news as the company continues to teeter on bankruptcy. The market speculation is that the company will enter bankruptcy as early as next week.

Market Beating Foresight

Our optimism continues to grow as the market builds on recent gains. A 3.6% increase for the week is modest, but represents the kind of growth that is more sustainable over the long term. Volatility levels continue to moderate and that is a positive barometer that will help bringing investors back to the market. The economy remains very weak and we do not see a major reversal anytime soon. However we do think now is an excellent time for investors to increase stock allocations. Over the past few weeks, we have gone from a 70% cash position to begin nearly fully invested. We have been very aggressive increasing our stock allocations. We do think that the worst is over for the stock market, but caution that the market could still suffer significant bumps. Given a longer term view, this should be an excellent time for investors to enter the market. However, investors can reduce the risk of market timing on entry by spreading their new stock investments over a few months. The other important factor is to maintain portfolio diversification by investing in 10 stocks across a variety of industries. The stock market has already made a strong move since the March 9th lows. But we think the odds are good that the market will continue its uptrend amidst what will surely be bumps along the way. Last week was a short week with the holiday and trading volumes and net inflows were relatively light. But we expect the inflows into the market to grow significantly over the remainder of this year and that will likely support a rising market. Investors will not want to miss out on this potential rally. Obviously there is no guarantee, but we think the market upside potential outweighs the risk. We are 90% invested in our stock portfolios and plan to be fully invested very shortly. Our plan will be to stay fully invested over the near term as long as the market avoids another meltdown.

Weekly Stock Recap

2009-05-24T13:45:00.000-04:00

Housing & Jobs Weigh on Market

Last week started off with a bang only to end with a whimper. However, the broad market did end the week with a slight 5% gain leaving a Year to Date loss of -1.8%. The start on Monday was strong and encouraging following the losses the prior week. Financials and investment firms led the way based on their improving outlooks. The bulk of first quarter earnings reports are nearly complete. Several key retailers announced particularly strong results that exceeded expectations, a sign that distressed consumer spending may be finally turning the corner. Frankly, spending has a long way to go before returning to levels seen from prior years, although the slowing decline we now see is encouraging. But the real story last week was the release of poor economic data on Housing and the Job market. Housing starts fell again to record lows on larger than expected declines. Jobless claims rose higher than expected with continuing claims once again setting new records. Frankly, these economic reports are not a surprise to us. The rate of deterioration in Housing and unemployment may be decreasing, but the bottoms remains elusive. In fact, we continue to believe that unemployment will not peak until later this year or even next year. For some reason, the market woke up and that realization weighed on efforts to push the market advance forward. It should be no surprise that the economy remains very weak and continues to decline across most measures.

Market Beating Foresight

We find the modest gain this week encouraging following the pullback from the prior week. The market had gotten a little ahead of itself, so we view the two week consolidation as a positive sign. Too much growth too fast just raises volatility levels. High volatility creates anxiety amongst investors and that usually slows the net inflow of funds into the market. Moderate and sustainable growth is what we like to see, and that helps investors maintain staying power for the long term. The economy remains very weak and in decline. However, first quarter earnings season was generally better than feared, and did not cause another market meltdown. We think now is an excellent time for investors to increase their stock allocations. The stock market will likely remain choppy, but we do not expect another meltdown barring an unforeseen world event. The market will certainly not be immune to bad news over the remainder of this year, such as bankruptcies that continue to mount. In fact, speculators are betting that General Motors will declare bankruptcy. It that does happen, we do not expect that announcement to cause another market meltdown. We think that investments made now and over the next few months will be very rewarding over the long haul. Investments made in the stock market today will look very good three to four years out. We also expect net cash inflows into the market to grow sharply over the remainder of this year. That will help drive a strong stock market recovery. Investors will not want to risk missing out on that recovery by sitting on the sidelines. In keeping with our plan, we are now moving aggressively to 100% equity investments in our stock portfolios now that the market has survived the first quarter earnings season. Generally speaking, we do not try to time the market as we like to stay fully invested in our stock portfolios except during times of unusual market volatility. The volatility we experienced in 2008 was truly unprecedented, and we expect the market to revert back to more normal volatility levels over time. That means we expect to carry higher stock allocations this year than what we carried last year. In addition, we are optimistic that the stock market will maintain a positive bias and uptrend for the remainder of this year.

Weekly Stocks Recap

2009-05-17T12:11:00.001-04:00

Market Pulls Back!

Last week was tough for the stock market with the S&P 500 declining 5%, dropping the Year To Date return back in negative territory. The market pullback is not all that surprising after experiencing two months of unusually large gains. The reality is the market just got a little ahead of itself. As we have said before, we think it is healthy for the market to take a breather over the near term, 30% plus gains are just too much over a two month period in a declining economy. Yes, the economy is still in decline, although that rate of decline has slowed. Retail sales came in lower than expected last week, a big disappointment for the market. Consumer spending will likely continued to be challenged with unemployment fears and overriding concerns regarding economic health. Industrial production is still declining, although recent reports suggest the pace of that decline is slowing. Reports next week will provide more light on Housing, but a recovery in this sector just does not seem near. All in all, this is still a declining economy, although the positive is that the pace of that decline is slowing. That is good news, but we also suspect that economic recovery will be modest and slow when it does come. First quarter earnings season is almost over, and while most companies have treaded water, results show just how deep the economic impact has been.

Market Beating Foresight

We are not surprised nor particularly concerned with the market pullback last week. Frankly, the stock market had gotten a little ahead of itself. The financial sector led the decline, also not surprising given the remarkable gains from that sector over the prior two months. The economy is not in recovery mode, it is still in decline. Investors have been encouraged with the slowing rate of decline, but it is clear that the economy has not yet reversed course. We expect the stock market remain choppy and trading range bound over the next few weeks. However, we look at the recent pullback as a buying opportunity. For investors that have been sitting on the sidelines, now is an excellent time to increase stock allocations. As we mentioned last week, we too plan to increase our equity allocations now that the bulk of 1st quarter earnings have been released. We think that investments made now and over the next few months will be very rewarding over the long haul. We remain optimistic on the direction of the stock market, despite the market volatility last week. We expect incremental net inflows into the stock market to increase and that the rate of those increases likely will escalate over time. Net cash inflows into the market will drive the demand for stocks and their prices higher over the coming months. All in all, we remain optimistic, and expect an overall positive bias in the stock market trend over the remainder of this year. However, we also hope that we experience a more moderate and sustainable market growth than what we have had over the prior two months. Moderate growth will make it easier for participants to stay invested and will reduce market volatility. Confidence is critical towards turning around this economy and stock market. Reducing the fears that consumers and investors carry, will go a long way in restoring positive momentum in the economy and stock market.

Remember, you can access daily updates on Hot Stocks to Buy directly from our web site At: http://www.marketbeatingstocks.com

Weekly Stocks Recap

2009-05-10T16:42:00.002-04:00

Amazing Two Month Turnaround!

Wow, another strong week with the broad market (S&P 500) advancing a whopping 5.9%! That brings the Year to Date performance on the index into positive territory, now at 2.9%. That is an amazing turnaround from the market lows hit on March 9. Over the past two months, the broad market index has risen an incredible 37%, for what is surely one of the best two month performances in stock market history. To many of us, it feels like the worst is over for the stock market, and recent money flows into the market would support that. Late March and April cash inflows were at their highest percentage levels since 2003, which coincided with the start of our last bull market. Net cash inflows are highly correlated with stock market performance, as inflows drive up demand for stocks and prices follow suit. For this recession, we do think that the March lows may turn out to be the stock market bottom. However, we also know that the market cannot sustain 30% plus gains every two months for the remainder of this year. Do not be surprised if there is a bit of a pullback or market consolidation over the next few months. In fact, it might be healthy to see the market take a breather over the near term. However, we suspect there is still a great deal of money on the sidelines that will eventually enter the stock market. Those inflows have the potential to drive the market significantly higher. Our only concern is that the stock market may be getting a little ahead of itself, as the economy is still in decline as we discuss below.

Rate of Decline is Slowing!

Has the recession hit bottom? The evidence suggests that the recession is still very much in force. Most economic measures are still declining, although the rate of that decline has indeed slowed significantly. That slowing rate of decline is what has most investors excited. For example, most manufacturing activity still shows contraction and the unemployment rate continues to rise, although jobless claims did come in lower than expected last week. Measures on GDP continue to show declines, although that rate (pace) of decline is slowing. Housing measures are still very poor and a bottom still appears elusive. However, it is fair to say that the economic news and forecasts today are less bad than they were a few months ago. Those are encouraging signs that we too think are positive. However, we do not think we will see the end of the recession until later this year. In fact, we think unemployment will continue to rise through the end of this year. Real economic growth and job creation may not reverse trend and start upward until 2010. However, the stock market is considered a leading indicator on economic measures, with past history suggesting it will lead the economy out of recession by 6 to 8 months. If March was the bottom that would suggest economic trends will turn positive by the end of the fourth quarter this year. While it will take time for the economy to reverse trend, the stock market has already begun its march upward. The other big news last week was the financial sector. The government released the bank stress tests, and results were better than the market expected. The financial sector exploded, rising more than 23% in one week alone! Also, the 1st quarter earnings season is now winding down. All in all, corporate earnings have come in mostly better than expected, although they are down from prior years. On the other hand, companies have not done as good a job meeting revenue expectations, which we view as a reflection of just how poor the economy really is.

Market Beating Foresight

We are encouraged with the momentum and strength the market has shown over the past two months. However, we are a little concerned that the market and certain sectors may be getting a little ahead of themselves. Yes, the worst is probably over, but the economy is still in decline. Businesses are not likely to start expanding again until next year. The financial sector is a good case in point of after having just risen 23% last week. Now may be a good time to take a little money off the table. If you have large gains in some financial stocks, you may want to sell part of your position. That is what we did when we sold our option position in Bank of America. In our view, financial stocks will likely continue to rise long term from the levels today and still represent an excellent buy. However, a prudent strategy would suggest cashing in on part of those recent gains. Remember, you can always reinvest the gains into another industry or even back into the financial sector after a pullback on longer consolidation period. We subscribe to the old Wall Street adage, “Little Piggies Get Fat, Hogs Get Slaughtered”, which in essence means do not get greedy on any one stock. Despite the big gains, we have no plans to short financial stocks or the market itself as the current momentum is very strong. For those of you that have been sitting on the sidelines, now is an excellent time to increase stock allocations. We would suggest gradually increasing your stock allocation over the coming months rather that jumping in all at one time which will reduce your timing risk over market entry. We too plan to increase our equity allocations now that the bulk of 1st quarter earnings have been released. We remain optimistic on the direction of the stock market, but do have reservations with the pace of recent gains. Volatility could return if the market gets too overextended from what economic conditions warrant. But the real market power lies with the net inflows that drive the market over the next few months. We think there is significant pent up demand that is sitting on the sidelines. As consumer confidence and retail spending gain momentum, that could drive the market sharply higher over the remainder of this year as more investors join the party. All in all, we think the market upside potential is stronger relative to the downside risk. That should make investing at current levels very rewarding over the long haul.

Weekly Stock Update

2009-05-03T16:47:00.001-04:00

Market Shrugs Off Flu!

The market was able to resume its advance last week, despite wide ranging fears over spread of the swine flu. Concerns over the swine flu appear to have been overdone and by the end of the week the broad market (S&P 500) finished up 1.3%. The Year to Date loss on the market index has now been trimmed to -2.8%. However, the NASDAQ continues to be the big winner and is now up 9% for the year thanks to technology and smaller capitalization stocks. Subscribers will notice that our investment activity has begun to pick up over the past month. The number of opportunities that show on our stock screen has grown each week over the past month. We remain optimistic as the market continues to show strength and resiliency. First quarter earnings season is still in full swing, but will wind down over the next couple of weeks. All things considered, the market has held up pretty well with the onslaught of earnings reports.

Earnings Down, Revenue Lower Than Expected!

Economic reports last week were mixed. On the positive side, consumer confidence readings came in much higher than expected. In addition, manufacturing readings also come in higher than expectations. However, for perspective, the manufacturing readings still indicate contraction, although the pace of contraction has slowed significantly. There were also some negative economic readings released. Preliminary readings on first quarter GDP came in much lower than expected for a declining annualized rate of -6.1%. It appears that some of that GDP decline is attributed to sharply reduced inventory levels, which may tend to overstate the ongoing economic weakness as inventory replenishment will need to happen over time. In addition, reports on technology and construction spending were drastically down for the quarter. We are very encouraged with the consumer confidence readings as improvement in that key measure is vital towards jumpstarting spending levels. And without consumer spending, economic growth will be challenged. Consumer confidence remains at low levels, but the upward trend is an encouraging sign that a economic bottom may be near. However, other reports such as GDP and construction spending highlight just how weak the economy is. Our view is that the economy is still declining, but at a much slower rate. Early bird speculators might see that as the green light to rush in and buy more stocks. We also see this as a sign to increase equity allocations, but would caution those investments are best made only gradually over the near term.

Market Beating Foresight

Last week the market resumed its uptrend. First quarter earnings season remains in full swing as more companies plan releases for next week. It was also another week of choppy trading and spikes of higher market volatility. As we reported last week, most companies are doing better at beating earnings expectations while falling short on revenue expectations. That reinforces our belief that economic recovery may be slower than expected. Next week will also bring more information over the much rumored bank stress tests. Stress Test reports were originally planned for release Friday, but were delayed and all we got were rumors that some large banks may need additional capital. The speculation is that Bank of America and Citigroup stress tests are likely to highlight the need for additional capital. Those rumors will continue to pressure those banks and the financial sector in general until the market gets more clarity on the stress tests. Our trading activity picked up last week and we expect to continue buying as long as the market continues to show strength. However, we do not plan to become fully invested until at least after the first quarter earnings season is complete. We would still caution that the economy and future outlooks will show only slow recovery at best. We hope that the market rebounds with a measured and appropriate response. If the market rises too far too fast, volatility will likely return and could spook investors once again. Overall, we think now is a good time for investors to gradually reenter the market over time.

Remember, our complete list of stocks is Available Online At: http://www.marketbeatingstocks.com

Weekly Stock Recap

2009-04-26T15:35:00.002-04:00

First Down Week In Nearly Two Months!

The broad market (S&P 500) had its first weekly loss in nearly two months. Market results were mixed though as the S&P 500 fell, but the NASDAQ posted yet another weekly gain on the strength of technology stocks. The S&P index dropped to a -4.1% return Year to Date. Trading was volatile as the market swung widely throughout the week. On a positive note, the market continues to hold the gains made over the past seven weeks. The NASDAQ has been the big winner so far this year in large part due to technology stocks. The NASDAQ has now reached a 7.4% Year To Date return, which is a big premium over the S&P Index return. Smaller cap stocks which make up more of the NASDAQ index have clearly performed better than the large cap stocks that dominate the S&P index. That is a good sign for our strategy as our stock screens tend to uncover more smaller cap stocks. Company size is not a criterion in our stock screen. However, small caps are more prevalent on our screens since our focus is on momentum, growth, and value, attributes where small cap stocks often excel relative to their larger counterparts. The facts suggest it is a lot easier for a $200 million company to grow 25% than a $20 billion company. We continue to be optimistic on the stock market as the recent trend continues to show significant strength. First quarter earnings season is now in full swing, and will continue to be the primary driver on market direction over the near term.

