What the Market Wants: April Showers Bring... More Showers

 |  Includes: DIA, IVV, QQQ, SPY, VTI
by: David Brown

Monday's trading began amidst a multitude of unpleasant factors. France handed over its leadership to a socialist regime; a Greek election offered no support for current leadership or austerity; Asian markets were down sharply overnight; and European markets continued to exhibit weakness. Fortunately, we had no economic news at the open, but near the market close, consumer debt was released, coming in at more than double the prior month's reading and far off expectations. While I'm not sure what to think of that, I can tell you that it is not the most stable indicator, as it is frequently revised. The April showers (loss) have led to a very poor opening week for May.

The selling abated throughout the day, with the S&P 500 and the Nasdaq closing up a tiny fraction of a percent while the Dow was off about 30 points.

The market has shown no appetite for much of anything the past 6 weeks. The only sector up for the week was Telecommunications, although not everyone considers it a sector. Our SectorCast was off target last week, but right on target today with Financials, Healthcare, Technology, and Consumer Cyclicals up a tad. Our 30-day forward sectors look very much the same this week.

The worst style/cap this past week was Small-cap Value, down -3.5%. The best was Mid-cap Value, down -1.8%. Clearly, there's not much help there although Small-caps have been weak over the past 6 weeks.

Valuations remain moderate to attractive. The Top 100 Sabrient GARP (Growth at a Reasonable Price) stocks have a forward P/E of only 7.22 compared 8.23 a year ago. Their P/E (ttm) is 9.72 versus 10.33 a year ago. Of course, these are both higher than March 2009's low of 5.25 and 5.78 respectively. However, it's worth noting that net revisers (net analysts revising EPS upward) was -4.72 then, but now it is a sturdy 6.84 (the higher, the better). And, next quarter's expected growth valuation is a solid 8.10 versus 4.84 a year ago and 1.84 in March 2009. The best reading of that factor since the low was 9.95 in September 2011.

Figures for the Top 300 are bit lower but still better than a year ago.

Only when we get to the Sabrient Top 1000 GARP stocks do we get a higher forward P/E than a year ago, while the trailing PE remains well below (16.8 vs. 18.3). However, next quarter's projected earnings valuation is much better than it was a year ago.

Looking forward, we don't get much in way of new news this week: Initial Jobless Claims, Producer Price Index, Michigan Consumer Sentiment, Trade balance, and Pricing data.

So, too early to scream Mayday or run from the market. Just buy well-valued stocks and continue hedging with puts on the European ETFS EWP, VGK and/or IEV, all down around 2% last week.

Here are the market stats.

4 Stock Ideas for this Market

This week, I used the GARP (Growth at a Reasonable Price) preset search in MyStockFinder. Here are four stocks worth your attention:

United Therapeutics Corporation (NASDAQ:UTHR)-Healthcare
Stoneridge, Inc. (NYSE:SRI) - Cyclical Consumer
Western Digital Corp (NYSE:WDC)-Technology
Gulfport Energy Corp. (NASDAQ:GPOR)-Energy