Monday, August 31, 2009

Chicago ISM Hits 50

After recording a 31.4 reading back in March, the Chicago ISM Index has rebounded all the way t0 50 for August. It basically has rebounded as fast as it fell and is consistent with a V shaped recovery that all the pundits scoff at these days.

Expectations were at 48 after last months reading of 43.4 so this is yet another case of economic data being much better then expected and goes along with the Intel announcement of raising guidance on Friday. It also suggests to us that the market is on the verge of melting up as the shorts finally throw up their hands on this economic recovery. The market sharply fell from the 1,300 level back this time last year and we could easily see a similar rebound. Won't be too hard because just about everybody is positioned for a sell off in the dreaded Sept - Oct period.

Inventories came in at 27.4 which will only add fuel to any rally. Businesses will be forced to restock empty shelves and parking lots. Everybody has seen the pictures of empty car lots. Those must all be filled not to mention it'll have to happen as demand returns to normal levels.

  • The Institute for Supply Management-Chicago business barometer rose to 50.0 from 43.4 in July. Economists had forecast the index at 48.0.
  • The employment component of the index rose to 38.7 from 35.3 in July. Prices paid rose to 50.0 from 35.0 and new orders jumped to 52.5 from 48.0. Production rose to 52.9 from 43.3.

Wednesday, August 26, 2009 likes LIZ

Interesting article I pulled using InfoNgen. Not that I've ever heard of or that I have any knowledge of the fashion value of this source. What is interesting is that the writer has clear fashion knowledge and they have gone from thinking that Liz Claiborne (LIZ) is a 'granny' concept to hip enough for the writer to wear.

My take is that Issac Mizrahi is making the brand hip. This is his 3rd season working with LIZ and should be close to when his impact really begins to be felt. Assuming he can lead a revival with the brand at the same time that the economy recovers combined with essentially wrapping up a restructuring of the company this could be an explosive period for the stock. Jones Apparel (JNY) which is a main competitor has already soared from $4 to $15 after reporting impressive results sooner then expected. LIZ hasn't seen such a turnaround especially on the bottom line, but that could change in a hurry if Mizrahi works his magic if only by changing perceptions.

My fear in buying LIZ last week was that the apparel options weren't as compelling to consumers any more hence lagging way behind JNY. That apparently is changing and the stock has started to perk up of late. LIZ is definitely a buy at these levels for those looking for a big risk/reward play. And by somebody willing to do the research to confirm other opinions on the brand to see whether they agree.

Disclosure: Long LIZ in client and personal accounts.

Tuesday, August 25, 2009

Consumer Confidence Beats Expectations - Finally!

After a few rough months, consumer confidence has finally rebounded sharply after peaking in May. With the general economic situation much improved over the last 3-4 months, the confidence of consumers has been of the main laggards in the Leading Economic Indicators. Indicators that were up 6% on a annualized basis would've been significantly higher had consumer confidence been up to match the economic reality.

The August report showed a significant jump over July from 47.4 to 54.1 The main gains took place in the Expectations Index while the Present Situation Index saw a very slight improvement. Its not surprising to see expectations soar to highs not seen since the recession started in Dec 2007, but its still disappointing to see consumers so gloomy about the present situation. A reading below 25 is absurdly low. I'd look for continual improvements throughout the next year unless the media can convince us otherwise.

  • The Conference Board Consumer Confidence Index ®, which had retreated in July, rebounded in August. The Index now stands at 54.1 (1985=100), up from 47.4 in July. The Present Situation Index increased slightly to 24.9 from 23.3 last month. The Expectations Index improved to 73.5 from 63.4 in July.
  • Says Lynn Franco, Director of The Conference Board Consumer Research Center: "Consumer confidence, which had posted back-to-back monthly declines, appears to be back on the mend. The Present Situation Index increased slightly, mainly the result of an improvement in consumers' assessment of the job market. The Expectations Index improved considerably and is now at its highest level since December 2007 (Index, 75.8). Consumers were more upbeat in their short-term outlook for both the economy and the job market in August, but only slightly more upbeat in their income expectations. And, as long as earnings continue to weigh heavily on consumers' minds, spending is likely to remain constrained."