Earnings Down, Revenue Lower Than Expected!

Earnings reports were the primary driver last week and will likely be the focal point next week as well. So far, most companies are reporting significant drops in earnings which news reports suggest are down overall on average 40%. However, the majority of companies did beat analyst expectations relative to their earnings performance. Beating expectations is a positive, although we would caution that expectation levels were in general very low. However, we do think companies overall have been aggressive and successful with reducing expenses quickly, and that has help sustain higher earnings levels. In our mind the bigger concern is the behavior of top line growth, revenue. News reports suggest that overall revenue is down nearly 11%. That is a smaller decline that earnings, but what is interesting is that the majority of companies are posting revenue numbers that are worst than expected, the opposite of the earnings situation. Our concern is that it is easier for companies to manipulate earnings over the short term than it is to manipulate revenue. Revenue growth is usually a very good barometer for the long term health of a company. The fact that most companies are missing revenue expectations suggest that market and economic factors are indeed having a significant impact, one that will likely continue for some time. Declining revenue will certainly pressure companies over the near term, declines that could have a more significant impact as companies exhaust their cost cutting measures. The Treasury stress test is also causing volatility in the financial sector, although preliminary reports suggest that most banks are carrying more than enough capital. Existing home sales were down again in March, while new home sales were up slightly from very low levels. The Housing sector has just not responded yet to low mortgage rates, lower house prices, and government efforts to increase available credit. We view that as a sign that a recovery in housing is not going to happen overnight as job fears and higher inventories depress sales. In fact, we see a long term housing trend that will demand adjustments to what we would call the re-pricing of American real estate. That means a downward bias in long term real estate price trends, including smaller and cheaper homes.

Market Beating Foresight

Despite the small loss on the S&P last week, the market continues to show strength and a positive bias. However, volatility did rise early last week as the market swung sharply through the week. Earning season is in full swing and both earnings and revenue are down. Companies have been doing better at beating earning expectations than revenue expectations. The revenue concerns suggest to us that recovery may be slower than expected. Next week will be another large slate of companies reporting quarterly earnings. These reports will again be the primary driver on market direction. More news may also come from the Treasury on the Bank Stress tests, and that too will influence the behavior of the financial sector. We continue to believe that the likely scenario is that most companies will meet or exceed what are low earnings expectations. We plan to gradually increase our stock allocations and will likely go all in once this earnings season is complete assuming that there has not been a meltdown. We could go all in now, but we think it is more prudent to wait a little longer. We still have 7 months left this year to make up for any potential gains we give up by sitting in cash. While we do expect to survive the quarterly earnings season without a meltdown, we would still caution that the economy and future outlooks will show only slow recovery at best. In our minds, a slow recovery is not a bad thing, it just means that the stock market will rise more slowly that it has over the past 2 months. Of course, as optimism grows, we recognize there is a great deal of pent up investor demand now sitting on the sidelines that could drive stock prices higher than fundamentals would otherwise warrant. Either way, if corporate earnings and future outlooks hold up, we will likely see a rising stock market. Our stock selection strategy will provide winners regardless of whether the market rises slowly or fast.

Weekly Options Recap

2009-04-19T15:56:00.002-04:00

Sixth Straight Week of Market Gains!

Another positive week as the broad market advanced last week for its sixth weekly gain in a row! The S&P Index rose 1.5% reducing its Year to Date loss to -3.7%. The stock market continues to show significant strength in what continues to be a challenging economic environment. The NASDAQ also continued its hot pace rising 1.2%for the week, but even more striking is its 6.1% Year to Date gain. We are encouraged with the strength the market continues to show as volatility moderates. We grow more optimistic every day that the worst may be over for the stock market. However, uncertainty remains high, and the market could easily fall 10% as it trades within a wide and choppy range. But all in all, we think the bottom was most likely reached in March. Investor confidence is growing and the money flow into the market appears to be growing momentum which will drive stock prices higher.

Economy Disappoints, But Earnings Up Beat!

All in all the economic data was a bit disappointing last week. Retail sales were slower than expected putting a damper on what had been an improving consumer trend over prior weeks. Housing data was also very disappointing with starts dropping to a 510,000 annual rate for one of the lowest levels over recent readings. Housing permits also fell bringing more questions over whether housing has really bottom. The data would suggest that an overall declining trend remains in force, although the declines do appear to be slowing. It is positive that the downward trend is slowing, but the bottom will not be hit until the trend reverses. Industrial production also declined and was worse than expected. Despite the worse than expected economic data, the corporate earnings released last week have shown promise. Intel, JP Morgan, Citigroup, and GE all posted earnings that were better than expected. That helped provide some juice to move the market higher despite the disappointing economic data. However, some perspective on Corporate earnings is important here. While these companies are reporting better than expected earnings, its worth noting that expectation levels are very low. So it is not like company prospects are returning to pre-recession levels any time soon. To date, future outlooks from these companies also remain somewhat mixed. We still look for the economy to begin improving late this year or by first quarter 2010.

Do we have option tips for investors?

We expect the market (S&P) to swing between a trading range of 800 and 925 over the near term in what may remain choppy trading. We also expect volatility (VIX) to trade between 30 and 40 over the next month, mostly in the mid 30 range. The volatility or fear gauge has dropped to levels not seen in many months, and that is encouraging for the market. There is still downside risk given the fragile economy and uncertain corporate outlook. However, the next quarterly earnings cycle should shed light on the future outlook, and we are encouraged that the market has held the large gains from the prior six weeks. Our primary options strategy is to buy long call options on stocks that hit our Momentum and Value screen. Given the rocky market since November, that strategy has been pretty much on hold. However, with the recent market strength and growing investor optimism, we are now ready to begin investing in this strategy again. We are not ready to go all in on options, but do plan to increase our allocation on long call options over the near term.

Weekly Stocks Recap

2009-04-19T15:55:00.001-04:00

Sixth Straight Week of Market Gains!

Another positive week as the broad market advanced last week for its sixth weekly gain in a row! The S&P Index rose 1.5% reducing its Year to Date loss to -3.7%. The stock market continues to show significant strength in what continues to be a challenging economic environment. The NASDAQ also continued its hot pace rising 1.2%for the week, but even more striking is its 6.1% Year to Date gain. We are encouraged with the strength the market continues to show as volatility moderates. We grow more optimistic every day that the worst may be over for the stock market. However, uncertainty remains high, and the market could easily fall 10% as it trades within a wide and choppy range. But all in all, we think the bottom was most likely reached in March. Investor confidence is growing and the money flow into the market appears to be growing momentum which will drive stock prices higher.

Economy Disappoints, But Earnings Up Beat!

All in all the economic data was a bit disappointing last week. Retail sales were slower than expected putting a damper on what had been an improving consumer trend over prior weeks. Housing data was also very disappointing with starts dropping to a 510,000 annual rate for one of the lowest levels over recent readings. Housing permits also fell bringing more questions over whether housing has really bottom. The data would suggest that an overall declining trend remains in force, although the declines do appear to be slowing. It is positive that the downward trend is slowing, but the bottom will not be hit until the trend reverses. Industrial production also declined and was worse than expected. Despite the worse than expected economic data, the corporate earnings released last week have shown promise. Intel, JP Morgan, Citigroup, and GE all posted earnings that were better than expected. That helped provide some juice to move the market higher despite the disappointing economic data. However, some perspective on Corporate earnings is important here. While these companies are reporting better than expected earnings, its worth noting that expectation levels are very low. So it is not like company prospects are returning to pre-recession levels any time soon. To date, future outlooks from these companies also remain somewhat mixed. We still look for the economy to begin improving late this year or by first quarter 2010.

Market Beating Foresight

Six straight weeks of market gains demonstrates the strength and positive momentum in the market. We are now in full swing with 1st quarter earnings reports which will take several weeks to complete. We had several key companies report last week, and most reported earnings that exceeded what were admittedly low expectations. If that trend continues, the stock market should respond favorably. That will bring stability to the market and what we hope is a sustainable uptrend. On the other hand, a disastrous outlook on corporate earnings holds potential for driving the market significantly lower. In our view, the most likely scenario is that most companies will meet or exceed what are low earnings expectations. We plan to gradually increase our stock allocations and will likely go all in once this earnings season is complete assuming that there has not been a meltdown. We could go all in now, but we think it is more prudent to wait another few weeks. We will still have 6 or 7 months left this year to make up for any potential gains we give up by sitting in cash. While we do expect quarterly earnings to be okay, we would still caution that the economy and future outlooks will show only slow growth at best. In our minds, that is not a bad thing, which likely means that the stock market will rise more slowly that it has over the past 6 weeks. Of course, as optimism grows, we recognize there is a great deal of pent up demand that could drive stock prices higher than fundamentals would otherwise warrant. Either way, if corporate earnings and future outlooks hold up, we will likely see a rising stock market. Our stock selection strategy will win regardless of whether the market rises slowly or fast.

Weekly Stocks Recap, April 10, 2009

2009-04-12T18:03:00.001-04:00

Fifth Straight Week of Market Gains!

Another strong week as the broad market advanced last week for its fifth weekly gain in a row! The S&P Index has now pared its Year to Date loss to -5.2%. That is a dramatic 26% turnaround from the lows that were hit in early March. But the NASDAQ has been an even better performer and now sits with a Year to Date gain of 4.8%. We definitely sense that the market is beginning to stabilize and that investor confidence is growing. The stock market advance over the past five weeks has been strong and has been supported by higher trading volumes. The optimism that is building will encourage more and more investors to leave the safety of cash bringing even greater demand for stocks to drive prices higher. We too are feeling that the worst may be over for the stock market, although the economic struggles are likely to continue for some time.

Signs Economy is Stabilizing!

The economic data was a bit better last week, but still provides overwhelming evidence of a struggling economy. However, the economy appears to be showing some signs of stabilizing although at very low levels. US retailers posted smaller-than-expected sales declines, a hopeful sign that consumer spending may turn soon. In fact, the S&P retail index gained 4.6% for the week with Macy as one of the industry leaders. But the economy will likely continue to struggle for some time. New jobless claims fell last week, but claims remain at very high levels that suggest peak unemployment is still a ways out. Perhaps the biggest market mover last week was the financial sector. Financial stocks got a big lift from Wells Fargo after the bank forecast a profit of $3 billion for the first quarter and indicated they saw significant strength in their mortgage business after refinancing hit a six-year high. The financial sector has been at the heart of the global economic crisis, and an improving outlook for banks will surely drive the stock market higher. Another sign of the changing market sentiment is the Volatility Index (VIX), often referred to as the fear gauge. Last week the volatility index closed at its lowest level since September 2008. Lower volatility is a sign that the market is beginning to stabilize. However, as we have seen over the past year, market movements can swing wildly very quickly, particularly when there have been strong moves in one direction.

Market Beating Foresight

We like the signs that we see of growing investor confidence and optimism. The financial sector has been very strong over the last month as prospects improve and regulatory assistance takes hold. Banks are critical to a recovering economy as credit needs to be freely available. Banks will start to ease credit restraints once write-offs and delinquencies begin to trend down, and profitability forecasts become more optimistic. Wells Fargo helped drive financial stocks significantly higher last week with strong earnings forecast that was much higher than expected. Additional quarterly announcements are due next week from other large financial companies and expectations may now be higher following the Wells announcement. We find the signs of profitability in the financial sector very encouraging, but would also caution that a significant portion of the reversal in fortune is due to banks that over allocated for loss reserves and write-offs in past quarters. Wells in particular is thought to have been very conservative with the write-offs taken as part of the Wachovia acquisition. The point here is that a long and sustained recovered will have to come from a healthy and growing economy, not the short or one time gains from write-off adjustments. We do expect consumer confidence to trend upward as consumer cash levels rise from tax refunds, other government incentives, and lower mortgage rates. Another big milestone is quarterly earnings season which will get in full swing over the next two weeks and run through May. We think the quarterly reports and future company outlooks will set the tone for the market in the coming months. If future outlooks improve, the market could be poised for strong second half gains. The stock market and economy do appear to be stabilizing. Our best guess is that the stock market will continue to trade with an upward bias, but we would also caution that 8% monthly gains cannot be sustained month over month. In that light, we would expect an upward trend and bias that is far more modest. But for investors, slower and steady moves are a good thing. Greater stability and lower volatility will bring more investors off the sidelines, and that will provide even more interest and demand for stocks. The overall economy will probably continue to trend downward or at least remain at very low levels as unemployment continues to rise. We still expect the market to remain choppy as it swings around current trading levels. In our minds, now is a good time for investors to gradually begin increasing their stock allocations and we plan to do that with our own funds. However, we still plan to wait until after the next set of quarterly reports in April-May before raising our stock allocations significantly.

Weekly Stocks Recap, April 3, 2009

2009-04-05T16:13:00.002-04:00

First Monthly Gain in Eight Months!

Another strong week as the broad market advanced 3.3% last week for its fourth weekly gain in a row! Even better, those four weeks left the broad market index with a monthly gain of 8.5%, the first monthly gain in 8 months. However, despite the large monthly gain, Year to Date performance remains at a loss of 6.7%. All things considered, it does feel like the market is starting to stabilize and investors are gaining more confident. March price movements were indeed rocky, but we find the recent strength very encouraging. We mentioned last week that the market has been trading in a wide range around 800 now for the past six months. Right now the market is on the upper end of that trading range and we think the next few weeks will be very telling with regard to its long term trend. Many stock market pundits now consider the worst to be over. That could be right, but we also don’t think the market can sustain the recent trend and rise 8% each month for the rest of the year. Given the strong advance, do not be surprised if the market pulls back or trades in a much smaller range over the near term. Nonetheless, this appears to be a good time for investors that are sitting on the sidelines to gradually re-enter the market.

Market Advances Despite Weak Economy!

The economic news last week again highlighted the weak economy. The stock market was able to advance for the week despite less than good economic news. Home prices came in with declines worse than expected at 19% year over year. In addition, consumer confidence remains at low levels and was lower than expected as measured by the recent March reading. Manufacturing reports continue to show a contracting economy, although the rate of that contraction is slowing. The jobs situation continues to be the more troublesome indicator, as jobless claims continue to mount. Most economists expect unemployment to trend upward and at 8.5% is already at the highest level since 1983. We would not expect the unemployment rate to crest until later this year or even early next year. The other big news was the pending bankruptcy of GM and Chrysler. The CEO for GM was forced out last week, and news rumblings are rife with bankruptcy talk. It may be very likely that GM does enter some form of bankruptcy protection, although we suspect the government will help soften the impact of such an event on the larger economy. As for Chrysler, the government has been blunt suggesting that they have 30 days for which to consummate an agreement with FIAT. The government message is that Chrysler will not be bailed out if a merger agreement is not reached. The market has been taking the potential for bankruptcy from these automakers in stride as stock prices still advanced through the week despite all the talk. We are more cautious as bankruptcy with one or both of these automakers will have significant downstream impacts on supply chain participants and other industry stakeholders. The market did appear to get a lift from the Financial Accounting Standards Board when it was confirmed that mark-to-market accounting rules would be eased.

