by Todd Shaver | Mar 30, 2016 | Uncategorized
THE BULL MARKET REPORT DAILY
• The Ides of March Bring New 2016 Highs for U.S. Equity Indexes
• The Fed Backs Dovish Interest Rate Stance
• Oil Slips; Gold Remains a Cruel Mistress
• Tesla Decelerates Before Model 3 Launch
Key Market Measures (Wednesday’s Close)
Dow Jones 17,716 +0.5%
S&P 500 2,064 +0.4%
NASDAQ 4,869 +0.5%
Crude $38 Unch.
Gold $1,226 +0.1%
Happy Days Are Here Again; Market Disconnects from Oil
From the way U.S. equities have traded in March, you’d be hard-pressed to know that January and February combined to be one of the worst performing periods in market history. Thankfully, the gloom and doom created by China’s faltering economy, cratering oil prices and a moderately aggressive interest-rate hike schedule outlined by the Fed has receded dramatically, with the Dow and S&P 500 trading up 1.7% and 1% on the year, respectively.
During the early year bludgeoning experienced by U.S. stocks, almost every bad trading day up until this week could be measured by losses in Crude, with U.S. equities moving in virtual lockstep to the downside. This week may mark a turning point in that phenomenon, as stocks have shaken off a pullback in oil prices and marched higher to their best levels of the year.
Interest Rates to Remain Tame; Gold Fluctuates Wildly
With few significant economic data points on the calendar mid-week, market participants focused their attention on the resurgent accommodative interest rate posture of the Fed. Janet Yellen’s follow-up comments in the wake of last week’s FOMC policy statement, along with statements from other Fed governors, have pretty much guaranteed that there will be no rate bump in April. While that may signal good times ahead for stocks, gold bugs may start feeling the pinch.
Gold is currently sitting just above key support at $1220. If you follow the yellow ore, and make bets on related stocks, many technicians believe that $1220 must hold for the precious metal’s rally to have legs. If $1200 falls, it could trigger more selling.
Company Thoughts & Commentary
Tesla (TSLA: $227, down 1.4%) On the eve of the highly anticipated debut of Tesla’s new Model 3, the stock struggled to find buyers during Wednesday’s bullish market move. Tesla shares slumped more than $3 Wednesday, as shorts put up a valiant fight against Elon Musk’s wealth-creation machine. As one of the best stocks of the decade, I still wouldn’t want to be on the short side of the issue this week, or any other for that matter. But especially not now! As we keep saying, fasten your seatbelts, and expect fireworks.
PayPal (PYPL: $39, down 0.5%) There was an article in Barron’s that came out this morning that mentioned that Square (SQ, $15) is escalating the war against PayPal. It is the first time that Square has offered sellers the ability to put a Square checkout page on any website. This puts some pressure on PayPal, which already is facing stiff competition from Apple Pay and Google’s Android Pay. Google is a unit of Alphabet (GOOG, $751). Square has more than 2 million merchants and PayPal has more than 13 million merchants, so we are watching but are not overly concerned.
LinkedIn (LNKD, $114, up $4) had a good day yesterday. This stock is so beaten down that it has had a nice rebound, just as we expected. Take the S&P 500 to new highs and this one is going to $120 and then higher. We added the stock in early February at $101 and we are now up over 13%.
Good investing,
Todd Shaver
Editor in Chief
by Todd Shaver | Mar 28, 2016 | Uncategorized
THE BULL MARKET REPORT DAILY
• Stocks closed yesterday with a yawn - Dow and S&P slightly up
• Nasdaq fell slightly - 0.1% - on weakness in Crude and the Energy sector
• Bonds and Gold took a pause; US Dollar slightly weaker in Europe and Asia
• Janet Yellen speaks at lunchtime in New York today
• Consumer Confidence and Home Prices out this morning
• Pending Home Sales for February jumped 3.5% - big surprise
• Gilead Sciences/Merck: The cost to Gilead is “Chump Change”
• Comments on other companies we favor: First Solar, PayPal, Solar City
• Late breaking: US drops action against Apple
Key Market Measures (Monday’s Close)
Dow Jones 17,535 +0.1%
S&P 500 2,037 +0.1%
NASDAQ 4,767 -0.1%
Crude $39 -2.5%
Gold $1,220 -0.1%
Winners & Weaklings
Strongest: Consumer up 0.6%
Weakest: Energy down 0.8%
Stocks Mixed, Oil Lower
The slumbering market continued to snooze on Monday in the face of some decent economic news. And there was plenty of data to digest. Before the opening, Personal Income increased by a slightly better than expected 0.2% while Core Inflation measures increased only 0.1%, better than forecast. That should quiet the inflation hawks at the Fed. That’s not all. Consumer Spending increasing 0.1%, just slightly more than expected. But the big surprise was the 3.5% jump in Pending Home Sales. Recall, that we have shared our concerns over housing and consumer spending, so Monday’s announcements were a welcome surprise.
