Nov. 26, 2013, 10:19 AM
- There's plenty of economic data to mull over, but Treasurys are taking their cue from an unexpected decline in Consumer Confidence in November - this despite (or because of) the government returning to work and a stock market that won't quit. Those with good memories will remember the big drop in October was attributed to the government shutdown and chatter about default.
- The Expectations Index also declined - to 69.3 from 72.2.
- "With such uncertainty prevailing, this could be a challenging holiday season for retailers," says The Conference Board's Lynn Franco.
- TLT +0.4%, TBT -0.8%, and the 10-year Treasury yield is off 3 bps to 2.70%.
- Treasury ETFs: TBT, TLT, TMV, TBF, EDV, TTT, TMF, TLH, ZROZ, SBND, DLBS, VGLT, UBT, TLO, FSA, LBND, TENZ, TYBS, DLBL
- Retailing ETFs: XLY, XRT, VCR, RTH, RETL, PEJ, IYK, IYC, SCC, FXD, UCC, PMR, UGE, RCD, SZK, FDIS, PSCD, PEZ
Nov. 26, 2013, 4:57 AM
- Consumers who think they'll be getting huge discounts on Black Friday might want to think again. In the words of the WSJ's Suzanne Kapner, "those bargains will be a carefully engineered illusion."
- Retailers and suppliers first work out the lowest price they can sell a product at and still make the profit they want, and then they jack up the "suggested retail price" so that the retailer can later offer a big discount.
- Another tactic is for stores to raise selling prices just before the holiday season discount period kicks in.
- Retailers: WMT, JCP, M, SHLD, JOSB, MW, KSS, BBY, TGT, HD
- ETFs: XLY, XRT, VCR, RTH, RETL, PEJ, IYK, FXD, PMR, UGE, RCD, SZK, PSCD, FDIS, PEZ
Nov. 23, 2013, 2:27 PM
- "The U.S. economy might be limping along, but many consumers have broken into a sprint," Jacqueline Doherty writes, in what seems like a rather paradoxical passage considering that consumer spending accounts for around two-thirds of U.S. economic output.
- Doherty cites an October retail sales print that came in ahead of consensus, NRF's expectations for a healthy Y/Y increase in holiday sales, and a hefty, market-beating return for the S&P Retail Select Industry index as evidence of "improvements in the consumer's fortunes."
- Still, Barron's thinks some stocks, like Michael Kors (KORS) and Restoration Hardware (RH), may have limited upside after big runs.
- Among retail stocks listed as "bargains": Bed Bath & Beyond (BBBY), Home Depot (HD), and Macy's (M).
- Retail ETFs - XLY, VCR, FXD, IYC, PEZ, RCD, PSCD, UCC, SCC, RTH, PMR, XRT, RETL
Nov. 21, 2013, 8:50 AM
- Multiple expansion was behind stock gains this year, but next year it'll have to be earnings and money flow rather than further valuation re-rating, says Goldman's David Kostin, reiterating his cautious 1,900 end-of-2014 target for the S&P 500 (SPY).
- Margins are key, and Goldman's forecast is the "greatest investable gap relative to consensus expectations.” The bank expects 8.9% in 2014 and 9% in 2015 vs. the Street at 9.5% and 10.1%, respectively. Every 50 basis point swing in margins translates into a swing of about $5 per share in EPS.
- Four recommended strategies: Pick growth (IWF) over value (IWD), firms investing in capex, companies with high buyback yields (seems contradictory with previous), and stocks with high operating leverage.
- As for sectors, Goldman is favoring IT (VGT), consumer discretionary (XLY), and industrials (XLI) vs. underweighting consumer staples (XLP), utilities (XLU, IDU), and telecom (IST).
- S&P 500 ETFs: SPY, SH, SSO, SDS, IVV, SPXU, UPRO, VOO, RSP, RWL, EPS, BXUB, TRND, SFLA, BXUC, BXDB
Nov. 15, 2013, 8:18 AM
- Paul Tudor Jones' Tudor Investment in Q3 greatly boosted its holdings in the Consumer Discretionary Select SPDR (XLY), purchasing 3.6M shares to bring the total owned to 4.1M. The firm also opened a 2.8M share holding in the iShares MSCI Emerging Markets ETF (EEM).
- No longer a part of the portfolio are the Financial SPDR (XLF), Industrial SPDR (XLI), and the Energy SPDR (XLE).
- It's probably not too financially healthy to read a ton into these moves, as the ETF holdings could be hedges against other positions as easily as outright bets.
- Q3 13-F
- Q2 13-F
Oct. 22, 2013, 1:25 PM
- The mutual fund giant greatly boosts its ETF presence, rolling out 10 sector ETFs on Thursday, with BlackRock (BLK) - whose iShares has its own suite of sector ETFs - as the funds' sub-advisor. State Street (STT), though, is better-known for its sector offerings. Launching on Thursday - and popular existing State Street SPDR ETFs they'll be competing with:
- Fidelity MSCI Consumer Staples Index ETF (FSTA) - XLP.