Market Beating Foresight

Optimism continues to build among investors. The financial sector continues to improve and got another lift last week with easing of the mark-to-market rules. The stock market showed strength last week despite weak economic data and looming bankruptcies in the auto industry. That optimism is helping to sustain the strong monthly gains experienced in March. Consumer confidence remains at very low levels, but did show a slight improvement over prior readings. The trend is in the right direction, but clearly there a long way to go before consumer confidence drives spending to old levels. But it’s the trend that will drive stock prices higher and we do expect consumer confidence to trend upward. Confidence and spending will improve as consumer cash levels rise from tax refunds, other government incentives, and lower mortgage rates. Another big milestone is quarterly earnings season which will get in full swing over the next two weeks and run through May. We think the quarterly reports and future company outlooks will set the tone for the market in the coming months. If future outlooks improve, the market could be poised for strong second half gains. The stock market and economy do appear to be stabilizing. Our best guess is that the stock market will continue to trade with an upward bias, but we would also caution that 8% monthly gains cannot be sustained month over month. In that light, we would expect an upward bias and trend that is far more modest. But for investors, that is a good thing. Stability and lower volatility will bring more investors off the sidelines, and that will provide even more interest and demand for stocks. The overall economy will probably continue to trend downward or at least remain at very low levels as unemployment continues to rise. We still expect the market to remain choppy as it swings around its recent trading levels. In our minds, now is a good time for investors to gradually begin to increase their stock allocations and we plan to do that with our own funds. However, we still plan to wait until after the next set of quarterly reports in April-May before raising our stock allocations significantly. That may mean that we leave on the table some of the market gains if there is a strong advance while we are mostly in cash. However, right now, we value the addition risk protection from being in cash more that the potential loss of gains from a market advance.

Remember, our complete list of stocks is Available Online At: http://www.marketbeatingstocks.com

Weekly Stocks Recap, March 27, 2009

2009-03-29T15:46:00.001-04:00

Bull Market or Consolidation?

Another strong week as the broad market advanced 6.2% last week. That makes the third straight week that the market has advanced reducing the Year to Date loss to 9.7%. Most of the weekly gain came on Monday, but the fact that the stock market held those gains through the rest of the week was an excellent sign of resistance. Investor confidence appears to be returning and with that will come the more cash to push stocks higher. In our view, the stock market has been consolidating in the 800 range (S&P 500) for nearly six months now, since November of last year. Yes, there have been large swings above and below that level as we have seen over the prior two months, first losing more than 24%, before recovering 22% over the last three weeks. These percentage movements have made for a very rocky market over the last six months. However, when those market movements are smoothed out over a longer period, we see a market that has been consolidating in that 800 range. Many consider a bull market to have begun once the stock market moves more than 20%. The market has now moved up more than 20% from its March lows! However, our view is more cautious as we believe it is still too early to call for the start of the bull market. Frankly, we see the recent move as more of a consolidation back to that 800 level. Although not ready to jump on the Bull stampede, we are growing more optimistic that the worst may be over for the stock market. We sense that investor confidence is building and eventually that will bring the necessary demand to drive stock prices higher.

Economic Data Fuels Optimism!

Last week the economic news was pretty good. Existing home sales and new home sales both rose substantially more than expected. Estimates called for month over month declines, but instead both new and existing reports increased in the 5% range! Granted these increases need to be validated over a longer trending period, but nonetheless are encouraging signs. Reaching a bottom in housing will certainly help the economy regain its footing. Another positive was durable goods orders which rose 3.4% for the first increase in six months. Retail sales also showed strength with results that exceeded expectations. Consumer spending appears to be showing signs of life and that is critical for an improving economy. Last week long term mortgage rates moved lower as a result of recently introduced FED programs to buy up long term treasury securities. Those programs will help drive mortgage rates down for consumers, and lower rates will encourage refinancing and in turn put more money in consumer pockets. Consumer spending will pick up as the cash available to consumers grows. Mortgage refinancing is not the only factor driving up cash levels. Tax refund checks have begun to arrive and government relief programs are now taking hold which result in additional cash to taxpayers and consumers. We do believe having additional cash will help build consumer confidence pushing spending levels higher and driving the economy forward. However, we have not yet seen the jobs situation improve and unemployment may continue to rise over the next few months. The concerns over job loss and employment will certainly temper any growth in consumer spending that we do have.

Market Beating Foresight

Optimism is showing signs of life among both consumers and investors. The financial sector got a big lift from the Treasury and Federal Reserve last week. We sense growing optimism over improved financial regulation and plans for managing toxic assets. A stable financial sector is critical towards fostering a growing economic climate and we are growing more confident that the banks are regaining their footing. Spending will get a lift from rising cash levels as consumers take advantage of tax refunds, other government incentives, and lower mortgage rates. The economic data is encouraging and has been improving recently, although economic measures overall remain at low levels. For us, the next big milestone is quarterly earnings season in April and May. From these quarterly reports, we should get a very good reading on company performance and more importantly, on their future outlooks. In our view, the market has been consolidating in rocky fashion in the 800 range (S&P) for about six months now. We would expect the market to hold this range at least through 1st quarter earnings season. If company outlooks improve, the market could be poised for strong second half gains. With the growing optimism that we see, market volatility will likely trend downward. In that light, the market may not be as rocky as it has been over the last six months. However, the market will likely remain very choppy, as the market swings back and forth around this consolidation level. A choppy market should provide patient investors that want to enter the market with plenty of opportunity to buy on dips. All in all, we think the market will continue to show a positive upward bias, but the pace of that increase will likely slow from that we have seen over the past three weeks. We plan to increase our stock allocations slightly over the near term given the recent market strength. However, we plan to wait until after the next set of quarterly reports in April-May before raising our allocations significantly. As we said before, now may be a good time to begin gradually increasing your stock allocations.

Weekly Stocks Recap, March 20 2009

2009-03-22T18:19:00.001-04:00

Market Holds Gains From Prior Week!

The broad market advanced 1.6% last week, a good showing in that it held the extraordinary gains achieved over the prior two weeks. The market declined on Thursday and Friday as investors took profits, although there was enough resistance to still end the week with a weekly gain. We view the market strength shown last week in a very positive light as investors did not run following the recent strong advance. Our sense is that investors may begin to return to the market. As cash flows in, the demand for stocks will rise, driving stock prices upward. It is still too early to say the worst is over, although we are encouraged with the recent resistance the market has shown. Our view is that the S&P will remain rocky, swinging back and forth within a trading range of 150 points. We expect the economic struggles to continue over this year, and that will temper the stock market advance. The stock market is usually a leading indicator for economic recovery, so the stock market should begin to recover well before the economic conditions improve. Overall, we want to see the market display strength and resistance over several months before feeling comfortable that the bottom has been reached. Another strong indicator will be first quarter earnings, for which reports will begin April and May.

FED Purchases Expand!

Last week the economic news was somewhat mixed. Industrial production declined slightly more than expected, although at a slower rate than the prior month. Inflation figures also rose more than expected, but remain at very modest levels. On a positive note, housing starts and building permits both showed unexpected increases in February. Housing starts in particular showed a very large percentage increase. Both signs are encouraging, but we want to see an uptrend with several months of advances before calling a housing bottom. The biggest news for the week came from the Federal Reserve after announcing they would purchase up to an additional $750 billion of mortgage-backed securities. In addition, the Federal Open Market Committee decided to purchase up to $300 billion in longer-term Treasury securities and $200 billion in other agency debt. Bonds rose sharply following these announcements and stocks too followed that lead. To date, the FED has been aggressive with monetary policy by dropping interest rates to near zero levels. The commitment to expand purchases of troubled assets has propelled their program to a new level. We do think these measures will help both the economy and financial markets find and regain their footing over the near term. However, we do have long term concerns over the amount of this funding and the resultant burden placed on taxpayers in future years. Over the long term, we certainly would expect interest rates and inflation to rise sharply in response to all of the government spending and outstanding debt. We do not expect interest rates to rise this year in light of a sour economy, but at some point in the future, consumers and taxpayers will bear the burden of the actions taken today.

Market Beating Foresight

Both existing and new home sales are due out next week. Other economic reports will include a final reading on fourth-quarter GDP and weekly jobless claims. These reports will likely provide further evidence of economic weakness. Unemployment rates continue to run high, and that directly impacts consumer confidence and their willingness to spend. The economy will continue to struggle until confidence returns and consumers start opening their wallets. We still consider the market very shaky despite the strong performance over the past few weeks. A primary market mover next week will likely be the Geithner plan for addressing troubled bank assets. The market is looking for a clear and credible plan for addressing toxic assets in the financial sector. The market expects Geithner to put forth more details on that plan next week. That announcement could drive the market significantly higher or lower depending on the reception it receives. Geithner fell short on the details in his last plan discussion and the market punished stocks. Hopefully, Geithner will not fall short on the details once again! Volatility, as measured by the VIX, has been trading in a more narrow range since January of this year. Volatility is still well above long term trends, but appears to be stabilizing which eventually will lead to lower levels over time. Lower volatility will help encourage more investors to return to the stock market. We are currently 20% invested in our stock portfolios. We may increase those allocations slightly over the near term given the market strength shown over the past few weeks. However, we plan to wait until after the next set of quarterly reports in April-May before raising our allocations significantly. Investors should remain cautious and very selective with any investments that are made. However, now may be a good time to begin gradually reducing cash levels with additional stock purchases over the next few months.

Remember, our complete list of stocks is Available Online At: http://www.marketbeatingstocks.com

Weekly Stocks Recap, March 13, 2009

2009-03-15T13:10:00.001-04:00

Market Rallies From Oversold Levels!

Relief! The broad market advanced 10.7% in its best week since November. The market had gotten oversold over the past few weeks as the selling pressure and short interest intensified. It is good to see the market break the downtrend, as it had become far too easy for short sellers to make money. We like the market rebound, but are still very concerned with the downside risk, and consider the recent move more of a bear market rally. We expect the market to be rocky, swinging back and forth between a trading range of 150 points. We would like to think that last week was the beginning of a sustained bull run, but just do not think the economy and financial sector are quite ready to support a prolonged uptrend. In our view, the economy is a long way from recovery, and will likely continue to deteriorate in 2009 and perhaps into 2010. As reported last week, even if the market has hit bottom, the upside may be limited over the short term, whereas the downside risk remains high. Investors with long time horizons (5-10 years) could consider buying now, but even then we would suggest only slowly entering the market with incremental stock allocations over the next six months. In other words, if you want to resume investment in this market, invest 10% to 20% of your available cash each month into stocks. Investors do not need to hit the market bottom, to be successful over a long time horizon.

Banks Show Profitability!

What drove the market 10.7% higher in just one week? One of the big drivers was announcements from each of the three major banks (Citigroup, JP Morgan, and Bank of America) that all were profitable over the first two months of the year. That is certainly good news and the financial sector responded rising 34%! However, those increases are extreme and cannot be supported by just two months of bank profitability. Certainly the large increase is a combination of oversold levels in the financial sector and what we all hope is a break in the trend of mounting financial sector losses. Other big drivers in the market advance last week was discussion on suspension of the mark to market accounting rule and reestablishment of the uptick rule for short selling. The mark to market accounting rule has faced severe criticism during the downturn as assets were required to be severely marked down as markets for these products dried up due to the credit crisis. As asset values fell, companies were forced to report paper losses against real earnings which further eroded the valuation of these assets. A house subcommittee has taken up the issue and speculation grows that the rule will be suspended. However, no decisions have yet been made to reverse the mark to market accounting rule and the market may be getting a little ahead of itself. As for short selling, there is also movement to reestablish the uptick rule for short selling. Speculation is that the SEC may rule in favor of the uptick rule. In theory, the uptick rule requires that a stock move up in price before a short sale can be executed. The belief is that short selling has exaggerated downward market moves and the uptick rule will make it harder for short sellers to drive markets wildly down over short periods. If the rule does reduce market volatility, that would be a good thing for investors. The other positive news was that February retail sales declined less than expected and actually increased after excluding for auto sales. All in all, it was a positive week in terms of news, but in our view not substantial enough to justify the remarkable 10% swing in the market last week. We suspect much of the advance was attributable to Short sellers that had to cover positions as the market rose sharply last week.

Market Beating Foresight

Next week will bring an onslaught of economic reports on inflation, manufacturing, housing, the labor market. These measures will help us gauge the state of the economy and perhaps offer more clarity on its near term direction. The data is likely to confirm the gloomy view of the economy and its future prospects. It will interesting to see how the stock market responds particularly after the strong market gains last week. We do think the market got oversold over the past month, so part of the strong advance can be attributed to those adjustments. But as we have said before, the market remains very shaky and further downside moves are possible. We continue to believe the market will remain rocky over the next three months as job losses continue to mount and economic conditions deteriorate. The market can move up in this kind of environment as it did last week, but investors need to be prepared for large swings. In our view, the market is not yet poised for a sustained bull market advance. On a positive note, volatility (VIX) did fall significantly last week and that is one of the measures we watch closely. Lower volatility levels will help bring investors back to the market. We are currently 20%invested in our stock portfolios. We will likely sit tight on that allocation until we see more sustained optimism and strength in the market. As the market builds strength, our stock allocation will rise over time. For now, investors should remain cautious and very selective with any investments that are made.

Stock Market Recap, March 6, 2009

2009-03-08T13:56:00.002-04:00

Fourth Week of Declines!

Ouch! Another very tough week as the broad market lost 7% in a fourth week of declines. Year to Date the S&P has declined 24% in just over two months and those declines come on the heels of nearly 40% losses last year. We reported our concern last week that volatility and fear was rising, and sure enough the market turned sharply down. We wish we could say the stock market is at bottom, but there is just too much fear and uncertainty to make that call. We continue to be concerned with the downside risk, as there are just not a lot of positives right now to drive the market sharply higher. In our view, the economy is a long way from recovery, and will likely continue to deteriorate in 2009 and perhaps into 2010. As reported last week, even if the market has hit bottom, the upside may be limited over the short term, whereas the downside risk remains high. In that light, we do not like the risk reward tradeoff for the long side of the market. Investors with long time horizons (5-10 years) could consider buying now, but even then we would suggest only slowly entering the market with incremental stock allocations over the next six months. In other words, if you want to resume investment in this market, invest 10% to 20% of your available cash into stocks each month. Investors do not need to hit the market bottom, to be successful over a long time horizon.

Economic Conditions Deteriorate!

The financials were the biggest loser last week as the sector dropped 19% as fears over financial health and nationalization continue to grow. Citigroup stock stoked nationalization fears as their stock price dropped below $1. Mortgage delinquency rates continue to rise sharply as the numbers mount on consumers unable to pay bills. The unemployment rate hit a 25 year high, rising to 8.1% as job losses grow across all industries. Economic data on Housing remains bleak and continues to deteriorate. The auto industry is a disaster as General Motors reported February sales sank nearly 53% with Ford sales dropping 48%. The losses at General Motors are huge, and bankruptcy concerns loom large. Retailers are also showing declines in monthly sales as consumers continue to tighten the purse strings. With all the bad news, it is tough to see the glass as half full. There needs to be more clarity from regulators on how toxic assets will be dealt with and how those remaining assets will be valued in the financial system. Asset valuation is a tall order for the Fed and Treasury to resolve, but may be critical to any meaningful and lasting recovery.

