It appears that the market is shaking off the Syria news this morning and moving on as the movement to attack has hit some stumbling blocks in France and the United Kingdom. We are also seeing reports that the evidence the U.S. and its allies had of the chemical weapons being used by Assad's regime is not as conclusive as previously advertised and with the doubts it is becoming obvious that everyone wants to slow down the war machine.
Oil, gold and safety assets are retreating this morning, but we would caution readers to not move aggressively against these asset classes as anything could happen between now and the long holiday weekend.
Today we would also like to sell the 1/2 position of Tesla (TSLA) that readers still have and keep that in cash for the time being. Some will hate this move but the fact of the matter is that we were quick to jump on the rally and recently locked in profits that essentially covered the basis. It seems logical now to book the entire gain here and move on as the upside is minimal now and the risk/reward scenario is not nearly as good as it once was. This is the prudent move.
Chart of the Day:
This is probably the chart of the year, but we are now closing out the entire position. The stock is in a defined uptrend, but it is at the top end of the range there and near what we think is full value right now.
Source: Yahoo Finance
We have economic news today and it is as follows:
- Initial Claims (8:30 a.m. ET): 330k
- Continuing Claims (8:30 a.m. ET): 2969k
- GDP - Second Estimate (8:30 a.m. ET): 2.1%
- GDP Deflator - Second Estimate (8:30 a.m. ET): 0.7%
- Natural Gas Inventories (10:30 a.m. ET): N/A
Asian markets finished higher today:
- All Ordinaries -- up 0.10%
- Shanghai Composite -- down 0.19%
- Nikkei 225 -- up 0.91%
- NZSE 50 -- up 0.24%
- Seoul Composite -- up 1.22%
In Europe, markets are higher this morning:
- CAC 40 -- up 0.55%
- DAX -- up 0.29%
- FTSE 100 -- up 0.62%
- OSE -- down 0.06%
Last night news broke that the negotiations between Vodafone (VOD) and Verizon (VZ) had once again been restarted with a $130 billion price tag associated with the 45% stake currently owned by Vodafone. The deal is something we have watched and waited for over the years but something has always prevented it from happening as one of the two parties always seemed to get cold feet. Now it appears that a deal makes sense for both parties as Verizon needs to consolidate the wireless business to better compete with competitors as well as continue to pay their healthy dividend to shareholders. Vodafone can finally use the proceeds of the deal to reinvest in the European cellular market which now appears to be open to consolidation. We have liked Vodafone on pullbacks and for those who purchased shares today appears as if it will be a rewarding day.
Speaking of the telecom business we want to revisit two names in the smart phone market making news recently. First up is BlackBerry (BBRY), which as many are aware has effectively put itself up for sale in a bid to create value for shareholders. The fact that no serious buyers have emerged since the announcement now has the company's management scrambling and we are seeing more and more reports about possible spin-offs, break-ups and piece-by-piece sales. All of which are terrible ideas. If the company is for sale, the whole thing needs to be sold. One cannot take the company and sell off certain pieces which are integral to the BlackBerry experience. That makes zero sense to us and we think would be viewed negatively by the market once shareholders realized exactly what had happened. Readers should stay away from the fiasco that is BlackBerry as tech turnarounds are few and far between.
Under what circumstances would one want to own BlackBerry? Certainly not under the current set of circumstances and if a sale cannot be completed then shares fall 10-20%. Get out of the way of this one.
Source: Yahoo Finance
If readers want a misunderstood company that is taking hits for doing right by shareholders then look no further than Apple (AAPL). Yesterday the big conversation on many of the stock news networks was whether Apple making an iPhone with a lower price entry was going to ruin their brand and/or earnings power. We think this is silly talk. Yes, it does lower the bar for entry into the Apple iPhone club but the cheaper phones would increase the number of people using Apple's various services and also deliver what we believe would be either comparable margins or margins which would be stronger. Remember, Apple has a brand and if you are looking at phones that cost $200, then an Apple would win over an HTC (OTC:HTCCY), BlackBerry, etc - even with a plastic case and slower processor. Apple stock is a buy ahead of their next product releases and investors need not fear entry into newer markets.