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INDEPENDENT Financial Advisor / Professional Investor- with over 30 years of navigating the Stock market's "fear and greed" cycles that challenge the average investor. Investment strategies that combine Theory, Practice and Experience to produce Portfolios focused on achieving positive... More
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  • Updates On The "January Effect" & "Dow Dogs" Portfolios

    Here are the results of the two portfolios (with documented links) that I presented at the end of last year, designed to take advantage of opportunities that would outperform in 2015. To date they have done just that.

    Dogs of the Dow (presented Dec 18, 2014)

    The 'Dog' portfolio yields 3.8 % - when I presented this list of stocks, I thought they would make a great starter portfolio. The list is diversified and produces a good yield.

    January Effect (presented December 19th ,2014)

    The "Jan" portfolio yields 4.37%

    To date, one has to be pleased with these results. As with any portfolio, results will vary as the year progresses and how one manages that portfolio will of course vary depending on many variables. The highest on the list of those variables is personal "risk tolerance".

    I wrote this piece - Ideas, Suggestions, Disclosure and Common Sense as a way of putting things in perspective when my ideas are presented and managing the results that are posted during the year.

    The Jan effect stocks are a great example of how different investors would manage this list. Outsized gains are present and could be harvested, while others will stay in for the ride on the MLP's as their yields are well above average, given the prices paid.

    (CCLP - 13% , HCLP - 8% , MEMP - 17% )

    Suffice to say anyone that put together this portfolio has a nice dilemma.

    Best of Luck to all !

    May 02 11:11 AM | Link | 4 Comments
  • May 2nd- S & P - False Breakout, False Breakdown, What Next

    This week, I'll start with a "technical" look at the market. During the last 2 weeks I spoke of the potential breakout of a "wedge" pattern that developed in the chart of the S & P 500. It appeared we had a false breakout initially, but buyers came in setting a new high on Friday April 24th.

    However, this past Monday the S&P 500 pushed out to a new intra-day high before rolling over and closing near the low for the day. Such action suggests stocks are far from ready to tack on a major rally from here. The thought of a false breakout loomed large.

    Tuesday took the averages right back down to their 20 day MA of 2090, then bounced higher. All seemed well for the bulls until Thursday rolled around, sending the S & P below the short term support of 2090 and many were now looking and talking a "breakdown" was imminent.

    Continuing with the 'false' theme, the S & P not only regained that 2090 level the very next day but vaulted 22 points higher and finished @ 2108. Now just 10 points shy of making a new high.

    I believe that the most likely course of action is more of the same as investors appear reluctant to make major bullish beats until the unknowns (Greece, Fed action, U.S. economy trends, and earnings) are better understood. In the current state, equities are vulnerable to near term pullbacks, but with the intermediate trend solid, and with the economy expected to improve in the coming quarters, any developing pullbacks should be viewed as a chance to look at candidates on your watchlist. Rotation within sectors is prominent once again.

    The S&P 500 historically has shown a respectable steady uptrend after major oil price bottoms, as may be occurring now, particularly in defensive consumer areas such as consumer discretionary, consumer staples and health care. At the moment the market as measured by the S & P is still basically flat on the year-near-term support is at 2,080 - 2090 and resistance at 2,119 on the S&P, signaling a still range-bound market.

    Now that we have turned the page into the month of May, there is already the usual discussion about the old adage: "Sell in May and go away." Market lore holds investors shouldn't come back until November in order to avoid the seasonal swoon that presumably occurs regularly between May 1 and Halloween. How has the adage worked during the current bull market?

    Through Tuesday, Yardeni Research says the S&P is up 210% since the start of the bull market on March 9, 2009. Being out of the market between May 1 and October 31 during this period would have produced a gain of 139.5%. Looking at the performance of the S&P since 1928, the index rose on average by 1.9% during the May-October periods and by 5.2% during the November-April periods. So, the long-term data show that stocks underperformed but had a positive return on average during the mythical go-away period.