Monday, August 24, 2009

Net Payout Yield Focus: General

In general, net payout yields are starting to drop as most companies haven't bought back stock in the first 2 quarters this year. Remember that net payout yields are the combination of dividends + buybacks over the past 12 months and most of the higher yields come from buybacks. In most cases companies like Caterpillar (CAT) and CSX were under extreme pressure and it was only prudent to conserve cash and curtailing a buyback has always been viewed with less disdane then cutting a dividend. Heck even cash rich companies like Microsoft (MSFT) bought basically no stock in the last 6 months. It was a huge mistake as they could've bought stock at a huge discount to the current price but the markets were very shaky.

Our Net Payout Yield Portfolio and the general concept held up well during this turbulent environment regardless. Our portfolio has averaged beating the SP500 by 6% a year including last year. Over the next couple of weeks we'll begin to focus more on the individual names in this portfolio. Try to glean some insight into whether buybacks will start back up. Stay tuned as this is a great portfolio for somebody wanting market risk, but with consistent returns greater then an index.

Sunday, August 23, 2009

Performance Review: Growth Portfolio up 84% Last 6 Months

With an 84% return in the last 6 months, the Growth Portfolio has out grown the SP500 by nearly 50%. Unlike most the 'experts' that you see on TV that have continually called for a significant correction or at least one of at least 10% Stone Fox has consistently expected the market to melt up similar to the melt down which would bring the market to at least the 1,200 level. A steep drop off like we had in October last year is typically followed by a similar rally.

Our favorite stocks in this portfolio have mainly been techs like Apple (AAPL), Baidu (BIDU), Millicom (MICC), and Riverbed (RVBD) along with Internation Growth plays like ICICI Bank (IBN), Gafisa (GFA), and US Steel (X) combined with our favorite financial recovery play in Hartford Financial (HIG).

Most of the stocks have seen major moves off the bottom, but for the most part they all still trade at discounts to most major valuations or substantially off highs. We expect all of the stocks to see more gains in the near turn as the market continues to rally. Until something changes we'll remain very bullish having added a small position in Liz Claiborne (LIZ) on Friday.

Overall the portfolio is still down 5.8% on a annualized basis which is disappointing yet satisfying that the portfolio has averaged a 12.5% return higher then SP500. We're continuing to look at ways to prevent the huge downside that happened in 2008. Though it provided the opportunities for the huge outperformance this year, it could've been so much better with some downside protection last year. In general though most of the firms that saved clients money last year failed to invest properly for the gains this year. In the end all 3 of our portfolios held up well in the downturn and have done exceptional in the recovery leading to outstanding outperformance.

Last Week 1.25%
Last Month 7.08%
Last 3 Months 26.22%
Last 6 Months 84.15%
Last 12 Months 2.08%
Last 2 Years N/A
Last 3 Years N/A
Last 5 Years N/A
Since Inception -7.98%
(Annualized) -6.83%
Last Week 2.27%
Last Month 7.80%
Last 3 Months 16.33%
Last 6 Months 34.88%
Last 12 Months -17.48%
Last 2 Years N/A
Last 3 Years N/A
Last 5 Years N/A
Since Inception -21.19%
(Annualized) -18.34%
Last Week -1.02%
Last Month -0.72%
Last 3 Months 9.89%
Last 6 Months 49.27%
Last 12 Months 19.55%
Last 2 Years N/A
Last 3 Years N/A
Last 5 Years N/A
Since Inception 13.21%
(Annualized) 11.51%

Friday, August 21, 2009

Trade: Bought LIZ on Recovery Hopes

Liz Claiborne (LIZ) is a much maligned retailer that sorely needs a economic recovery. We've added shares in our Growth porfolo accounts just below $4 in hopes that a recovery will lead to a Jones Apparel (JNY) type of return. In the last 4 month JNY has soared from $4 to $15.

LIZ still has some strong brands but its questionable whether management has been focused enough on building the strong brands or selling off the weak ones. If they can become more focuses and turn the results around to match that of JNY this could be a great Christmas for shareholders.

Thursday, August 20, 2009

Leading Economic Indicators Continue to Soar

One of the most important indicators and one that has been grossly overlooked by the media continues Leading Economic Indicators of the Conference Board. The last 6 months show a annual growth rate of 6%. Sure sounds like a V to me. Even the coincident indicator was flat in July showing that the economy has clearly leveled out and is ready for substantial growth. Whats even more impressive is that if Consumer Confidence were to turn positive, this number would be off the charts bullish. It amazes me that such a predictor of the future could be this positive yet consumers are so negative. All consumers need to do is turn bullish and life is good. Incredible!