As for today, there are three events. Home prices appear to be meeting buyer resistance and we will get a look at 9 AM with the Case-Shiller Home Price Index that covers January. In the last report the price gain was a whopping gain of 5.7%. Increases like this are good if you are a landlord but not so much for others.
The second is Consumer Confidence for March. Forecasters are looking for a big increase but we think very doubtful.
Finally, Fed Chair Janet Yellen will be speaking today at the Economic Club in New York. She is expected to restate the likelihood for only one or two rate hikes this year. Last week several FOMC members publicly took issue with her stance so today’s speech may add some clarity to the outlook. But even this family conflict did little to move interest rates on Monday. All this lethargy won’t last much longer with 1Q earnings reports due out in the next two weeks. Until then: Invest in Peace.
Company Thoughts & Commentary
Gilead (GILD: $92, up $1.15, 1.3%) The stock is showing good follow through from last week’s legal hullabaloo. It was the Super Bowl of lawsuits and Gilead came out the winner in a $20 billion patient spat with Merck. The jury sided with Merck on the issue of patient infringement but only awarded $200 million in damages. As they say on Wall Street, that’s “chump change”. Gilead’s gross profits on hepatitis C drugs Harvoni and Sovaldi are north of $10 billion. Last July, even while this litigation was overhanging, the stock was selling at $122, 33% above yesterday’s close. Go Gilead.
First Solar (FSLR: $68, unch.) We are big believers in alternative energy and solar is where the biggest growth is occurring. First Solar avoids the pitfalls of residential installation. It builds utility-scale solar plants that generate operating and maintenance services to utilities, independent power producers, and commercial and industrial companies
First Solar’s other advantage is employing a technique that more efficiently extracts energy from sunlight. They produce solar panels faster and thus more cost effectively. That is a winning combination and what led us to adding it to our favored list in February. Since then, the stock has rewarded us by appreciating 18% before reaching $73 last Thursday. We are hoping for some bad news to get the stock down so we can buy more. (We are smiling.)
Solar City (SCTY, $22, down 2.4%) We will say that we are not happy with our addition of this company. It has shown us nothing but bad news and poor price performance since we added it to our Stocks for Success in January. We are watching (and weeping) at the moment and in a quandary, as we know this stock will hit $50 in the future. We just can’t tell you when, and if the meantime if it hits the teens, we will have to exit.
PayPal (PYPL: $39, down 0.5%) We find it difficult not to be totally excited at the prospects of PayPal. It is the only company that is in the forefront of everything to do with electronic payments. After years of critical nurturing under the eBay umbrella, the company has the necessary mass in merchant services to be able to expand into credit and in mobile with the acquisition of Venmo, a recent startup that has a big millennial fan base. PayPal also has a Tap-and-Pay App that puts them on par with both Apple Pay and Google. This is a long-term winner.
Good investing,
Todd Shaver
Editor in Chief
by Todd Shaver | Mar 23, 2016 | Uncategorized
What You Need to Know For March 24, 2016
• Stocks closed yesterday just off their lows as market digested events in Brussels, Fed rumors and the latest political news
• Nasdaq fell over 1% on weakness in the Energy sector
• Bonds and Gold took a pause; US Dollar stronger in Europe and Asia
• New Housing Sales for February: Weakness nearly everywhere.
• Gilead Sciences/Merck: Unwelcome patent suit ruling is a long way from over.
• Financial Stocks: Some surprising winners this year. Better days ahead
The Box Scores
Key Market Measures (Monday’s Close)
Dow Jones 17,503 -0.5%
S&P 500 2,037 -0.6%
NASDAQ 4,769 -1.1%
Crude $40 -0.7%
Gold $1,222 -0.2%
Winners & Weaklings
Strongest: Utilities down 0.2%
Weakest: Energy down 3.2%
Stocks Lower
After five weeks of gains, the market is consolidating. We think that is a good sign. Considering how far the market has come back from the January lows market stability makes a positive statement. Yesterday, hedge fund manager Marty Sass stated that he has been putting literally half of his huge portfolio back in the market. After moving heavily into cash at the start of 2016, Mr. Sass naturally has enormous credibility. Good luck Marty.
The FOMC meeting last week may be history but the market is still looking for signs of a rate hike. Yesterday several FOMC members openly discussed their disagreement on rate policy with Chair Yellen, and this morning St. Louis Fed President James Bullard speaks to the New York Association for Business Economics. The speech takes place at 8:15 AM. He is an inflation hawk so we should be prepared for a weak opening.