    One thing I know for sure If I do sell anything in May the proceeds wont be going in to bonds. I continue to hear that advice from some pundits. I spoke about the dangers of being overexposed to Bonds in May of 2014 and once again last February.

    Q1 GDP

    1st Q GDP came in at .2%

    While there are lots of reasons to be disappointed by Q1 growth, I don't think it's a good indication of the prospects for the whole year; this was true in 2014 as well.

    Consumption slowed in the quarter along with imports. This supports two narratives ("bad winter" and "port closure" due to the strike at west coast ports). Note that lower consumption and lower imports flow directly through to each other; if we don't import stuff from abroad, we can't consume it, and if we don't consume stuff, we don't buy as much from abroad.

    Given the steep declines in Q1 with a huge rebound in volumes for March, I would expect both consumption and imports to rise in revisions to Q1 GDP and in Q2. At least that is what the economy gurus I hang out with are telling me. To date they have done a good job of forecasting the ups and downs of the economy.

    U.S. Dollar

    Don't look now, but the USD has broken below its 50 day MA. Folks, nothing goes up in a straight line, whether it be stocks, commodities or in this case the USD. Those that positioned themselves in the 'Long" dollar, "short" Euro trade, as if the USD would never pull back might need to rethink their strategy.

    From Trend Macro;

    Donald Luskin views the dollar hit to multinational earnings as accounting fiction and thinks other dollar effects will eventually equilibrate away. The real question is what has caused recent dollar strength, he says. There's little evidence it's central bank policy. Instead, it seems to be connected to the drop in oil prices, a connection that can be observed over more than 40 years. If oil has stabilized for the year, as he predicts, then the dollar's strengthening should be over.

    Food for thought; IF we have seen an intermediate top in our currency, think of the tailwind that will provide equities. Everyone has cut their earnings forecast on the multinationals based on the strong dollar continuing an unabated trip to the moon.

    Last week I mentioned that the housing sector started showing some bright spots. This weeks data confirmed this trend, as home prices continue to rise with Case-Shiller Home Prices coming in ahead of expectations. The 20-city composite rose 5.03% year-over-year in February versus 4.7% expected.

    Crude oil

    Crude is up more than 41% from its March 18th low. I envision some consolidation in price now, before an attempt to move higher. The dire forecasts and the contagion affect from low oil prices that many were calling for can be put back in the drawer.

    Even with big drop in oil, XOM just raised its dividend and has raised its annual dividend for 33rd straight years.

    That XOM headline from this week says it all. I have been a buyer of the entire oil sector since December of last year. Telling anyone that would listen that the sell off in crude was overdone. Those taking a LT view of their holdings need to take the approach that a LT investor just needs to be in the "ballpark" when initiating a position in these beaten down names. That strategy is paying off handsomely. I don't believe the move in energy stocks is over. While I wouldn't chase here, anyone with little or no energy exposure might consider buying names for the long haul that are still on sale.

    Notable Earnings

    AAPL Beat EPS forecasts by 18 cents (2.33 vs 2.16) on stronger revenues; raised buyback to $140 bln.

    COH Beat EPS forecasts by 1 cent (0.36 vs 0.35) on weaker revenues.

    F Missed EPS forecasts by 3 cents (0.23 vs 0.26) on weaker revenues.

    MRK Beat EPS forecasts by 10 cents (0.85 vs 0.75) on stronger revenues; raised guidance.

    PFE Beat EPS forecasts by 2 cents (0.51 vs 0.49) on stronger revenues; lowered guidance.

    UPS Beat EPS forecasts by 3 cents (1.12 vs 1.09) on weaker revenues.

    KRFT Missed EPS forecasts by 9 cents (0.72 vs 0.81) on weaker revenues.

    WYNN Missed EPS forecasts by 63 cents (0.70 vs 1.33) on weaker revenues; cut dividend.

    X Missed EPS forecasts by 30 cents (0.07 vs 0.23) on weaker revenues.

    ABC Beat EPS forecasts by 26 cents (1.45 vs 1.19) on stronger revenues; raised guidance.

