Thursday, January 24, 2013

Apple Update: Buy, Sell, Hold?

Unless your have been out of touch over the last 23 hours you know that Apple ($AAPL) reported earnings last night that were short of analyst expectations. The result is the stock getting clobbered today and most recently trading at $452/share, down 12% on the session. The stock is now at the lowest level in nearly one year and is 35% from its all-time high of $705 that was set in September of last year.

Now to the more important aspect of this blog post: What to do now?

Buy? Well there is certainly a case to buy the stock at current levels because based on valuations alone the stock has huge upside in the coming years. The counterargument to this thesis is that growth is slowing and Apple has lost its edge and therefore should not be valued at the same level as competitors.

Sell? Selling now and locking in what is most likely a gain is one strategy that makes sense because you are not losing money and you can always buy the stock back at a later date in the future. This has been the common theme today - selling into the news. In the years I have watched stocks fall as Apple has there often tends to be a day/week when everyone throws in the towel. This could very well be that week for Apple and it could be marking a bottom.

Hold? Assuming you own the stock this would be my strategy of choice today. By holding you are not joining the masses and panic selling - when has that ever worked out for you? You are also giving the stock a week or so to shake out the weak hands and see what is left. You are also giving the stock a chance to see if it attracts value buyers and the beaten down levels.

Now that I have laid out the three options you should have a better idea of what to do with your Apple shares. For our clients we are holding at this point. We still have a solid gain on the stock and believe the selling is overdone and a bottom will be created in the near future. Therefore selling now is not the best strategy. As we do with all stocks we will re-evaluate Apple on a daily basis for clients.

High Dividend ETF Under the Radar

Then 10-year Treasury is yielding 1.86%, well off the lows of last year, but still not enough for a large group of investors that are relying on regular dividends/interest payments.

There are a number of high-yielding stocks and ETFs available to investors and I regularly mention them in my blog posts. We also offer The ETF Bulletin newsletter that has an all-ETF Portfolio that yields over 6%!!

However, one ETF that is not currently in our Income ETF Portfolio is the ETRACS Wells Fargo Business Development Company ETN ($BDCS). The ETN tracks a portfolio of BDC's that will offer loans to small and mid-cap companies and may also take stakes in these companies. The loans are at a high interest rate often and if the value of the companies increase it could lead to profits for the BDC's.

$BDCS currently pays quarterly dividends and yields 7.3%. Not including the dividends, the ETN was up 23.5% in 2012, easily outpacing the overall market.

Investors that want to take substantial risk could look at the leveraged version of this ETN, $BDCL. The ETN was up 49% in 2012 and it currently has yield of 14.4%.

** For more info on High Yielding Investments please contact the office at info@pennfinancialgroup.com or 1-877-383-7366. We can build a portfolio tailored to your individual risk tolerance and goals.

Apple Struggles - These Stocks Shine

Shares of Apple ($AAPL) are trading lower by 11% this morning and hit a low of $450, close to the lowest level in a year. The earnings report last night was not up to far and guidance was disappointing.

But as Apple struggles and investors continue to dump the stock, there are a handful of companies that are quietly flying under the radar. I thought it was important to put the entire market in perspective on a day when a bell weather such as Apple is leading the news cycle.

  • Rayonier ($RYN) - The timber REIT continues to shine with the entire timber sector, breaking to a new all-time high today.
  • Mattel ($MAT) - The toy maker has quietly put together a remarkable long-term chart and is hitting a fresh all-time high today.
  • The Walt Disney Company ($DIS) - No explanation here, think Mickey and ESPN hitting all-time highs.
There are also a handful of ETFs hitting all-time highs.

  • iShares S&P 400 Midcap Growth ETF ($IJK) - The mid-cap sector is often overlooked as investors focus on large and small-cap stocks. The growth portion of the sector continues to lead the charge higher, hitting a new all-time high today.
  • SPDR Consumer Staples ETF ($XLP) - The "boring" sector continues to slowly climb higher and today it is breaking out to a new all-time high.
  • iShares Dow Transports ETF ($IYT) - This ETF has been on a tear recently, up 8 straight days, led by airlines and railroad stocks.


Thursday, January 17, 2013

The Real "Growth" Industry: Timber 101

One of our purchases for clients during the fourth quarter of 2012 was Rayonier ($RYN), a Timber REIT. This article is a great overview of the sector and why we bought $RYN. And I am happy to say $RYN is hitting a new all-time high today and adding to out double-digit gains!!

The Real "Growth" Industry: Timber 101

Today's Stock Movers: Intel, Banks, CBS, NuSkin

Lots of individual stock news hitting the wires after the bell last night and this morning. Here are some of the movers that I feel are of importance.

Bank of America ($BAC) and Citigroup ($C) - The two big banks reported earnings this morning before the opening bell and $BAC was able to beat by a penny after one-time mortgage-related charges and $C missed their estimates. Both stocks are down about 3% in early trading. This is after $GS and $JPM rose on their earnings earlier in the week. Keep in mind that $BAC was the top performing Dow stock over the last year, so a 3% pullback is not too worrisome.

