1,400 accomplished, now where?

From the last few times I wrote, I have emphasized the 1400 level on the S&P 500 being key in keeping this upward momentum going. This past week we did just that, and my thoughts are as long as we can hold 1,388 then 1,421 is our next target to the upside. There has been some fairly positive news on the US front, some concerns over China’s growth, but it seems like the buy and hold value investor is back.

The screenshot above of the S&P 500 1 year chart shows that the 1,400 level has been broken through, but I am a bit cautious very short term here. On a technical standpoint, we broke hard through the upper Bollinger band, the many times this has happened before, we saw a slight correction, usually a couple of percentage points, but not to worry because it seems upward bias is still going.

Also, this past week and a half, we saw some inverse correlation between the Euro/Dollar and the S&P. this is the first time in years I have seen this, especially with the S&P breaking some key resistance levels, with the Euro holding flat to slightly negative along with oil stabilizing. The only thing I can think of is that if Americans really do believe that the US is recovering, they will flock more toward the dollar, it could be something to look at this year.

Upcoming this week, I want to look at DSW, Inc. reporting on Tuesday and FedEx Thursday. Both of these names will give us a better indication of the global growth and US consumer.

DSW Inc. offers a range of assortment of better-branded dress, casual and athletic footwear for men and women, as well as handbags and accessories. We have been seeing a slight move out of high end retail to mark down retail in the past few months (notice TJX Companies and how well they have done). I went into a DSW this past summer and many of the items in the store are brand name mark downs, there were also quite a few people buying as well (Buffalo, NY area).

Fundamentally, they look solid for long term growth. Notice the only reason their profit margin bounced in the previous quarter was because of a tax deduction, which was a one-time only occurrence. Revenue continues to grow at a sustained rate, so I don’t foresee any problems. Middle aged female shoppers will continue to buy these discounted items.

Some graphs on DSW also show how they are fundamentally sound. Profit and Gross margins continue to increase along with cash per share.

I probably will not be buying this, but I would rate it as a long-term buy on this fundamental analysis.
FedEx is next and they report their quarterly earnings this Thursday. This is going to be very important to look at; on a technical standpoint, we have not seen FDX above 100 since 2007, which is also where the broad market index (S&P 500) is right now. Below is a look at their income statement and how well they have done the past year. Net income more than doubled in one year and revenue was up more than 10%. As more people move to online shopping outlets, phone shopping and Amazon, this will definitely benefit companies like FedEx.

Below a screenshot of fundamental graphs showing huge growth in profit and gross margin this past year.

This comparison to the S&P 500 and UPS below shows how FedEx tends to underperform, at least in the past year

I will not be buying this, do not have the funds right now, but would recommend it, thinking it could make a run to one hundred dollars.

That’s all for this week, I’ll be on twitter as much as I can (@peter_eller10) covering these reports and others as they come up, have a good week everyone.

Crude reality of oil, how can it positively impact Apache

Welcome back everyone, it has been a good week break, but time to get back on the school grind once again. While I was home I was doing some analysis, basically noting that we are in a continued uptrend with equities and crude oil. Many economists, analysts and people I follow on Twitter have noticed some interesting patterns. The last time we had the forst two months of the year where we did not close down 1% or more on the day was 1995. That year, the S&P rallied 34%. Not saying this is what is GOING to happen, but something to look at.

Here is the S&P so far for ’12

Notice solid vertical bars denote performance in January and February respectively

Now look at 1995 YTD, similarities?

My take is as I have been saying for a bit now, we may have continued problems short term, it looks as if people investing today are looking far long-term and ignoring what is going on today. They either figure stocks are cheap now and are a value play into the future, or something will happen and they will miss the run-up. My target is sill 1,400 then I think we see some profit taking; correction 5-10%, after that we will probably stabilize, unless there is more unrest in Europe.

As this is happening, we are also seeing crude rally, though demand is decreasing and supply is increasing in the US, one would think gas prices here would decrease, no one can change that but the pattern continues to be up. I will explain later why I think oil companies today are cheap and can really go up from here on this increase in the price of oil.