    BP Beat EPS forecasts by 7 cents (0.14 vs 0.07) on stronger revenues.

    XOM Beat EPS forecasts by 34 cents (1.17 vs 0.83) on stronger revenues.

    CVX Beat EPS forecasts by 56 cents (1.37 vs 0.81) on weaker revenues.

    I guess the large cap oil names wont go belly up -- (sarcasm intended as I am always amazed how exaggerated things can get)

    GILD Beat EPS forecasts by 62 cents (2.94 vs 2.32) on stronger revenues; raised guidance

    SWKS Beat EPS forecasts by 2 cents (1.15 vs 1.13) on stronger revenues; raised guidance.

    CVS Beat EPS forecasts by 6 cents (1.14 vs 1.08) on stronger revenues; lowered Q2 guidance.

    V Beat EPS forecasts by 1 cent (0.63 vs 0.62) on stronger revenues; reaffirmed guidance.

    As of April 24th - Factset

    With 40% of the companies in the S&P 500 reporting actual results for Q1 to date, the percentage of companies reporting actual EPS above estimates (73%) is equal to the 5-year average, while the percentage of companies reporting actual sales above estimates (47%) is well below the 5-year average.

    The blended earnings decline for Q1 2015 is -2.8%. If this is the final earnings decline for the quarter, it will mark the first year-over-year decrease in earnings since Q3 2012 (-1.0%), and the largest year-overyear decline in earnings since Q3 2009 (-15.5%). Six sectors are reporting year-over-year growth in earnings, led by the Health Care and Financials sectors. Four sectors are reporting a year-over-year decline in earnings, led by the Energy sector.

    The Health Care sector is reporting the highest earnings growth rate at 14.8%. At the industry level, all six industries in the sector are reporting or are predicted to report earnings growth, led by the Biotechnology (41%) industry.

    Remember those that told anyone that would listen, how the biotech sector was "rolling over" and taking the entire market with it. Many of these wizards also predicted panic selling was about to hit the energy stocks. Use the indiscriminate selling that is taking place in large cap biotech as an opportunity. These growth stories are still in the early stages, avoid the short term noise.

    The Financials sector is reporting the second highest earnings growth rate at 12.5%. At the industry level, six of the eight industries in the sector are reporting or are expected to report earnings growth, led by the Banks (24%) and Capital Markets (21%) industries. Funny how many called the financials "dead money".

    No surprises here, the Energy sector is reporting the largest year-over-year decline in earnings (-65.2%) of all ten sectors.

    This sector is also the largest contributor to the earnings decline for the S&P 500 as a whole. If the Energy sector is excluded, the estimated earnings growth rate for the S&P 500 would jump to 5.6% from a negative -2.8%.

    This sector is also the largest contributor to the blended revenue decline for the S&P 500 as a whole. If the Energy sector is excluded, the estimated revenue growth rate for the S&P 500 would jump to 2.6% from a negative -3.5%

    These results clearly demonstrates that energy is masking what would otherwise be positive developments in other parts of Corporate America. WE truly have seen an energy "shock" , but I believe its far too early to extrapolate this event to the dire market forecasts I have been hearing lately.

    I've recently seen a few missives how inflation may be just "around the corner". They seem to be running about the same rate as those promoting the deflation theme. I am in neither camp at this point as I discussed my thoughts on these two issues.

    That said, no thanks to the promoters of the Inflation and or Deflation themes. I'd rather take my cues from someone that has had the market story "right". Interesting thoughts which concur with my previous views on the topic from Califia Beach Pundit and why there is no looming "inflation threat" at this moment.

    Another "theme' and concern making the rounds on articles here on SA is the "R" word, some are saying "recession is right around the corner". I have presented many reasons over a period of time why there does not appear to be any risk of recession at this time, here is another:

    From Evercore ISI :

    Recessions have started six years on average after the leading indicators make a new high, and this isn't likely to happen until this summer or fall, There are a number of interrelated frameworks with the same implication, i.e., the Fed typically first tightens when the Conference Board gauge moves above its prior peak, and recessions start roughly six years on average after the Fed first tightens. Surely there could be a recession before six years, but there's not one in sight at the moment, and that's bullish for equities.

