Broad Market Drops 1.7% As Commodities Get Hammered!

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

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!

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.

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Market Ends Flat Under Weight Of Middle East Turmoil!

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!

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!

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!

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!

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

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!

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!

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

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.

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Market Grinds Out Small Gain on Mixed News!

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!

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

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

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

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Flat Week As Market Consolidates

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.

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Market Stumbles to -2.2% Loss!

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.

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Don't Fight The FED, Market Jumps 3.6%

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.

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Earnings Remain Strong, But Unable To Move Market!

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.

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Only Small Gains as Market Sells Earnings News!

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.

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Market Near Trading Range Highs

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.

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