This week I am looking at a couple of names: Bank of Nova Scotia (Tuesday) and Apache (not till May)

Bank of Nova Scotia (BNS), per Google Finance has 18.6 million customers in more than 50 countries around the world. The Bank has four business lines: Canadian Banking, International Banking, Scotia Capital and Global Wealth Management. In a macro perspective, the Canadian banks are monsters compared to US financial institutions due to one simple event: they did not participate in the buying of Mortgage-backed securities which caused the 2008 financial crisis in the US. These banks are highly regulated by the Canadian Government, so shareholders should not have to worry about much. With equities rebounding this year and the jobs picture beginning to look a bit better than the prior few years, I can expect interest rates to rise in Canada in the near future, in turn garnering in more profits for the banks. This is strictly long term though.

Fundamental analysis of BNS shows that indeed they are pretty solid. Having generated almost 800mm in cash last year along with income being stable around 1.2 Billion, this looks like a pretty safe place to park some money. Their profit margin has gone down from 32 to 27% this year, but they do look to continue to pay a nice 3.75% dividend while you wait.

Fundamental look at BNS:

Technical analysis BNS:

Both above show strong hold/slight buy recommendations.

Comparing BNS to 2 of its mail competitors in Canada, Toronto Dominion and Bank of Montreal, we can see significant underperformance the last year.

Personally, doubtful I will buy but from my perspective looks attractive to own, especially as we approach a strong $56 resistance level not tested since last summer. A break above there on this report will propel this stock forward north of 60, in my opinion.

Next company I want to look at, though the report is not for a couple of months, is Apache. Apache Corporation (Apache) is an “independent energy company, which explores for, develops and produces natural gas, crude oil and natural gas liquids” What got me interested in this company is 1. The recent spike in oil and 2. The bullish look at the charts I have been seeing this past week.

Looking at how closely correlated Apache is with Crude oil and my bullishness on Crude, this chart can really breakout above 120 and they have the fundamentals to do it.
Their profit margin is up from 23 to 27% from their last quarters report, mainly on crude oil prices, they still have a good amount of cash and A/R for financing and new investments, dividend hike could be in the works with share prices approaching highs, and cutting costs. It does seem like this company is on the path to make a good run this year.

Above some valuation trends for Apache, notice how profit margin and gross margin have both increased this past year, also EBITDA/share increased along with decreasing Debt to EBITDA. All positive signs so far.

Notice also P/E very low compared to S&P which is roughly 13, this industry is right now at a discount price/earnings wise relative to the broader market.

Technical analysis on RSI and MACD show a slight bearish case in the sense of this past weeks impact on Crude being down 5%

Here is a look at their competition and how they have underperformed their peers in the past year. Notice how tightly correlated they were with Anadarko Petroleum, even after they have been under fire previously with the oil spill in 2010.

I will also this week look to make a trade in DYN if I can get it at the right price.

Have a good week all! Get at me on twitter @peter_eller10 for more updates!

concise look at $CL_F $ES_F long term

Welcome back everyone; it has been a couple of weeks so let’s begin with a recap:

-Markets have continued the slow grind up on rumors and proposed deals to keep Greece afloat one more day. This is beginning to seem like a new norm.
-Friday was a new almost 4 year closing high for the S&P tracking back to before 2008 crisis
-Last post indicated 1,350 S&P resistance, tested 2x after that with a 3rd breach and close above. S&P has not broken below 1,350 since and looks to be new short term support.
-New resistance level 1,373 as shown below, lining up with levels last seen in June ‘08.

The pic above shows my 1,400 long-term resistance level. Notice a pattern taking place from ’08 where we see 200pt run up off of a 5-10% correction. I have 1,400 pinned seeing that it would make a near 200pt up move since we last saw a rather large down move. 1,400 could see some selling pressure and could push us back down to 1,330-50 area pretty quick.

Oil has become a hot topic as of recent. This past week we saw some huge up moves in WTI nearing last springs highs of 110. I am long crude, but a straight up move like this so quick believes me into thinking we could see a bit of profit taking back down to possibly below 105. Get ready to be paying $4 or more at the pump soon. Hybrid cars?  Toyota? Possibly.

Above CL_F Weekly chart rather large bids coming in this past week, pattern looks to continue if we can breach 110 and hold above. Notice 114 is last year’s high and 80 is support.

Above CL_F Monthly looking back about 10 years, notice pattern in 2005-06 when we saw pattern of a top, profit taking then, continued up again, seems like the pattern we are seeing this past year.