    Many long time readers know that I have been involved in for quite some time with my last purchase being at $390 or a post split price of $55.70.

    The following are thoughts from one of the best, Brian Gilmartin for those that may be in this stock or contemplating purchase.

    Fundamentally, the stock is still very reasonably valued at just 15 expected 2015 EPS of $8.71, for expected 3-year EPS and revenue growth rates of 18% and 12% respectively. Removing the $30 per cash from the stock price, AAPL is trading at just over 10 this year's eps.

    Technically, the stock is locked in a trading range between the Feb '15 high of $133 and the late November '14 high of $119.75. A trade below $119.75 and AAPL drops to $100. A trade above $133 on volume, and the stock has broken out again,

    Sentiment: who doesn't own or who isn't wildly bullish on AAPL these days ?

    The fundamentals are bullish, the technicals are indifferent right now, while the positive sentiment is clearly negative for prospective returns.

    The only real negative I can find in the fundamental story for AAPL is that the current expectations for fiscal 2016 (.i.e. next year) is for 5% revenue growth and 8% EPS growth. Clearly the Street is not expecting an iPhone sequel or encore.

    My valuation model puts a $180 intrinsic value on AAPL, while Morningstar values AAPL at $120. Split the difference you get $150 roughly, per share.

    I'll simply add that the recent earnings report this past week, and the subsequent price action moving the stock to a new high, takes Brian's bearish "technical" case off the table. The shares may enter a consolidation phase now but over time, a price target of $150 seems reasonable.

    Ray Dalio - "Hedge Fund Market Wizards"

    "In trading, you have to be defensive and aggressive at the same time. If you are not aggressive, you are not going to make money, and if you are not defensive, you are not going to keep money."

    I have been asked recently to explain why a LT investor, like myself needs to be active with what I describe as "intermediate holdings".

    The answer is simple, they don't, and I have stated that the strategy that I am employing in the present market environment isn't for everyone. I don't believe that one approach fits all, and I have always looked for ways to increase wealth and that doesn't always include "buy and hold" as the only strategy to employ.

    Consider the example of two people traveling in their car trying to get to a destination. For sure, an investor knows his or her destination and just gets in a lane that is heading in that direction and stays there. Sure, there will be times when cars in the other lanes are moving faster, but the investor is not concerned and just remains defensive. Progress is being made over time, and barring a crash, the investor knows that he or she will eventually reach the intended destination.

    Contrast this approach with the trader, who is constantly trying to be aggressive and move into the fastest lane. He or she will not always time it right, but if things do go well, the trader has the potential to advance very quickly.

    I revisit this metaphor from time to time as it not only underscores the important difference between an investor and trader, but also illustrates perfectly how, in my case (and anyone that wishes to follow) must trade in this current market environment.

    Stocks continue to move all over the place. As noted last week look at the number of those polled who are now "neutral' in their market stance. That is a sure signal that the general feeling that there is no compelling reason to buy nor sell at this time. That has surely been reflected in the week that just passed and the "breakout", "breakdown" story I spoke of earlier.

    Take note that unless you've uncovered a great growth situation, the rallies in individual names are more of a "Give and Take" in fairly large trading ranges. Therein lies THE opportunity.

    So for those that want to also put on a "trader hat", you must carefully balance being aggressive and being defensive. In this context I am not referring to 'daytrading", or 'swing trading" ( a week or less) but more of a situation where the position is held anywhere from 3 - 9 months. The "2015 Stock Ideas" list which I will update during the year is an example of what I am referring to.

    We have seen plenty of volatility this year on a weekly basis , including the abundance of large intraday swings higher, hopefully setting us up for more upside. But, of course, if you are an investor, than you really shouldn't be worrying about the overall market and all of this recent noise. The long-term uptrend remains intact and until this changes, you should be sitting back and relaxing.

