August historically is one of the worst months for technology and precious metals stocks while financials tend to have a seasonal rally. Investors looking to pick up some quick alpha can play some odd cross currents during this seasonally weak month.
Goldman Sachs (GS) – An earnings miss last quarter should deter investors from going long one of Wall Street’s premier names. Goldman’s earnings growth was very strong on a year-over-year basis. Year-to-date the firm is the leader in M&A and equity underwriting with a strong Tier 1 capital ratio. The recent selloff should be looked at as a buying opportunity.
Wells Fargo & Co. (WFC) – One of the stronger financials in a weak sector with strong Net Interest Margins and ROA when compared with peers. Credit quality continues to improve and its depth and breathe in US retail banking will allow Wells Fargo to lead when the sector turns.
Best Buy (BBY) – The leader in the big box electronics retail segment. Technically, we are putting in a triple bottom and with back-to-school season in full swing electronics sales should see an uptick. Best Buy’s dominant position in this retail segment will drive revenue and profit growth into the fall and Christmas buying season.
Microsoft (MSFT) – The new Windows phones are right around the corner and there will be a massive retail push in an attempt to grab significant market share during the Christmas buying season. However, PC sales growth continues to sputter as tablets are making inroads and Online is bleeding red ink.
Intel (INTC) – Strong second quarter earnings masked significant portfolio weaknesses. Overall desktop sales are flat as smartphones and tablets begin to push out replacement cycles. Intel continues to miss the switch into smartphones and tablets.
Silver Wheaton (SLW) – This stock is everyone’s darling as the unique business plan has been copied by a few other companies. However, silver’s meteoric rise this year means that it becomes more difficult to sign contracts with mining companies to sell silver for $3.90 per share. The change in leadership this year has not brought new contracts and clarity for the future business plan. There are better values elsewhere in the streaming sector.
Silver Standard (SSRI) – Management has overcome problems at Pirquitas in Argentina, but questions concerning sovereign risk at San Luis in Peru have popped up. Technically, we are in the process of completing the right shoulder of a head and shoulders pattern so investors should be wary ahead of earnings.
I have no positions in any stocks mentioned, but may initiate a long position in GSover the next 72 hours.