Looking at my portfolio so far, relatively no change since my last post, Earnings for DryShips came out and reported a loss, though their oil drilling division showed signs of strength. The stock initially sold off down to the 3.09 level, a bit overdone I believe on my part. Just to save some of my profits, I put a 3.00 stop in, thankfully it did not kick in and the shares shot up to 3.80 intraday. Still holding long-term. Still holding RadioShak after the earnings report, shares are currently below the 7.30 level where I bought them, will look to sell out of all my position at 1st breach of 7.00.

Having off from school this week for mid-term break, I will be at the charts and on twitter @peter_eller10 pretty much all day, many names I am looking at including $FDP and $DAR (big food bull, see post on $BG last year). Catch you all next week.

1,350 big resistance, w/ some analysis and trades

Welcome back everyone; hope you all had a great last two weeks of trading. It very much does appear like we are out of the woods with indexes nearing the highs we have seen last year. Since I wrote last, we have seen the index’s gain again on hope of deals everywhere. Same pattern now for roughly four weeks, sell in the pre-markets and morning cash open, then fill the gap up on the day to go unchanged or positive. We saw a break of that pattern on Friday where we were down roughly 1% the whole day, though closed off of the lows. To be completely honest, we have seen quite the explode up since the beginning of the year and 1,350 was huge resistance to test. The picture below of the S&P 500 1 year chart shows how 1,350 has proven to be huge resistance.

Notice how in one year’s time, no matter what the news events were, we closed above for a day or two, then corrected 5-10% in some instances. I am anticipating a correction this week, but if we can get a rally going Monday, hold 1,350 for 3 or more days, bullish momentum could continue toward 1,400. The stock market and economy are 2 different beasts, remember that.

I made a couple of new positions since I last wrote. After the guidance cut at RadioShack, I decided that it looked attractive to step in for a small position, on a fundamental basis. At 700M mkt cap, it is definitely a takeout target for private equity, and they are pretty liquid, enough current assets to pay off 90% of all debt. My opinion is yes the business is dying but I think investors really hammered this one pretty good on the guidance cut. I am keeping a close eye on levels and seeing if I can get a close and hold above 8.00. So far it is up 6.5% since hitting its all-time low last week of 7.15.

Above RSH and slight recovery after guidance cut.

I ended up not selling THQ when the report came out an got hurt pretty bad. There was a 25% initial drop in the shares to near 50 cents (half of my position lost) after the report. Still hanging on to this, though delving more deeper into it, looks to be in pretty rough shape. They have some notes due soon, and with net losses + a dwindling cash pile, this could spell disaster for them. But could there be an acquisition by ATVI or ERTS?

Above THQI after the quarterly report,

My best trade last week goes to DryShips. I bought this back in mid-December on hopes of a global shipping recovery, 2.00 just looked all too good for me to put some new cash to work. Unfortunately since then the Baltic Dry Index has tanked, but the stock has flatlined. Just last week the company announced Ocean Rig has a revenue backlog of 653M. This is great news for DryShips seeing as they own a majority of this driller. That contract is good for 3 years. I am still holding this name and watching the 3.00 level which is where it closed at on Friday. About 100 dollars was made on paper for that trade and has given me a slight confidence boost form all of the losses I have incurred these past few months.

Above DRYS and big move up after that announcement.

This week I have a couple trades to look at, just my opinion and probably will not put any to work this week. Wednesday we hear how Dean Foods is doing. This company is a disaster waiting to happen. Last time they reported, they had a huge drop in Assets and negative Shareholders equity, coupled with mounds of debt. This would also be the 5th net loss in a row, after a monster billion dollar net loss in the last earnings statement. The chart looks very sick and I expect another loss from Dean as competitors continue to take market share away from them. Until we see some growth and profits coming from the company, this could be the next bankruptcy target, I would stay away.

Above DF not looking so hot in the recent years, this is what happens when a company continually churns out huge net losses.

Much earlier, back last July when I started the blog, my first pick for long term growth and dividends was Waste Management. You can see my thoughts here-> http://theroaringbear.blogspot.com/2011/07/trash-is-treasure-wm.html Looking now 6 or so months later, it is up roughly 10% while maintaining a hefty dividend. I still think that this stock has more room to the upside. The last two reports were solid with profits up 10%, while cutting costs. It does appear that they have the assets to finance debt also. Consumers will continue to generate trash and recycle goods, so for long term growth, this is definitely your best bet. They report earnings on Thursday.