- Fidelity MSCI Consumer Discretionary Index ETF (FDIS) - XLY.
- Fidelity MSCI Energy Index ETF (FENY) - XLE.
- Fidelity MSCI Financials Index ETF (FNCL) - XLF.
- Fidelity MSCI Health Care Index ETF (FHLC) - XLV.
- Fidelity MSCI Industrials Index ETF (FIDU) - XLI.
- Fidelity MSCI Information Technology Index ETF (FTEC) - XLK.
- Fidelity MSCI Materials Index ETF (FMAT) - XLB.
- Fidelity MSCI Telecommunications Services Index ETF (FCOM) - XTL.
- Fidelity MSCI Utilities Index ETF (FUTY) - XLU.
Oct. 16, 2013, 3:47 PM
- Discretionary stocks (XLY), the U.K. (EWU), and the Eurozone (EZU, VGK) have the highest weighting relative to historical norms in global fund managers' portfolios, according to BAML's quant strategy group.
- The lowest weighting: Commodities (DBC), Emerging Markets (EEM), Energy (XLE), and Materials (XLB).
- "It's shocking how hated emerging market equities and commodities have become. Contrarians take note...," writes Josh Brown.
- Eurozone ETFs: EZU, VGK, FEZ, EPV, IEV, ADRU, FEP, FDD, UPV, EPV, DFE, FEU, FEEU.
- Broad commodity ETFs: DJP, GSP, LSC, RJI, GSC, GCC, GSG, DBC, DPU, DJCI, UCI, USCI, DYY, UCD, DEE, CMD, DDP, RGRC, CTF, CFD CSCR, CSCB.
- Emerging markets: EEM, ADRE, SCHE, GMM, VWO, DEM, EWEM, PXH, PIE, EWX, DGS, EMLB, EDC, EET, EMSA, EDZ, EEV, EUM, TLTE, HILO, EELV, EEMA, EMFT, DVYE, FEMS, EVAL, EGRW, EMCR, IEMG, EMDR, EEME.
- Energy: IEO, IEZ, IYE, PXE, PXI, XES, XLE, XOP, VDE, RYE, FXN, OIH, PXJ, PSCE, ERX, DIG, ERY, DUG, DDG, IXC, IOIL, AXEN, IPW, GNAT, FILL.
Oct. 16, 2013, 3:21 PM
- It's a good year for large-cap core mutual funds, with 46% beating the S&P 500 vs. a 10-year average of just 36%, according to Goldman Sachs.
- The study finds most are overweight health care (XLV), which not coincidentally happens to be the best-performing sector this year, up 30%.
- The funds are most underweight utilities (XLU), which just happen to be the second worst-performing sector YTD, up 10%. Only telecoms have done worse.
- Chasing performance? May be, but the team finds the funds have tended to be present in the good performers for the last 12 months, and have retreated from discretionary stocks (XLY) of late despite their outperformance.
- Individual names? CVS Caremark (CVS), JPMorgan (JPM), and Cisco (CSCO) are the stocks liked the most vs. the benchmark.
- Health care ETFs: XLV, XHE, VHT, FXH, IHF, IHI, IYH, PTH, RYH, PSCH, RXL, RXD, XHS.
- Utility ETFs: IDU, PUI, XLU, VPU, RYU, FXU, PSCU, UPW, SDP, UTLT.
Oct. 9, 2013, 6:50 PM
- Scores of companies in nearly 200 public filings have cautioned investors that their businesses could suffer from the government shutdown, now in its ninth day.
- J.C. Penney (JCP), Wolverine World Wide (WWW) and Humana (HUM), for example, all warned this week of potential bottom-line consequences of federal furloughs and agency closures; corporate M&A plans also appear to be on hold as executives await a return to normal.
- Every week the government is closed trims economic output by ~$1.6B, or 0.16 percentage point for the quarter, according to research firm IHS, and "if the shutdown drags on, the effects will start to add up."
- The last fight, in 1995-96, impacted consumer confidence; with the year-end shopping season approaching, that's critical, especially for retailers.
- ETFs: RTH, PMR, XRT, RETL, XLP, VDC, FXG, IYK, PSL, RHS, PSCC, UGE, SZK, XLY, VCR, FXD, IYC, PEZ, RCD, PSCD, UCC, SCC.
Oct. 3, 2013, 2:55 AM
- The National Retail Federation expects sales during the November-December holiday shopping period to increase 3.9% to $602.1B, with growth accelerating from 3.5% last year. However, says the NRF, a prolonged government shutdown could hurt consumer sentiment and harm sales.
- Retail ETFs: RTH, PMR, XRT, RETL, XLP, VDC, FXG, IYK, PSL, RHS, PSCC, UGE, SZK, XLY, VCR, FXD, IYC, PEZ, RCD, PSCD, UCC, SCC.