Market Beating Foresight

Next week the government is expected to review the mark to market accounting rules on the valuation of assets. Some speculators suggest that elimination of this rule will have a measurable and positive effect on the valuation of companies. Frankly, we do think adjustments to this rule will help ease the volatility in capital requirements caused by short term fluctuations in asset prices. The volatility in capital requirements creates short term liquidity problems that companies have struggled to meet in these tight credit markets. But we do not think that the mark to market rule will be the panacea that solves all of the issues with company balance sheets. There has been simply too much financial and credit excess built up over many years. There is no quick fix and it will take years and significant pain before the economy and financial systems eliminate that excess. The severe downturn in the stock market over the past year reflects the beginning of that recovery process, but we think there is still a long way to go. Again, the market is very shaky and further downside moves are still possible. We believe the market will remain rocky over the next three months as the future outlook continues to deteriorate and job losses reach critical mass. The retail sector reflects just how weak consumer spending is and we do not see consumer confidence returning any time soon. We are currently 20% invested in our stock portfolios. We will likely sit tight on that allocation until we see more optimism and strength in the market. As the market builds strength, our stock allocation will rise over time. For now, investors should remain cautious and very selective with any investments that are made.

Remember, our complete list of stocks is Available Online At: http://www.marketbeatingstocks.com

Stock Market Recap, February 27, 2009

2009-03-01T11:51:00.002-05:00

Worst Start Ever Brings 12 Year Lows!

Ouch...another very tough week on Wall Street as the broad market lost -4.5% for the week bringing the Year to Date loss to -18.6%! In the long history of the stock market, that is the largest decline ever over the first two months of the year. Furthermore, the -18.6% decline brings the broad market index to a 12 year low. Investors that are long stocks are clearly losing money, and most are losing lots of money. Could we now be at market lows? We sense investors are very apprehensive with many sitting on the sidelines. Volatility and fear could be poised for another strong run. If volatility returns, the market could take another severe turn downward. Our concern is that we just do not see a lot of positives on the immediate horizon to help push the market significantly higher, particularly in light of the worsening economy. Even if the market has hit bottom, the upside may be limited over the short term, whereas the downside risk remains high. In that light, for the near term, we do not like the risk reward tradeoff for the long side of the market. Investors with long time horizons (5-10 years) could consider buying now, but even then we would suggest only slowly entering the market with incremental stock allocations over the next six months. In other words, if you want to resume investment in this market, invest 10% to 20% of your available cash into stocks each month. Investors do not need to hit the market bottom, to be successful over a long time horizon.

Economic Conditions Deteriorate!

Last week the financial sector and economy were again the big market drivers, although there was a surprise development in Healthcare. Investors remain wary over nationalization of large banks as the government now owns 36% of Citigroup common stock. The Obama administration announced its Capital Assistance Program, which includes stress tests for banks that will determine the capital assistance levels provided by the government. But it was the deteriorating economy that brought the most bad news. Existing and new home sales, along with home prices all declined more than expected and provided further evidence that we have not yet hit that elusive bottom in housing. Bernanke gave the market some hope in his latest congressional visit when he said the recession may end in 2009 with recovery in 2010. We hope the Fed chairman is right, but suspect that could be a little optimistic given that economic conditions continue to deteriorate. For example, fourth quarter GDP was reported to be sharply lower (-6.2%) than its advanced reading of -3.8%. That is a big difference and shows just how quickly economic conditions deteriorated. The other surprise was the announcement from Obama that he will cut Medicare spending as part of his healthcare plan. The healthcare sector, which had been holding up better than most, proceeded to lose more than 11% for the week following those remarks. On the employment front, jobless claims continue to hit record levels resulting in the lowest consumer confidence readings ever recorded.

Market Beating Foresight

Next week the Federal Reserve will provide details on its program to shore up consumer and small business lending. In addition, there is the labor report that is due out on Friday. Other than those items, there are not a lot of planned economic reports scheduled for release. We mentioned in our prior newsletter that right now the downside risk in the market was higher than the upside potential. That turned out to be true last week, and we think that still holds true for next week. It is difficult to imagine what news might come next week that would drive the market sharply higher. Our hope is that the market will recover some losses, although we do not expect a big turnaround next week. Again, the market is very shaky and further downside moves could bring panic. We believe the market will remain rocky over the next three months as the future outlook continues to deteriorate and job losses reach critical mass. Consumer spending is extremely weak and we do not see consumer confidence returning any time soon. We are currently 20% invested in our stock portfolios. We will likely sit tight on that allocation until we see more optimism and strength in the market. As the market builds strength, our stock allocation will rise over time. For now, investors should remain cautious and very selective with any investments that are made.

Remember, our complete list of stocks is Available Online At: http://www.marketbeatingstocks.com

Stock Market Recap, February 20, 2009

2009-02-22T10:42:00.002-05:00

Market Drops Amidst Growing Resignation!

Another tough week on Wall Street as the broad market lost -6.9% last week and is now down a staggering -14.7% Year to Date. It is scary to think of extrapolating those losses across the rest of the year particularly since we have not yet even closed the month of February! We should probably be thankful it was a holiday shortened week, as that may have been one of the few factors limiting the weekly loss. There are just not many positives out there to counteract the continuing mantra of a deteriorating economy, housing woes, and a financial sector in shambles. We sense a growing resignation amongst investors that this recession will indeed be severe and long lasting. Investor fear has moderated, only to have been replaced with the resignation that it will be a long time before conditions improve in the economy and stock market despite the best intentions of government efforts over financial sector reform and massive spending programs.

Nationalization Fears Harvest Market Attention!

Last week started off poorly with Global economic and financial fears taking their toll on US markets on Tuesday. A manufacturing survey was also released that showed a significantly greater decline than what was expected. On the government front, Obama announced his plan for Homeowner Affordability to provide stability to at risk homeowners, assist in refinancing, and to support lower mortgage rates indirectly through Fannie Mae and Freddie Mac assurance. The government efforts are positive, but in reality the reach of this initiative is miniscule in light of the overall mortgage debt at risk. On the housing front, a dismal report was released showing housing starts at their lowest levels ever recorded. Unfortunately, a housing bottom just does not seem near. But last week, the really big news concerned the financial sector, as fears over bank nationalization grew astronomically. Overall the financial sector plunged another 15.9% from already depressed levels. Bank of America and Citigroup took the hardest hits. The administration came out late Friday to reassure Wall Street in its belief that the private sector should run the banking system, and that nationalization is not goal or preferred option. Despite their best efforts, the government was not able to reverse the downward momentum in financial stocks.

Market Beating Foresight

Next week the Treasury will again be in the limelight as Geithner is expected to discuss more details on a government assisted private sector solution to the financial crisis. The government will have to put forth a credible solution that assuages concerns over nationalization, yet has enough details to provide confidence there is a path to return normalcy to the financial sector. An effective financial sector is a prerequisite towards stopping the bleeding in the overall economy and to restore investor confidence. Geithner was not adequately prepared in his last presentation, and will be expected to step up in a big way next week. Given the resignation in the marketplace, we suspect there is more downside risk than upside potential to the government response expected next week. If a credible plan is delivered, the market will likely respond favorably. But if expectations are not met, the downside move may be much greater than the upside potential. We have made recent investments in the financial sector due to the very depressed market conditions. We still do not think nationalization is likely, and eventually would expect the financial sector to show improvement. Although investors should be prepared to weather a difficult and long lasting storm before they see improvement in financial stocks. The market will likely remain rocky over the next three months as corporate earnings continue to deteriorate and job losses reach critical mass. Consumer spending is extremely weak and we do not see consumer confidence returning any time soon. We are currently 20% invested in our stock portfolios. We will likely sit tight on that allocation until we see more optimism and strength in the market. As the market builds strength, our stock allocation will rise over time. For now, investors should remain cautious and very selective with any investments that are made.

Stock Market Recap, February 6, 2009

2009-02-08T12:17:00.001-05:00

Losing Streak Ends!

Last week brought an end to the weekly losing streak. The broad market gained 5.2% for the week, an excellent start to the month of February. Those gains are encouraging after following on the heels of the worst January performance on record. The tech sector was the real market leader as evidenced by a NASDAQ gain of 7.8%. The market though showed volatility after having been down early in the week before rallying over the last two trading sessions. Investor sentiment appears to be growing more positive, particularly now that the large institutional funds are done with massive selling. What was the driver for the gains this week? There were no real surprises on the economic front, so we speculate the optimism came from hope and closure over the pending government packages for the economy and financial sector. We are encouraged with the market advance, but caution there is still much uncertainty on the details of these packages. We will likely learn more details next week and that additional clarity will likely drive the market higher. However, we still expect the market to remain rocky over the near term.

Job Losses Hit Record Highs!

Quarterly Earnings releases continued last week and overall reflect the weight the poor economy is having on earnings and future outlooks. The uncertainty and lack of clarity on future guidance is still an achilles heel for many companies. Both the manufacturing and services surveys recently completed beat market expectations, but remain at poor levels indicating contraction. Personal spending and personal income both declined, not a big surprise given the state of affairs. Jobless claims hit another record high, and major companies continue to announce additional layoffs. Last week, it was reported that nearly 600,000 positions were lost in January, the largest monthly loss in 34 years. Surprisingly, the market rallied following announcement of the poor jobs data, presumably from the optimism surrounding government progress on the economic and financial sector stimulus. The unemployment rate now stands at 7.6%, but that is likely to grow over the next few months as we search for a climax in jobs lost. The financial sector had a volatile week, but ended the week over 6% higher as optimism returned over hope of financial sector reform.

Market Beating Foresight

Fourth quarter earnings reports continue, but there is little doubt most companies are struggling as evidenced by the reports over the last few weeks. The Senate is working on tweaks to the Obama spending plan, and the plan appears to be gaining momentum. But the big market mover next week will likely be the government plan for the financial sector. Geithner is scheduled to outline this plan on Monday. The market will likely react favorably, as investors seek clarity and details over the financial sector program. Personally, we hope to see government measures that bring more transparency and accountability over the capital infusions provided to banks. The market is looking for a plan, and greater definition on that plan of action will restore investor confidence at least for the short term. Next week, additional reports will again be released on the economy, but they will likely provide more evidence of the decline in housing, jobs, and economic growth. As we have said before, the market will remain rocky over the next several months as the economy finds better footing and searches for bottoms in housing and jobs. Volatility stayed high despite the market advance last week, although it remains well below the extremes from October and November. Short term, the government spending programs may provide an additional boost to the market. However, we remain concerned over the next three months as the market will remain rocky as corporate earnings deteriorate and job losses reach critical mass. Consumer spending is extremely weak and we do not see consumer confidence returning any time soon. We are currently 30% invested in our stock portfolios, but may try to increase that allocation to take advantage of renewed optimism in the financial sector following the Treasury announcement. However, we will not increase our stock allocations more than 50%, and will increase our stock allocation above those levels only over time. If the market advance continues, our portfolio returns may begin to lag the market return slightly since we are limited our stock allocation to 50% or below. However, it is still very early in the New Year, and we would rather lag the market advance at this stage than risk another premature rally and meltdown. As the market builds strength, our stock allocation will rise. For now, investors should remain cautious and very selective with any investments that are made right now.

Remember, our complete list of stocks is Available Online At: http://www.marketbeatingstocks.com

Weekly Recap, January 30, 2009

2009-02-01T14:02:00.001-05:00

Worst January Ever!

A fourth straight losing week as the S&P declined -.7% last week. The weekly decline was not horrible, but the loss ensured that this month would be the worst January performance on record. The S&P lost a whopping -8.6% for the month. What might that performance signal for the rest of the year? Statistics from Stock Traders Almanac suggest that 90% of the time the market will end the year with an overall loss if January has negative performance. Should we move completely to cash? These kinds of statistics are always interesting, but in reality have little relevance or predictive power. However, the significant market decline in January clearly communicates the state of the markets and the economy. There are recessionary factors that we may very well have to live with through the rest of the year if not longer. The weight of those factors has more credibility than the Stock Traders almanac. But how bad is it? For perspective, January was bad, but the market is still above lows hit in November. However, we could test those November lows if government credibility and resolve towards solving the economic challenges comes into question. Given all of the challenges currently in play, we expect the market to remain very rocky over the near term.

Dismal Corporate & Economic Data!

Many companies reported fourth quarter earnings last week that reflected the poor economic environment. But the other disconcerting news was the uncertainty and lack of clarity most companies had giving further guidance. Many companies would not or could not provide guidance for the remainder of the year. That showcases the concerns and impact the global meltdown is causing. Consumer confidence hit a record low just as jobless claims hit another high. Housing brought mixed results as December existing home sales rose 6.5%, yet new home sales fell to their lowest annualized rate since 1963. Gross Domestic Product (GDP) dropped -3.8%, a significant drop, but that was not as sharp a decline as expected. The roller coaster ride in the financial sector continued as the sector was up strong through Wednesday before giving back gains by the end of the week. Each week, companies from nearly all industries announce more and more layoffs. No doubt there is considerable uncertainty over what this year will bring in terms of economic activity, and that just adds to investor fear.

Market Beating Foresight

Fourth quarter earnings reports continue, but there is little doubt most companies are struggling as evidenced by the reports last week. The Obama spending plan passed the House and the Senate will take up review this week. It is worth noting that the House version had no republican support. Changes in the Senate are likely and failure to make progress on the plan could swing the market severely. Another item that could sway the market is the government plan for the financial sector. Last week discussions centered on a possible plan to create a “Good Bank” “Bad Bank” structure by segmenting all bad assets into the “Bad Bank”. Early discussions propelled the market higher on Wednesday despite the lack of details and clarity around the proposal. However, by the end of the week the market and financial sector came back to earth after succumbing to the uncertainty and the lack of details over the proposal. The market is clearly looking for a plan, something to hold onto for hope. Greater definition and agreement on a plan of action will help restore investor confidence at least for the short term. Next week, additional reports will again be released on the economy, but they will likely provide more evidence of the decline in housing, jobs, and economic growth. The market will remain rocky over the next several months as the economy finds better footing and searches for bottoms in housing and jobs. Volatility has increased, although it remains well below the extremes from October and November. In addition, the massive selling and flight to cash from stocks and mutual funds that we saw late last year has subsided. We think this means investors are just adjusting to the realization of a longer lasting recession. As investors resign themselves to a difficult market, bad news just doesn’t carry the shock value that it did late last year. But for stocks, we remain concerned over the next three months as the market will remain rocky as the full weight of poor earnings, bankruptcies, and bailouts reach critical mass. Consumer spending is extremely weak and we do not see consumer confidence returning any time soon. We plan to stay between 30% and 50% invested in stock portfolios and will increase our stock allocation only over time. Investors should remain cautious and very selective with any investments that are made right now.

