The markets got exactly what they wanted yesterday and the Fed's actions have set off a worldwide rally with shares in Asia and Europe up strongly this morning. Futures are up here in the US as well and commodities are surging to 6 month highs across the board. Prices have risen smartly over the past few days and weeks, but we still see some sweet spots for investing with prices which have still not gotten out of hand. We will begin to cover some of these names in future articles in a bit more detail than we usually give. But this morning we have a few names which we want to talk about which should do well over the short-term due to recent market events.
We have economic news out today, and it is as follows (data set - consensus):
Retail Sales - 0.7%
Retail Sales ex-auto - 0.8%
CPI - 0.6%
Core CPI - 0.2%
Industrial Production - -0.2%
Capacity Utilization - 79.2%
Michigan Sentiment - 73.5
Business Inventories - 0.4%
Looking at Asian markets we see markets are strongly higher:
All Ordinaries - up 1.16%
Shanghai Composite - up 0.64%
Nikkei 225 - up 1.83%
NZSE 50 - up 0.17%
Seoul Composite - up 2.92%
In Europe markets are strongly higher:
CAC 40 - up 1.99%
DAX - up 1.45%
FTSE 100 - up 1.48%
OSE - up 2.04%
We did some checking on the iPhone 5 yesterday and made some calls to contacts we have. After those conversations we think the two big winners from the iPhone 5 will be Sprint (S) and Verizon (VZ). As we mentioned in yesterday's article, we think Sprint will be able to leverage their data plans to their advantage to lure new customers to the iPhone experience and snag a few looking to upgrade from other carriers. Sprint closed at $5.20/share yesterday after having risen $0.10 (1.96%) on volume of 50.2 million shares. From here we think that shares will do a melt-up and hit new highs soon as news begins to trickle out regarding iPhone sales and subscriber growth.
Regarding Verizon, we know there is a lot of demand built up for the iPhone 5 as many customers skipped the 4S version and instead held out for the 5 as it was assumed that it would be out much sooner than now. People on the sales side are talking about their inventory running out quickly and think that the Pre-Orders will sell out in short order. We have no way of confirming the demand they talk about with foot traffic coming into the stores recently and calls yesterday, but if this is true it should push all names up. Yesterday Verizon traded higher by $0.69 (1.54%) to close at $45.58/share on volume of 20.6 million shares.
The banking industry was an obvious winner with the QE3 being confirmed yesterday by Ben Bernanke, and one leading the way was Regions Financial (RF) which saw shares rise $0.30 (4.12%) to close at $7.59/share on volume of 31.1 million shares. What we like most is the fact that shares hit a new 52-week high yesterday and managed to close very near that level. It will be interesting to see if shares follow through in today's session, and as it appears now with the futures it should have a strong market to help put investors in the right mood to push it to new highs.
In our commodity article we write daily we always like to point out that investing in solar panel companies is a fool's game. Making money is extremely too hard and competition is extremely cutthroat. Our ongoing advice there is to simply stay away, and it has worked for years. This brings us to airlines where the same advice applies to this industry. Repeat customers are great in the business world, and something which bankruptcy attorneys probably do not see a lot of - outside of the airline industry that is. There need to be fewer carriers in the industry with fewer routes, but no one is willing to sacrifice potential revenue for fear of another competitor coming in and snapping up that route revenue and keeping prices down still. It is a crazy business which has seen one really good operator over the years. Oh yea, and they are heavily unionized. With that said, US Airways Group (LCC) is one we would stay away from. Shares are sharply higher than their 52-week low, and trading closer to their 52-week high but we would put the capital elsewhere, especially if you believe that oil prices are going higher. Yesterday the shares closed at $11.25/share after falling $0.57 (4.82%) on volume of 8.6 million shares.
One of our recent picks was AuRico (AUQ) which has risen smartly in recent sessions as the countdown to QE3 began. Currently shares trade at $6.34/share after having risen $0.48 (8.19%) in yesterday's session. It is our belief that the company is worth roughly twice the current market price, and this is based on their actual assets - the properties. Shares were recently battered after the company actually put numbers to the previously disclosed production issues at their mines, but this should be rectified which is what we think will be the item which will play the largest factor in the market revaluing shares. Either that or another operator who thinks they can run the mines better steps in, and shareholders are not going to sell out cheaply here. This is a medium to long-term investment with an attractive entry point here.