This week we have a ton of housing data which will be released and today that is all we will get with both data sets being released focusing on housing. We had a nice rally in the market yesterday with a broad based rally touching retail, technology, commodities and nearly every other sector as we had a relief rally. For retail investors the interest will be what happens Thursday night and Friday morning and after that we would expect a melt-up into the close of the year. It has been our thinking that the US consumer is back, and that this holiday season shall be a strong one as they return to stores with more purchasing power than in years past.
We have economic news due out today and it is as follows:
Housing Starts - 840k
Building Permits - 870k
Asian markets finished mostly higher today:
All Ordinaries - up 0.57%
Shanghai Composite - down 0.04%
Nikkei 225 - down 0.12%
NZSE 50 - up 0.77%
Seoul Composite - up 0.64%
In Europe markets are mixed this morning:
CAC 40 - down 0.26%
DAX - up 0.29%
FTSE 100 - down 0.08%
OSE - up 0.13%
Yesterday Lowe's (LOW) hit a new 52-week high after reporting earnings which beat on both the top and bottom lines. The company also raised its full-year guidance as it appears that their cost cutting efforts have been successful and the home improvement market as a whole continues to improve. Some analysts have pointed out that Lowe's margins are lower than Home Depot and have lagged for some time, but this we view as a positive because it provides further room for improvement and is indicative that the low hanging fruit in their cost cutting efforts have not all been had. We remain bullish on the industry as a whole, and think that in the aftermath of Sandy's destruction that we will begin to see sales in the Northeast tick up over the next quarter or two.
Yesterday's rally was led by Apple (AAPL) as it bounced off of recent lows to finish at $565.73/share after rallying $38.05 (7.21%) on volume of 29.4 million shares. Also of interest to those who watch the options market, there was a ton of call activity in Apple's options yesterday as the rally gathered strength. A lot has been made regarding the lack of new products coming out of Apple these days, but it is not just a copycat factory now. The company has always gone through spurts of innovative products and then lulls before a new product is launched and we believe that this is simply what is going on now. There has been too much talk of other products in the pipeline for there not to be, so in short we are still bullish of Apple and expect to see a new product in 2013, quite possible iTV.
We have also been discussing Cirrus Logic (CRUS) lately and the large pullback its shares have experienced even though the company reported strong numbers and guidance. It was a real head scratcher but one of those moments where the market was being irrational with its valuation. After yesterday's rise of $2.56 (9.06%) the shares now trade at $30.83/share and we still think that there is upside here. After all, if one is bullish of Apple, they have to be bullish of Cirrus Logic.
Some of our readers have sent us emails discussing Arena Pharmaceuticals (ARNA) and discussing how it has been one of the better trading vehicles of 2012, especially after the approval from the Food and Drug Administration, FDA. The stock sure has settled down into a trading range, and although it has not benefited long-term investors much, the range has allowed traders to 'buy on the dips and sell on the rips' as they say on Wall Street. Many are not bullish on the outlook for the stock based on the drug and current valuation, but we think that long-term this will be a successful play. In the meantime we believe that this remains an excellent stock to set up a core position with a trading position on the side.
Tyson Foods (TSN) saw its shares rise $1.84 (10.90%) to close at $18.72/share yesterday after the company announced earnings which beat Wall Street's estimates and topped that with a 25% raise on their quarterly dividend while simultaneously announcing a special dividend in the amount of $0.10/share. The company is facing higher feed and input costs, however they are still producing plenty of cash flow and their cash at year-end is roughly 40% higher than at the beginning of the year. The key yesterday was that the company provided 2013 guidance above what analysts were expecting as they are able to raise prices to offset their own rising input costs. It appears that the company has turned this around and adapted to the current environment. We were quite impressed with yesterday's earnings report.