Economic News: New Homes Sales Sink
The big news yesterday was New Home Sales. The headlines were ok, but the devil is always in the details. Total sales for February came in at 512,000 versus expectations of 515,000. That is pretty close to the mark. However, all the gain took place in the West +39%. Every other region was a bummer: Northeast, -24%, Midwest, -18% and the South, -4%. Is all this winter-weather related?
Meanwhile, the Mortgage Bankers Association weekly report shows applications nationwide fell 3% and refinance applications fell 5%. Mortgage rates were slightly lower during this period. We’re keeping a close watch on the sector as we go further into the prime spring season.
Company Thoughts & Commentary*
Gilead (GILD: $90, down 4%) The headlines are worse than the news. In their ongoing litigation with pharma giant Merck over patents covering Gilead’s super blockbuster hepatitis drugs Harvoni and Sovaldi, yesterday was a setback. The jury found in favor of Merck. The stock sold off on the news. All things considered, the reaction was relatively mild on a day when high growth stocks were under pressure.
Any further selling will provide a special opportunity to own Gilead. Here is why. Forget the headlines, this litigation is likely to go on unresolved for a very long time. Sales of Harvoni and Sovaldi, two drugs that contributed $12.5 billion in revenue last year, will continue. Gilead and Merck are the only two drug companies in the game. Yesterday, one Wall Street analyst predicted a global market of $100 billion. The rewards are worth living with the litigation headlines. We would buy the stock here and even more if the stock goes lower.
Financial Stocks: Some Surprising Winners This Year; Better Days Ahead
It has been tough sledding for financial stocks this year. Paper-thin interest spreads make it difficult for traditional banks to make money on the difference between the cost of borrowing and lending rates. With that in mind, our Financial favorites this year have been diversified players that earn their keep from services like investment banking: Goldman Sachs (GS: $154, unchanged), The Blackstone Group (BX: $27, down 3%) and Bank America (BAC: $14, down 1%) the company that owns Merrill Lynch. So which of these has performed the best so far? The answer will surprise you; none of the above.
The best performing financial favorite has been Annaly Capital Management (NLY: $10.42, unch.) where the stock has gained 5% in value since back in the last month when we added it to our list. Here is a company that thrives when interest rates are nice and wide. We know that Annaly is run by some pretty smart minds and the stock performance lends a lot of credibility to that notion. But now with a better stock market environment, it is time to realize that Blackstone and Goldman Sachs should benefit as well.
*For The Full Story on these companies, please see our individual reports.
Good Investing,
Todd Shaver
Editor in Chief
by Todd Shaver | Mar 16, 2016 | Uncategorized
The Box Score
- Fed statement greeted with enthusiasm as commodities rip higher
- Equities celebrate interest rate “dovishness”
- Housing starts jump
- Gold surges $34 in late trade
| Key Market Measures (Wednesday’s Close) |
| Dow Jones |
17,325 |
+0.4% |
|
| S&P 500 |
2027 |
+0.5% |
|
| NASDAQ |
4,764 |
+0.8% |
|
| Crude |
39 |
+2% |
|
| Gold |
1,232 |
+0.1 |
|
Winners and Weaklings
Strongest: Gold, oil, bonds Weakest: Nothing of note.
March Madness! Fed Spikes U.S. Equities, Gold Shines
Usually reserved for the Division I college basketball tournament, March Madness hit U.S. equity markets Wednesday as well. Quiet, range-bound trade prevailed during the morning half of the session, as market participants approached the impending Fed announcement with cautious optimism. Then the Fed decision came down - widely anticipated by pundits to be a non-event - and the fireworks began.
Gold and oil quickly spiked in the wake of the Fed statement, mainly because key interest rates remained unchanged and the Open Market Committee downgraded its forecast for the number of rate increases to two in 2016 from an earlier projection of four. Simultaneously, the Euro hit new highs against a weakening dollar.
The move in gold was particularly notable, after the yellow ore had closed its early trading session at the $1229 level. By the time U.S. equity markets closed for the day, gold was sitting right at the key $1263 pivot. It’s a good illustration of why precious metals stocks are so difficult to trade: It was literally only moments before the Fed statement when it looked like the gold rally had completely lost its luster.
Jurassic Rig Count
A Baker Hughes report released last Friday, showing that oil and natural gas rigs in the U.S. have plunged to their lowest level on record going back to 1949, continued to grab the market’s attention this week. Widely attributed to excess supply, the diminishing oil and natural gas rig count has fallen to 480, down a whopping 57% from a year ago - and at the lowest levels in 70 years! The previous low was established near the turn of the century, in 1999. Notably, the price of crude has staged a 33% recovery from its $26 dollar trough early this year and is poised to challenge the $40 per barrel mark, perhaps as early as tomorrow.