Nu Skin Enterprises ($NUS) - This is a stock I own for clients and it has been a very big winner over the last few years, but recently has gotten beat up over the Herbalife ($HLF) debacle/attack. Heading into today the stock had rallied 30% off the lows and is up another 9% today after raising guidance ahead of the 2/2/13 earnings announcement. This is a case of a stock getting battered due to its business model and investors selling first and asking questions later. Keep an eye on $NUS.

CBS Corp ($CBS) - Surging to a decade high, up over 10% today after announcing it will convert its outdoor advertising unit into a Real Estate Investment Trust (REIT). The news has analysts predicting the move will add several dollars per share to the value of the company.

Intel ($INTC) - A world leading semiconductor company reports earnings after the bell today and the stock is up 1.2% to a new 3-month high ahead of the announcement. The large-cap has been beaten up lately, but is up over 12% in the last two months. EPS are expected to have dropped to $0.45/share and any upside beat should propel the stock higher. We do own shares of $INTC and love the upside potential as well as the 4.1% dividend it currently pays.

Investor Sentiment Remains Bullish but Drops

The latest reading from the American Association of Individual Investors (AAII) has the bulls at 43.9%, this is down 2.5% from the last report. Most of the bulls moved to neutral territory where there is 28.7% and the remaining 27.3% are bearish.

The chart below shows the that the 43.9% reading is high, but by no means an extreme level. From a contrarian viewpoint I believe there is still more upside for stocks before the masses begin to buy into the market again.

http://charts.stocktwits.net/production/original_11524219.png?1358435142

Wednesday, January 16, 2013

Guess the Strongest Country ETF?

A country with a population greater than France, Spain, or Italy. 

A country that relies on trade with the Euro Zone. 

A country that is estimated to grow their GDP at a rate of 4.1 in 2013.

A country that geographically up against Greece as well as the geopolitical mess that is Syria.

A country who's ETF is up 8% in 2013 and hitting a 2-year high.

Did you guess Turkey? If not, you were incorrect.

The iShares MSCI Turkey ETF ($TUR) has had a great 2013 and been on a tear since hitting a low in May of last year. The ETF has rallied 60% in the last 8 months.

The country recently announced they believe the economy will grow at least 4% from last years 3% and that inflation should fall from 6.16% in 2012 to 5.3%. The one concern the World Bank has is that the current account deficit is expected to increase from 6.8% to 7.0% this year before falling to 6.8% in 2014.

The bigger concern for me is two-fold. Number one is the issues with its neighbor Syria. That situation could explode. The second is the reliance on the Euro Zone as their number one trading partner. If Europe slows again it will directly affect Turkey. 


What I am Buying Today

In the last 2 days there have been some interesting opportunities in the market and I feel the next couple of weeks will offer buying opportunities for investors that believe the uptrend will continue.

Today we purchased a stock for several of clients in a sector that is often overlooked, but has great value when compared to the overall market.

How would you feel about a stock that is trading with a forward P/E ratio of 8.6 and a PEG ratio of 0.38? And it sports a 2.5% dividend yield. Well that is just the fundamentals.

Here is a little about the company. It is an offshore drilling company that has over 70 rigs positioned around the globe that are mainly focused on deepwater. With the search for oil expanding to the deeper parts of the ocean the demand for deepwater drilling services provided by this company should remain high for years to come.

Technically the stock is pulling back from a 52-week high and the healthy weakness triggered a buy signal. We felt is was a great combination of fundamentals, technicals, and sector.
 

   

Playing the Transports at an All-Time High with an ETF

The market today is following the same pattern it has for the last few days, opening lower and rallying throughout the session to close near the highs. A little over 2 hours into the trading day the S&P 500 is back in the green and close to hitting a fresh 5-year high.

Dow Transports

Already breaking out to new highs is the Dow Jones Transportation Average. Since forming a double bottom patter in mid-November the index is up 16% and sitting at the best level EVER!

The index is composed of 20 stocks and the top performers recently have been the Airlines that are breaking out. The Guggenheim Airline ETF ($FAA) is up another 1.3% today to the best level in nearly 2 years.

The Dow Jones US Railroads Index is also close to an all-time high and a few of the leaders in the Dow Transports are rail stocks. Both Kansas City Southern ($KSU) and Union Pacific ($UNP) have very bullish charts.

** FYI: The Guggenheim Airline ETF ($FAA) was recommended in our newsletter "The ETF Bulletin" on 9/26/12 at $29.50/share and today it is trading at $38.56, a gain of over 30%in less than 4 months for an ETF!!

Here is the actual email sent to subscribers:

NEW PURCHASE:
Today we will be adding a new ETF to the ETF Rotation Portfolio in The ETF Bulletin newsletter. The Guggenheim Airline ETF (FAA) will be added with a cost basis of $29.52/share. The ETF will account for 10% of the portfolio and this move lowers the cash balance to 17%. Two new positions could be bought if we choose to move to 100% invested in the coming weeks.

