World markets are bouncing back a bit today after a few days where investors took money off of the table. We do not think that the pullback is over for the general market, but for some stocks it might very well be. The next month or two might just be a stock picker's market rather than an across the board investor as we believe that we pull back a bit and stagnate to build a solid base to rally from going into the close of the year. We are still overweight stocks and have not taken money off the table, choosing rather to add to positions in this bull market on the pullback.
We have no economic news out today, the next batch will be out on Tuesday of next week.
Looking at Asian markets we see markets are mostly higher:
All Ordinaries - up 0.25%
Shanghai Composite - up 0.09%
Nikkei 225 - up 0.25%
NZSE 50 - down 0.25%
Seoul Composite - up 0.60%
In Europe markets are higher:
CAC 40 - up 0.38%
DAX - up 0.73%
FTSE 100 - down 0.15%
OSE - up 1.17%
Sirius XM (SIRI) broke through the $2.50/share level yesterday and rallied higher. We have seen the stock put together a solid string of up days with it rising 2-3% each day after it broke sharply below the $2.50/share area earlier this week. Volume continues to be strong with 117.4 million shares traded yesterday and that seems to be laying the foundation for a really bullish story here. We love solid charts where they rise from the lower left to the upper right, and that is the case with Sirius lately and when you couple that with strong volume that is well above the average then one has to take notice - and that is exactly what the market is doing right now.
We have covered coal extensively in our morning notes and in various coal focused articles here on Seeking Alpha, and over the months one thing has been obvious in the sector. A lot of production has been taken off of the market and with that a ton of coal which needs to be shipped, mostly by rail for domestic purposes. It does not just affect those with lines around Appalachia or the Powder River Basin but even those with lines around large metropolitan areas and the south. Those with lines around the production areas will get hit hardest, but so too shall those with lines around the consumers (power plants) and especially the ones who used to service coal fired power plants which have switched to gas powered. Railroads really lose out on that business as it is not just lower volumes but a whole other means of transportation with the pipelines doing the work. With that said, we believe that the American economy is only going to get stronger moving forward and we would be buyers of railroads such as CSX (CSX) and Norfolk Southern (NSC) on this weakness. There is no need to catch falling knives, so wait for them to bottom out if you are only making one purchase and should you decided to average into your position then the first part of that transaction could take place at these levels.
We discussed Bed, Bath & Beyond (BBBY) yesterday and stated that we did not think that the brand was damaged with recent news, and we still do not. However, the price action in the stock only became weaker from what we saw in the after hours market which is where the latest data was available at the time. With the stock closing at $62.08/share after falling $6.71 (9.75%) on volume of 14.6 million shares we believe that the disappointing guidance given by the company is offering an attractive entry point for those who believe that this is a short-term issue which the management team is capable of fixing.
One company which may be beyond repair in the short-term is JC Penney's (JCP) which fell $3.26 (11.21%) yesterday to close at $25.83/share on volume of 24.9 million shares. We have been one of those who have refused to buy into the Johnson vision - at least the way he carries it out which is quite confusing to the consumer - and his star appears to be beginning to lose its luster. He has been the catalyst for moving shares based on his reputation and past history at some great retail names, but we think that was more a results of being in the right place at the right time with great leaders showing him the path. Now Johnson is the leader and it seems he is leading JC Penney aimlessly down a path that he still has not figured out. With that said, we are not buyers nor would we recommend readers be buyers on this pullback as we think the stock is going lower.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.