Remember, our complete list of stocks is Available Online At: http://www.marketbeatingstocks.com

Weekly Recap, January 23, 2009

2009-01-25T12:14:00.001-05:00

Pessimism, Volatility Rise!

Another depressing week as our 44th President of the United States takes office. The market fell -2.1% and is now down -7.9% for the year. The NASDAQ lost even more during the week with declines of -3.4%. The pessimism in the marketplace continues to boil, with volatility/fear again on the rise. The financial sector is driving the most fear, but corporate earnings for all sectors continue to deteriorate. The market remains above November lows, but nervousness and confidence is shaky as volatility and fear escalate. Fear is what investors have to watch, as that can cause quick and violent downward moves in stock prices. Current news on the whole is primarily bad, and that is not likely to change anytime soon, which will surely keep many investors on the sidelines. We expect market movements to remain rocky for some time.

Financial Sector and Earnings Woes!

The drama in the financial sector continues as the sector dropped another -7.1%. That decline just adds to the financial sector losses of 16% from the prior week. Financial stocks are very volatile right now and B of A is one of the leading causes. Problems with the Merrill acquisition are causing heartache with B of A investors, and some are calling for Ken Lewis to resign. The stock has been volatile in trading with daily moves up and down of 30%! No doubt the financial sector is leading the way in stoking investor fears regarding a long lasting and painful recession. But it is not just the financial sector. One report from Thomson Reuters, estimates that corporate profits will drop 28% this earnings season, with seven of the 10 S&P sectors expected to see double digit declines. Companies, like Microsoft that reported last week, brought mostly unfavorable announcements on revenue and earnings. Microsoft then made matters worse by also reporting that market volatility left it unable to provide quantitative revenue and EPS guidance for the remainder of the year. No doubt there is considerable uncertainty over what this year will bring in terms of economic activity, and that is just adding to investor fear. Of course, the economic data reported continues to be dismal, as jobless claims again hit extreme levels, and home sales/starts remain very weak. Each week, companies from nearly all industries announce more and more layoffs. This recession is severe, and will not begin to turn any time soon despite the best efforts of Obama.

Market Beating Foresight

Fourth quarter earnings season is in full swing. Next week, 137 companies in the S&P 500 will report earnings. There is little doubt those earnings reports will confirm what we already know. The economy is in dire straits as this will surely be another quarter of significant decline. 4th quarter GDP will also be released and is expected to show a contraction of more than 5%, a much larger decline than the previous quarter of .5%. There will also be reports next week on consumer confidence, home sales/prices, jobless claims, and manufacturing volume. The news next week is not likely to renew optimism in the market. We believe the market will remain rocky over the next several months as the economy finds better footing and searches for bottoms in housing and jobs. We are also seeing increases in the volatility index and that could be a sign of more dramatic stock swings to come. Oil prices are one of the few assets that have risen significantly, now trading around $46. We suggested buying last week when levels were closer to $33, and investors that jumped in would have earned significant gains in just one week. Oil prices rose on evidence of production cuts by oil producing countries. However, oil demand will continued to be pressured given the weak economy, even after accounting for production cuts. We would not buy oil at these levels, but would consider buying if there is a significant pullback to a range under $34. As for stocks, we remain concerned over the next three months as the market will remain rocky as the full weight of poor earnings, bankruptcies, and bailouts reach critical mass. Consumer spending is extremely weak and we do not see consumer confidence returning any time soon. We plan to stay between 30% and 50% invested in stock portfolios and will increase our stock allocation only over time. Investors should remain cautious and very selective with any investments that are made right now.

Remember, our complete list of stocks is Available Online At: http://www.marketbeatingstocks.com

Weekly Recap, January 16, 2009

2009-01-18T14:17:00.001-05:00

Rocky Trading Week!

Last week marked the second straight down week as the market fell sharply 4.5%. It could have been worse if not for the Friday rebound. We have not gotten the start to the New Year like we hoped as the S&P is down -5.9% and the NASDAQ -3%. It was a rocky week of trading as prices fell sharply before recovering somewhat by week end. The market remains well above November lows, but recent declines are spooking already nervous investors. News has been predominately bad and in a good light has not carried the shock value we saw in 2008. Nonetheless, the news appears bad enough to pressure stocks and to keep investors on the sidelines. Market movements will likely remain rocky for some time.

Financial Sector and Earnings Woes!

The bad news continues to build. Retail sales declined for the sixth straight month, Circuit City is liquidating, and more struggling retailers are likely to fall over the next few months. Industrial production declined sharply again in the fourth quarter. Jobless claims continue to mount as more companies announce layoffs. On the earnings front, most companies are showing poor results, with many providing warnings on future earnings. But the big news was the financial sector as it lost a whopping 16% for the week. The drivers were Bank of America and Citigroup whose shares dropped over 45% and 55% from highs at one point. Citigroup announced plans to sell a controlling interest in Smith Barney, along with a subsequent announcement of a business restructure that would divide the company in two. The restructure appears to position the company for sales of additional business units. The Citigroup business model will change radically, and will likely include the breakup of its many parts. The dismantling of Citigroup is a reflection of the great turmoil in the financial sector. Bank of America also contributed to market fears based on news from the Merrill acquisition. B of A will report large losses from the Merrill acquisition, to the extent that the bank now needs additional government support. In fact, the bank has requested an additional $20 billion in TARP funds in order to complete the acquisition and to cover losses and write downs. That is a huge number that further stoked fears in the financial sector.

Market Beating Foresight

About the only good news last week were reports of lower inflation, levels that have not been seen for many years. Of course, some argue that low inflation is just another sign of how bad the economy really is. Inflation is so low that concerns are circulating that we may enter a painful period of severe deflation. Fourth quarter earnings season is in full swing, and to date, has provided only downward pressure on stocks. Investors will begin receiving year end reports on retirement accounts, which will cause more angst as investment losses will be significant. That will be just one more challenge to overcome before investors return to the market in large numbers. Obama takes office next week and no doubt will enact massive spending programs. Those initiatives may help consumer confidence, but material impacts to jobs and the economy will not happen for months. We believe the market will remain rocky over the next several months as the economy finds better footing and searches for bottoms in housing and jobs. Last week, oil dropped to $33 dollars, a level we view as a good long term buy. For stocks, we remain concerned over the next three months as the market will likely remain very rocky as the full weight of poor earnings, bankruptcies, and bailouts reach critical mass. Even those consumers that have jobs are fearful, hoarding cash, and restricting spending. Consumer spending will need to return before the economy can gain momentum and start growing, a prospect not likely over the very near term. We plan to stay between 30% and 50% invested in our stock portfolios and will increase our stock allocations only over time. Only cautious investments on very selective stocks make sense right now.

Weekly Recap - 1/09/2009

2009-01-11T13:16:00.001-05:00

First Full Trading Week

Last week marked the first full trading week of the New Year. Unfortunately the week marked the worst market decline (-4.4%) since November 2008. The NASDAQ was also down 3.7% for the week. Does this foretell doom for the rest of the New Year? Obviously, one trading week does not have any predictive power for the entire year. For perspective, the market has advanced more than 20% since November so a pullback is not surprising particularly in light of the constant bad news released every day. Furthermore, despite the losses last week, the market continues to show signs of moderating with lower volatility. Higher trading volume also returned last week, which often provides more reliable signals on both the direction and conviction of price moves.

2009, Job Losses Mount!

Most of the news last week was not good. Increasing unemployment numbers are grabbing most of the headlines. The unemployment rate rose to 7.2%, the highest figure in many years. In addition, the line of companies announcing cutbacks continues to grow as job losses continue to mount. Major retailers reported dismal December sales, no real surprise although Wal-Mart had been expected to do better than reported. Automakers also reported December sales declines of more than 30%. Oil prices were volatile, first rising early in the week on tensions in the Middle East, before falling sharply due to demand concerns from the worsening global economy. The fourth quarter earnings season has begun which is also causing investor anxiety. The quarterly reports that have trickled in to date highlight the toll the weak economy is causing. In addition, companies are adjusting future outlooks downward with greater regularity.

Market Beating Foresight

Fourth quarter earnings and future outlooks have the potential to really move the market. If earnings results and future outlooks are worse than expected, the market could plunge to much lower levels. Most observers expect results to be very weak. But at issue will be how bad results relative to expectations are. Obama is gearing up to take office January 20 and we are confident that his administration will push massive spending programs to stimulate the economy. That will help boost confidence in the economy and market, but will certainly take months before having any material impact on jobs and economic growth. We continue to believe that the market will remain rocky over the next several months as the economy finds better footing and searches for bottoms in housing and jobs. Oil continues to trade in wide price swings, so short term traders can make significant profits from moves in both directions. Long-term, oil may be a good buy if investors can buy between $32 and $36. No doubt oil prices will rise over time once the economy gets through this difficult patch. When bubbles burst, there is often an overcorrection, and Oil in the low $30 range may be one example. For stocks, we are sticking with our current investment allocation and plan to gradually increase our investments only over time. If the market can get through quarterly earnings season relatively unscathed, we will significantly increase our stock allocation. Short term, the best approach is patience and cautious investment.

2008 Year End Review

2009-01-04T14:29:00.003-05:00

Did Anyone Make Money?

Last week marked the end of the 2008 trading year. Surely most investors are glad to see 2008 come to an end, as last year marked the worst stock market performance since 1937! How bad was it? The S&P 500 lost 38.48% for the year, and the NASDAQ followed suit losing 40.58%. Those are horrendous numbers, but frankly it could have been worse as the market had lost nearly 50% from market highs at one point. According to Lipper Analytical Services, which tracks returns on 4,000 publicly traded mutual funds, as of early December, there were ZERO US stock funds that had a positive 2008 YTD return! Wow, that is amazing. No one likes to lose money, but we all were in good company. The trick is to at least lose less than the market averages, thereby earning market beating returns and real gains in relative wealth. Our portfolios did lose money in 2008, but we lost less than the market as each portfolio beat the market averages significantly by a difference of more than 10%, 10%, and 25% across three portfolios.

Recession in Full Force!

No surprise to anyone that the economy has been shattered. Eventually, we got official word that the recession began in late 2007, which of course by the time of the announcement, was well known. This may come to be the worst recession since the great depression. It started with the subprime mortgage collapse which then spread to the rest of the mortgage market and asset backed securities. Credit markets became locked and a liquidity crisis ensued. The housing market collapsed as home prices fell to levels not seen in years which put many homeowners underwater on mortgages. Increasing delinquencies and massive corporate write-downs brought a financial collapse that will permanently changed the landscape on Wall Street as companies fell, got acquired at fire sale prices, while survivors became bank holding companies for access to government bailout funds. But the problem became bigger than Wall Street, as job losses began to mount, home equity vanished, and consumers slowed spending. Consumer confidence hit record lows, while investor fear hit record highs. Volatility (VIX), often viewed as the investor fear gauge, started the year just above 22 and hit an intra-year high over 89, a disastrous 300% increase. Furthermore, the market had 18 daily moves of 5% or more in the S&P 500 over just the last three months of the year. That is a higher volatility than the market experienced over the last 50 years combined! That volatility and the bear market certainly pushed many investors out of stocks, as the cash levels on the sideline continues to grow. Yep, no doubt we are in a severe recession, one that has roiled the stock market and frankly nearly every other asset class as well.

Hope? What Can We Cling To?

No one can predict what 2009 will bring. However, in our view, we see more job losses, foreclosures, bankruptcies, and spending cutbacks as the economy continues to contract and deleverage. This will be painful, but will probably not carry the same shock value that we experienced in 2008 as companies and consumers adjust. On the positive side, we have a new administration taking office that has big stimulus plans and a government eager to intervene with bailout funds and additional spending. Interest rates are extremely low, at levels not seen in many years. Rates will likely remain low for most if not all of 2009, which will help spur economic activity. Low interest rates and lower commodity prices will improve cash flow for consumers and over time spur consumer confidence. All of these factors are positive for the economy and the stock market, but all will not be cured overnight. We expect the economy to be very sluggish over the first 6 to 9 months of the new-year, as more time is needed for all these measures to take effect. For the stock market, volatility ended the year at 43, still on the high side, but much lower than 2008 highs. Volatility has been trending down, and if that continues, investors will return to the market. In addition, with the flight to safety, there is a lot of cash on the sidelines and in Treasuries, as investors wait out this rocky period. The stock market may skyrocket once this money comes back into the market propelling the demand for stocks higher. History is also on our side with respect to a strong recovery. Since World War II, the S&P 500 index has soared 32% on average during the nine months following a bear market. The trick, of course, is identifying when the bear market ends and the recovery begins.

Market Beating Foresight, 2009 Outlook

Overall, we think the economy has a long way to go before it gets better. However, the stock market has begun to show signs of life. We are very encouraged with the downward trend in volatility. Stability is critical to bringing investors back to the market which will increase the demand for stocks and therefore prices. The market has also been showing strength over the last few weeks and has shown resistance to the lows hit in November. However, trading has been light over this time, and the real test will be the first quarter 2009. If the market can hold current levels through the first quarter, the worst may indeed be over for the stock market. A case can be made that equity prices today represent compelling values. The PE ratio of the S&P 500 index now stands at 11 or 50% below its ten year average. In addition, the S&P dividend yield is a juicy 3.4%, which is more than twice its ten year average. Although stocks are compelling, it does not mean that prices could not fall further, as we saw even lower PE ratios during the depression. But we do not think lower valuations are all that likely, as governments worldwide demonstrate their inclination to take action and provide the economic stimulus needed in 2009. However, we do think that the market will likely remain rocky over the first half as the economy searches for bottoms in housing and jobs. Hopefully, by the second half, enough time will have passed for government interventions to take hold, for corporate earnings to stabilize, and for deflationary concerns to subside. Interest rates will likely remain low and by fourth quarter 2009, consumer confidence should hopefully already be trending upward. With time, the market will return to normalcy, that is, a market not ruled solely by fear. The stock market is usually a leading indicator for an economic turnaround, so in that light we expect a more consistent and upward market trend later this year.

Investment Themes for the New Year

Our themes for the New Year are to stick with defensive industries such as utilities, healthcare, food, and consumer staples. Focus on value stocks that have strong balance sheets, are well capitalized, and have high cash levels, as those are the companies that will survive and even prosper in difficult economic times. Strong companies that are paying high and sustainable dividend yields are also good longer term investments. For speculative investors, we think there is a bubble right now in US Treasury Bonds as investors have driven yields down to incredible levels not seen in many years. We do not think that yields will be rising anytime soon so buying now may mean carrying losses short term, but that may still be better than missing the reversal which tends to happen quickly with bubbles. Investors will eventually begin to move money out of treasuries and back into stocks, and when that begins, investors should be ready to move as bond prices will surely fall. Oil and other commodities are also good places for speculators to invest. Demand for commodities will likely grow as the year unfolds, so prices could be substantially higher by the end of the 2009 and 2010.

