Well there was no Mayan apocalypse and the world is still here as we know it, so that in and of itself is bullish in our eyes (although we never doubted today would come and yesterday would have been the last day). However this craziness out of Washington has us scratching out head this morning, and it is just surreal. It is like a Saturday Night Live skit, but since it is playing out on "respected" news channels we cannot laugh because it is in fact so sad (the fact that it has come to this irrational behavior in Washington). Today we half expect to see our leaders hold a press conference, apologize to the American public and announce a deal with their excuse for not doing so earlier being that they thought for sure the world was ending due to classified research given to them by NASA.
Alright enough with the joking around, this morning it appears that the market will open red and sharply so. We would like to point out that the futures have been getting stronger so although a negative open seems likely there is a strong underlying trend with bulls still running around.
We have economic news due out today, and it is as follows (these numbers indicate the consensus):
- Personal Income (8:30 AM EST): 0.3%
- Personal Spending (8:30 AM EST): 0.3%
- PCE Prices - Core (8:30 AM EST): 0.1%
- Durable Orders (8:30 AM EST): 0.2%
- Durable Orders - ex Transportation (8:30 AM EST): -0.2%
- Michigan Sentiment - Final (9:55 AM EST): 74.8
Asian markets finished lower today:
- All Ordinaries - down 0.25%
- Shanghai Composite - down 0.69%
- Nikkei 225 - down 0.99%
- NZSE 50 - down 0.51%
- Seoul Composite - down 0.95%
In Europe markets are lower this morning:
- CAC 40 - down 0.76%
- DAX - down 0.81%
- FTSE 100 - down 0.89%
- OSE - down 0.48%
Many investors have been worried about their positions in Apple (AAPL), Nokia (NOK) and Research in Motion (RIMM), but why pick just one name to try and play the continued adaptation of smartphones when one could simply invest in one company with the best technology and which also finds itself in most of the models out there. We are discussing ARM Holdings (ARMH), and interestingly since October the shares have risen whereas Apple's have fallen (see accompanying chart). At one time these two traded in lockstep, for obvious reasons, but that has not been the case recently and with Apple's share of the smartphone market not growing as it once did, it appears that investors have gravitated towards ARM as a way of playing this strong global trend. Our opinion has long been that this is one of the best plays on the continued growth in the proliferation in smartphones, and with the latest rally shares are trading at 52-week highs, faring far better than when we last discussed them.
Chart courtesy of Yahoo Finance.
Allscripts Healthcare (MDRX) announced yesterday that they were abandoning their plans to sell the company or pursue other strategic alternatives and instead would be parting with the Chief Executive Officer and the President. They announced their new CEO, and although the President was fired he will remain on board no longer than 6 months in the capacity of an adviser for new management. Investors did not like the news, as many had moved into the shares expecting an eventual payout from an outright sale. Accordingly shares fell $1.54 (14.42%) to close at $9.14/share with 42.9 million shares traded. The new CEO certainly has his work cut out for him as this is a turnaround situation and he is now dealing with unhappy shareholders as well as unhappy customers. Let's just say we are not envious of his situation at this time.
Yesterday Bank of America (BAC) hit another 52-week high with the stock closing at that level. The chart rose from the lower left to the upper right making this one of those rare days where everyone who bought shares before the close either made money or were even for the day. The stock has been on a huge winning streak, however rising in good markets is one thing but rising in down markets is another. With that said, it will be interesting to see exactly how Bank of America shares respond to today's market action which at this time appears will be sharply lower at the open. We have triple witching today and we will have some serious volatility especially with the fiscal cliff news making the rounds.
Shares in Herbalife (HLF) continued lower yesterday as Ackman presented his thesis for the short position that his firm holds in the company. It was very detailed with over 300+ slides and looked at information that it is safe to say many Wall Street analysts had no idea existed. Shares finished the day at $33.70/share, a new 52-week low, after falling $3.64 (9.75%) with volume once again being higher than normal as 34.4 million shares were traded. These MLMs (multi-level marketing) entities have always looked suspect, and we even did some due diligence on one recruiting around our home area recently for a friend. If an investment does not make sense, AVOID. Likewise, if it does not pass the sniff test the same should be done.
Investors pushed shares of Rite-Aid (RAD) higher by $0.17 (16.35%) to close at $1.21/share yesterday with 55.4 million shares being traded. The news was good for long suffering shareholders as the company boosted their forecast for profits, this after beating on EPS for the current quarter. This was a name which we wrote about earlier in the year where we were highly critical of rumors that the company was a buyout candidate, which we thought was baseless and still to this day believe. From an investing standpoint we would rather own shares in the bigger players in the industry, however we recognize from time to time this is an attractive play for one's spec capital which we have done in the past. One thing to keep in mind is that should this good news be a turning point for the company, this could be a deleveraging play and that we would find enticing.