Highlights of the LEI section of the report:

  • The Conference Board LEI for the U.S. rose again in July, its fourth consecutive increase. The six-month change in the index has risen to 3.0 percent (a 6.2 percent annual rate) in the period through July, up substantially from -2.8 percent (a -5.4 percent annual rate) for the previous six months, and the strengths among the leading indicators have grown more widespread in recent months. The interest rate spread, initial unemployment claims and the average workweek made large positive contributions to the index this month, more than offsetting the negative contributions from consumer expectations, real money supply, and building permits.

  • LEADING INDICATORS. Six of the ten indicators that make up The Conference Board LEI for the U.S. increased in July. The positive contributors – beginning with the largest positive contributor – were interest rate spread, average weekly initial claims for unemployment insurance (inverted), average weekly manufacturing hours, index of supplier deliveries (vendor performance), stock prices, and manufacturers' new orders for nondefense capital goods*. The negative contributors – beginning with the largest negative contributor – were index of consumer expectations, real money supply*, and building permits. The manufacturers' new orders for consumer goods and materials* held steady in July.
  • The Conference Board LEI for the U.S. now stands at 101.6 (2004=100). Based on revised data, this index increased 0.8 percent in June and increased 1.2 percent in May. During the six-month span through July, the leading economic index increased 3.0 percent, with eight out of ten components advancing (diffusion index, six-month span equals 85 percent).

Eddie Lamperts Troubles at Sears?

Are they kidding? This is the major problem with journalists and why its so crucial to understand your investment. Journalists only know how to report the numbers and always seem to lack the ability to analyze the investment opportunity.

Sears Holdings (SHLD) the operator of Sears and KMart stores reported a dismal quarter this morning. While I'll concede that it was a bad quarter, it wasn't exactly all that shocking that a bad retailer like SHLD would report a loss in this environment. If they hadn't have reported such a great Q that ended on May 1st, then this result would've been much more in line with expectations.

Still the issue isn't with the earnings, but rather that investors just don't get the reason to invest in SHLD. It sure isn't because they own Sears stores. I've written a couple of articles and you can find many more on the web about the value of the real estate, brands, and net inventory (inventory - debt = roughly $6B). The current valuation of $7.8B leaves very little value left over for valuable brands like Diehard, Craftsman, Kenmore, Joe Boxes, or Lands End and not to mention the crown jewel of nearly 250M square feet of very valuable retail space. Even at only $100/sq ft the real estate alone is worth $25B or nearly 4x the market valuation.

So watch this video from CNBC or read numerous reports about how bad the retail operations are and just laugh all the way to your broker and buy more shares on the dip. Eddie Lampert knows what hes doing which is to continually buy back shares and reduce the float. You don't want to be out of the stock when Eddie announces plans to monetize these assets. He controls nearly 55% of the outstanding shares and several other hedge funds quickly bring the total up to over 90%. With such little outstanding float, I'd hate to be short and wrong. As the housing market recovers so will Sears that is heavily reliant on Kenmore sales.

This isn't so much as a trouble as an opportunity.

Wednesday, August 19, 2009

Highly Leveraged Obama Play: TerreMark

One way to play the ever growing government reach under the Obama administration is to invest in internet companies that are helping the governments promise under Obama to be more transparent and internet centric. TerreMark (TMRK) fulfills that role as the Data Center operator that now runs some of the biggest government sites such as

The stock is also on sale after being hit 15% after reporting a strong Q2 with revenue and EBITDA a the high end of estimates. Its the 2nd time the stock appeared ready for a major breakout only to be hit by major selling. The last time was in early July when fears of internet security issues sent its stock plummeting.

TMRK is highly leveraged like the typical data center/telecom provider of the 2000 era. It takes a lot of capital to buildout the data centers and thats been know different with TMRK. They recently completed a $420M debt offering. Thus they provide the opportunity to invest in a high risk leveraged play just as the economy is coming out of a recession. That's the best time to go down the balance sheet chain. It sure doesn't hurt to invest alongside Obama considering the risk if they weren't to meet targets.

TMRK just recently reported Q2 results that matched the high end of their guidance. Unfortunately though the stock tanked some 20% in the ensuing days. The reason for the drop wasn't apparent other then concerns from analysts like the one at Zacks that is worried about the debt situation.