FAA does not fall into the “normal” category of ETFs we typically purchase in the newsletter of for clients. However, with oil prices falling recently and airlines being able to charge more per ticket and add-ons, it puts the oft-flawed business model in an attractive situation.

The ETF is a basket of 26 airline stocks with the top 3 making up 45% of the entire portfolio (LCC, DAL, LUV). All three have similar charts in that they have pulled back recently and are near support, making a buying opportunity even more appealing. The annual expense ratio is 0.65%.

We will place a 12% stop-loss on FAA at $26.00 in the event we are wrong and the current valuations and oil prices below $100/barrel are not enough to push the sector higher. 



You can make big money in ETFs, the key is know which of the over 1200 you should own.

To find out more about the ETFs in The ETF Bulletin please contact the office at 1-877-383-7366 or info@pennfinancialgroup.com

Tuesday, January 15, 2013

2013 Market Outlook with Top Stocks and ETF

The annual Penn Financial Group Outlook has been released to clients and subscribers. This year the 12-page report includes over 30 stock/ETF ideas for the new year. They range from high flyers such as a recent wi-fi IPO to an ETF that yields over 7.0%.

The high flying tech stock I mentioned above is Ruckus Wireless ($RKUS). The company sells wi-fi equipment to carriers and corporations to help them keep up with the growing demand for data that is being downloaded. The stock is in a sweet spot as far as services that will be in demand for the years ahead.

There are many more stock and ETF ideas plus in-depth analysis of predictions and sectors for 2013.

Typically we DO NOT offer this report to non-clients but this year we are offering the report Free to a select 20 investors. If you are interested in receiving a copy of the PFG 2013 Outlook please respond via email to info@pennfinancialgroup.com or call the office at 1-877-383-7366.

Retailers Higher on December Sales

December Retail Sales came in better than expected with a gain of 0.5% versus the estimate of 0.2%. The ex-auto numbers were even more impressive, gaining 0.3% versus an expectation of losing 0.1%.

The SPDR S&P Retail ETF ($XRT) is outperforming the market in early trading with a gain of 0.5% versus a drop of 0.3% for the S&P 500.

Leading the way are:

  • Bon-Ton Stores ($BONT) up 2.7%
  • Kohls ($KSS) up 1.7%
  • Pier 1 Imports ($PIR) up 1.0%
  • Express ($EXPR) up 19%
  • Gap ($GPS) up 2.5%
  • American Eagle Outfitters ($AEO) up 2.1%

Monday, January 14, 2013

What Euro Crisis? Germany Near New High

We are not too far removed from the Euro Crisis that hit global economies and stock markets worldwide. Considering Germany is the largest economy in the Continent and one of the largest in the world it was directly affected by the situation.

However, at last glance the Frankfurt DAX was within 5.5% of breaking above the 2007 all-time high.

Let me repeat that: The German stock index, the Frankfurt DAX is less than 6% away from an ALL-TIME HIGH!

The chart below shows the DAX going back to 2006.












There are a few ways to play the German stock market. One is through the iShares Germany ETF ($EWG). Unfortunately it has not tracked the DAX as closely and would need to gain another 46% to get back to its all-time high set in 2007. This is due to the makeup of the index that EWG tracks; it is the MSCI Germany Index vs. the DAX.

The iShares Germany Small Cap ETF ($EWGS) is almost a year old and is a way to play the small cap stocks in Germany. The Market Vectors Germany Small Cap ETF ($GERJ) has been around since mid-2011 and is similar to $EWGS.

Since $EWGS began trading on 1/27/12 the ETF is up 20.4%. In the same timeframe $GERJ is up 18.8% and $EWG is up 16.3%. The DAX is up 18.7%. In the last year the small cap stocks have been where it is at; this makes perfect sense because as the risk-on trade expands the small cap stocks will outperform. If the trend continues expect $EWGS to continue being the leader.

Favorite Stocks Hitting 52-Week Highs

Looking over my list stocks/ETFs that are potential buys shows a number of stocks that are hitting new 52-week highs. If you have followed me for years you know I do not chases stocks and buy at new highs, but rather look for healthy pullbacks as opportunities to buy into strong stocks.

Below are a few stocks that are hitting highs that should be buy candidates when they pullback.

  • Copa Holdings ($CPA) - Panama-based airline company.
  • Tyler Technologies ($TYL) - Computer software firm.
  • Rentech Nitrogen Partners ($RNF) - Nitrogen and high yield play.
  • Delta Airlines ($DAL) - The sector remains red hot and undervalued.
  • Salesforce.com ($CRM) - A could computing leader.

What to do with Apple Stock Today

Just 4 months ago Apple ($AAPL) could do nothing wrong in the eyes of investors or analysts. Today that view of Apple is 180 degrees different. The amount of negative stories regarding the company greatly outweigh the positive remarks.

Does this signify the end of the remarkable run for the largest company in the country? Is it merely profit-taking and ganging up on the global leader? Or is this a complete overreaction by investors that have been burned too many times in the past? Finally, is this a long-term buying opportunity?

