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Brendan O'Boyle  

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  • Stocks haven't exactly been following oil's lead, but you can still feel crude's impact in two key sectors - energy and consumer discretionary - and that means you may want to target stocks like Dollar General (DG) and AutoZone (AZO) as well as ETFs like XLY and VCR.  [View news story]
    Bought DG at 41 in Q1, sold for 55 on Friday.

    The market is pricing in too much growth here. As a momentum investor I shed a tear when I sold, but as a value investor I had to do it. Plus family dollar had relatively weak earnings and guidance, the run up has gone too far in my opinion. Still long TGT, WMT is a good choice as well.

    Bought TIF instead for 52.

    Also sold AZO for 385 last quarter and went long AAP instead at 66. I think AAP is more attractively priced and has a much cleaner balance sheet. Their earnings Q1 left something to be desired, but I view this as the result of a warm winter compounded by very high expectations when the stock was trading at 90.
    Jul 7, 2012. 10:59 AM | Likes Like |Link to Comment
  • Nokia: It's Getting Ugly Out There [View article]
    Never hold a stock like this for the dividend. Have you noticed these high dividend stocks always sell off brutally as soon as the ex-dividend date passes? Everyone holding thinks, "let's just get the dividend and then sell."

    Better to sell NOK short into the ex dividend date...
    Jul 7, 2012. 10:06 AM | 1 Like Like |Link to Comment
  • U.S. Stock Market Complacency On Verge Of Collapse [View article]
    Did I say you left the market at 1120? I said you advised people still in the market to sell at or around 1120 after the market had crashed.

    For example in October you penned, "Is this a bear market rally?" Then you decided that it was and stated that bear market rallies are to be sold.

    So I am emphasizing that many of your writings could be interpreted as very poor investment advice. I will also note that you should be aware of the opportunity cost of your strategy. You mentioned (among others) that investors should wait to purchase AAPL, MSFT, INTC, PEP, etc. last summer. The return on purchasing those 4 stocks would have been 30% by now. So the opportunity cost of your strategy is now approaching the level of your downside target. Just an observation...
    Jul 7, 2012. 08:58 AM | 16 Likes Like |Link to Comment
  • U.S. Stock Market Complacency On Verge Of Collapse [View article]
    How would 950 on the S&P 500 not be a bloodbath? That would represent one of the 5 or so worst bear markets since 1929 if it happened.

    Fisher's default position is to be fully invested because that is the strategy that is most effective over long periods of time. The market mostly goes up, therefore, you should be in it most of the time.

    The thing about large bear markets is the market is always blindsided by something that wasn't anticipated. Europe has been such a source of fixation for 2 years that it's hard for me to believe it can cause a major bear.
    Jul 7, 2012. 08:22 AM | 4 Likes Like |Link to Comment
  • Nokia: It's Getting Ugly Out There [View article]
    Will be a penny stock soon???

    How is $1.93 not a penny stock?
    Jul 6, 2012. 10:27 PM | 1 Like Like |Link to Comment
  • U.S. Stock Market Complacency On Verge Of Collapse [View article]
    So the market rally had nothing to do with going from decimated to record corporate earnings? Earnings which for all the doom and gloom still hover at record highs?

    Bull markets begin with irrational pessimism and end with irrational exuberance. You can say what you want about the market, but I have yet to see irrational exuberance. High beta stocks massively trail low beta. Treasuries trade at record highs, cyclicals trade low, utilities have higher P/E than tech stocks. If 1420 was a bull market top, it was an extremely sad one...
    Jul 6, 2012. 10:17 PM | 12 Likes Like |Link to Comment
  • U.S. Stock Market Complacency On Verge Of Collapse [View article]
    Which would only be known in retrospect. Every quarter bears have been calling for a peak in earnings. Every quarter they have been wrong.

    I see nothing new, nothing the market doesn't already know. Do you think Warren Buffett made a big investment in a cyclical company like GM because he is stupid? Or that Ken Fisher says he is very bullish on the market just as a bluff?

    Sure they could be wrong, but I wouldn't count on it...
    Jul 6, 2012. 09:57 PM | 8 Likes Like |Link to Comment
  • U.S. Stock Market Complacency On Verge Of Collapse [View article]
    How will earnings season be a major disappointment if 94 out of 500 companies have already priced in below expectation earnings?

    You realize only negative pre-announcements are made and it is likely the other 406 will have earnings in line with expectations.

    The bad news you refer to is already priced in. If you know the future do tell, but otherwise you are stating widely known information. Widely known information is priced in, you can go ahead and ignore it...
    Jul 6, 2012. 09:32 PM | 13 Likes Like |Link to Comment
  • U.S. Stock Market Complacency On Verge Of Collapse [View article]
    I would imagine that anyone who followed your advice and sold at S&P 1120 last August might disagree with that statement, James.

    I don't mind your staying out of the market, just be careful when you recommend capitulation selling after the market has gone down. Anyone following your advice after the market crash last year would have lost substantial money.