- Boeing (BA) has warned that deliveries of some jets could be postponed, as the FAA officials who need to approve the planes before they're handed over to customers have been furloughed. Airbus has already delayed the delivery of an A321 to JetBlue.
- The closure is hurting small businesses that rely on federal agencies to operate or that were trying to secure government-backed loans.
- How the shutdown is affecting United Technologies and USEC.
Oct. 2, 2013, 10:25 AM
- The restaurant sector is proving to be more sensitive than most to the developments with the government shutdown and the potential impact to the U.S. economy.
- Analysts already saw restaurant traffic under pressure during Q4, but an extended government shutdown could take estimates even lower.
- Leading decliners: Brinker International (EAT) -2.4%, McDonald's (MCD) -2.0%, Cracker Barrel (CBRL) -1.9%, Yum Brands (YUM) -1.7%, Bob Evans Farms (BOBE) -1.6%.
- Related ETFs: PBJ, XLY.
Aug. 17, 2013, 9:02 AM
- The market's more richly valued than you think, writes Jack Hough in Barron's, as Q4 S&P 500 (SPY) earnings are expected to rise 10.5% on just a 0.6% increase in revenue. "Where's that margin growth going to come from," asks S&P's Howard Silverblatt. "Most of us aren't exactly napping on the job as it is."
- Avoid sectors particularly prone to estimates cuts like consumer discretionary (XLY) and telecom (IYZ), suggests Hough, but favor safer groups like tech (XLK, though Cisco last week calls "safe" into question) and health care (XLV).
- A stock screen scoring companies by free cash yield as well as ability to still boost margins yields 5 top picks:
- Pfizer (PFE) trades inline with a slow-grower like Merck (MRK) but maybe deserves a multiple closer to a fast-grower like Bristol-Myers Squibb (BMY).
- Danaher (DHR) - it trades at what seems like a pricey 18x earnings, but just 15x projected free cash.
- Lear (LEA) at 10x earnings is growing faster than the auto market as a whole as it picks up market share and electrical content in cars is rising.
- Oracle (ORCL) and Qualcomm (QCOM) have both seen earnings growing faster than their share price of late, leaving them attractively priced.
- The screen also yielded 3 to avoid:
- Tiffany (TIF) at 20x earnings is pricing in faster earnings growth in 2014. Praxair (PX) expectations are for a near-doubling in earnings growth to 13%. Lennar (LEN) with 32% projected earnings growth remains pricey even as the housing recovery appears to be slowing.
Aug. 15, 2013, 2:08 PM
- Merrill Lynch analyst Savita Subramanian cut consumer discretionary stocks to Underperform on her view the sector is greatly overvalued. Margins are stretched to the limit and rising interest rates are creating some savers out of spenders, she notes.
- Warnings signs of a cautious stance by U.S. consumers have been popping over the last weeks from teenage retailers to restaurants, but the unexpected strength in the automobile market has largely muted the argument. It took Wal-Mart dipping into negative comp sales growth to swing the pendulum on Wall Street in force.
- Related discretionary stocks: HD, LOW, JCI, CMCSA, MCD, PCLN, TJX, VFC.
- Related ETFs: XLY, VCR, PEZ.
Jul. 25, 2013, 2:06 PMConsumer stocks - both staples (XLP, FXG, VDC) and discretionary (XLY, VCR, PEZ) - have valuations that look stretched out, warns Ronald Thomas. The analyst exudes caution after taking a pulse on the economy and checking in on Treasury yields. To buy the sector now is a bet on 4% GDP, according to Thomas, or put another way - "the Fed's Kool-Aid does not justify valuations." | 1 Comment
Jul. 17, 2013, 9:11 AMAfter a major run and with valuations at the highest in years, is it time for consumer discretionary stocks to pull back. The XLY is up 25% YTD, 700 bps ahead of the S&P 500. "We're still positive ... (but) we have to be a lot more selective," says JPMorgan U.S. equity strategy chief Steven Rees. The sector trades at 17.5x earnings vs. a 10-year average of 16.3x and the S&P at 14.2x. "The good news has been priced in," says Jerry Braakman, CIO of First American Trust.
Jun. 26, 2013, 10:40 AM43 out of 45 global markets are oversold, according to BAML's "Breadth Buy" indicator. These extreme signals tend to be followed by a short-term 6-7% bounce, but, cautions chief investment strategist Michael Hartnett, a sustained rally would require a shift in policy behavior. What's more, the 2 markets not in oversold territory are the U.S. (SPY) and Japan (EWJ, DXJ) and they're kind of important. Most oversold: Brazil (EWZ), Turkey (TUR), South Africa (EZA), Mexico (EWW), Materials (XLB), China (FXI, CAF). Least oversold (in addition to the U.S. and Japan): Health Care (XLV, IYH), and Consumer Discretionary (XLY). | Comment!
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