Remember, our complete list of stocks is Available Online At: http://www.marketbeatingstocks.com

Weekly Recap - December 26, 2008

2008-12-28T16:32:00.001-05:00

Trading Volume Low Over Holiday

Last week the market lost 1.7% on the S&P and 2.2% on the NASDAQ in light trading from the holiday shortened week. Economic news again was poor, although not a surprise from what most of us were expecting. Frankly, it is more difficult to assess directional trends in the overall market when there are low trading volumes. Trading volumes will likely remain low again this week with the holiday shortened new year. We remain encouraged that volatility, while still high, continues to moderate, which we view as critical relative to bringing investor confidence back to the market.

Rates Lower, Refinancing Rises!

On the economic front, last week was much of the same as reports showed declines in existing home sales, along with new home sales that hit lows not seen in 17 years. Personal income and spending also reported drops in November. Jobless claims last week hit new highs again. Consumers have clearly cut back on spending in the face of job and housing concerns. Holiday retail sales will likely show declines from last year. Overall, the market is taking most of the bad news in stride, as volatility continues to moderate. Oil prices remain low, although prices began to move up by the end of the week. Although most of the news was bad, there were positive developments last week including GMAC which received government approval to become a bank holding company. That should help GMAC stave off bankruptcy at least for the short term and provide more credit to the GM customers to buy cars for which GM desperately needs. Also, another hopeful sign was applications for new mortgage loans hit their highest level in five years, as lower interest rates begin to have an effect as an incentive to refinance. The Federal Reserve program to buy mortgage securities from Fannie, Freddie, and Ginnie Mae is bringing mortgage rates down which lowers borrowing costs to consumers and encourages more refinancing for those that can. According to Freddie Mac, 30 year fixed rate mortgage loans have dropped to 5.14%, a 37 year low. As borrowers refinance, consumers will then have additional cash to either spend or to save, which will help improve consumer confidence.

Market Beating Foresight

The market continues to show resistance at current pricing levels, along with a lower downward trend in volatility. Both trends are encouraging despite a very difficult economy. Next week will bring reports on manufacturing and services, along with consumer confidence and jobless claims. Trading volumes will likely remain low in another holiday shortened week. The other story unfolding next week is the Santa Claus effect which began last week and will run through January 3. Quantitative research suggests that the Santa Claus effect has been responsible for an average market increase of 1.5% from the last five trading days of the year through the first two trading days of the new-year. A net gain for the Santa Claus period is considered by many as positive for the new-year, while a loss is viewed as a negative. We remain hopeful that the market is starting to show signs of stabilizing, although it could remain very bumpy or even rocky over the next few months.

As we have said before, a bumpy market will provide short-term investors with many profitable opportunities on both short and long positions as the market swings back and forth, within a 100 point trading range. Our stock tips for investors has not changed from last week, and would include sticking to defensive industries such as utilities, healthcare, food, and consumer staples. Focus on value stocks that have strong balance sheets, are well capitalized, and have high cash levels, as those are the companies that will survive and even prosper in difficult economic times. For speculative investors, we think there is a bubble right now in US Treasury Bonds as investors have driven yields down to incredible levels not seen in many years. Yields are unbelievably low and at a minimum, rates will rise over time as they begin to normalize. But the bigger story is likely to be inflation, which over the long term horizon will likely heat up in a major way due to all of the government spending underway to revive the economy. When inflation hits in a few years, yields will rise significantly forcing the prices of bonds to fall severely. Exchange Traded funds are an easy way to play this bubble where investors can buy one of the Short or Ultrashort Treasury Bond funds where performance moves inversely to the Treasury Bond price index. We do not see the government raising interest rates any time soon and the flight to safety will likely continue over the near term until investors are more confident that the worst is over. With that in mind, buying now may mean carrying losses short term, but that may still be better than missing the reversal which tends to happen quickly with bubbles. Investors will eventually begin to move money out of treasuries and back into stocks, and when that begins, investors should be ready to move as bond prices will fall.

Remember, our complete list of stocks to buy is Available Online At: http://www.marketbeatingstocks.com

Weekly Recap - December 19, 2008

2008-12-21T16:27:00.003-05:00

Market Resistant, Volatility Declines!

Last week the market gained .9% on the S&P and 1.5% on the NASDAQ in a week that brought more layoffs and bad economic news. The market continues to show resiliency and volatility is declining. The resistance the market shows at current levels and the decreasing volatility is encouraging. Volatility ended the week at a level just under 45. That is still on the high side, but we view the decline very favorably particularly since Friday marked expiration of a quadruple witching hour, typically a period of high volatility with the all at once expiration of four types of futures and options contracts. We remain hopeful that the current market strength is a sign of a market that has already reached bottom.

Recession Continues, Bailout For Automakers!

No real economic surprises from the recession watch last week. Industrial production declined in November, as did housing starts. Jobless claims remain at high levels and the parade of companies announcing layoffs continues. However, oil continued its promising trend towards lower prices after falling for the sixth day in a row despite the announcement of aggressive OPEC production cuts. The other big news was the auto industry bailout with the Bush Administration offering to provide the initial relief from the TARP program. Congress could not reach agreement on an Auto package, so Bush stepped in to provide a bridge. The automakers will likely need much more than the $17.4 billion that Bush approved, and additional measures are likely from Congress and Obama next year. Rumors have also circulated that Obama has additional measures planned in an effort to help the overall economy, and that amount could be as high as $850 billion. The other big news was the action taken by the FED to lower the federal funds rate to 25 basis points or lower. Yields on treasuries reacted by dropping again to levels not seen in many years, and mortgage rates have also followed suit. The government interventions to date have truly been remarkable which should help the economy recover more quickly. However, the extent of those interventions can also be viewed as a sign of just how bad economic conditions really are.

Market Beating Foresight

The market continues to show resistance at current pricing levels, along with a lower downward trend in volatility. Both trends are encouraging despite a very difficult economy. Next week will bring reports on new and existing home sales and readings on consumer sentiment. Another round of jobless claims will be released and we will likely get progress reports from retailers on the holiday shopping season. There is also the Santa Claus effect that if it holds true, will begin this week. Quantitative research suggests that the Santa Claus effect has been responsible for an average market increase of 1.5% between the last five trading days of the year through the first two trading days of the new-year. Hopefully, Santa will show again this year! We continue to believe the market is starting to show signs of stabilizing, although it could remain very bumpy or even rocky over the next few months.

For short-term investors, a bumpy market will provide many profitable opportunities on both short and long positions as the market swings back and forth, within a 100 point trading range. Our stock tips for investors, would include sticking to defensive industries such as utilities, healthcare, food, and consumer staples. Focus on value stocks that have strong balance sheets, are well capitalized, and have high cash levels, as those are the companies that will survive and even prosper in difficult economic times. For speculative investors, we still think a play in oil is interesting, as prices keep dropping to new multiyear lows. No doubt oil demand will be pressured in the coming year with the global slowdown, but it seems oil price levels are currently on the low end of their long term trend. A reversion back to that trend and mean assumes a price rise is probably more likely over the long term. Buying an Exchange Traded Fund focused on Oil would be one way to play the market, but investors should be prepared to hold for a longer period until the economy and oil demand begin to stabilize. Overall, equities remain at very compelling price levels despite an economy that has a long way to go before it gets better. We have begun to invest some of our cash into growth stocks and will gradually increase our stock allocations over the coming months. Patience will reward the long term investor as positive momentum and confidence will eventually return. Investors buying stocks at these levels will be rewarded in 2-3 years even if they are early in calling the market bottom. Despite a difficult year, all of our portfolios still show positive returns since their inception, which is truly exceptional given that corresponding market returns all show significant losses.

Remember, our complete list of stocks is Available Online At: http://www.marketbeatingstocks.com

Another Rate Cut

2008-12-17T08:47:00.002-05:00

Yesterday, the market was up strong increasing over 5% largely due to the stronger than expected FED cut in interest rates. The FED indicated they would seek a rate cut that would essentially leave rates between zero and 25 basis points. Rates have never been lower in 50 years and the stock market responded! Today will be a good test on whether the market holds these gains. The market sentiment appears to be growing more positive every day. However, the economy has a long way to go, but it seems clear the government and next admistration will apply all the tools they think necessary to get the economy back on tract and to minimize current hardships.

Volatility has moderated and now may be a good time to start investing cash that has been on the sidelines.

Weekly Recap - December 12, 2008

2008-12-14T14:19:00.002-05:00

Market Resilient Despite Auto Woes!

The market gained .4% on the S&P and 2.1% on the NASDAQ last week despite more bad economic news and the ongoing saga involving the nearly bankrupt auto industry. The market was up strong most of the week, but took a significant swing down on Friday to essentially end the week where it started. The market continues to show resilience to all of the bad economic news including the pressure from the auto industry. Could the sentiment finally be changing? Volatility decreased last week and the market continues to show strength despite a difficult economy that will struggle well into 2009. The oversold conditions and the market resistance shown at current levels provide support for the belief the market is in that bottoming process.

Recession in Full Force!

We got official acknowledgement the prior week, so now we can use the word recession, which has been in full force. The economic data released last week clearly adds further evidence of the recession severity. November retail sales declined again, with retail sales now reported down 4.7% over the past three months. That is a significant decline that shows consumers are restricting spending wherever possible. In addition, the procession of companies announcing layoffs continues, as jobless claims hit 26 year highs. It is also worth noting the breadth of the layoffs as almost all industries are being affected by the downturn. But the biggest news for the week was the auto industry and the failure of the senate to approve the $14 billion bailout package. Some reports suggest that the auto industry employs as many as 350,000 people directly and indirectly. The impact of an auto bankruptcy could be very significant to the overall economy, not to mention payrolls. Speculation remains strong that the auto industry will get help in some fashion, but the uncertainty over direction clearly weighed on the market Friday. On a positive note, Obama provided a spark by suggesting his administration is putting together plans to provide substantial support and new funding early next year. No doubt that will help, but we need to see improvement in housing and employment before the economy can make headway and start growing again.

Market Beating Foresight

The market finished the week flat, after having been up strong until Friday when the auto bailout failed to pass. Volatility has recently started to trend downward although it still remains at historically high levels. Investor sentiment appears to be improving, as bad news announcements seem to have less shock value. The fact that the market has declined over 50% since October 2007 highs lends support for an oversold market that might be ready for a trend reversal. As we have said before, there is no doubt that the economy is bad and that only time and government intervention can turn the tide. Next week will bring additional reports on industrial production, consumer price index, housing starts, and another round of jobless claims. The FED is also meeting next week and is widely expected to lower the FED funds rate to .5%. To date, the FED has been an active participant in helping to stabilize the financial markets. However, after the next cut, interest rates cannot go much lower so future FED plans will be of great interest as the FED has to find another way to help with economic recovery. The looming bankruptcy of General Motors and the auto industry bailout will also surely be a hot topic next week. Our speculation is that relief will come from either an agreement over the bailout proposal or perhaps administration approval to use TARP funds. We continue to believe that the economy has a long way to go and could be as long as year-end 2009 before improving. However, we also believe the market has reached a trading range bottom. Volatility is starting to trend down and the market has been resilient in resisting sharp drops over the past two weeks despite bad economic news. We think the market is starting to show signs of stabilizing, although it could remain very bumpy or even rocky over the next few months until volatility returns to normal at much lower levels.

For short-term investors, a bumpy market will provide many profitable opportunities on both the short and long positions as the market swings back and forth, within a 100 point trading range. For now, long investors should stick to the defensive industries such as utilities, healthcare, and consumer staples. Stick to those companies that have strong balance sheets, are well capitalized, and have high cash levels, as those are the companies that will survive and even prosper in difficult economic times. For speculative investors, maybe now is the time to consider a play in oil, as prices have hit multiyear lows. No doubt oil demand will be pressured in the coming year with the global slowdown, but perhaps prices have moved down too far too fast. Some speculators suggest oil could fall as low as $30 over the short term, however this was also the same investment house that suggested it would hit $200 before the end of this year. No one can predict short term prices, but we believe oil price levels are currently on the low end of their long term trend, and a reversion back to that mean assumes a price rise is probably more likely. Also, we mentioned the prior week the bubble in Treasuries, as the flight to safety, along with the FED buying initiative, has pushed 30 year treasury yields to their lowest levels ever! In fact, last week we saw briefly negative yields on short term T-Bills, meaning investors are willing to pay the government to hold their money. Clearly, the pressure and downward trend on yields will change as this bubble will eventually burst as they always do. The FED will likely cut short term rates again next week, which will further pressure yields on government securities. Overall, equities remain at very compelling price levels despite an economy that has a long way to go before it gets better. We are planning to invest some of our cash into stocks over the next few weeks as we find good opportunities and would suggest that investors sitting on cash do the same. Patience will reward the long term investor as positive momentum and confidence will eventually return. Investors buying stocks at these levels will be rewarded in 2-3 years even if they are early in calling the market bottom. Despite a difficult year, all of our portfolios still show positive returns since their inception, which is truly exceptional given that corresponding market returns all show significant losses.

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Weekly Update - December 5, 2008

2008-12-07T15:40:00.004-05:00

Resilient Despite Economic Woes!

The market lost 2.3% on the S&P and 1.7% on the NASDAQ last week but that performance was much more interesting when viewed in context of what transpired. We expected a pullback following the extreme performance from the prior week and the market responded by dropping 8.9% on Monday to start the week. But then, the market showed its resilience by increasing 7.3% over the next four days despite an avalanche of bad economic data. The strength shown by the market was very encouraging in light of an economy that continues to worsen. No doubt the economic woes will continue well into 2009. However, the market appears to be showing more resistance at current levels probably due more to the fact the market had been way oversold even after consideration of the ongoing and deep recession.

Economic Conditions Worsen!

We finally got the official word on what we all already knew, we are in a recession! In fact, the experts now say we have been in recession for one year, since December 2007. That is no surprise to us as that has been our prediction all along. But last week brought stark data on just how bad the economy really is. The ISM manufacturing index came in at 36.2, the lowest reading since 1982 and far below the level considered contraction. The ISM Services index also hit record lows. November same-store sales reported declines and continuing claims for jobless benefits reached a 26-year high. Some reports have the percentage of home loans at risk of default (foreclosed loans and those with late payments) at record levels. Of course, the biggest news was that payrolls declined 533,000 in November, the largest decline in 34 years! Obviously the unemployment rate continues to rise as companies across many industries rush to announce more job cuts. The automakers testified on Capitol Hill to receive bailout funds, but no agreements were reached. The prospects for the auto industry are indeed very dim, as GM reported a decline in November sales of 41%. On a positive note, the government is looking at initiatives to help drive mortgage rates down and interestingly, mortgage applications showed an increase over the prior week. Also, gas prices continue to fall after hitting a 4 year low, and lower prices will help improve cash flows and confidence. But the real story is housing and employment, both of which have to improve before the economy can make headway and start growing again.

