China's PMI was less than expected while the numbers out of Europe were below 50 and we are already seeing negative notes coming out as unemployment is climbing. People are beginning to worry that the slowdown has now spread to the larger, core economies of Europe and that another move downward is in the works. It also appears that the Greeks will submit a budget and are trying to lay the groundwork in order to restructure their payments and elongate the current deal. It is all about surviving at this point for many of the European members, and if all members do not get on the same page soon we could see a fiscal cliff scenario of sorts develop in Europe.
We have economic news out today, it is as follows (data set - consensus).
ISM Index - 49.7
Construction Spending - 0.4%
Looking at Asian markets we see markets are mixed:
All Ordinaries - up 0.05%
Shanghai Composite - CLOSED
Nikkei 225 - down 0.83%
NZSE 50 - down 0.11%
Seoul Composite - CLOSED
In Europe markets are higher:
CAC 40 - up 1.41%
DAX - up 1.21%
FTSE 100 - up 1.00%
OSE - up 0.06%
Clearwire (CLWR) stock fell $0.14 (9.46%) on Friday to close at $1.34/share as Time Warner began the process of unwinding their stake in the wireless network. As with all secondaries shares fell, and we would expect to see a bottoming out in the next few trading sessions with an entry point developing following the announced results (shares sold, at what price, etc). Long-term this could provide a nice entry point for those who believe that the company makes it, or that some white knight swoops in and buys the company out. Right now we would like it as a trade, but as more events play out we could see it becoming a play on the availability of spectrum in markets where the big boys are experiencing network strain (San Francisco would probably be the best example).
We have looked long and hard at this next retailer and deciding not to put out a bullish note on this one before earnings turned out to be a good call. Bed, Bath & Beyond (BBBY) is the retailer we are discussing and Friday it finished up in a down market which is always good news, but that is something the company has been lacking recently (the good news that is). The shares finished at $63/share on Friday after rising $0.54 (0.86%) and we believe that this is a good long-term entry point here. We must stress the long-term emphasis we placed there, because this goes against most every rule we have about investing in retail but with the housing market rebounding and our belief that management rights the ship we think that the risk/reward here is favorable.
Healthcare information technology services company Allscripts (MDRX) saw shares catch fire around midday on Friday as rumors broke that the company had hired Citigroup to look into a sale of the company. Bloomberg first reported the news citing sources close to the matter and indicated that the company has potentially been shopping itself around recently. The market liked the news sending shares up $1.54 (14.15%) to close at $12.42/share on volume of 21.9 million shares. We generally refrain from trying to play the takeover game, but we recognize that many of our readers who are traders like to do so, which is why we decided to cover it today. Were a buyout to occur, we would figure that there is at least another $1-2/share still on the table.
Our investing philosophy has always been to make money in the risky assets and to then take our 'winnings' and deploy them into far safer, blue-chip plays which provide solid growth, safe dividends and diversification to our portfolio. The concept has enabled us to succeed in both good times and bad, and in the recent abysmal times survive - which is the key to the entire game. We would recommend Pepsico (PEP) as a good place for readers to park their recent 'winnings' from the market as it provides a generous 3% yield and should the upcoming earnings report drastically disappoint the downside would be minimal as investors bet on a breakup of the company. We like the company as it is currently configured, but we recognize that value could be created by splitting up the assets. Either way we believe that long-term this is a great place to park money for retirement or to be a cornerstone of a portfolio.
Full Disclosure: We previously owned shares in PEP which were purchased in the $63/share area but sold out in order to move that money to a stock with a higher yield and more capital gains upside (this was done to increase risk in our portfolio as we saw the market heading higher).
Risk-On, Risk-Off Trade
We have talked before about the risk-on and risk-off appetite of investors and how it seems they trade Cheniere Energy (LNG) along the lines of their sentiment. We went as far as to recommend investors who felt that the market would be heading lower to go short the shares via options in order to play this upcoming sell-off and it appears that thus far the trade has paid off. Shares in the company have fallen to $15.53/share from recent highs south of $17/share. Now might be a good time to book some of the profits and keep maybe half of the trade on with a short leash. It is a conservative move, but we see some volatility ahead and think that some cash right now might not be a bad thing to have in order to take advantage of where the opportunities may appear.