    For myself and my 'intermediate " portfolio

    CAVM - Cavium - I added this tech name to my small & mid cap growth portfolio on Tuesday 4/28 @ $65.58.

    CAVM is a semiconductor company that designs integrated processors for networking, communications, and security applications. Cavium's products are system on a chip (SoC) solutions, which provide Layer 4 through 7 processing and are sold into the enterprise network, data center, broadband and consumer, and access and service provider markets.

    Shares have been under pressure following weak results and commentary across the industry last week (Altera, Xilinx, Texas Instruments), largely due to ongoing challenges in wireless markets in China and North America where Cavium is exposed to basestation

    investment.

    Assuming momentum in all other segments can mostly offset continued weakness in wireless for Q2 (supported by favorable broadband/datacenter commentary from Broadcom, Intel, Xilinx), it would suggest the recent price collapse in Cavium shares is overdone - I view this as an opportunity for investors with a last half of '15 and longer-term investment horizon.

    CELG- I mentioned earlier that it may be time to take advantage of the indiscriminate selling in the biotech sector. Celgene has been in a downtrend since late March along with the rest of the biotech space. From a high of $129 to a low of $108 this week right down to its 200 day MA.

    I purchased CELG shares this Friday at the open @$109.42. These shares more than likely will become part of my LT "core" growth holdings in the Healthcare sector, joining GILD & MRK.

    Many still don't like or "trust" the biotech sector. That is simply a case of misunderstanding the sector and not knowing what they are looking at. The Biotech stocks have been weak , but that doesn't mean they stay weak forever. The large cap biotechs always seem to get thrown in the bucket with the companies that are selling at 25 times sales rather than 20 times earnings and growing revenues @ 20 +%.

    Let me once again remind everyone that not all biotechs are created equal, there is a huge difference, and at times the baby does get thrown out with the bathwater. Such was the case with when I purchased shares during last years selloff.

    Celgene is selling at approximately 18 times profit projections, a premium to the overall market multiple but one that is certainly warranted given Celgene's superior revenue and earnings growth prospects. The company's growth rates are in the neighborhood of 20-30%. Last Qtr --- CELG Revenue up 20%, net income up 157%. I'll add that the company has no debt.

    Going back to GILD, the upside breakout I was looking for seems to have occurred after a blockbuster earnings report. Barring a market meltdown, shares should retest that old high of $115.

    GILD is growing @ 30+% , and is priced at a discount to the market with a PE of 10. Gilead earned $4.3 B in the first Qtr of '15 - more than it earned in all of 2013. They have a huge share repurchase program in place and just initiated a dividend.

    Headline for HZO- Marinemax - mentioned last week

    MarineMax announced that its board approved a share repurchase program authorizing the company to repurchase up to 1.0M shares of its common stock during the period from today through March 31, 2017.

    While wearing my trading hat, and staying true to what I referred to earlier on being aggressive (to make money) yet maintaining a defensive mindset, (to keep that money), there will be a mid week update on the "2015 Stock Ideas" list. The recent weakness of the USD and the wholesale selling in the domestic small caps this past week, now requires a review of each of those positions.

    Best of Luck to all !

    May 02 9:41 AM | Link | 1 Comment
  • Market Update April 25 - New Highs For Nasdaq - S & P

    Bulls and bears don't seem to be around anymore as the masses seem to have gone "neutral" on their outlook for the stock market. Nearly 50% surveyed last week by the AAII described themselves that way, the highest level of neutrality in 12 years. However, it appears the remaining bulls had something to say this week as the Nasdaq along with the S & P recorded a new all time high which comes on the heels of the new high posted by the RUT last week. Economic data continued to disappoint but for now, good earnings reports trumped the global economic news.

    With the Nasdaq at new closing highs, we've heard plenty of talk about another "bubble" and the comparisons to yesteryear. With some wizards now touting the purchase of puts and shorting the index. It wont be a straight line up from here, but I believe the Nasdaq is not done in setting new highs for this year.