Above WM and move up since I last mentioned it looked attractive long-term.

That’s all I got this week, catch me on twitter @peter_eller10 have a good week all.

My US Macro view + why CNH and LVS may rally

Welcome back everyone, been out for a couple weeks adjusting to the new semester. Things at school seem to be pretty under control for now, so lets begin with some Macro highlights since last time..

As we see 2012 roll on through with January pretty much in the books, the S&P 500 is looking to have its best start in some time. Towards the end of the year, we saw the Dollar Index rally to near 2 year highs amid continued European concerns. It seems like that has blown over for now and we are back to the same old “risk on” game. Don’t fool yourselves though, Greece WILL eventually default/leave the Euro Zone. There really is no way for them to repay without more haircuts, and debt holders are already disgruntled about only getting 50% back. The only reason people are “less worried” now is because Germany could bail them out. Do they want to? No. Could the EZ force them? Maybe. This is why the Euro currency is such a problem, I can honestly say there has never been a situation this dire until they decided to bring about all of these countries to use a common currency.

Last Friday, Peter Schiff of Euro Pacific Capital did a Skype call with our Students in Money Management class discussing how US is going to be the next Greece. He went on to state our debt situation is pretty much out of control, and that poses risk for high inflation and default in the near future. I have to agree with him on this. Basically within a few years when China no longer wants to buy our debt, we will be in deep trouble. The US will be like Greece without Germany, no one wants to of will be there to bail us out. The reason why we have not seen rampant inflation and high yields is because the Fed has been buying the long end of the curve through Quantitative Easing, especially Operation Twist. This covers up the problem, but really you can only cover up a problem so long. Its fun to spend money you don’t have but we have literally shopped till we dropped.

What we need is job growth, and I know that everyone says this, but it is true. Government jobs do not count and make the situation worse. They are the reason corporations are not able to hire. Too many regulations and double taxation making large companies with profits give back to the government to do what with it? Give to people who don’t work? This is not the USSA it is the USA. At least 1/6 people here are on food stamps, our taxes paying for those who I’m sure would LOVE to work. There are plenty of people who WANT to work but can’t because of the reasons stated above. What we need is a change in Economic policy, we see that supply does not create demand and Keynesian ideology is completely wrong.

Above the US dollar index currently in a channel, expect this to move down and test the lower trendline with a possible break. I have changed views on US dollar now looking for short term bearish because of continued easing and low interest rates till 2015.

Earnings have been so-so to begin the year so far. Google’s numbers were not the best but Apple really did blow it out of the water with a monster beat. We are seeing pickup in global demand from Caterpillar and the larger industrials, along with tech reporting very well. This week I want to throw out a couple names to watch for.

Reporting on Wednesday is CNH Global. (CNH), a 11B mkt cap company headquartered in the Netherlands with business in both the agricultural and construction equipment industries. They manufacture Case and New Holland equipment. As we have seen recently from the very good CAT report, this is one that could go up after the report.
Fundamentally they look pretty good with a profit of 1.2 B in Q3 ’11 compared to 968M in Q1’11. Profit margin also increased 2% last year to near 6%. Costs have been going up, but were able to keep them under control and went down 10% Q/Q in ’11. Another plus was the 20% revenue growth from Q1 to Q2 ’11 which helped boost shares earlier last year. If you are one to believe in Emerging Markets and sustained but minimally slower global demand, CNH looks good to me. It is currently trading 1.4 BV 11.8 P/E, though does not pay a dividend. Expectations are 72 cents/share on $4.41B Revenue.
All time high is 66.00 and 52Wk high is 54.00.

Above some tech analysis on CNH, started off the year with a run up, but this is a buy high sell higher environment in the world of easy money. MACD is looking a bit toppy though so it could slightly sell off pre-report but looks good to buy long term.

Above a couple pictures of fundamental valuation, notice in the one right above, y/y increase in EBITDA/share, profit margin, and ROI.

Next I want to look at Las Vegas Sands. Right now, they have top market share in casinos and resorts in the world. A large percentage of their revenue comes from Macau in Asia. An article I came across this morning from yesterday: http://www.travelbizmonitor.com/las-vegas-sands-corp-interested-in-indian-market-15512
This would be HUGE for LVS and with the worlds second largest population, soon to overtake China in the next 10-20 years, what an opportunity to expand now. If you are a believer in emerging markets and the BRICs there is definite room for this thing to run.