Market Beating Foresight

Despite the overwhelming bad news, the market only lost 2.3% and in fact, gained significant ground over the last four trading sessions. What could account for this resiliency? We think the stock market has reached oversold levels given a 53% decline since October 2007 highs. That and the fact that the market has largely already accounted for much of the bad news just released. There is little doubt in our minds that the economy is bad and that only time and perhaps government intervention can turn the tide. Next week will bring additional reports on unemployment and retail sales. In addition, there is speculation that a bailout plan for automakers may finally be settled. Given the weight of bad economic conditions, the government will likely implement other initiatives to help provide support for the economy. Obama will likely push additional measures when he takes office in the new-year. These efforts will help the economy over time, but it is still likely to be well into 2009 if not year-end, before we start to see an economic revival. Short term these government measures will help, but we are also concerned that inflation over the long term may again rear up as we struggle with growing budget deficits as a result of these government interventions. The market has risen in eight of the past ten trading sessions, a remarkable feat considering the plethora of bad economic news. We view this as a positive sign for the market, a sign that lends support to the argument the market may have established a trading range bottom. We think the worst may be over for the stock market, despite the poor economy. However, that does not mean the market will not drop further, in fact the market trend will likely remain very bumpy or even rocky over the next three to six months.

For short-term investors, a bumpy market will provide many profitable opportunities on both the short and long sides of the market as the market swings back and forth within a 100 point trading range. For now, long investors should stick to the defensive industries such as utilities, healthcare, and consumer staples. Stick to those companies that have strong balance sheets, are well capitalized, and have high cash levels, as those are the companies that will survive and even prosper in difficult economic times. For speculative investors, maybe now is the time to consider a play in oil, as prices have hit multiyear lows. No doubt oil demand will be pressured in the coming year with the global slowdown, but perhaps prices have moved down too far too fast. Also, what about the bubble in Treasuries, as the flight to safety, along with the Fed’s buying initiative, has pushed 30 year treasury yields to their lowest levels ever! This bubble will eventually burst as they always do, and when that happens, investors on the short side of the treasury market will make a killing. We do not expect treasury prices to fall immediately as the Fed will likely cut short term rates again in December. But rate cuts will stop sooner rather than later, and treasury prices will begin to fall and the shorts will prevail. Overall, equities remain at compelling price levels despite an economy that has a long way to go before it gets better. We are planning to invest some of our cash into stocks over the next few weeks as we find good opportunities and would suggest that investors sitting on cash do the same. Patience will reward the long term investor as positive momentum and confidence will eventually return. Investors buying stocks at these levels will be rewarded in 2-3 years even if they are early in calling the market bottom. Despite a difficult year, all of our portfolios still show positive returns since their inception, which is truly exceptional given that corresponding market returns all show significant losses.

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Extremes Continue

2008-12-02T08:33:00.004-05:00

OUCH! One of the worst trading days in the history of the stock market as the S&P was down nearly 9%! Obviously the market continues to trade in extremes. We expected to get a pullback given that the market had risen so strongly over the preceeding week, but this was a bit overdone. The market will likely bounce back today, but probably won't make up for the entire loss from yesterday. This is a critical week that may be very telling on where the market will finish year end. The market could move up and by year end hold in the 875 to 950 trading range or it could finish the year lower from where it is today.

Market Wrap - Thanksgiving Holiday

2008-12-01T09:31:00.001-05:00

Week of Extremes!

Another week of extremes, but this time the S&P and NASDAQ both experienced strong gains over the holiday shortened week. The S&P scored what might have been its best week ever, increasing 12% by the end the week-end. The NASDAQ was also up strong at 10.9%. But despite the extreme gains the last week, the month of November ended down 7.5% for one of the worst monthly declines on record. The big question is whether last week gains will continue through the end of the year or whether the market will pullback or extend to even greater losses.

Government Action Drives Market Higher!

The government was probably the biggest positive contributor to the market action last week. Government actions included an $800 billion plan to improve consumer credit conditions and the bailout of Citigroup. In addition, Obama's economic team was announced and for the most part was generally well received on Wall Street. The Federal Reserve announced that it was creating a $200 billion facility that will focus on getting liquidity flowing in asset-backed securities markets to help facilitate auto loans, student loans, credit cards, and small business loans. Also, the government announced that $600 billion will be allocated for the purchase of direct obligations of mortgage backed securities backed by Fannie, Freddie, and Ginnie Mae. These efforts are expected to drive down mortgage rates and improve conditions in the housing market bringing relief to the stock market as many analysts consider housing the heart of the crisis. The government also took remarkable action in the bailout plan of Citigroup with a $20 billion preferred stock investment. Citigroup stock increased over 100% during the week as a result. But Citigroup was not the only beneficiary as financial stocks in general rebounded strongly with the announcement.

Economic Data is Poor

Despite strong market gains, the economic data released last week continues to show a troubled economy. Gross Domestic Product was revised downward for the third quarter and durable orders fell 6.2%. Housing stats continue to show decline as existing home sales fell 3.1% and new home sales dropped 5.3%. Consumers are feeling the pinch as reports on personal spending showed declines of 1%. Consumer confidence remains at very low levels as high jobless claims and unemployment weigh on consumers. Volatility as measured by the VIX index did decline last week with the strong market gains and fell below 60 for the first time in weeks. Lower volatility is critical to bringing investors back to the market. We are encouraged with lower volatility, but would caution that the market has moved up 21% over the past five trading days and may be due for a correction. The market has been oversold and desperately needed an upswing, but the gains over the past 5 days may have been a little extreme. We would not be surprised to see a pullback and a return to higher volatility over the near term.

Market Beating Foresight

Next week will be a busy week for economic reports with releases on jobless claims, unemployment, manufacturing, car and truck sales, and service sector activity. The big news will likely center on retail sales data from Black Friday and the holiday weekend. The prospects for consumer spending and employment will also be primary market drivers. However, the government has been the wildcard, as intervention into the private sector to stimulate the economy has been bold and frequent. The hearings will resume for a bailout package for automakers and that result could also drive the market. Volume which has been light with the holiday, but will return in full force next week, and may represent an excellent barometer for where the market may head for the remainder of the year. If the market can hold last week gains in high volume and lower volatility, that would be a strong bias towards a year end rally. Of course, we could also get a pullback from recent gains, or even worse, hit new lows. While volatility decreased significantly last week, we still think volatility will remain at high levels over the near term. We were very encouraged with the market gains last week, but do expect a pullback given the extreme 21% gain over the past five trading days. This is still a very good market for short term trading as market swings are very wide in both directions. As we have mentioned before, the defensive industries should do better over the near term, particularly utilities and healthcare. In addition, companies that provide staples that consumers will still need in difficult times should also do well. We also look for companies that have strong balance sheets, are well capitalized, and have high cash levels. These are the companies that will survive and even prosper in difficult economic times. The breakout stocks that currently show on our buy list are Gentiva Health (GTIV), Emergency Medical SVCS (EMS), ACETO Corp (ACET). Emergent Biosolutions, which had been on our buy list, has already moved up 30% since we first reported on it, so interested investors should wait for a consolidation period or even a pullback before investing. Overall, equities remain at compelling price levels despite an economy that has a long way to go before it gets better. We are planning to invest some of our cash into stocks over the next few weeks as we find good opportunities, and would suggest that investors sitting on cash do the same. Patience will reward the long term investor as positive momentum and confidence will eventually return. Investors buying stocks at these levels will be rewarded in 2-3 years even if they are early on the market bottom. Despite a difficult year, all of our portfolios still show positive returns since their inception, which is truly exceptional given that the corresponding market returns all show significant losses.

Week in Review

2008-11-23T12:49:00.002-05:00

Horrific Year Just Got Worse!

Another bad week as the S&P and NASDAQ both experienced sharp weekly declines of 8.4%and 8.8% respectively. As bad as the weekly declines were, it could have been worse had it not been for an amazing 5% rally on Friday. November could end as the worst month ever in what has been a horrific year. Stock market gains achieved over many years have now been eliminated. In fact, new lows hit last week essentially erased all gains experienced from the start of the bull market in 2002 and the S&P dropped to levels not seen since 1997. Year to date, this has been one of the worst market periods ever recorded. So what will happen next?

Fears of Protracted Recession

Fears of a protracted and global recession escalate as the economic evidence pours in. A big concern is that consumers will stop spending as fears over their own financial security grow as investment assets plunge and job losses mount. Last week, jobless claims hit a 16 year high as the job market continues to deteriorate. No signs of life yet in the Housing market as housing starts declined again in October. The big three automakers are clearly in dire straits with bankruptcy looming unless a government bailout is approved. The uncertainty with approval of that bailout program weighed heavily on the market and resolution will like not come until the next meeting with lawmakers on December 3. The other remarkable development was the flight to safety with Treasury securities. Yields on treasury securities reached their lowest levels since the 1950s. Short term treasuries yields approached zero, which would be negative yields after accounting for transaction costs! In essence, investors are paying the government to safe keep their money, with no expectation of return! This flight to quality is another barometer of fear in the marketplace, which has arguably reach irrational levels as interest rates trend to zero. On a positive note, producer and consumer prices are dropping as inflation concerns subside. But lower inflation offered no solace, as investors just viewed this as another sign of the weakening economy. Clearly, the market concern now has transitioned to deflation. Despite the difficult week, the market did rally late on Friday after news reports that Obama had selected the NY Fed president Geithner as his appointment for Treasury secretary. By most reports Geithner has an excellent reputation on Wall Street, and will bring continuity with the current crisis, but also brings a reputation for creative problem solving and crisis management.

Volatility Extreme At Historic Levels

Market volatility remains at extremely high levels. The historic average for volatility as measured by the popular VIX index is 30, versus the off the chart levels we see today near 80. The volatility level has been above 30 for 50 straight trading days, which is truly remarkable. But it is also the dramatic swings that we see each day that has investors running to the safety of cash and treasuries! Over the past two months, the daily average percentage change on the market index has been 6% versus an historical average of 1.17% that is almost 5 times the normal level of volatility. There is little doubt that volatility is extreme and at historic levels, as fear runs rampant and drives investor behavior. Turning points usually occur when reliable measures become extreme, and that is where we think the market is now. The critical question is how long will we stay in this period of high volatility and when will it normalize which at some point it will. Market Beating Stocks believes that volatility will remain high at least through the end of the year and likely well into next year. There is simply too much uncertainty and moving parts with regard to financial stability, government intervention programs, the new administration, and other bailout programs. More time is needed for the storm to settle, and consumers have to begin to feel safer when it comes to their jobs and financial assets.

Market Beating Foresight

Economic reports will be released on existing home sales, consumer sentiment, and weekly jobless claims which will further weigh on the market, along with a Black Friday that carries a bleak forecast. The viability of Citigroup is being tested as the share price falls below $4. Government intervention may be necessary to avoid a failure, concerns that certainly trouble the financial sector. As we have said before, we think that volatility will remain very high over the near term. However, we also believe there are signs the market has reached extreme levels in volatility, interest rates, and equity valuations, and levels that usually represent turning points. Are we at the bottom? No one can predict, but we may have hit bottom on Thursday last week, but as investors you do not have to worry with calling the exact bottom. Market Beating Stocks believes we are at a trading range bottom based on extreme volatility levels, near zero treasury interest rates, and compelling equity values following market losses nearing 50%. Are there ways to profit in this environment? Fear and risk aversion is very high which drives up the price investors pay to manage risk. Now may be a good opportunity to play the volatility in your favor by trading options, particularly writing puts in spread positions. We are also going to look for more short term trading opportunities with the market indexes to take advantage of large daily price swings. As for stocks, defensive industries should do better over the near term, particularly utilities and healthcare. In addition, companies that provide staples that consumers will still need in difficult times should also do well. We also look for companies that have strong balance sheets, are well capitalized, and have high cash levels. These are the companies that will survive and even prosper in difficult economic times. The breakout stocks that currently show on our buy list are Gentiva Health (GTIV), Emergency Medical SVCS (EMS), ACETO Corp (ACET), and Emergent Biosolutions (EBS).

We may continue to test the market lows set last week, but overall we think equities have reached compelling price levels despite an economy that has a long way to go before it gets better. That does not mean the market will rise sharply in price over the short term, but we do think the worst of the decline is over. But frankly, as long as volatility and fear remains high, it will be a crap shoot over the near term. We are planning to invest some of our cash into stocks over the next few weeks as we find good opportunities, and would suggest that investors sitting on cash do the same. Patience will reward the long term investor as positive momentum and confidence will eventually return. Investors buying stocks at these levels will be rewarded in 2-3 years even if they are early on the market bottom. Despite the terrible market, all of our portfolios still show positive returns since their inception, which is truly exceptional given that the corresponding market returns all show significant losses.

Insanity, Armageddon on the Horizon

2008-11-20T17:46:00.002-05:00

Brutal Day on Wall Street

Today, the S&P closed down to its lowest level since 1997 on brutal declines across the equity markets! Fear is simply out of control in this insane market. Investors have run for the exit, as Armageddon must be near! Why do we say that? It's simple, the yields on short term treasuries declined to almost zero! That is truly crazy and highlights the insanity in the market. Near zero or even negative yields after transaction costs means that investors are willing to pay the government to hold their money as they do not want to invest anywhere else. I don't know that we have ever seen this before, and that is crazy. Fear is driving the volatility and extremes in this market, and today was the crowning moment.

Is this the Bottom?

What now? Market Beating Stocks thinks that we have reached the bottom for the stock market. That's right, we think this is the bottom. We know we are going against the crowd, but we are now seeing even greater extremes than we saw at the market top, and we view that as the indicator for a market bottom. Make no mistake, the S&P market index is dropping 50 points a day with great regularity and as long as volatility stays high, that is always a risk. But we think when investors look back at this time, with hindsight they will recognize this period as the market bottom. While we do think the equity market has hit bottom, we think the economy has yet to see its worse days. The economy will get worse and will carry negative growth and higher unemployment well into 2009, and maybe even 2010. But the stock market is at an extreme and has more than overcompensated for the struggling economy. It may take a while for the market to realize that, but think the worst is over for equities.

Sell or Buy?

Unless your selling for tax purposes prior to year end, now is not the time to sell. As for buying, we think now is a good time to buy, but would caution that the market is still too volatile to go all in. If you are going to buy, invest gradually over several months. Don't go all in until the volatility levels decrease, as risk is just too high.

Fears Grow Over Deepening Recession

2008-11-15T17:56:00.002-05:00

Significant Losses Amidst Extreme Volatility!

A second tough week with growing losses as the S&P and NASDAQ both experienced sharp weekly declines of 6.2% and 7.9% respectively. Volatility was at extreme levels as the market swung back in forth throughout the week. However, intraday volatility was even more surprising and extreme. In Thursday trading, the market average swung an incredible 11% in just one day. Volatility is so high that market moves over 5% in just one hour of trading are becoming commonplace. We just have not seen market swings like this in a very long time, if ever! The extreme levels of volatility are very disconcerting, and really testing the patience of investors. It is not surprising that many investors are sitting on the sidelines. The volatility was tied to growing concerns that the recession would be more severe and longer lasting that previously thought.

Fears of Deeper Recession

Reports continue to build providing more evidence of a deepening economic recession. Retail sales dropped a record 2.8 percent in October as consumers slammed the brakes on spending out of recession fears. Many retailers lowered their next year outlooks yet again and this time even more severely. Best Buy went so far as to say that “rapid, seismic shifts in consumer behavior have created the most difficult climate ever seen”, and then subsequently slashed earnings guidance for their fiscal year. Unfortunately, it is not just retailers as Intel also slashed earnings guidance due to slowing business demand and investment. The reluctance to spend is contagious and exasperating the fear that this recession will be long and deep, much worse than previously feared. To add more fuel to the fire, jobless claims hit another high, and more companies announce major layoffs with each passing week. The big automakers are teetering on bankruptcy and may fail unless there is government intervention. Oil prices dropped again this week, clearly a sign that demand is decreasing as businesses cut production needs. We all know that the economy is not doing well, but this week marked a growing sentiment that the recession could be longer and more severe than first perceived.