    This new found 'neutrality" sentiment could be a reflection of the contradictory data of late. Manufacturing is weakening but housing is strengthening (more on housing later), and auto sales are robust but overall retail sales are just so - so. Then there's Greece. The back and forth of "will they", "wont they" work out a deal, putting the "Grexit" issue back on the table.

    But I think the bulls need to keep a watchful eye on what is going on in another part of the world -- China.

    Its annualized real Q1 GDP hit a 6-year low of 7% (just 5.8% nominally before deflation boosted the real rate) and March data was worse. Industrial production, fixed-asset investment and retail sales all hit multiyear lows. Cornerstone Macro thinks China's record plunge in foreign-exchange reserves means it's experiencing significant capital outflows.

    According to HSBC/Markit's Purchasing Managers Index. PMI fell to 49.2 (est. 49.6) in April, beneath the 50-point watermark that separates growth from a contraction.

    Back here in the U.S.

    Revisiting a theme I have laid out in past blog posts. The strength of the RUT and small cap U.S. based companies. Large-cap U.S. companies were one of the best U.S. investments in 2014. In fact, large-cap stocks as measured by the S&P 500 Index returned 8.8% more than small-caps as measured by the Russell 2000 Index in 2014, the best annual relative return for large-cap vs. small-cap since 1998. But a curious trend developed at the end of 2014 and has continued through the first quarter of this year: the return of small company stocks.

    Large-caps reached a peak level of outperformance vs. small-caps on October 1 of last year, at 16.1%. This was almost exactly at the average peak outperformance we have seen over the past twenty-four years. Perhaps not surprisingly, since October 2014 small-cap companies have begun to outperform the S&P.

    To be sure, the RUT, as of last Friday, was up 5.2%

    year-to-date versus the S&P 500's present 2.8% gain.

    More on individual stocks to take advantage of this trend later.

    Economy - Housing

    Housing continues to be a source of strength with MBA Purchase Applications recording their largest weekly gain since 2013 and year-over-year change in the index continuing to accelerate, now up 14.4% versus a year ago.

    March Existing Home Sales from the National Association of Realtors, showed a very, very similar story. While Existing Home Sales total level is still modest at a (SAAR) seasonally adjusted annual rate of 5.19 million , the rate of change is surging, with the number of homes sold going from 0.0% year-over-year in January to +13.5% in March.

    After a blow out report last month, new home sales were much less impressive in March, missing expectations by 34,000 on a seasonally adjusted annual rate (SAAR). That said, year-over-year new home sales are up 19.35% on a seasonally-adjusted basis, 15.38% on a non-seasonally adjusted basis. Supply also remains relatively tight with only 5.3 months available. This current period for homebuilders may be difficult. but I still believe in the story long-term, and suggest investors take a look at a sector that has truly lagged the most since 2009.

    Markit PMI missed estimates on Thursday, following up a simply disappointing Wednesday evening for PMIs around the world.

    The 54.2 reading this month wasn't "weak" in any absolute sense, as it still shows solid expansion. But given the explosive highs last summer, the mid-50s readings of the last few months remain disappointing in the minds of many .

    Amidst all of the so - so global economic news was a bevy of earnings reports this past week.

    Earnings Highlights

    Financials

    MS Beat EPS forecasts by 6 cents (0.85 vs 0.79) on stronger revenues.

    STI Beat EPS forecasts by 6 cents (0.78 vs 0.72) on inline revenues.

    Other Notable Earnings

    KMB Beat EPS forecasts by 9 cents (1.42 vs 1.33) on stronger revenues; reaffirmed guidance.

    IBM Beat EPS forecasts by 8 cents (2.91 vs 2.83) on weaker revenues; reaffirmed guidance.

    HAL Beat EPS forecasts by 11 cents (0.49 vs 0.38) on inline revenues

    DD Beat EPS forecasts by 3 cents (1.34 vs 1.31) on weaker sales; sees EPS at low end of guidance

    LMT Beat EPS forecasts by 25 cents (2.74 vs 2.49) on weaker revenues; guided inline.