I wish I had the answer to one of the above questions. The only thing I can do is use my knowledge of the market and Apple stock to come up with a plan. For starters, we do own shares of Apple for several of our clients and as of today I plan on holding for the time being.

For investors that do now own Apple I would consider buying IF and only IF the stock can hold near the $500 level for a few days.

Fundamentally the stock is undervalued based on future projections. For fiscal year 2013 the stock is estimated to earn $48.69/share. Based on today's price that has Apple trading with a P/E ratio of 10.3, well below the market and its peers. When looking out to 2014 the estimate is for earnings of $57.10; based on 2014 numbers the stock is trading with a P/E ratio of 8.8. The PEG ratio, which is even more important is a very low 0.53, well below the 1.0 we consider an attractive value.

To put the situation into real numbers. If the stock were to trade at 13 times 2014 earnings (assuming they remain the same), it should be at $750/share or 50% higher than it is today. This is a realistic target for the stock based on fundamentals and offers a large upside versus limited downside considering the already low valuation.

From the technical view, the stock needs to hold near $500 or it could continue lower by another 10% before finding support.

So what to do?

I would hold if you own. And if you are looking to buy wait a few days to see if $500 holds, if it does go in with a 1/2 position and wait and see for the next move.

Playing China Breakout with ETFs

The Shanghai Composite Index rallied 68 points overnight to close at 2311, good enough for a gain of 3.1%. The index is now sitting at its best level since June of last year and is up 18% from the low set less than two months ago.

A strong export number last week and the hopes of continued stimulus and domestic demand have investors putting money back into the 2nd largest economy in the world.

Most investors will turn to an exchange-traded fund (ETF) as the way to play the rally in China. The largest of the group is the iShares FTSE/Xinhua China 25 ETF ($FXI), which is just off a 52-week high. This is probably the best option for the average investor because it invests in 25 large-cap stocks based in China.

But for others (like most of our clients) that like to think outside the box there are other options in the world of China ETFs. Because consumption within the country is doing well and more stimulus would spur this growth even more, investors should turn to the Chinese consumer.

The Global X China Consumer ETF ($CHIQ) is a basket of consumer oriented stocks that has done really well the last few months. Since hitting a low last July the ETF is up 30%, but still not at a new 52-week high, suggesting there is definitely more room to run on the upside.

Monday Morning Market Outlook

The major indices are in the red to begin the new week. The S&P 500 is down 0.25% and is 4 points from its 5-year high. The NASDAQ is not holding up as well with a loss of 0.6%, due to the sell-off in its biggest component Apple ($AAPL).

  • Apple ($AAPL) broke below the $500 level this morning for the first time since last February and is now teetering with break some major support. On last check the stock is back to $505/share, however if the stock closes below $500 it will be a technical breakdown and it will force us to reevaluate our bullish stance on the stock. More to come after the close.
  • Has the situation in Greece really improved that much? There was a recent story in the WSJ that talks about Greeks that are unable to pay their utility bills and are therefore forced to cut down trees in the countryside and use the wood to heat their homes. I still believe there is a chance the Euro situation could flare up one more time in 2013 before it is completely resolved. The Global X Greece ETF ($GREK) is up 44% in the last 12 months.
  • The Biryini Sentiment Reading (a measure of bulls vs. bears) recently hit a new low for bears and the last time three times this has occurred it has led to short-term market sell-offs. Does this suggest the market is a little long in the tooth at today's levels? I would say YES, but only in the short-term as I do believe we will see the market at higher levels in the months ahead. If I am correct you would want to wait a week or two for some healthy weakness to buy into the market. Support on the SPDR S&P 500 ETF ($SPY) is at $143/share, a pullback of approximately 2.5%.

Friday, January 11, 2013

Time to Buy Grains?

For the first time the monthly crop reported was during trading hours and it led to an immediate spike in the price of Corn and Wheat futures. The stock for corn came in lower than expected the planted acres for wheat were below what analysts expected.

The Teucrium Corn Fund ($CORN) closed up 0.6% and the Teucrium Wheat Fund ($WEAT) added 1.5%. The more widely followed iPath UBS Grains ETN ($JJG) closed higher by 1.1%. In early session trading $JJG hit a new 6-month low before the reversal on the midday report.

The action today in $JJG is extremely bullish and considering the oversold territory it is in after falling for the last five months I like it as a potential buy candidate.

It just so happens $JJG was one of the 35 ETFs/Stocks that were highlighted in the Penn Financial Group 2013 Outlook. 

If you are interested in receiving a copy of the PFG 2013 Outlook that includes our top 35 plays for the new year please email the office at info@pennfinancialgroup.com or call 1-877-383-7366.

2 Foreign Banks to Lead the Market Rally

The S&P 500 closed Thursday at a new multi-year high led by the large US banks. Goldman Sachs ($GS) hit a new 52-week high, JP Morgan Chase ($JPM) closed within a few pennies of a yearly high and the SPDR Financial ETF ($XLF) was a few ticks away from the best level in over four years.