Future Outlook is Challenged

Next week will bring further pressure as more quarterly earnings reports are released reflecting poor economic conditions. In addition, the PPI and CPI measures will be released and most certainly will provide further evidence of the economic slowdown. There is also growing concern and a lack of confidence in the ability of the government to provide support and solutions to the crisis. The government plans put forth to date to address financial and economic concerns keeps changing as priorities shift. Concern is growing with the suggestion that the government does not have a good handle on the problem and the solutions that are needed. Agreeing to spend money is good, but throwing good money after ineffective solutions will not be helpful. The first priority from the Treasury is now to strengthen the capital base of our financial system. The second priority is to provide support for the credit securitization market outside of the banking system, which encompasses items like credit card receivables, auto loans, student loans and similar products. The third priority is to continue to explore ways to reduce the risk of foreclosure. Our main concern is that these measures may not be direct enough to address the housing concerns and related problems, which in our view is the largest component of the problem. Consumers have to feel secure in their jobs and the value of their homes before they will get back on that spending bandwagon. The government has to encourage business and consumer spending with all tools available in order to provide the necessary stimulus. Our economy is driven more by consumption, and until consumers begin to spend, the economic struggles will continue. We expect that corporate outlooks will continue to be challenged well into 2009, and this will weigh on any potential moves in the stock market.

Volatility Remains Extreme

We reported last week that volatility will likely remain high and that turned out to be an understatement! The market has had extreme movements throughout the week and has moved more than 5% in just one hour of trading with growing regularity. Last week marked the Nov 15 deadline for hedge fund redemptions and surely that had an impact on volatility. However, fears of a deepening recession continue to grow and that is weighing heavily on the market, and some would argue a level not yet fully factored into current stock prices. The volatility will likely continue as concerns over the economy and skepticism over government interventions continue to grow. The change in administration will also bring uncertainty as Obama appointments are announced and evaluated, and as more information on future administration plans are announced. With year-end approaching, there is also the looming tax sale deadline for dumping losers which will further pressure stocks. As we have said before, investors need to be patient, and perhaps even opportunistic in light of the current volatility. If the market moves strongly in one direction, there may be opportunities to play a bounce, as the market has intraday swings of 5% or more quite frequently. A good way to play these short term movements is by trading the market indexes or even options based on those indexes. Volatility can be very trying for buy and hold strategies, but it does offer opportunities for short term trading. Last week we set new market lows as we broke through previous lows set in October, before settling back at higher levels. We may test those lows again next week or in coming months as the volatility and selling pressure continues. However, while the economy has a long way to go before it gets better, we still think the market already reflects most of the bad news, with many stocks sitting at very compelling price levels. We are planning to invest some of our cash into stocks over the next few weeks as we find good opportunities, and would suggest that investors sitting on cash do the same. We are also going to look for more short term trading opportunities with the market indexes to take advantage of the high volatility in the market. Patience will reward the long term investor as positive momentum and confidence will eventually return. Despite the terrible market, all of our portfolios show positive returns since their inception, which is truly exceptional given that the corresponding market returns all show significant losses. Remember, the ultimate goal is to beat the market, even if that means losing less than the market over a short time periods!

Market is out of Control

2008-11-13T19:33:00.003-05:00

The market is simply out of control and volatility is extreme. Just today the market moved from a 4% loss to an almost 7% gain before closing. That is a swing of 11% in just one day. What event could have moved the market that much? There is simply no explanation, other than the market is out of control! There was no significant news to support those market moves today. What is an investor to do? Generally speaking, this is not the time to be selling stocks unless you have other stocks you want to buy in their place. We are hopeful that volatility levels will begin to reduce by late November. That doesn't mean the stock market is about to rocket upward. It just means that the volatile swings we have seen over the last two months will become more infrequent. Surely it will be easier to hold stocks when that happens and investors should begin to return to the market. If you are sitting on cash, just sit tight and look for quality investments in the next few weeks.

Weekly Recap Following Presidential Election

2008-11-09T12:53:00.004-05:00

Tough Week, But Could Have Been Worse!
A tough week for the stock market as the S&P and NASDAQ both declined dropping 3.9% and 4.3% respectively. Volatility reemerged with swings of 5% or more on 4 out of 5 days. Frankly, we were not surprised to see a correction as the market had advance 18% over the preceding six days prior to the start of last week. The weekly decline would also have been a lot worse without the rally and gains on election day and Friday. The week brought more evidence of economic slowdown, but a recession should not be a surprise to anyone.

Easy To Be Glum
Reports last week provided more evidence of a deepening economic recession. Most retailers reported the worst October same-store sales in 35 years. The unemployment rate reached 6.5%, its highest level since March 1994. September factory orders declined 2.5% and the October ISM Services index fell to 44, both levels that clearly indicate a contracting economy. Jobless claims continue to rise and at 3.8 million are the highest levels in 25 years. It should come as no surprise to anyone that the economy is not doing well. However, the stock market was able to post gains on Friday, despite all of the depressing economic news. We view that as a sign investors had already accounted for the worst of the economic conditions. Oil prices decline again for the week which provides positive support to the market and indirectly increases consumer sentiment. Lower gas prices represent very real savings that are readily apparent to consumers and help to ease other economic burdens. We just hope that the bubble in oil prices does not return any time soon.

New President, Future Outlooks Uncertain
The big news for the week was clearly the election of the first African American as President of the US. The certainty of that decision lent support to the market and election day brought a strong rally. But future corporate outlooks continue to deteriorate. The most visible corporate disappointment was Cisco who warned that fiscal second quarter revenues were expected to decline 5-10% as large customers across all sectors face a very challenging business environment. This statement pretty much sums up the future outlook for many companies regarding the coming year. Ford and GM also reported major losses, raising concerns over their cash levels and wherewithal to avoid bankruptcy. Again, it should come as no surprise that many companies are pressured in these very difficult economic conditions. The President elect did suggest that the economy would be his number one priority, as talk began on additional incentives that would jump start growth and spending. We expect that corporate outlooks will continue to be challenged well into 2009, and this will weigh on any potential moves in the stock market. However, there will be some companies that hold their own and even thrive in this environment, and those are the companies we will invest in over the coming months. As for performance last week, all sectors were down last week with Consumer Cyclical and Financials the worst performers. The best performing sectors were Consumer/Non Cyclical and Healthcare, although they were also down -.7% and -1.3% respectively.

Volatility Demands Patience
Volatility will likely remain high next week as more companies report earnings and Obama moves forward with his administration appointments. In addition, the looming Nov 15 deadline for hedge fund redemptions may also contribute significantly to the volatility. The economy is not well and that will not change next week. We still believe that the market is at attractive levels, and that this is not the time to move to cash. That said one risk of concern is that the market could move down further on “bad appointments” on the part of the incoming administration. Some of the selections for cabinet positions may be market movers like the choice for the all important Treasury secretary. We hope that Obama is deliberate and insightful with his selections. Oil prices are always a wild card, and we hope the recent declines continue which relieves some pressure on consumers. Another major risk is whether the selling pressure returns that we saw in prior weeks, particularly from the Hedge funds. It could be a very volatile and difficult week if the selling pressure overwhelms the market with the Hedge Fund redemption deadline looming. Investors need to be patient, and perhaps even opportunistic in light of the current volatility. If the market moves strongly in one direction, there may be opportunities to play a bounce, as the market has intraday swings of 5% or more quite frequently. A good way to play these short term movements is by trading the market indexes or even options based on those indexes. Volatility can be very trying for buy and hold strategies, but it does offer opportunities for short term trading. Overall, we still think the economy has a long way to go before it gets better, but we think the market already reflects most of the bad news, with many stocks sitting at very compelling price levels. We are planning to invest some of our cash into stocks over the next few weeks as we find good opportunities, and would suggest that investors sitting on cash do the same. We are also going to look for more short term trading opportunities with the market indexes to take advantage of the high volatility in the market. Patience will reward the long term investor as positive momentum and confidence will eventually return. Despite the terrible market, all of our portfolios show positive returns since their inception, which is truly exceptional given that the corresponding market returns all show significant losses. Furthermore, our performance and portfolio returns stack up very well against our best competitors, many of which are not even beating the market!

Remember, complete stock portfolio updates are available at: www.marketbeatingstocks.com

Post Election Jitters

2008-11-06T19:18:00.002-05:00

The market was down sharply again ending the day more than 5% down. That is a 10% loss over the past two days. Not a whole lot of new information released today, investors must just be getting jittery with the post election blues and the realization the economy is not good. Employers continue to cut jobs and consumers aren't spending money. But that is no surprise today, we already knew that.

We still think the market is trading at attractive levels despite the turmoil in the economy. Yes, there could be further drops, but we think the market is closer to that bottom. This is a good time to buy if you have available cash. Of course, we would suggest gradually entering back into the market over the next month or so. Today, we purchased a long term call option on the market index given the market drops over the past two days. The option price became attractive and we think this option will increase significantly in value over the next year. Check out our website, www.marketbeatingstocks.com for details.

Election Resolved, Market Down

2008-11-05T20:26:00.002-05:00

The good news is the elections are now over. Just the fact that decisions have now been made is better than living with the uncertainty. Nonetheless, the market tumbled today 5.3%, giving back all of the gains from the prior day and then some. We are not particularly surprised at the fall today in part because of the large advance on Monday. The economic news that was released today was not good as employment continues to deteriorate and activity in the services sector clearly shows contraction. Frankly, this is no surprise, the economy is not doing well and in our view, will continue to struggle for some time. However, we still think the stock market is at attractive levels, although it could easily see saw back in forth over the short term. We still think now is a good time to buy. We have our eye on EMS, the stock is currently a little overextended, but if it falls a little more we are going to buy.

Great Week, But One of the Worst Months Ever!

2008-11-02T18:00:00.002-05:00

A turnaround last week as the market reversed trend with the S&P rising 10.5% in one of the best weeks ever! The NASDAQ followed suit increasing 10.9%. Fear, as measured by the volatility index, subsided despite poor economic reports. While the week ended well, the end of the October marked one of the worst months on record after losing 16.9% even after accounting for the strong abnormal gains last week. In fact, October 2008 was the worst monthly performance in 21 years, since October 1987. Volatility decreased by the end of last week, and that will bring investors back to the markets. However, lower volatility levels over a longer sustained time period will be needed in order to get the strong buying interest that is needed to push the market significantly higher.

Hope, Resilience in the Face of Tough Economic Conditions

Last week brought hope with strong market performance and lower volatility. The relentless selling we have seen over the past few weeks finally subsided. Are we at the end of the selling frenzy from institutional investors and hedge funds? Now that we are in November, the tax selling and portfolio rebalancing we have been seeing should decrease, along with the selling frenzy. Volatility, which has been at extreme levels, will likely remain high, but should decrease as the selling pressure subsides. Another good sign was that the market was able to hold the whopping gains made on Tuesday that moved the index up more than 10% in a single day. In addition, the market ended the week strong despite economic reports that were very poor. GDP declined in the 3rd quarter, consumer spending was down 3.1%, consumer confidence hit record lows, and jobless claims rose to recession levels. Despite the bad news, the market was able to shrug off the economic data, and maintain the gains made on Tuesday. However, there were also positive developments in the economy, such as interest rates that continue to fall including the Libor, commercial paper, and federal funds rate, all of which have fallen to very low levels. The Fed recently cut the fed funds rate to 1% and even hinted there may be more room for rates to fall further since inflations concerns have been neutralized with slowing global growth. Lower rates are indeed positive for the stock market, although expectations on future decreases should be tempered as rates are already very low. For example, the fed funds rate has not been below 1% since 1958, and rates cannot go below zero! Oil prices have also been a plus as October marked the biggest drop in 25 years with prices falling 36% for the month, and 56% from highs in July. Lower oil prices offer very real and tangible benefits to main-street. Consumers will feel the savings at the pumps which will hopefully generate more optimism. New home sales rose, a trend change that the housing market desperately needs. These positives are encouraging and will help balance the negative, but all in all, the economy will need to time to recover and work through the excesses of past years.

Big Events Next Week: Elections and More Economic Data

In corporate news, third quarter earnings reports remain in full swing with over half already having reported. To date, earnings reports have been mixed, although the most future outlooks have been cautious given the economic turmoil. More and more companies are announcing job cuts as future outlooks continue to deteriorate. The economy is clearly struggling and our view is that those challenges will likely continue well into 2009. Next week will bring more big news as the Presidential election closes, and the market evaluates the winner. Reports on manufacturing, as well as service level activity will also be released this week, and quarterly earnings reporting will continue. Any or all of these events could move the market in a major way. Next week also marks the start of trading in a new month, and historically November has traditionally been a very strong month. Certainly, all stock investors would welcome a strong November and embrace the start of long upward market trend. In industry news, all sectors shared in the good fortune last week with all showing positive gains. Basic Materials and Capital Goods had the strongest weekly gains at 17.25% and 15.62% respectively.

Our Strategy: Avoid Panic Sells, Great Prices, Increase Investment

The stock market volatility and performance in October was painful, although the performance last week did bring relief and hope. The selling pressure in October was extreme and volatility hit record setting levels. However, over the past few days, volatility did subside, perhaps a sign that fear levels are decreasing. Lower volatility is critical to bringing investors back to the market, but lower levels are needed over sustained periods before buyers will return in mass. There were positive developments last week with declining oil prices, lower credit rates, and rising new home sales. Yet in sum, there were more economic negatives with falling GDP, historically low consumer confidence, declining spending, and jobless claims that continue to rise. But the stock market was able to rise strongly last week despite the negatives, something it has not been able to fight through recently. In addition, we were encouraged that the market was able to hold onto the strong gains made early in the week. We are hopeful that a support base is forming at current price levels, but ideally want to see that base sustained over a longer period in an environment with lower volatility. We are now more optimistic that we have either hit the stock market bottom or that we are very close. The selling pressure subsided last week and the pressure from fund redemptions and tax selling may mostly be over. That should give the market greater resiliency for absorbing bad news. By historic standards, November is usually a good month and we think that may hold true this year barring some major unforeseen event. Overall, we still think that the economy has a long way to go before it gets better, but we do think that equities have hit very compelling price levels. In our view, now is not the time to exit the market. You should only sell a stock if you truly have a better stock investment. In addition, we plan to gradually begin investing some of the cash we have on the sidelines. For those that are sitting mostly on cash, now may be a good time to gradually reenter the market by investing a portion of that cash each month. Investors will reduce their risk over market timing if they allocate portions of their available cash over time. Do not try to wait and catch the market bottom as you will surely miss it! Despite very tough conditions, all of our portfolios continue to show positive returns since their inceptions, which is truly exceptional given that the corresponding market returns all show significant losses.