Futures are lower again this morning here in the U.S. and world markets are under pressure. Part of it is a healthy step back after a few steps forward, but part of it also has to do with the move yesterday in the physical commodities which are traded as they fell hard into the close, which started with oil. We think that a 5-10% pullback for individual stocks is realistic, especially as we follow stocks with high betas (volatility). Our plan is not to sell our holdings in the portfolio at these levels, rather we are willing to hold during this pullback and add to these holdings as we regroup. We are doing this as we feel that share prices across the board will be higher by year-end and this little pullback is not worth trying to trade in and out of.
We have economic news out today, and it is as follows (data set - consensus):
- Current Account Balance - -$126.8B
- Net Long-Term TIC Flows - N/A
- NAHB Housing Market Index - 38
Looking at Asian markets we see markets are mostly lower:
- All Ordinaries - down 0.09%
- Shanghai Composite - down 0.91%
- Nikkei 225 - down 0.39%
- NZSE 50 - down 0.33%
- Seoul Composite - up 0.13%
In Europe markets are lower:
- CAC 40 - down 1.30%
- DAX - down 1.16%
- FTSE 100 - down 0.84%
- OSE - down 0.97%
The price action in Sirius XM (SIRI) yesterday confirmed our beliefs that volatility was ahead. Calling that the day of was a stroke of luck, but we were taught growing up that it is better to be lucky than good. Shares fell $0.08 (3.24%) yesterday to close at $2.39/share or just below the $2.40/level we discussed yesterday. Volume was once again strong with 53.5 million shares traded in yesterday's session. Now if we do not get a bounce back above that $2.40/share level we would worry about testing the support which exists at much lower levels than the stock is currently trading at. This is most certainly one to pay attention to moving forward.
One of our favorite retail stocks, Gap (GPS), had a strong day yesterday as shares rose $0.85 (2.41%) to close at $36.05/share after the company named Rebekka Bay as their new head of global design. The intraday chart on this one was a thing of beauty in yesterday's market and the shares finished near the day's highs. We think that the back to school season and fall fashion will see Gap come out as a big winner in 2012. We like how they have all major brands operating on all cylinders and a new brand concept which we think has all the makings for another engine for growth. Investors should maintain their holdings in Gap moving forward through the end of January to receive all of the benefits of what should be a big Christmas for the company.
Rosetta Genomics (ROSG) is on the move once again. Shares rose $0.92 (17.42%) to close at $6.20/share on volume of 3.2 million shares. We would like readers to remember our advice on these day trading situations, and that is to buy in the morning and sell in the afternoon. So long as shares finish higher, as they did today, into the close the situation is good. When the play is overplayed, one will notice sell-offs from the highs into the close. We continue to recommend that readers not hold names such as Rosetta Genomics overnight as the risk is just too great…at least for us.
One of the great names in this space is Gilead Sciences (GILD) and shares hit a new 52-week high in yesterday's session. Shares traded $3.78 (6.09%) higher to close at $65.80/share on volume of 21.5 million shares. An analyst at JP Morgan raised his price target to $75/share having raised it from $70/share. The analyst's thinking is that the HIV drug looks like a winner and they like what the company is doing with Hepatitis C. All biotech investors should have a piece of Gilead in their portfolio for exposure to this play, either directly or via some sort of index fund.
Threshold Pharmaceuticals (THLD) saw shares get clobbered after releasing the most recent data from their trial on the most advanced drug in their portfolio. Shares fell to $7.00/share after falling $1.72/share on volume of 13.4 million shares. The company is testing the drug's effectiveness against a host of different types of cancers and will still be tested on pancreatic cancer in another study. The results from studies have varied, with some coming back as positive and others negative (such as the latest batch), so this biotech we are avoiding until there are results showing that the drug's effect on patients is statistically significant over those not treated with it.