As much as I like the US banks to lead the current bull market to new highs in 2013, there are a handful of Foreign Banks that look just as attractive and will add diversification to the typical portfolio.
  • HDFC Bank Limited ($HDB) - India-based bank that has rebounded nicely from the 2009 lows and recently has pulled back from an all-time high. The stock is now sitting on support at the $39-$41 area and is oversold in the short-term. The PEG ratio is an undervalued 0.86 and when combined with the chart the stock looks like a buy today.
  • Banco Bradesco ($BBD) - The Brazilian bank trades with a similar PEG of 0.89 and the chart is not quite as attractive has $HDB, but it is in the upper echelon on bank stocks. I like Brazil as a turnaround story in 2013 and $BBD would be a beneficiary of renewed growth.

Tuesday, January 8, 2013

Little News - More Selling

On a day the market does not have an overwhelming amount of news and stocks are still overbought in the short-term the default is for more profit-taking. There is also some hesitation today as earnings season kicks off after the bell when aluminum maker Alcoa ($AA) reports its 4th quarter earnings.

The S&P 500 is now at the lows of the session, down 10 points or 0.7%. The small-cap stocks are holding up better with the Russell 2000 down only 0.4%.

Gold is able to avoid today's selling and the SPDR Gold ETF ($GLD) is gaining 0.5% and trying to put in a double bottom at the $158 area. The ETF is currently trading at $160.16/share.

Some early standouts include:
  1. Pfizer ($PFE) - the drug maker hitting a new 5-year high 
  2. Allergan ($AGN) - another health care stocks (think botox and breast implants) is shooting to a new all-time high
  3. Monsanto ($MON) - the agribusiness company is up 2.5% after beating earnings
  4. McKesson ($MCK) - drug wholesaler breaking above the century mark to a new all-time high
  5. Market Vectors Vietnam ETF ($VNM) - the small Asian country continues it hot streak rallying another 1.7% today and is now up 11% in 2013

Monday, January 7, 2013

Matt McCall at World Money Show in Orlando

Untitled Document
Join Me in Orlando for the Largest Investor Gathering of 2013
Matt McCall
The economy's continued state of flux has many investors and traders wondering how to best position themselves for a profitable year of investing and trading. Smart investors and traders, like you, know that in times like these it is even more critical to stay informed and surround yourself with the best in the industry. There is no better place to do this than The World MoneyShow Orlando, January 30 - February 2, 2013 at the Gaylord Palms Resort & Convention Center!

The World MoneyShow has another stellar line-up of over 150 financial investing and trading experts who are joining me to share what they see as the best places offering profit in the coming months; projections on what to expect from the markets; what sectors will be offering the best opportunities for profit, and much more!

You cannot afford to miss this most important investor gathering in 2013! It will be your one-stop resource for the most comprehensive education, efficient research, and valuable advice that will lead you to a profit-packed 2013!

While at the show, be sure to join me for my presentations:

Using ETFs to Generate Income in an Uncertain World*
Thursday, January 31, 2013 | 1:00 pm - 5:00 pm

Want to buy virtually any part of the stock market for the price of a share--at extremely low cost with extraordinary liquidity? Then exchange traded funds (ETFs) may be for you. ETFs are more flexible than mutual funds. You can lessen your risks by hedging and shorting ETFs, bet on the direction of entire sectors, or employ them for tax-loss strategies. This four-hour event will feature four top ETF experts who will share the strategies that have been working in these markets to help you learn how to maximize your profits and limit your risks.

*$99 per person if purchased by January 16; $149 per person if purchased after January 16.


Dividend ETFs: Build an Portfolio with Over 6% Annual Income
Thursday, January 31, 2013 | 4:30 pm - 5:00 pm

We are living in a world of low yields as the 10-year bond sits near an all-time low. But there are options available for investors willing to think outside the box. You will learn how to build an all-ETF portfolio that will generate over 6% in annual income with exposure to stocks, bonds, and commodities.


Must Own ETFs: 10 ETFs for a Market-Beating Portfolio
Friday, February 1, 2013 | 4:00 pm - 4:30 pm

Ready to build your own ETF portfolio to beat the market? You will learn how to pick the next winners from the over 1200 ETFs available to investors. This interactive presentation will also include analysis of ETFs requested by the audience. Get your pen and paper ready for 30 minutes of the best ETF info you will get anywhere.


The World MoneyShow is your one-stop resource for:

  • More than 150 top financial experts
  • Over 300 free sessions
  • Direct Access to Test-Drive Hundreds of Industry-Leading Products & Services
  • Plus, you'll have a chance to win $50,000 in the Exhibit Hall!

I look forward to seeing you in Orlando!

Matt McCall
Founder and President, Penn Financial Group, LLC

REGISTER FREE for The World MoneyShow Orlando
Call 800/970-4355 mention priority code 030177
or visit www.WorldMoneyShow.com

 

Five Extremely Undervalued Stocks

Depending on the analyst there a variety of way for stocks to be valued. I will use several, but my favorite is the Price-to-earnings ratio divided by growth. Also known as the PEG Ratio. The reason I prefer to use the PEG is that it takes into consideration not only the current valuation based on earnings, but also future growth. 