Fundamentally, they look great. Q4 ’10 rev. came in at 2B and recent Q3 ’11 revenue at 2.4B so about 20% revenue growth y/y. Profit also went from 700M to 1.1B in this timeframe. Costs and taxes have stayed pretty much stagnant, profit margin up 4% to a current 18%. They have double the amount of cash they need to pay down short term debt and enough assets to cover the rest, another plus. They did not suffer from the Auguat selloff as they are now at near pre-Lehman ’08 levels and continuing to grow. 17/20 Analysts rate it a strong buy.

Above valuation shows just how strong this company is. Notice in ’11 they have increased cash, profit, EBITDA, ROE and reduced debt to EBITDA. As for now, I am looking to possibly buy some before the report comes out after the close Wednesday. To do this, I would need to sell my Frontier Communications holdings. I will discuss this later on.

LVS has been getting stopped out at $50 for the whole ’11 year, I think that with this news headline and blow out numbers, we can push above and sustain $50 this year.

Last, S&P dropped a bomb on my largest holding for my IRA fund, Frontier Communications. http://www.bloomberg.com/news/2012-01-27/frontier-falls-on-s-p-outlook-cut-to-negative-new-york-mover.html I will make my decision early this week to sell of hold, I thought things were going pretty well a few months ago, but you can never tell. So far, I have lost over 30% of my position in 2.5 years. (Bought at 7.00 Break-even after dividends would be mid 5.00’s). Live and learn.

Above 5min chart of FTR the past 2 days, nice to know someone knew about it the day before and got out. The SEC is doing a great job on that BTW.

That’s about all I have for this week, I’ll get back to these when able, you can always catch me on Twitter @peter_eller10 for more analysis and trade updates. Let’s make this a good week!

short review of last wk, long oil, MTB earnings

One week in the books, not too much happened on this 1st week of 2012, but let’s take a look:
S&P 500: up 1.6%
Dow Jones: up 1.17%
Nasdaq the winner up 2.65%

We saw some weakness in IBM, large weight on the Dow, so that was the lagger this week, though by Friday Apple closed at a new high (not intraday high) of 422.40. This is less than $4.00 from an all-time high which I will assume will happen sometime this week. There is still a lot to be bullish about on in this name, iPhones and iPads are still selling very well, and who is to say they don’t have another new invention down the pipeline? Long term, this looks good, and speculation of them paying a dividend or doing a share repurchase makes owning Apple more attractive.

The jobs report came out on Friday, and of course everyone’s reaction was to the headline where we created 200K jobs in December. I would give this a B, because at least 25% of those jobs were due to seasonality and the labor force continues to decline. The positive thing is at least we are not losing jobs, but one has to be careful of the rate. Unless you are looking at the U6 (measures discourages and unemployed “real unemployment) the rate that they give you on TV or in the news is the false. It is only a matter of time before people wake up and realize you can only decrease the labor force so much.

It appears to me like bullish sentiment is setting in for 2012, we are definitely seeing it in the crude oil space. Last week at the open, we saw a rocket higher above 100 and we managed to hold above 100 the whole week getting to almost 104. With continued games in the middle east including the Strait of Hormuz, expect oil prices to be around these levels or higher this year.

Below the narrow trading range in the ES last week, it seems like someone already knew about the jobs report Friday zzz… 20 handle range

This week begins Q4 earnings and what better way to kick it off than highlighting one name on my radar. M and T Bank $MTB is a smaller regional bank, mkt cap ~10B, headquartered in Buffalo, NY. Looking at their internals, the company over the last year has been dealing with declining net income due to selling expenses. As the entire banking sector still continues to teeter in the edge, I would not be a buyer of M&T here. Valuations do look cheap, but there are many headwinds. Current liabilities increased 20% from March to June of this year, though their cash pile also increased.

Above it seems like MTB is ready for a breakout, but this looks to me like the top of a range imo, be careful.

Short post, but last week at home until Spring semester starts, and its going to be pretty boring, might do a couple trades I’ll keep you all updated on twitter @peter_eller10 have a good week all.