  • We believe the company’s industry leading product/service portfolio, coupled with a differentiated execution strategy, uniquely positions it to leverage attractive market trends for managed hosting and colocation services.
  • While we are encouraged by the company’s ongoing expansion initiatives and healthy contract booking levels supported by the robust demand for its services, our primary concern remains the highly leveraged balance sheet as most of the expansion initiatives are being funded by debt financing.
Basically the analyst says if you like the sector then TMRK is the play. They have been hitting the high end of their numbers so the earnings report shouldn't have been a reason to panic and sell.

On the Conference Call management remarked that debt service costs will be $55M annually and in 2009 they expect EBITDA of $80-85M. Considering they have a growing corporate client base and a customer like federal government (Obrama) growing by 30%, it seems reasonable that they'll meet those targets and some. After all, EBITDA in Q2 was up 50% YOY. Revenue was up 17%. How many companies have reported that much growth during the Great Recession?

As long as TMRK holds the 200EMA currently at $4.75 this is a great place to load up.

Monday, August 17, 2009

Airplane Lessors: AerCap Leads

The airplane leasing sector has been promising for a while now as emerging markets expand air traffic and airlines with weak balance sheets look to cut cash outlays for new planes. Its also a much better way to play this trend then to own a airline as they typically struggle to make profits with the fierce competition in the sector yet every time we turn around another company wants to open an airline. Owning one seems like a status symbol similar to a sports franchise except airlines almost always lose value.

Airplane lessors on the other hand are typically very profitable. The airplanes typically hold their values and during a period where both Boeing (BA) and Airbus struggle to get new versions out, the planes on hand remain in high demand. Its also an attractive investment because the leases are typically for 5-7 years providing for a consistent return.

Unfortunately though the stock prices are not nearly as consistent. Fears of bankruptcies in the industry (leases can be canceled) combined with fears of airplanes losing value causing loans to default drove the lessor stocks of AerCap (AER), Aircastle (AYR), Babcock & Brown Air (FLY), and Genesis Lease (GLS) to extreme lows down as much as 90%. Not that these companies weren't impacted by the global melt down, but for the most part they had limited long term impacts. Just about all of their combined planes are now leased which is remarkable at a time when most sectors are happy with stable revenues down 30-40%. AER just reported lease revenues up 18%. Alot of the increase is because of new planes, but the fact that they were able to report steady lease rates and an increase in planes leased is amazing. Investors though haven't agreed.

Stone Fox Capital has long been invested in GLS being that the seasoned management team at GLS is suppose to be the best in the business. GLS recently reported a new lease deal and that all of their planes have been leased. Impressive, but they have been very conservative during this global recession period. Though it seemed prudent during the crisis, its actually turning out to be a negative for investors as AER is investing nearly $2B this year on new planes. Planes they are putting to work at high spreads. Evidently the global market has been a lot stronger then typical of recessions. Emerging markets are seeing strong demand and the global recession seems long over now as countries like France, Germany, and now Japan have emerged from the slump to join China, India, and Indonesia to name a few fast growers. This puts companies that have been adding planes ahead of the game. GLS is waiting for the depressed values that never happened.

All of the airplane leasing stocks trade at sub 8 forward PEs making the sector very attractive considering the growing trend to lease planes. AER trades at a sub 4 forward PE presumably because they have the highest risk if the market was to turn south again. At this point, AER if anything seems like a solid bet to exceed estimates for 2010 that factor in very little growth yet AER is adding a ton of planes to its portfolio (41 in 2009 or roughly 20% growth). As we exit 2009, it wouldn't surprise us for AER to trade at the highest PE north of 10 on earnings that could easily exceed the $2.09 expected in 2009.

Highlights from the AER Q2 report highlighting why we like AER at this point in the cycle:
  • Lease revenue for the second quarter 2009 was $169.8 million, compared to $144.4 million for the same period in 2008, an increase of 18%.
  • Net spread, the difference between basic lease rents and interest expense excluding the impact from the mark-to-market of interest rate caps, was $112.6 million in second quarter 2009 compared to $93.1 million in second quarter 2008, an increase of 21%. This measure reflects the increase in leasing income.
  • Committed purchases of aviation assets delivered or scheduled for delivery in 2009 are $1.8 billion, of which $0.8 billion closed in the first half year of 2009.
  • Klaus Heinemann, CEO of AerCap, commented: "Our net spread, which is our industry's key measure of lease rental income after interest expense, increased by 21 percent in second quarter 2009 as compared to the same period in 2008, while we were managing our portfolio through the worst recession since World War II. Our cash position reached nearly $350 million on June 30, 2009 representing over 50 percent of our current market capitalization." Klaus Heinemann added: "We achieved our key goal for the first half of 2009; all of our aircraft orders to be delivered in 2009 through 2011 are placed with airline clients with committed financing arranged. AerCap has strong growth prospects as one of the leading players in the global aircraft operating lease market with financial resources and a commitment to participate in the anticipated market recovery during 2010."
  • Signed 5 lease agreements and 21 LOIs for new planes with an average term of 133 months or 11 years.