The PEG Ratio is the P/E ratio divided by future annual growth estimates. For example, if a stock is trading with a P/E ratio 12 with future earnings growth projected at 6% the PEG would be 12/6 or 2.0. A stock with a P/E ratio of 20, but earnings growth of 40% would have a PEG ratio of 20/40 or 0.50.

I consider stocks under 1.0 undervalued; here are 5 stocks that have PEG Ratios well below 1.0.

  • Apple ($AAPL) - PEG Ratio 0.52
  • Ensco ($ESV) - PEG Ratio 0.40
  • Delta Air Lines ($DAL) - PEG Ratio of 0.21
  • Cosan Limited ($CZZ) - PEG Ratio 0.43
  • Delphi Automotive ($DLPH) - PEG Ratio 0.57

Breakout Stocks as Profit-Taking Rules

After closing at a new 5-year high on Friday, the S&P 500 is pulling back 0.4% in the opening hours of trading to begin the week. The modest pullback is not a cause of concern is somewhat welcomed by long-term investors looking to build new positions after the recent breakout.

I would be more than okay with a pullback in the S&P 500 to the 1440-1450 area on light to moderate volume. This would offer the market a chance to take a breather and allow investors to buy on the "healthy pullback" that creates a more attractive reward-to-risk setup.

As the market pulls back heading into the lunch time here on the east coast I did scan and find a few stocks that continue to breakout and are in the green to begin the week.

  • Rentech Nitrogen Partners ($RNF) - The fertilizer company is breaking out on the charts and pays a hefty 8.4% dividend yield.
  • Cerner Corp ($CERN) - Healthcare IT company that is breaking out of a consolidation pattern could see continued growth as the industry improves its IT departments.
  • Brookfield Infrastructure Partners ($BIP) -The company that owns/operates infrastructure facilities around the globe and pays a 4.1% dividend yield is hitting new highs. (WE OWN $BIP FOR OUR PORTFOLIO MANAGEMENT CLIENTS.)
  • Lennar Corp ($LEN) -The homebuilder is breaking out of a consolidation pattern to a new 5-year high.
  • Visa ($V) - A new all-time high for the credit card and payment processing company. One of my favorites in 2013 - but only buy on some weakness.

Friday, January 4, 2013

Market Recap - 5 Year High for Stocks and the Winners

Today the S&P 500 closed at 1466, breaking above the 2011 closing high of 1460 set in mid-September. The 7 point gain was enough to push the index to the best close in 5 years.

The index is now within 111 points or 7.6% from breaking above the all-time high set in October 2007. That is hard for many to believe with the negative headlines that have been present for the last 5 years. Unfortunately many of the non-believers are the very investors that have been sitting in cash as the market has been kind to the investors that are willing to think outside the box and not follow the crowd.

To give you an idea of what stocks have been the big winners over the last five years take a look at the list below. Keep in mind the S&P 500 is up a mere 3.8% since 1/4/08.

  • Priceline.com ($PCLN) - Up 503%
  • Alexion Pharmaceuticals ($ALXN) - Up 423%
  • Dollar Tree Stores ($DLTR) - Up 414%
  • Catamaran ($CTRX) - Up 1,311%
  • Regeneron Pharmaceuticals - Up 705%
  • Liberty Media Capital ($LMCA) - Up 432%
  • Home Depot ($HD) - Up 153%
  • IBM ($IBM) - Up 92%
  • Walt Disney Company ($DIS) - Up 68%
  • Starbucks ($SBUX) - Up 208%
  • Apple ($AAPL) - Up 193%
  • Amazon.com ($AMZN) - Up 192%
  • Mastercard ($MA) - Up 154%

Lots of big names you all know on that list. This is one of the major reasons you NEVER should give up on the US stock market is you are a long-term investor. Let that resonate over the weekend and if you are ready to take advantage of this market please give Penn Financial Group a call for more information on our Portfolio Management services for investors of all sizes.

Have a great weekend!!

Breaking Down the Jobs Report

Once per month the BLS releases the jobs report and it tends to be the most anticipated economic number on Wall Street. Today was no different when the December report was announced.

A total of 155K jobs were created in December according to the government agency. This was slightly below estimates and in-line with what most economists had targeted for the month.

Here are the highlights and lowlights:

  • The private sector created 168K jobs and the government lost 13K jobs
    • Good to see it is private sector and not government
  • During the fourth quarter the government sector lost 89K jobs
  • The unemployment rate was revised here in November to 7.8% and it remained there in December
    • The real rate is double-digits if the Americans that dropped out of the workforce were put back in. Also the same rate when Obama took office.
  • Average Hourly Workweek increased by 0.1 to 34.5 hours
    • Step in the right direction.
  • Average Hourly Earnings up $0.07 to $23.73 - up 2.1% year-over-year
    • Moving higher, but need a better annual increase.
  • Labor Force Participation Rate steady at 63.6%
    • When only about 2/3 of the American population that qualifies to work under this statistic are actually working it is a disgrace. And this is another reason the unemployment number is so high.
  • U-6 number at 14.4%
    • This is the number of people unemployed plus part-time workers that want full-time jobs and job seekers that gave up on looking for work. The number is lower than the 15.2% last year, but still way too high for a robust economic recovery.
  • The average monthly jobs created in the last two years is 153K - December was right in-line
    • There is not upward movement. The labor market is stagnant. At this point in time in a recovery the number should be above 300K (a number it needs to be at to keep up with demand for jobs and to bring down the unemployment number).

