The rest of the world is red today, however US futures are showing up green and indicating that traders want to see the rally carry through from Friday. We continue to like commodities in the current market and decided to include some ways to play silver and gold in today's article. Bernanke's speech on Friday was not as dovish as we would have liked, but at least it was not at all hawkish. We now know where the US Fed stands and will have to wait for Europe to see which central bank acts first. If Europe fails to come through for the markets, then the US Fed will most certainly have to step in and fill the void.
We have economic news out today, and it is as follows (data set - consensus):
- ISM Index - 50.0
- Construction Spending - 0.5%
- Auto Sales - N/A
- Truck Sales - N/A
Looking at Asian markets we see markets are mostly lower:
- All Ordinaries - down 0.60%
- Shanghai Composite - down 0.75%
- Nikkei 225 - down 0.10%
- NZSE 50 - up 0.19%
- Seoul Composite - down 0.29%
In Europe markets are lower:
- CAC 40 - down 0.50%
- DAX - down 0.37%
- FTSE 100 - down 0.78%
- OSE - down 0.21%
The story that is Facebook (NASDAQ:FB) is a tragedy, and if it were not so sad it might actually be comedic. The company's IPO is best described as a broken IPO, and they have a disgruntled founder unloading as many shares as possible each day and that has barely put a dent in his overall holdings - certainly not a bullish sign for investors. Fortunately for him he still is not taking losses on his sales, unlike nearly every single current shareholder in Facebook. That is a blanket statement one is not often able to employ, however in trading on Friday shares fell $1.03 (5.40%) to close at $18.06/share - a new closing 52-week low. This was just barely above the new 52-week low, which happens to also be a new all-time low. This is all pretty pessimistic sounding, but at some point one has to wonder where the actual value here really is as the shares are down over 50% from the IPO date. Short-term we are bullish here, thinking that $12-15/share will be the final low in the current market, but as soon as the company discovers how to monetize their data, users and experience then investors will see the bottom line growth that deserves the multiples which were paid for when the shares were private and the day they came public.
Regions Financial (NYSE:RF) has held in strongly over the past few trading sessions, but we had a bit of a sell-off going into the close on Friday. The shares finished off $0.07 (1.00%) to close at $6.96/share on volume of 13.5 million so the damage was not bad and volume not heavy indicating to use it was someone probably rebalancing their portfolio or selling positions to window dress their portfolio at month's end - for those who need to do it monthly. This is still one of our favorite deleveraging plays in the regional banking sector and with some of the recent deals we know that there are buyers looking at the right prices…but the big question is whether Regions is a buyer or seller in this market and we view them as a buyer, consolidating smaller rivals in markets which they need to beef up in.
Hovnanian Enterprises (NYSE:HOV) saw shares rally $0.20 (7.35%) to close at $2.92/share on volume of 8.2 million shares following Ben Bernanke's speech in Jackson Hole. Cheap money has a tendency to inflate prices, and real estate throughout history has performed quite well in times of low interest rates. It has been our opinion that the economy is only going to gain strength from these levels and if that does turn out to be the case then homebuilding stocks shall do just fine. Hovnanian is not one of our favorite names, but could very well outperform the rest of the sector should this rally continue as that is the way these things usually work - with the weaker names outperforming the stronger names during good times and vice-versa during bad.
We saw the precious metals arena heat up following Ben Bernanke's speech Friday, and silver outpaced gold with equities rising more than the physical metals themselves. We are holders of the physical metals, with an emphasis having been put on silver more so than gold. As we have said numerous times over the past year or so, silver shall outperform gold in a low interest rate environment with a healthy economy due to its industrial qualities and uses.
Looking around at the gold equities, we noticed that Yamana Gold (NYSE:AUY) was up $0.81 (4.96%) having closed at $17.13/share. The shares are about $1/share off of their 52-week high now, and one of the gold stocks which has been an outperformer recently. We would continue to ride the momentum here, and for those not yet involved we would recommend entering on any pullback as we believe that Europe will soon have good news regarding easing of their own.
That news would be super bullish for the silver equities, including Silver Wheaton (NYSE:SLW) as well. The company is not a miner at all, but rather a financier of mines with rights to buy certain production quantities from those who it lends money to. It is a business which has worked for years and when the precious metals compound heats up performs quite well and in-line with the underlying commodity. As the shares generally track silver pretty well, and based on the charts it appears as though we are breaking out of the lower lows and lower highs trend of the last year or so. If one desires liquidity and something a bit more leveraged than physical silver and the silver tracking funds, then Silver Wheaton is the best play in our opinion.