    TRV Beat EPS forecasts by 3 cents (2.53 vs 2.50) on weaker revenues; adds $5B to buyback plan.

    UTX Beat EPS forecasts by 5 cents (1.51 vs 1.46) on weaker revenues; reaffirmed guidance

    VZ Beat EPS forecasts by 7 cents (1.02 vs 0.95) on inline revenues.

    ABT Beat EPS forecasts by 5 cents (0.47 vs 0.42) on stronger revenues; guided inline.

    AMGN Beat EPS forecasts by 37 cents (2.48 vs 2.11) on stronger revenues; raised guidance.

    BIIB Missed EPS forecasts by 9 cents (3.82 vs 3.91) on weaker revenues

    BA Beat EPS forecasts by 16 cents (1.97 vs 1.81) on weaker revenues; reaffirmed guidance

    CAT Beat EPS forecasts by 50 cents (1.86 vs 1.36) on stronger revenues; raised guidance.

    Technology

    BRCM Beat EPS forecasts by 4 cents (0.64 vs 0.60) on stronger revenues; guided inline.

    EMC Missed EPS forecasts by 5 cents (0.31 vs 0.36) on weaker revenues; lowered guidance.

    LRCX Beat EPS forecasts by 10 cents (1.40 vs 1.30) on inline revenues; raised sales guidance.

    JNPR Beat EPS forecasts by 1 cent (0.32 vs 0.31) on inline revenues; raised guidance.

    VMW Beat EPS forecasts by 2 cents (0.86 vs 0.84) on inline revenues.

    MSFT Beat EPS forecasts by 10 cents (0.61 vs 0.51) on stronger revenues.

    YHOO Missed EPS forecasts by 3 cents (0.15 vs 0.18) on inline revenues

    EBAY Beat EPS forecasts by 7 cents (0.77 vs 0.70) on inline revenues; guided inline.

    FB Beat EPS forecasts by 2 cents (0.42 vs 0.40) on inline revenues.

    GOOG Missed EPS forecasts by 4 cents (6.57 vs 6.61) on weaker revenues

    AMZN Reported loss inline with expectations (-0.12) on stronger revenues; AWS growth 49%.

    QCOM Beat EPS forecasts by 7 cents (1.40 vs 1.33) on inline revenues; lowered guidance.

    Consumer

    MCD Missed EPS forecasts by 5 cents (1.01 vs 1.06) on inline revenues; sees negative global comps.

    KO Beat EPS forecasts by 6 cents (0.48 vs 0.42) on inline revenues.

    YUM Beat EPS forecasts by 9 cents (0.80 vs 0.71) on inline revenues; guided inline.

    DHI Beat EPS forecasts by 2 cents (0.40 vs 0.38) on stronger revenues

    GM Missed EPS forecasts by 10 cents (0.86 vs 0.96) on weaker revenues.

    T Missed EPS forecasts by 3 cents (0.63 vs 0.66) on weaker revenues; churn declined.

    PEP Beat EPS forecasts by 4 cents (0.83 vs 0.79) on inline revenues.

    SBUX Reported inline EPS (0.33) on inline revenues; reaffirmed guidance.

    AAL Beat EPS forecasts by 3 cents (1.73 vs 1.70) on inline revenues.

    Please note the aforementioned results isn't a case of 'cherry picking". The companies listed above are some of the largest players representing a variety of sectors. I believe the results are telling the story as investors are reacting to this data and to date brushing aside some of the economic news. After all, it always comes down to earnings. The worst fears that were put forth about this earnings season don't appear to be coming to fruition.

    Case in point --- amazing how much sentiment can shift with individual stocks. Last quarter MSFT dropped 9% after reporting, this week it's up 8% after reporting a nice quarter.