 

Thursday, January 3, 2013

Market Recap: Sectors Affected by FOMC Minutes

One day after a huge rally for stocks the major indices traded near the unchanged line for the majority of the day. When the closing bell rang it saw the S&P 500 down 3 points or 0.23%.

The big news of the day was the early afternoon release of the minutes from the latest FOMC meeting. The tone became more hawkish, suggesting that QE may end sooner rather than later and that affected the entire market. Here is how certain asset classes were affected.

  • Stocks moved from modest gains to the lows of the session before a slight bounce into the close. The reasoning behind the selling was that the Fed floor that has been built into stocks may be ending in late 2013.
  • Gold took an even bigger hit, the SPDR Gold ETF ($GLD) closed down 1.2% and wiped away yesterday's gain. As the printing of money comes to a halt it should be a boost to the U.S. Dollar and thus negative for gold.
  • U.S. Dollar rose as measured by the PowerShares US Dollar Index Bullish ETF ($UUP). The ETF finished the day up 0.8% at a new one-month closing high.
  • U.S. Treasuries fell in value as yields pushed higher. When the Fed stops artificially keeping rates low it will lead to a rise in interest rates on government issued bonds and the values of the underlying bonds will fall. The iShares Barclays 20+ Year Treasury Bond ETF ($TLT) fell 1.35% and closed at the lowest level since May 2011. The ETF is now down 11% from a July 2011 high. On the flipside, the ProShare Ultrashort 20+ Year Treasury ETF ($TBT) rallied 2.7% to a new multi-month high.
The Big Two both hit new 52-week highs today. General Motors ($GM) and Ford ($F) reported better than expected December sales figures and investors pushed the stocks to new highs.

A mixed bag as far as sectors today. The Transports ($IYT) broke out to a new 52-week high, led by the Airlines ($FAA) that surged 1.7%. The Pharmaceuticals ($IHE) also had a solid day with a gain of 1.1%, but they are well off their yearly high.

The Airlines are an interesting group because even as the price of oil has picked up recently, the Guggenheim Airline ETF ($FAA) continue to hit new highs. We recommended buying $FAA a few months ago for subscribers to The ETF Bulletin and since that time the ETF is up 23%!!

If you would like more info on becoming a subscriber to The ETF Bulletin please call 1-877-383-7366 or email info@pennfinancialgroup.com 

Muni Bond Rally will Continue

Municipal bonds were able to come out a winner after the Fiscal Cliff deal was finalized. Not only did the municipal bonds remain tax exempt, the increase in the top tax bracket is also a bonus for muni bond investors. Here is a breakdown:

  • The Fiscal Cliff deal extended the tax exempt status of municipal bonds - POSITIVE FOR MUNIS
  • The increase in the top tax rate back to 39.6% (the Clinton era) makes the tax exempt investments ever more attractive for the wealthy - POSITIVE FOR MUNIS
  • The more spending by the government will require the Fed to continue to keep interest rates artificially low, thus making the yields on munis the better option - POSITIVE FOR MUNIS
The bottom line is that municipal bonds continue to be a significant part of the portfolio building process at Penn Financial Group. Just over a year ago when Meredith Whitney was calling for the muni bond market to implode - I was on Fox News, Fox Business and quoted in the NY Times and NY Post telling people to buy. I was right and I am once again suggesting you continue to hold onto municipal bonds.

The two ETFs we have owned for years for client of PFG are:

  • iShares S&P National Municipal Bond ETF ($MUB)
  • Market Vectors Municipal High Yield Bond ETF ($HYD)

For more information on how you can use municipal bonds and other income-producing investments please call the office at 1-877-383-7366.

Two Stocks on our Buy LIst

The markets are holding steady an hour into trading based on a strong Jobs Number released from ADP ahead of tomorrow's government number. The 215 jobs created in December, according to the report, was the highest since February. This puts the total jobs created in 2012 at 1.7 million, even as manufacturing jobs continue to be lost (6 consecutive months).

The S&P 500 is currently down 0.2%, an impressive feat considering the big rally yesterday and the talk of profit-taking in the last few hours. I do believe the market continues to move higher, however the odds of a pullback are above average. We continue to build our Buy List and will look to allocate more cash into new stocks/ETFs in the coming weeks.

