Generally holiday weeks put investors in a good mood leading to positive returns for stocks. Yet Monday started in a bad way with continued concerns over the EuroZone.
Yes, there is enough money to handle a small country like Ireland. Portugal too. But potentially down the road we could be talking about Spain with an estimated price tag of $500 billion Euros. As you can see the stakes are getting larger and we in the States do need to keep a watchful eye.
Another thing to keep our eyes on is the banking situation as more concerns are bubbling to the surface. For starters, we get reports that Basel III shows that major US banks could be short $100 to $150 billion in equity capital. 90% of that shortfall is just from the Top 6 US Banks
And then we see the growing pressure that is arising from all the foreclosures that is increasing the risk that investors will put the mortgages back to the banks. Add these two things up and you’ll know why I recently added this 2X short financial ETF (SKF) to my portfolio.
Looking ahead to Tuesday we should definitely keep our eyes on the first round of revisions to Q3 GDP. The consensus calls for it increasing from 2.0% to 2.4%. A major deviation from that level, in either direction, will certainly be met by a strong investor response.
Note that if it this report comes up well short of expectations, then in combination with aforementioned concerns (EuroZone and banks) we will not have a lot to be thankful for this week in the stock world.
This is where I share 5 of my favorite stocks that all have a coveted Zacks Rank of 1 (Strong Buys)
1) Biogen (BIIB): This stock was a major disappointment during most of the last 18 months while other stocks rebounded. Finally we see some earnings strength that has the stock on the move with expectations of more to come.
2) Carmax (KMX): In case you’ve been living under a rock, the auto industry is having a big re-birth. Simply, for a couple years sales were at unsustainably low levels. Now in a reflexive action sales are significantly higher with signs that the party is far from over. KMX provides a great way to play this trend.
3) Coinstar (CSTR): The company keeps banging out earnings surprises. In fact, over the past 4 quarters they averaged a 28% positive surprise. What’s not a surprise is that shares are ready to make new 52 week highs (again).
4) KrispyKreme (KKD): In 2007 the magic ended for this once celebrated firm. From there shares fell over 80%. Yet just when virtually no one was paying attention they got their act together. Profits are on the rise and some of the early swagger is coming back.
5) Manpower (MAN): Employment trends are showing signs of getting better. More importantly for MAN the growth in demand for temporary workers is outstripping that for full time workers. All of this has folks very excited about the future profitability of an industry leader like Manpower.
Disclosure: I own shares of MAN and SKF