2011 in review, my take on 2012, some earnings

Another year in the books, and what a year it was indeed. Huge volatile swings first beginning with Japan in March, soon leading us to the highs of the year in May, back down to the lows in August-October over European debt contagion and US default fears. For long term investors, this was probably the worst they have suffered since ’08, though the S&P 500 ended only 4 pennies below unchanged. We saw a large inflow of capital into the utility sector and large outflow from the financials. Looking at the XLF the financial sector SPDR, it was down roughly 20%, near levels not seen since July ’09. Financials finished the year near the lows, some including Bank of America, down 70%. We continue to see fear in the US banking sector over toxic mortgages and home foreclosures. Until the housing market turns around and the banking sector once again has credibility, we will continue to see weakness in this sector. The inflow of capital into utilities tells me that those long the market in the hope of a recovery are fearful and are looking for a place to hide out. If investors were to be betting on a global recovery, we would be seeing more buying into the emerging markets.

Below are two charts, one of the XLU and the EEM. You can see the inverse relationship take place, especially after the large drop off in August. I expect this trend to continue until we get some clarity in our global markets.

One positive thing we did see this year was the rally in the US dollar. This strength will benefit those who consume, giving them more of a bang for their buck. As I have stated before, 70% percent of US GDP is consumption.

Lets take a look at what happened with me this year:

Above shows trades/transactions I have made. As you can see, 2011 for me was not the best. My worst was betting on a steel rebound. I got long AKS a bit over 12 at the end of July, then got completely crushed after a straight shot to 8 ish. I got out at the end of August before it continued down to break below 7.00 and continued to stay weak and close out the year down 50%. Second worst trade, though I did not lose too much money, was going long AMR after the initial plunge under 2.00 at the beginning of October. I should have sold a week after, but waited too long and actually sold a week before they filed for Ch11 and closed under a dollar.

Above are my current holdings, worst performers being Invesco and Frontier, both of which I am holding for my IRA. I plan on selling out of Kodak within the next 2 weeks before they have to delist for a pretty substantial loss. THQ is a small position hope play for now.

This week I want to highlight 2 possible positions to take follow earnings releases. Keep in mind Q4 2011 earnings will be in full force starting January 9th. On Wednesday, we get Mosiac, and on Thursday Constellation Brands.

Looking at Mosiac, this has been beaten up pretty bad this year on fears of global slowdown, weather concerns, and glut of vegetation. Down about 25% in 2011, I see this as a long-term value play on the need for more seed/potash for global agriculture. As population increases, not necessarily in the US but other countries, there will be a greater demand for food. The income statement by quarter over a year looks a bit rocky with continuing increases in revenue, though costs also increasing, so profit margins are being squeezed. One positive note I could was the decreased amount of borrowing they have had to do from 439K on the Feb report to just 6.5K in the August report. Borrowing less creates more cash on hand for future purposes.

Some fundamental analysis shows that MOS is still doing very well, increasing amount of cash per share and profit margin since Feb.

Basic technical analysis show it a buy also.

I probably will not act on this, but will give it a buy now for a long-term investment.

Next, we will look at Constellation Brands. Per the company’s website, they sell wine, sprits, and beer of brands such as: Corona, Svedka, and Black Velvet. A large majority (core business) of their sales are done in North America (primarily USA), Canada, and New Zealand. Having done a marketing presentation on Franzia, I know about the amount of people who drink and even during hard economic times, alcohol is not terribly expensive, and people are still going to use it, hopefully responsibly, to have a good time on weekends/special events. Looking at their fundamentals, Net Income nearly doubled from May to August, 40% less borrowing also took place with revenue increasing 5%.

Fundamental analysis show STZ holding up well, decreasing EBITDA debt, increasing EBITDA/share, cash per share also stable and profit margins still increasing and very strong.

Basic technical analysis also show this a buy here and might I add on cheap valuations. P/E under 10 is basically a steal and a good place to put $ on a US recovery.

Not much in the way of earnings this week, these are just a couple that stuck out to me. I also see that Family Dollar is reporting, an earlier post of mine described my bullish sentiment on DG, basically the same business and I would also get long that name as well.

The New Year is here and it’s time to get a fresh start. I wish all of you the best of luck in 2012, catch me on twitter @peter_eller10 I’ll be here all week, lets all make some $$!!