Here are two examples of stocks that are on the potential Buy List:

  1. Walker & Dunlop ($WD)- Provides commercial real estate financial services for owners and developers of commercial real estate in the US. Stock is breaking out of consolidation pattern and has an attractive PEG ratio of 1.08.
  2. Oceaneering International ($OII) - Offshore drilling company should see a boost in 2013. The chart is similar to $WD and is breaking out. The PEG ratio is 1.05 and the stock pays a 1.4% dividend.

Wednesday, January 2, 2013

Market Recap - Now What?

The only news that really mattered today was the Fiscal Cliff deal that sent stocks higher on the first trading day of the year. (More on the Fiscal Cliff deal in a previous blog post.)

A late day surge in equities put the US stock indices near the best levels of the day when the closing bell rang. The S&P 500 closed up 2.5% at 1462, only a few points away from a new 5-year high. The small-cap index, the Russell 2000, shot up 2.8% and closed at the best level ever!

Small-Caps Lead - Leading the way in the Russell 2000 were:
  • Zipcar ($ZIP) - Company being bought by Avis Budget Group ($CAR) for a huge premium and the stock rallied 48%.
  • Carriage Services ($CSV) - The morbid operator of death-based services hit a new multi-year high today with a gain of 13%.
  • Marlin Business Services ($MRLN) - The commercial equipment financing company rallied 10% and is closing in on a new all-time high.
Best Performing Country ETFs - The SPDR S&P 500 ETF ($SPY) that tracks the US market was up 2.5%, but a handful of other countries did even better on the first day of trading in 2013.
  • Market Vectors Vietnam ETF ($VNM) - rallied 5.3% and closed at a multi-month high as money found its way into the "risky" country.
  • Global X FTSE Argentina ETF ($ARGT) - another risky and underperforming country is Argentina and today saw a bounce of 4.3%.
  • Market Vectors Egypt ETF ($EGPT) - the rollercoaster ride that is Egypt followed the path of the first two countries with an oversold bounce of 3.8%.
  • iShares Mexico ETF ($EWW) - even thought Mexico did not keep up with the US today, the country's ETF closed at the best level ever after rallying 1.8%!
Now What? - Time to sell or is it time to ride this wave of buying? That was the number one question I received today from individual investors. My gut reaction to hold for the rest of this week as I believe there will be continued buying into the weekend. At that point I will have a couple days to analyze the charts and some individual stocks/ETFs to make a better determination of the next move in the market. I continue to feel new all-time highs will be set on the major US stock indices and therefore the bias will remain bullish. The only difference could be some selling of lagging positions into the recent rally to free up cash for new and better opportunities. Stay tuned.

ETF Portfolio Updates

The New ETF Bulletin that was launched on 6/8/12 ended the year on a strong note. The 2 ETF-Only Portfolios are both well positioned to continue their strong performance in 2013 and beyond.

The ETF Rotation Portfolio is an all-ETF portfolio that uses a mixture of the PFG Top-Down Approach and Technical Analysis to position the portfolio in a way that attempts to beat the market in both up and down trends. Since it began on 6/8/12 the ETF portfolio is up 10.67% versus a gain of 7.57% for the S&P 500.

The 3.1% out performance in less than 3 months is significant in nature. And when considering the lowest amount of cash the portfolio had all year was 16.7% at year-end, the risk-adjusted out performance is even more impressive.

The chart below shows the path the ETF Portfolio has taken to beat the S&P 500. They key was not falling as hard during the November sell-off. This allows a portfolio to snap back much easier when the selling ends.


The other portfolio, ETF Income Portfolio, has an objective of generating income for investors. The current yield on the portfolio is 6.0%, well above the 10-year treasury and most corporate bonds. The gain for the portfolio since 6/8/12 was 6.05%. Not surprising the portfolio is lagging the S&P 500 this year. The goal is not to beat the market; the goal is to provided steady above-average income with the potential to capture some of the upside of the stock market and more importantly to hold up better during any market sell-offs.

Take a look at the performance chart below. Besides the sell-off in November the Income Portfolio has been moving slow and steady, just as we designed.


If anyone is interested in learning more about The ETF Bulletin and would like access to the ETFs that make up the 2 portfolios please inquire at info@pennfinancialgroup.com or call 877-383-7366.

Not only do you get the 2 portfolios, but also real-time emails when to buy/sell the ETFs we cover.

AND for investors that sign up in the next 2 weeks you will get the 10+ page PFG Client 2013 Market Outlook with stock and ETF picks for the new year.

Happy New Year!

Team PFG




Fiscal Cliff Deal Kicks off 2013

Stocks surge to a gain of 2% during the first few hours of trading in 2013. The catalyst is none other than the resolution of the Fiscal Cliff that has been looming over the market for over a month.

While the news was taken as a positive by investors, there is still a lot that needs to get done in regards to the U.S. economy. The deficit is still an issue and the big headline we will be dealing with next is the Debt Ceiling debate.

With that being said, I expect the market to hold onto the gains today on the back of the Fiscal Cliff news, however the rally may be short-lived as investors begin to focus on the Debt Ceiling. I expect heavy volatility in January and the pullbacks should be used as buying opportunities.