    It's easy to say you are right after a 10% downturn and ignore when you miss a 30% rally. I would enjoy reading your column more if you were honest about your mistakes, no one can predict the market 100% of the time.

    And I should add, saying out of the market is logical if you believe based on evidence the market is not discounting that a major downturn is imminent. However, selling after a downturn has occurred is the best way to lose money in the market. Investors who agree with James should already be out. I happen to believe that growth concerns are overblown, that safe assets are overpriced and that a third year of seasonal weakness will pass, as will Euro fears...

    You do realize that Greece has been in some stage of debt restructuring for 52 of the past 100 years. And Spain for 25 of the past 100 years. None of these years led to a bear market in US equities (unless you count last year).
    Jul 6, 2012. 09:09 PM | 22 Likes Like |Link to Comment
  • Why Aflac Is A Compelling Dividend Stock [View article]
    I think the reason AFL declined was concern about their exposure to sovereign credit risk?

    Someone correct me if I am wrong, but I believe they had Euro debt exposure, which has since been cleaned up.

    And all this talk of Japanese default is BS. They can print their own currency for goodness sake and they have zero inflation. What does that tell you???

    England had 250% debt to GDP for TWO centuries. Kyle Bass will be right in 2222...
    Jul 6, 2012. 07:28 PM | 3 Likes Like |Link to Comment
  • Second Quarter 2012: The Beginning Of An Earnings Collapse [View article]
    I am tempted to write an article about how the CAPE is misused. I am tired of seeing people predict that because the CAPE is 21 and the historical average is 16.5 the market is bound to drop by 20%.

    P/E has zero correlation to 1 year returns, 10 year normalized P/E has zero correlation to 1 year returns. It's only when you wait 10 years that you start to have a statistically significant edge.

    The market could certainly drop by 20%, but if it does it won't have anything to do with 10 year normalized earnings. I'm still confused by James' 950 target. He has repeatedly stated he doesn't expect a US recession. How many >40% bear markets have there been in the last 100 years without a recession? I believe the answer is zero.

    I can't think of any, there are: 1929, 1937, 1942, 1974, 2000 and 2008. The idea that you won't get in the market until a 1 in 16 year event occurs is foolish. In 16 years you can pick a portfolio that will pay out 50% in dividends and will give a better return than if you perfectly pick the market bottom (which you will never be able to do anyway).

    Now everyone thinks a 40% bear market happens every 4 years, but historically they are quite rare...
    Jul 6, 2012. 03:47 PM | 2 Likes Like |Link to Comment
  • Buy Caterpillar Now, 100% Margin Of Safety That Stock Will Double [View article]
    The whole market should double by 2016? Keep dreaming, maybe by 2022 if we're lucky. I'll wager CAT will hit 170 before the market hits 2750, easily...
    Jul 5, 2012. 09:08 PM | Likes Like |Link to Comment
  • Second Quarter 2012: The Beginning Of An Earnings Collapse [View article]
    He is probably calculating it from the end of the month. By the end of March the S&P was at 840, which would give me 12.

    The numbers would come out a bit different if you used

    Jan 1, 2009 13.29

    and removed Jan 1, 1999

    But I don't think the full year earnings would have been known in March 2009, so I used 1999-2008. This (in retrospect) would give 14.2 - so about what Doug calculates, probably this is where that number comes from.

    My point is either way the 10 Year P/E was around 10-11 at the bottom of the 2008-2009 bear. So I stand by my first statement.
    Jul 5, 2012. 03:08 PM | 1 Like Like |Link to Comment
  • Second Quarter 2012: The Beginning Of An Earnings Collapse [View article]
    S&P 500 Earnings (Inflation Adjusted):

    Jan 1, 2008 69.95
    Jan 1, 2007 93.17
    Jan 1, 2006 82.10
    Jan 1, 2005 71.27
    Jan 1, 2004 61.83
    Jan 1, 2003 36.05
    Jan 1, 2002 32.04
    Jan 1, 2001 63.63
    Jan 1, 2000 66.83
    Jan 1, 1999 53.05

    10 Year Normalized Average: 69.9

    S&P 500 Closing Price March 9, 2009: 683

    10 Year CAPE March 9, 2009 = 683/69.9 = 9.77

    Ok, so I was wrong, actually the bottom in 2009 was lower than 10.
    Jul 5, 2012. 01:04 PM | 2 Likes Like |Link to Comment
  • Week In Review - July 1, 2012: Certainty Illusion [View instapost]
    Yes that's part of the reason I still see a wall of worry.

    Also, strong bids for bonds tend to precede excellent stock market returns. Google Business Insider the real cult of equities. Bond Price divided by stock price is an excellent leading indicator of stock market returns. Just as excessive risk taking leads poor performance, excessive risk aversion leads good stock performance.

    I expect Energy, Tech and Cyclicals to dramatically outperform in the next quarter or two, particularly with rebounding oil. Buy some APA, APPL, CMI, CAT, CVX, SLB and RIO while they are still cheap.
    Jul 4, 2012. 01:32 PM | Likes Like |Link to Comment