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  • Happy Birthday Bull Market - Make A Wish

    By Uri Gruenbaum

    It was only five years ago, on March 9th, 2009, that the Dow experienced its fourth straight week of losses and the S&P-500 was below 700 for the first time in 13 years. However, this stock market crash is now a distant memory as we celebrate a bull market of five years, where the S&P-500 is up 174.7% and the Dow Jones Industrial Average has gained 148.35%. This period of the S&P-500 gaining 20% or more is the sixth longest running since 1928, according to Bespoke Investment Group, and this optimistic outlook has more and more investors joining the game. But, the federal assistance that helped produce this comeback is about to start slowly ebbing away, and with more expensive stocks and already high profit margins, the market is looking riskier and riskier.

    The stock market's revitalization after the bottoming-out in 2009 was largely fueled by the Federal Reserve Bank with their slashing of interest rates almost to zero, as well as buying bonds in the open market. But now the Fed is starting to cut back on its bond purchases and they are looking to let interest rates return to normal. The government is crossing their fingers that markets will stand on their own without its help, but there is certainly some apprehension in the air as the Fed starts to pull-out.

    At the same time that the Feds are backing away from the market, stock prices have reached historically expensive prices and company profit margins are so high that it is almost impossible for them to grow them any higher. "The stock market doesn't look like it is going to get year after year of double-digit growth as it has in recent years, but the bull market can continue as long as you get continued economic growth pushing stocks higher." Says Russ Koesterich, chief investment strategist at investment firm BlackRock Inc. And, Scott Clemens, chief investing strategist of Brown Brothers Harriman Private banking, noted the volatility of stocks could continue stating, "I think we will have multiple 5% to 10% corrections in the next 12 to 18 months."

    Despite the underlying uneasiness of this bull market, last year U.S. stock funds received $172 billion, according to the Wall Street Journal. More and more investors are responding to the optimism of the bull market and are putting their money back into the market.

    So, is now the time to BUY, HOLD, or SELL? While some chief strategists are expressing caution, analysts are still active to recommend BUY. Looking at analyst recommendations from the start of the year until March 9th, we find that 8.1% of analysts recommend a SELL rating and 57.2% saying BUY. However, looking at the data for the same time period last year, SELL ratings received 10.3% of all ratings and 54% of all ratings were BUY. The remaining recommendations were HOLD ratings.

    Analysts seem confident that now is the time to BUY. What do you recommend?

    The year has only begun, but I'd like to wish the Bull Market another happy 5 years of growing big and strong. Here's to wishing you many more years of positive stock growth and happy investors.

    Uri is co-founder and CEO of TipRanks, an analyst accountability company.

    Mar 12 11:14 AM | Link | Comment!
  • SELLing Steel?

    Based on data from this February, the U.S. Department of Commerce (DoC) reported that U.S. Steel (NYSE:X) imports showed "a slight decrease from Jan. (-2.0%), but a robust +27% YOY." And while Nomura Holdings analyst Curt Woodworth is encouraged by this information, recommending BUY X, Axiom Capital analyst Gordon Johnson has interpreted this information as a SELL X recommendation.

    Curt upgraded U.S. Steel to BUY and increased his price target from $27 to $32. Curt noted that, "after the stock's 18% correction since January (vs. S&P500 +2%), we see many reasons to own X." After Curt met with both the CEO and CFO of the company he said, "we have increased conviction in the company's direction as well as the opportunity sets in the commercial, financial, and operating functions of the business." Curt was most excited to predict that he sees, "US Steel's cash flow significantly increasing in the coming years." Curt is ranked 2319 out of 2436 analysts and has a -5.4% average return over S&P-500 and a 39% success rate of recommended stocks.

    Curt also recommended BUY X with a price target of $40 back in 2012. Curt argued, "U.S. Steel is starting to see the unit cost benefits from much better volume levels and cost benefits from increased natural gas usage and lower coke usage rates, eliminating the need to buy expensive merchant coke." At the time he felt that U.S. Steel was undervalued, however Curt ended up losing -33.3% over S&P-500.

    On the opposite spectrum, analyst Gordon Johnson was not as convinced by US Steel's numbers, recommending SELL X. Gordon believes that "U.S. hot-rolled-coil (NYSE:HRC) prices are likely in the midst of a sharp, structural, correction lower," especially because of the "the current - and persistent - premium of U.S. HRC spot vs. international HRC spot steel prices (>$100/mt)." Gordon thinks that this implies "growing risk to steel group fundamentals."

    Gordon also noted, "imports will continue rising, for both long & flat products." And, "imports typically rise when U.S. steel prices, measured as a spread to international prices, trade>$100/mt>." "With suggestions of further increases in steel imports, we deem a potentially significant price correction - on the magnitude of ~$50/mt - is on the horizon." Gordon is ranked number 2 out of 2436 analysts with a 19.6% average return and an 83% success rate of recommended stocks.

    Who do you trust to help you make your next financial decision about U.S. Steel?

    Tags: X
    Mar 10 10:58 AM | Link | Comment!
  • RadioShack Gets Ready To Ship Out

    Did you catch Alf the Alien and Erik Estrada of Chips in between Super Bowl plays this year? Well, even if you did have a chance to see RadioShack's (NYSE:RSH) commercial poking fun at the store's outdated perception, it might be too late to save the electronics depot. For the eighth consecutive quarter, RadioShack has posted a quarterly loss, the last report revealing a net loss of $191.4 million for the fourth quarter of 2013. The company is struggling to survive due to competitors like Amazon.com, leaving the store with minimal foot traffic, overstocked unwanted items, as well as lack of inventory of key items. Some top analysts are ready to get rid of RadioShack's stocks recommending SELL RSH, while other analysts are recommending HOLD RSH as the company makes strategic business moves.

    B. Riley analyst Scott Tilgham recommended SELL RSH after the company announced that it will shut down as many as 1,100 underperforming stores. Scott argued, "the company is burning through cash. We don't see the fundamentals moving out of the red at least [not in] the foreseeable future." Even though RadioShack is staying active to slow its demise, Scott does not believe the "CEO Joe Magnacca has succeeded in rejuvenating the almost-century-old chain." Scott has a 4.1% average return over S&P-500 and a 71% success rate of recommendations.

    On the other hand, Stifel Nicolaus analyst David Schick recommended HOLD RSH, giving the company time to see their strategic plans bring results. David noted, "strategic initiatives will take time and expense. Closing stores is a positive and the chain may be able to regain some sales online." David does recognize that "their biggest category is wireless," and "the majority of folks have their mobile phones," so the company is "past adoption" on this market. But, he believes in the CEO's abilities to execute promising plans and advises investors to hold out for both these ideas to take shape and for the stock to see some positive outcomes. David has a +0.4% average return over S&P500 and a 43% success rate of recommended stocks.

    The closing of thousands of RadioShacks has some analysts worried about the downward trend of the stock and recommend that investors SELL their involvement with RSH, while other analysts see this as a step in the right direction.

    Tags: RSH
    Mar 05 10:11 AM | Link | Comment!
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