Friday, August 14, 2009

Chart of the Day: Investors still Bearish

Even after the huge surge in the markets, the investors at still are in the bearish camp. This is an unscientific poll and its hard to tell who the people are voting, but they have to be somewhat involved in the market to follow a site like this.

This continues to support our bullish theme that investors still don't buy the recovery. Too many people look at how far the market has come and not hot far the market fell. We're still 20% below the Oct highs before Lehman Brothers collapsed.

Why is the Consumer so Depressed Still?

The University of Michigan consumer sentiment survey came out with much worse then expected results today. Why in fact is the consumer sentiment down in August from July? And why are consumers have such lower personal expectations while being more bullish on the national economy? My guess is that the media spent most of July and now August obsessing about job losses, foreclosures, and such that its gotten the average consumer downbeat when they should be more positive. The economy clearly isn't peachy so it's not about whether its a great economy, but consumers should be much more bullish then they were in June and even July. Its so much clearer now that the economy has turned the corner and at this point all we lack is a stronger consumer in the US for an all out bullish scenario. About the only reason a double dip recession could happen is if the consumer were to remain hidden. Luckily though, consumer confidence surveys don't always align with spending. Consumers tend to spend what they have regardless of how they feel when answering a survey.

  • The Reuters/University of Michigan Surveys of Consumers said its preliminary reading of the index of confidence for August fell to 63.2 from 66.0 in July. This was below economists' median expectation of a reading of 68.5, according to a Reuters poll.
  • The index of consumer expectations fell to 62.1 in early August, its lowest reading since March and down from 63.2 in July.
Its also possible that the typical consumer surveyed isn't heavily invested or tied to the global economy. Though with a dramatic increase in car production in July its hard to see how everybody could not see improvements around the corner.

This report may make me pause on considering an investment in Liz Claiborne (LIZ), but it doesn't change my mind on global growth stocks like technology and commodities. It does make me wonder if a void is developing in the US. Anybody that just has wealth tied to their house is still hurting while the more wealthy with stock investments and a global perspective is much more bullish. In that scenario the typical LIZ consumer would be stronger sooner then expected.

Cramer had an interesting bit last night on his Mad Money show talking about how negative the media is these days. As he shows, the media is absurdly negative compared to where the economy is in this cycle. Cramer basically sums up our sentiment.

Sunday, August 9, 2009

Can the Terra Board Afford to not Accept the CF Industries Sweetened Bid?

Just last week on the 5th, CF Industries (CF) upped their bid for Terra Industries (TRA) from its prior bid of 0.4129 to 0.4539 shares to 0.465 CF shares. The deal currently values TRA at nearly $39 share (.465 x $83 CF share) or 30% above its Friday closing price of $29.91. How could the TRA BOD turn down that sweet offer?

Many reasons exist for turning down a premium offer such as shareholder growth would be higher as an independent compared to being part of a conglomerate, shareholders want cash for various reasons including the premium can be wiped out if the aquiorors price drops after announcing the deal, or the premium just isn't large enough to cash out.

In this case, the BOD is definitely leaning to the later but it just doesn't add up. Both companies have similar revenue, income, and growth prospects. TRA shareholders are basically getting a big company with the same basic growth - analysts list both companies with identical 5 year growth rates.

The main wrinkle in this deal is whether or not the price of CF is being propped up by the offer from Agrium (AGU) for its shares. Reviewing the PE ratios in the industry based on '10 earnings estimates, CF and even TRA all trade in the 10-11 range meaning that neither of the stocks has gotten a price bump based on these deals. So with little sign that CF will drop from losing the AGU deal and getting TRA why is the BOD of TRA taking so long on this deal? Seems to be a no brainer.

