Geopolitical events are starting to add some fear into the markets and will probably be a reason investors look towards for taking money off of the table. The markets are looking for the Fed to keep rates lower moving forward and to announce some sort of QE3, or at least allude to the fact that the Fed will be providing the market with some kindling to help restart the economic fire and really get things rolling. That will be key today, and until we have that news we are maintaining our portfolio just as it is this morning, heavily weighted towards oil, and those companies growing production and some precious metals exposure more weighted towards silver than gold. And yes, as of this morning we remain cautiously bullish.
We have economic news out today, and it is as follows (data set - consensus):
- Initial Claims - 369K
- Continuing Claims - 3300K
- PPI - 1.2%
- Core PPI - 0.2%
- FOMC Rate Decision - 0.25%
- Treasury Budget - -$192.0B
Looking at Asian markets we see markets are mixed:
- All Ordinaries - down 0.53%
- Shanghai Composite - down 0.76%
- Nikkei 225 - up 0.39%
- NZSE 50 - down 0.10%
- Seoul Composite - up 0.03%
In Europe markets are mostly lower:
CAC 40 - down 0.74%
DAX - down 0.43%
FTSE 100 - down 0.16%
OSE - up 0.04%
We saw Sirius XM (SIRI) fall below the $2.50/share level on volume of 93.7 million shares after Apple (AAPL) announced its new product line yesterday. Investors were already worked up due to the story in The Wall Street Journal regarding Apple releasing a Pandora (P)-like streaming service. The fact that the new line of iPods will have some new features on certain models, such as radio, had many people talking. It is not a direct attack upon Sirius, but it sure does add another feature which will compete for listening hours and is just another built in feature to entice consumers towards Apple's hardware. Should Sirius pull back further we would recommend buying shares for at least a trade.
Sprint (S) is another name which should benefit from the new iPhone 5 as it will be one of three carriers in the U.S. with the phone and the only one with truly unlimited data plans available. This should be a product line which continues to drive growth and we suspect that the company will steal customers away from competitors who do not carry the phone as well as those who do and simply cannot compete with the unlimited data plan. We have already noticed the company advertising the iPhone 4S at cheaper prices and we suspect that it will be quite aggressive advertising the iPhone 5. One important note for investors is that should it beat on subscriber growth, it will report poor financial numbers due to the large upfront costs, but over time those numbers will improve due to the higher margins from those users.
Abercrombie & Fitch (ANF) saw shares rise $1.95 (5.42%) yesterday to close at $37.92/share on volume of 13 million after the company announced that it had hired Goldman Sachs (GS) to help it with a large shareholder which looks to cause some trouble for the company. Not a lot of details were released, however investors assumed that this may lead to a buyout at some point in the future. We have previously stated how we view this as a damaged brand right now and with the company unable to meet expectations, we see no reason to speculate that someone would want to take over this business at a much higher price. This is another situation where if readers found themselves with shares before this revelation, then taking profits now would be the prudent move. We like other names in the retail sector right now, but if we were to see a reversal in the sales figures by the company we would revisit that thinking in the future.
Monster Beverage (MNST) saw shares fall $5.58 (9.90%) to close at $50.78/share on volume of 7.3 million as fears of the government stepping in to regulate the company's products once again moved to center stage. The fears were sparked by a letter that Senators Richard Blumenthal and Richard Durbin wrote to the FDA asking them to look into regulating energy drinks. These fears have come and gone over the years and in the future we may see some regulation on some level concerning energy drinks, but we think that the overall fears may be a bit overblown. We have no interest in buying share to gain exposure to this market as we would rather be diversified in the consumer beverage market, but we do think that when situations such as these present themselves it is a trading opportunity. Yesterday shares finished very close to the lows.
Heckmann (HEK) saw shares close at $4.50/share after rising another $0.37 (8.96%) as investors look to gain exposure to this oilfield services play. The stock has been on fire as they roll up smaller players in the field and the fact that they have a larger following since Jim Cramer went bullish on the stock. That was a great call and everyone who bought in at that time has experienced respectable short-term gains. We see this as a growing industry which may see business grow as regulations around shale drilling increase going forward - something we think is quite likely. This is certainly a play to watch moving forward.