Flat Week As Consolidation Continues

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.

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