Why would they turn down the premium and the similar upside from CF? Its not as if they are being aquired by a conglomerate that has less growth potential and hence it would stunt the long term potential of existing shareholders. In CF shares, TRA shareholders get a similar stock with 30% more value. Isn't 30% today better then the promise of 30% in the future?

As an investor bullish on this sector, it seems ideal to accept this deal. The argument that TRA is worth more can also be made with CF. If TRA is worth 50% more or say $45, then why isn't CF worth $120? They are very similar and trade together after all. Why not take .465 CF shares and have stock worth nearly $56 if values were to increase the example of 50%? Management must think this is more then possible to think $39 today isn't enough. Not to mention the combined companies could easily eliminate duplicated costs and increase EPS making the combined company even more valuable.

  • CF Industries continues to expect the combination to generate $105 to $135 million in annual cost synergies by combining corporate functions and optimizing transportation and distribution systems, and through greater economies of scale in procurement and purchasing.
Turning down the deal almost seems the BOD isn't doing their fiduciary responsibilities. Maybe even slightly concerned more about where the cost savings will be coming, then whether shareholders will benefit. Force CF to slightly raise the deal again and accept it. Where is the question?

Friday, August 7, 2009

Trade: Bought Terra Industries and Sterlite Industries India

After the market dipped from its highs in the first 30 minutes today, Stone Fox added Terra Industries (TRA) and Sterlite Industries India (SLT). The very positive jobs report likely sets the market up for an eventual run to the 1,200 -1,300 which is where the market was before it fell off the cliff with the Lehman Brothers blowup.

TRA is a nitrogen fertilizer company trading at $30 with a .465 share offer from CF. The deal was just recently upped and values TRA at over $38. The market doesn't believe the deal will be completed, but I'll post later why the BOD of TRA almost has to accept the deal. Even if not accepted, Stone Fox wanted more investments in this industry.

SLT is a copper and power generation play in India. With the big push by India to upgrade infrastructure and increase power generation, this company is in the sweet spot. They also recently raised $1.5B for investments.

Apple to $1,000?

Pretty shocking to see a site like listing a article detailing how Apple (AAPL) could reach $1,000 in 5 years from what was $140s when the report was written in June. Anybody following the markets knows as being a normally bearish site.

AAPL has huge potential as the article points out via 13 reasons. The iPhone is dominating the smartphone world yet its only avaliable via one carrier - AT&T. The Mac continues to gain market share but still has a very, very low market share that the iPhone and iPod will continue to help drive higher. The iTablet is now being rumored and that could have a huge potential.

As of late we've not put much focus on the long term value of a stock as its become a trading market. AAPL is very undervalued compared to its $30 in cash and $10+ eps for '10. Those conservative estimates during a tough economy should give AAPL a much higher then 13x EV multiple. Multiple will easily expand to double that.

Some key points from the article including the author's targets.
  • In the following article, I want to lay out an analytical framework for understanding how AppleAAPL) could reach $200 by late July, $300+ by late 2009, $400+ by late 2010 and $1,000+ by 2015.
  • Incorporating these baby steps into an earnings model, I get pro forma earnings of about $11 and free cash flow (or FCF) of about $13 for fiscal year 2010. Note that these estimates are within striking distance of the estimates of several street analysts.
  • Applying a conservative FCF yield of 4.5% on the 2010 FCF, the stock should be trading at around $289. Assuming a 5-year earnings per share (or EPS) growth of 18%, and applying a price/earnings to growth (or PEG) multiple of 1.5 to 2010 pro forma earnings, produces a price target of $297. Now add in the approximately $30 per share of cash on the balance sheet, and you have a stock that, only accounting for the factors that have been announced, could well be well above $300 by the end of 2009.
  • Invasion of the Chinese market. First with iPhone, then with Mac. I lived in China, and have witnessed the power of the Apple brand there. The potential is mind-boggling. Apple is an aspirational brand with which all young people want to be associated.

Tuesday, August 4, 2009

Once SHLD Breaks $70 Its off to $100

Sears Holdings (SHLD) looks poised to breakout. Once above $70, the next stop is likely $100. Now the market seems do for a pullback according to most analysts and media outlets, but not much of that happened when the market fell off the cliff last fall.

Its currently solidly above the 20EMA which is above the 50EMA which is above the 200EMA. Its a beautiful chart once it breaks $70. Its also will have clear higher lows and higher highs at that point. Until something changes don't fight the trend.