    From Bespoke:

    At the close of business this week we witnessed big jumps in both bottom and top line beat rates. As of Friday, 66.5% of companies have beaten consensus analyst earnings per share estimates so far this season. This is a huge number so far compared to past quarters over the last four years. The revenue beat rate also ticked up big this week, jumping from 42% to 52.3%. The early read this season was the bottom line numbers were strong but top line numbers were severely lacking. This week's reports generally came in strong on both accounts, and we think it's a big reason why the broad market indices did so well.

    Technically Speaking

    The S & P looks to have now broken out of the "wedge " pattern I mentioned a while ago. It fooled many, including myself as it sure appeared we had a false breakout last week and the S & P would be sent back into the trading range.

    However, I would like to see some "follow thru" next week to cement this break in place.

    The DJ Transports also have firmed up this week, but they still look less steady than the other averages, however in my view, not bearish. The average appears to have settled back in the middle of the trading range and on doing so has put some distance between the recent support lows that many thought might be taken out to the downside.

    We might be witnessing a situation in the transports, where once again, I believe consolidation within a trading range may be what is developing this year.

    After all, The Transports were leaders for much of 2014. Not many mention that the DJ 20 was up a whopping 33% last year and that followed 2013, where the transport average was up 26% . A "pause" certainly wouldn't be out of the question.

    The consolidation scenario rebuffs the argument from some pundits and authors here on SA, that the lethargic transports are "telling us something" about the economy.

    Individual Stock Ideas

    This past week I added LQ La Quinta @ $23.05 on Monday 4/20 and NCLH Norwegian Cruise lines @ $51.45 on Tuesday 4/21.

    The Consumer Discretionary, Health Care and Technology sectors have seen the biggest moves higher within their trading ranges over the last week, and all three look positive to me here. LQ & NCLH fit the bill as they are both in the consumer discretionary space.

    The entire "Stock Idea" list for 2015 was updated this week with details on those two additions and the sale of HAR. There are still some good ideas there that are worthy of a "look".

    One name that is getting interesting again is TOL. It has taken a 'round trip" and is back to a level below where I sold it. I reviewed the reasons why I like the sector for the long run earlier in this missive. That said, I note that summer is typically not kind to homebuilder stocks after a strong spring performance, as the good news for the year is usually fully reflected. Thus, investors may need to become more selective in this sector as the year goes on. In my opinion, it could be time to re-initiate a position in TOL, if the weakness persists in the homebuilders.

    HZO , Marine Max, a name in the small cap arena that I own, reported earnings this past week. This may be a case to look past the "headline" and check under the hood of a company's report.

    The headline :

    • MarineMax : FQ2 EPS of $0.02 misses by $0.11.
    • Revenue of $172.14M (+26.0% Y/Y) misses by $1.11M.

    However, the remarks from the company's CEO on the results paint a different picture.

    We were profitable for the first half of our fiscal year for the first time since 2006, (the first half of their fiscal year is typically their most challenging due to the seasonality of their business) paving the way for a successful 2015.

    The marine industry continues its slow, but steady improvement and based upon our 27% same-store sales growth this quarter, which is on top of 45% improvement we produced in December quarter, the evidence of the recovery is clear. This year our target efforts have resulted in a cleanest and precious inventory we have had since 2006.
    However, our product margins remain near historic levels and we are not seeing any competitive pricing pressure in the marketplace that concerns us.

    The stock was punished after that report dropping 8 % on the day of the announcement. Rather than jettison the stock from my portfolio, I'll go with what I read in the transcript and re-classify this one as a "hold" and wait for the story to play out in the second half of the year.

    Summary:

    The VIX remains low, oil continues to rally, Treasury yields are range bound, and the USD is consolidating.

    Overall this is a pretty good environment for stocks, but their is a deluge of economic data coming next week which will include the much-anticipated Q1 GDP report. (My guesstimate, a tad less than 1%)

    That news and plenty of earnings reports for over 800 publicly traded stocks next week, has the chance to derail the good vibes that the stock market has been working on for the past 2 weeks or perhaps keep the momentum going to the upside.

    Stay Tuned

    Best of Luck to all !

    Apr 25 9:08 AM | Link | 4 Comments
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