The market's major equity indices were all up a little more than 0.6% yesterday, which was off mid-day highs, but positive because the market shrugged off poor economic news from China. Today, the market stayed relatively even, with the S&P 500 ending down slightly by -0.13%.
Last week, the market shrugged off a number of worse than expected economic reports including a very poor Philly Fed report, weaker than expected housing data, but better than expected chain store sales.
Small-cap Growth led the way again, up 1.86% for the week. Mid-caps did well but were less robust than small-caps, and large-caps were marginally better than flat (see market stats).
Healthcare led the week as biotechnology continues to do quite well; today InterMune (ITMN) was up 170% after achieving its goals in a Phase III trial of a lung drug for release in the United States. Energy, Basic Materials and Telecom were all up more than 0.5%. The remaining sectors were up in small amounts. Looking forward one to three months, Financials, Technology and Healthcare remain atop the sectors much as they have since early January. Basic Materials, Telecomm and Consumer Services should probably be underweighted.
Today, home price appreciation in December came in solid, though a bit slower than prior months. The rest of this week should give us a good look at the rest of the housing picture with New Home Sales and Building Permits. Durable Goods is also on tap, along with the weekly Jobless Claims.
After the market yesterday, reports were mostly upbeat. Only Tenet Healthcare (THC) stood out with a loss based on acquisition costs. Today, Home Depot (HD) reported a positive earnings surprise and Macy's (M) delivered higher profits than expected. However, these reports were not enough to send the S&P 500 to a new high.
It is getting harder to find undervalued growth companies, although we still find some each week. We will revisit our valuation range over the past 5 years over the next several weeks and report our findings. Our weekly selections for your consideration are below.
3 Stock Ideas for this Market
I selected the following stocks from the top of our stock universe, looking for great earnings growth projections with reasonable valuations.
NXP Semiconductor NV (NXPI) - Technology
- Trading for 12x forward earnings estimates
- Analysts have revised EPS estimates up in the last 30 days
- 25% projected EPS growth current quarter, 42% next quarter, 27% in 2014, 35% 5-year
Actavis plc (ACT) - Healthcare
- Trading for 50x forward earnings estimates
- Analysts have revised EPS estimates up in the last 7 days
- 60% projected EPS growth current quarter, 60% next quarter, 66% in 2014, 17% 5-year
Valero Energy Coporation (VLO) - Energy
- Trading for 10x current and 9x forward earnings estimates
- Analysts have revised EPS estimates up in last 30 days
- 13% projected EPS growth current quarter, 87% next quarter, 29% in 2014, 7% 5-year