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Fear & Greed Trader
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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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  • Market Update 1/18/14 2 comments
    Jan 18, 2014 1:24 PM | about stocks: BAC, C, JPM, RIG, TGT, BBBY, MU

    Well it appears we are back to the valuation argument again as Goldman Sachs came out with a note to investors that stocks are overvalued... That message sent stocks crashing down on Monday with the S & P falling some 25 points on the day .. Combine this with the tax selling that is going on and the note that I saw from BofAM that hedge funds have been net sellers since Jan 2 and we can see why the tape action so far this year has been sloppy. Investor sentiment turned quickly mid week as the S & P made a new high ,but by the end of the week the S & P gave most of those gains back.

    In response to the Goldman "call" , While I have demonstrated that we aren't in a bubble and aren't wildly overvalued , I can state that many companies are 'fairly" valued at the moment.

    However, there is plenty of 'value" still around, and as mentioned 2014 could be a year where stock selection will be highlighted.

    It seems that the equity market's failure to pick up in 2014 where it left off in 2013 has a few more investors on edge. According to the weekly sentiment survey from AAII, bullish sentiment declined by nearly five percentage points down to 38.99% from 43.62%. With this decline, bullish sentiment has now declined by 16 percentage points this year alone! It may sound hard to believe, but even with the S&P 500 closing right at all-time highs this week, bullish sentiment is only right inline with its average reading of the current bull market. A good sign.

    On the fundamental side , I note these recent reports. Retail sales beat expectations , Commercial and Industrial loans continue to track upward, Non-defense factory orders are at an all time high , "truck tonnage" a great proxy for the economy, has increased at an annual rate of over 5% since 2009 and continues its upward path. All of the recent ISM manufacturing reports are consistent with GDP in the 3.5% range .

    Finally, the Empire manufacturing report just came in at its highest reading since May '12. I may have missed a report or two , but I think one can get the general idea that the economy has an upward bias. I also believe it makes a case to toss out that weak Jobs number we got recently.

    The Dow Jones Transports made a new all time high on Jan 15th and the Dow 30 has yet to do the same thing.. If you remember both indices made new al time highs on Dec 31.'13. This non confirmation by the Dow 30 is something I will keep my eye on ..

    What may lie ahead...I note by looking back at some history of the DJIA & its performance from December through January over the last twenty years. , the current pattern is nearly a carbon copy of the 'typical' pattern. If the pattern continues, look for continued weakness through next week before a rebound to close out the month.

    If I was limited to having only one piece of info to make my stock market decisions-- just one-- I would choose corporate earnings ..

    That hasn't changed over the years for me and earnings will once again be in the news forefront during the next couple of weeks and may well provide the direction of the S & P in the near term.

    Bank earnings as expected were fine & the stocks of (NYSE:JPM) & (NYSE:BAC) recorded new highs,, (NYSE:C) disappointed some , but the pullback after their earnings report is an opportunity to BUY.

    Some of the value that is out there resides with stocks like TGT & BBBY . Beat up retailers that offer attractive entry prices..

    (NYSE:RIG) I've mentioned this one before , undervalued with a 4.6% yield.

    One stock on my radar screen that is now "Lit up " is (NASDAQ:MU). It is getting very close to my buy zone and I may pull the trigger on that one during this week..

    Stay the course.. Use a call writing strategy to gain more income and provide protection for any LT holding you have that may be overextended.. & make sure your cash position is adequate....

    I'll be updating the call writing portfolio on Monday

    Stay Tuned ...

    Disclosure: I am long BAC, C, JPM, RIG, TGT, BBBY, .

    Additional disclosure: I am long numerous equity equity positions - all can be seen here in this blog

    Themes: Earnings Stocks: BAC, C, JPM, RIG, TGT, BBBY, MU
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  • BlueSkyForever
    , contributor
    Comments (1888) | Send Message
     
    Agree with you F&G, the overall market is watching as earnings come in. Actually, we may get a buying opportunity if next week gets rocky. We could even see the first half of 2014 going sideways, then start to gain momentum over the summer. This would be good for people looking for better entry points. Could be a good time to park some cash in (PTY) while you wait for the market to steady. Or continue buying every month, adding to existing positions on any dips. Many of my favorite stocks have extremely low PE ratios, like (IBM), (AAPL), (UNH), (JPM), (NOC), (LO), (MO), (CSX) etc.

     

    There are good value stocks out there. 5, 10, 20 years from now, we will see what a great year 2014 was to continue to add to your blue ribbon, dividend growth stock portfolio. My goal of constructing a solid dividend growth portfolio continues. (PTY) was a great pick for me, loving the $1.84 per share special dividend in December, on top of the 8.64% earned in 2013. Sweet! (PTY) was under $18 recently, it has gone up over the last week so I would wait for a pull back before buying it. Or buy in gradually over several months, to spread out your risk and get the lowest average cost. After such a huge run-up in 2013, best to proceed with caution and look for value.

     

    Some of the REITs are extremely beaten up. (NLY) has a PE ratio of 3! Initiated a small position in (NLY) last week. I'll watch it & add to it in the coming weeks. This is a riskier one, so do plenty of DD if you are considering it.

     

    As a long term investor, I don't mind the dips at all. The market does correct now and then, so that's the time to look for good values. With a dividend growth strategy, money is constantly coming in which sure does help take advantage of the dips.

     

    Keeping an eye on the dividend helps me to get out of a company that may be having trouble. Last summer, I did have (INTC) but sold it when the dividend was not increased. An early sign that there may be some problems is if the dividend gets decreased, or is frozen. It's not a "buy and hold forever" but rather a "buy and monitor" strategy that helps me maintain the quality of my investments. I'm certainly not a "financial expert" so research is the main way for me to make investing decisions.
    19 Jan 2014, 05:13 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5846) | Send Message
     
    Author’s reply » Blue ,

     

    you have a great investment 'style" thanks for the commentary
    19 Jan 2014, 06:25 PM Reply Like
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