Also, ignore all the nonsense about SHLD as a company. They have a ton of assets not fairly valued in the current market. SHLD can easily surpass old highs.

Dicks Sporting Goods (DKS) has a similar chart and setup. Any move above the current close at $20 solidifies a breakout that has some resistance around $24, but mostly opens up the stock to a move back to $30.

Both moves net close to the same game so pick your stock. Most people favor DKS for its better run operation, but SHLD likely has more upside as the economy recovers.

Edit 8/6: Once SHLD broke $70 on Wed its surged all the way to $74.81 on Thu. Plenty more room to run now that $70 will be support.

Monday, August 3, 2009

Performance Review: Net Payout Yields

Results from Year 1 on were 6.3% better then the market.

Last Week 0.48%
Last Month 8.66%
Last 3 Months 16.59%
Last 6 Months 28.14%
Last 12 Months N/A
Last 2 Years N/A
Last 3 Years N/A
Last 5 Years N/A
Since Inception -14.23%
(Annualized) -14.23%
Last Week 0.86%
Last Month 7.09%
Last 3 Months 13.19%
Last 6 Months 21.18%
Last 12 Months N/A
Last 2 Years N/A
Last 3 Years N/A
Last 5 Years N/A
Since Inception -19.51%
(Annualized) -19.51%
Last Week -0.38%
Last Month 1.58%
Last 3 Months 3.40%
Last 6 Months 6.96%
Last 12 Months N/A
Last 2 Years N/A
Last 3 Years N/A
Last 5 Years N/A
Since Inception 5.28%
(Annualized) 5.28%

Doc Copper Surges in the Last Few Trading Days

Copper has surged the last few days and this signals the world economy is back to growing. Its surged from $2.46 to close around $2.74 today. Copper has long been designated as the Doctor of the commodity world as its products are used so much in the construction space for basics such has housing and autos. Copper also is so dramatically controlled by China and the emerging markets since they have a larger need for the basics such as housing. While oil is still controlled by the US and the developed world because its use is based on the amount of commerce and vehicles owned as opposes to sold.

Freeport-McMoran (FCX) and Sterlite Industires (SLT) are two of the best copper plays right now. FCX is the best all around play and SLT is a great domestic play in India.

India PMI @ 55

More clear signs that the global economy is back into growth mode after the US just finished its longest post WWII contraction. India continues to see strong manufacturing growth with it's fourth consecutive month of growth. India actually has stronger growth then China which reported a number arorund 53 versus the 55 from India.

If India actually follows through on its infrastructure plans, stocks like Sterlite Industires (SLT), Foster Wheeler (FWLT), and Terex (TEX) could see huge growth from this country and hence stock prices.

  • Markit Economics’ Purchasing Managers’ index stood at 55.3 in July, unchanged from June, according to a report released today. It was the fourth monthly reading above 50, which indicates factory production increased.
  • The Reserve Bank of India last week raised its growth forecast for the year to March 2010 to 6 percent “with an upward bias” from the 6 percent estimated in April, citing favorable funding conditions for companies and a revival in industrial production.

July ISM Manufactures Report Highest Since August 2008

A huge rebound in this months ISM Manufacturing report solidifies the believe that not only has the recession ended, but that the economy will rebound in a V shaped pattern. The report came in at 48.9 which was way above the 44.8 in June and the consensus expected increase of 46.2. With new orders, production, export orders, and backlog now above 50 its only inventory levels that is keeping the report below the growth level of 50. Check out the report from First Economic Trust - Brian Westbury for more details on the V shaped recovery that almost nobody was giving a chance until just the last week. The graphs sure look like Vs to me.

Those inventories will have to be restocked soon and that will really boost the economy. The imbalance of new orders at 55 and inventories at 33 can't last for much longer.

  • The Institute for Supply Management, a trade group of purchasing executives, said Monday that its manufacturing index read 48.9, up from 44.8 in June. That's better than the 46.2 reading analysts polled by Thomson Reuters expected.
  • The pace of decline has been slowing since the index hit a 28-year low of 32.9 in December. And it was the third straight monthly reading above 41.2, which tends to indicate expansion in the overall economy if sustained at such levels, according to the ISM.
  • In July, new orders and production hit their highest levels since the summer of 2007, while new export orders tipped into growth territory after shrinking for nine months.