With new highs having been set on the Dow Industrial Average and S&P 500 last week we have started looking around to see where the value is in this market. Warren Buffett summed it up last week however when he said that there are few areas with value and that the market is essentially fairly valued. No longer can one invest in the index funds and expect to see outsized gains, we are in a stock picker's market and that is how we are trying to position readers over the next few months as we head into the close of the year.
Chart of the Day:
There are a few index funds which we think could outpace the general market, with one area being the biotechs. The Nasdaq Biotech index is at an all-time high and appears poised to head higher into the close of the year. We would be long here if one was trying to play the sector and get diversified among many companies.
Source: Yahoo Finance
We have no economic news today.
Asian markets finished mixed today:
- All Ordinaries -- down 0.47%%
- Shanghai Composite -- up 1.33%
- Nikkei 225 -- CLOSED
- NZSE 50 -- down 0.61%
- Seoul Composite -- up 0.19%
In Europe, markets are lower this morning:
- CAC 40 -- down 0.04%
- DAX -- down 0.14%
- FTSE 100 -- down 0.38%
- OSE -- down 0.20%
As we were watching the markets head into the close on Friday we were a bit surprised when we saw that BlackBerry (NASDAQ:BBRY) had requested that their shares be halted. We tweeted as much to our followers on Twitter and waited to see if an announcement would be released prior to the close. The company dropped a bomb as they announced that they would be laying off 4,500 employees and looking to further trim expenses. That includes selling the company's private jets, a move most corporate management teams are reluctant to do regardless of the circumstances which leads us to believe that this is probably the beginning of the final tailspin for the company. We have been one of those who have advised to sell into the rallies and for those investors without any exposure to the name to refrain from purchasing shares regardless of the buyout rumors or apparent value. With the 17% drop on Friday we think that the $8.73/share stock price and recent price action says it all; a takeover here is not likely, a take-under a bit more so.
Whereas BlackBerry has been a complete dud for investors, Himax Technologies (NASDAQ:HIMX) continues to show it is a winner. Last week the stock made a move above $10/share and Friday it put a little bit more room between its close and the $10/share level. So what is providing the latest pop for the shares? Well the company received another upgrade, this one calling for shares to hit $12/share while also acknowledging in the report that the company is ramping up production and could be working with Microsoft (NASDAQ:MSFT) on products in the future as well. If Google (NASDAQ:GOOG) Glass is as successful as everyone believes it will be, then Himax will be a huge winner and could become not just a supplier to Google and a handful of other companies but a major supplier to the tech industry of next generation parts for consumer electronics/devices.
Himax continues to hit higher highs while analysts continue to get bullish on the name. Look for this name to potentially hit $15/share heading into the end of the year so long as the general market remains strong.
Source: Yahoo Finance
We watch a lot of companies in our day-to-day research and read many press releases which gives us a little insight into underlying trends in the market. Lately we have noticed many of the secondary offerings by companies have been strong, even when they are initiated by insiders or large holders selling their shares and the company is not receiving any benefit. The latest name where we saw strong pricing was Shutterstock (NYSE:SSTK) which priced 1,000,000 shares it is selling via a secondary and 3,600,000 shares insiders and large holders at $60/share, which is in line with what the market expected. The news sent shares up over $10/share, or 16.73%, to close at $70.41/share on above average volume of 3.4 million shares. The market is strong and is soaking up a lot of these floats with strong bids. So long as this continues, so too does the bull market in these sectors.
If only J.C. Penney (NYSE:JCP) could stay out of the news for a while maybe it would be easier for management to focus upon turning around the business rather than having to worry about expectation and public relations management. The news that we see this morning is that the company is looking to raise more money and that Goldman Sachs has been retained to advise on any deal. The company has enough issues already with suppliers losing faith, shareholders too, a falling stock price which is mimicking sales and a cash crunch which they have already averted that now turns out maybe they have not? That is a huge issue and a red flag for us as we can really only think of one company which has maxed out its credit to do an overhaul and succeeded in recent years, and that was Ford. The company had a plan and a much more adept CEO, and that leadership issue is the primary reason why have trouble buying into this JC Penney story.
This name has run into resistance around the $45/share area and as we approach that level once again investors might want to take a little off of the table and attempt to buy back at a lower price.
Source: Yahoo Finance
The entire biotech sector has been on fire the past few months as rumors fly regarding potential buyouts and a number of big deals have been announced at large premiums. Also fueling investor optimism is the wave of drugs that the biotech names have before the FDA these days showing promise and going through the various phases to gain FDA approval. Sometimes one company's failure is another company's gain, which was the case Friday as shares of Sarepta Therapeutics (NASDAQ:SRPT) saw its shares rise $6.61 (18.02%) to close at $43.40/share after GlaxoSmithKline's (NYSE:GSK) drug which competes with its eteplirsen failed in a Phase III trial. This keeps the market free for Sarepta's drug, although it is important to note that it in no way makes approval more likely as the drug still has to prove it performs and meets various endpoints, which Glaxo's drug did not. We continue to watch Sarepta's shares as they develop their drug for Duchenne muscular dystrophy.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.