Today we have options expiration which could create for some interesting trading in some of the names we follow here and in our commodity article. Last night we got some good news from China where they announced that their economy continues to grow, although it seems that some are disappointed that the growth was not higher. To that we must simply shake our head because only two months or so ago people would have gladly accepted the number at face value and have been pleased with growth considering the issues we have been through in Europe and the U.S. over the last few years. The data continues to point to 2013 being a buyer's market and until we see signs of slowing we will continue to believe that.
We have economic news due out today, and it is as follows (these are the consensus estimates):
Michigan Consumer Sentiment (9:55 AM EST): 75.0
Asian markets finished higher today:
All Ordinaries - up 0.31%
Shanghai Composite - up 1.41%
Nikkei 225 - up 2.86%
NZSE 50 - down 0.78%
Seoul Composite - up 0.69%
In Europe markets are higher this morning:
CAC 40 - up 0.05%
DAX - down 0.15%
FTSE 100 - up 0.24%
OSE - up 0.03%
Yesterday shares in CBS (CBS) rose $3.01 (7.93%) to close at $40.95/share on above average volume of 35.1 million shares after the company announced that they were looking to convert their outdoor advertising business into a real estate investment trust, or REIT. In order to do so, the company is exploring a sale of its overseas assets in the division with analysts thinking that they will be sold off in two parts (Europe and Asia) rather than as a whole. Rushing in now and purchasing shares hoping to profit from this would be ill-advised as we heard that investors could see a benefit of $3/share created by such a move, which coincidently or not was in fact the move in yesterday's price. If the company is able to do the conversion and it goes successfully, we could see the entire industry convert over to this form of entity for tax purposes.
We are watchers of the 52-week and all-time highs lists on a daily basis, and it seems that not a day goes by where we do not see one of the cable or satellite providers listed on either of those lists. Yesterday it was Comcast (CMCSA) which caught our eye and got us wondering about the state of the current bull market in the industry. If you look at the attached chart, the company has been the second best performer among major content television distributors and the chart has been impressive for some time. Over the past few months the company's shares have closed the gap with the overall top returner and as the company continues to overhaul their content creation side of the business we think further gains will be had.
Chart courtesy of Yahoo Finance.
We are very aware that when it comes to biotech companies and even pharmaceutical companies that there are those out there with their own unwavering opinions which cannot be changed; whether that be overly bullish or overly bearish. We found it quite funny yesterday when we saw two articles pop up yesterday beneath the Arena Pharmaceuticals (ARNA) news page where one writer at the Motley Fool (see article here) wrote a bullish article only to have one of the bears who writes for TheStreet (see article here) write an article shortly thereafter to counter that argument. We try not to take sides when it comes to stocks in the market other than buy, sell or hold when the market so dictates, but for some reason this stock seems to make sane people go crazy either in their defense of it or their argument against the bullish case. What we do know for certain is that from today through the end of February a lot of questions surrounding the company will be answered and either longs or shorts will be proven correct. As we have stated before, with the big barrier already crossed it would seem that the remaining barriers would be far easier to obtain.
Most see the diet drug market as a zero sum game. To be as clear as possible we are not one of those people. Our view is that yes it would be nice for one company if they controlled the entire market, however in this case options are quite valuable as patients are given a choice with options as to what drug they want to take. Just because a patient starts off on Qysmia does not mean that they will not ultimately end up on Belviq, or vice-versa. In our opinion the drugs will play off of one another's success and one should view this as the fast food industry does competition in the same area (you never see just one fast food restaurant by itself, there are almost always others located nearby). With that said we think that Vivus (VVUS) shares will probably be unfairly punished with any good news coming out of Arena and we would expect the price action to be the opposite for these two regardless of whether the drug is approved or declined in Europe and whether something comes up with the DEA's final two steps before Arena is certified to sell.
In other news Vivus was downgraded by Brean Capital from a "Hold" rating to a "Sell".
As readers know we have been bullish retail for a while and one of the areas we chose to lead you into was the home improvement sector. These plays have done nothing but continue to set new 52-week highs, and in the case of Lowe's (LOW) shares, set new all-time highs. We like the sector as a whole, but over the months we have stated that we like Lowe's because of the fact that they have trailed behind rivals in operating results and thus have further room for improvement. The ability for the company to improve results is much easier attained than their rivals simply based on the laws of diminishing returns.
The housing market continues to improve and show strength and yesterday's housing starts number yesterday was impressive and that growth will result in further business for the home improvement chains, including Lowe's. Yes remodeling and add-ons are bigger business for Lowe's but new houses require appliances and outdoor supplies and we would expect these segments of the business to increase as new housing construction continues to improve.
Chart of the Day
Chart courtesy of Briefing.com.
Housing starts have been strong over the past two years and some may be questioning how long this strength can last. We think it has further to run because as bullish as the above chart may be, when looking at the following chart it sure seems that we have further room for improvement just in order to get back to where we came from.
Chart courtesy of Briefing.com.
We think it is safe to say that a further 20-40% rise in housing starts is probable and with the uptick in the numbers 2013 may be the year we see sentiment change regarding the notion of home ownership, its associated costs and whether it is viable to make the jump from renting.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.