Company Thoughts and Commentary:
Market sentiment is gearing back toward bullish, but it remains a stock pickers’ market, as a former high-flyer like Twitter (TWTR: $16.70 +3%) is having trouble gaining traction, while Tesla (TSLA: $222, +1.6%) continues to be the bane of professional short-sellers.
Tesla Announces More Details About Top Secret Model 3
Tesla keeps proving its large legion of naysayers wrong, at least in terms of the trajectory of its stock, as the issue tacked on 1.6% during yesterday’s trading session. As always, the news flow regarding the stock was steady, but none more significant than emerging details about the Model 3 unveiling, set for March 31st.
According to published reports fewer than 800 total people will be in attendance for the end-of-month presentation, with 650 spots allocated at random through a lottery for current Tesla owners who submitted their email before noon PT on Wednesday. Invitations will go out today to those selected. Members of the press will be allowed to take “a quick spin” in the vehicle, with orders for the cars opening up on that day.
Current short interest stands at about 29% of the float. We doubt it will be a profitable few weeks for the TSLA bet-against crowd. And you know that a large short position is a very positive sign.
Barrick Gold Gets Market Love
It wasn’t surprising to see shares of Barrick Gold (ABX, $15.20 +7%) - widely considered one of the best barometers of the trajectory of gold stocks and prices - tack on 7% during Wednesday’s gold-plated performance by precious metals. Earlier this week, however, when gold equities appeared ready to capitulate to the downside, Barrick Gold managed to rally as well. The catalyst was a brokerage house upgrade on Tuesday, which raised its view from Hold to Buy, with an $18 price target. Their timing turned out to be impeccable—at least for one day.
Good investing,
Todd Shaver, Editor in Chief
by Todd Shaver | Mar 8, 2016 | Uncategorized
THE BULL MARKET REPORT
What You Need to Know for March 8, 2016
Introduction to First Edition
Today we are testing a new service for our subscribers. What You Need to Know will be published several times each week as we fine-tune the product and get your feedback. Our goal is to provide unbiased coverage of our investment recommendations. We encourage you to share your thoughts. Thanks from all of us here at The Bull Market Report.
Looking For Leadership: The Oil Squeeze is On
The market continued to simply mark time yesterday. There wasn’t much movement. It was as if traders were waiting for the caffeine to kick in. Unfortunately, somebody forgot the coffee. There may not have been much going on in the major indices, but just look below the surface. There was plenty of java to be found. Let’s take a look.
The Dow, S&P and Nasdaq were largely unchanged:
Key Market Measures (Monday Close)
Dow Jones Industrial 17074 +0.4%
S&P 500: 2,002 +0.1%
Nasdaq: 4,708 +0.2%
Crude Oil $38 +5.6%
Gold: 1,267 +0.6%
The Russell 2000, a broader measure of smaller companies, rose over 1%. This is a clear sign that after a three week stock market rally, confidence in the so called “secondary issues” is taking place.
The big news of the day continues to be Oil with crude prices rising over 5.7% on the day and 13% in just the past week closing yesterday at $38. So what is triggering this latest move? Two things are at work. Yesterday’s rally got its start when the research firm Genscape reported that crude inventories in a certain Oklahoma delivery hub was declining. Even if this report is accurate, it is completely meaningless in the global oil supply scheme. One terminal doth not fill a thimble in the total supply picture.
However, this seemingly insignificant news was enough to scare plenty of short sellers. Fear is running rampant in the short community, putting loads of buying pressure on the price of both crude and the Energy sector in general. As we mentioned in our Weekly report, many times these moves take place for no fundamental reason. The higher prices go, the more shorts are likely to panic.
Fed Watch: The Operative Word is “Patience”
On the interest rate side of the market, the focus is honing in on next Wednesday’s meeting of the Federal Reserve. The chances of at least one rate increase before year-end is 100% according to an opinion survey of economists released early in yesterday’s trading. A short time later this hawkish inflation fighting sentiment was tempered by dual remarks from Fed Vice Chairman Stanley Fisher and Fed governor
Ms. Lael Brainard. Their message preached the gospel of patience with regard to reaching inflation targets. Translation, 100% of the opinion makers are in for a surprise.
Thoughtful Food To Start Your Day
As we look into today’s prospects, keep your eyes on the divergence between smaller stocks typical of the Russell 2000 whose performance on Monday was a standout. There is a big divergence here with the FANG stocks (Facebook, Amazon, Netflix and Google). Each stock was conspicuously weak yesterday. FANG stocks have led the growth stock charge for the past few years. Does this mean that growth stocks are dead as some pundits are suggesting? A quick check of yesterdays action in stocks of Solar City (SCTY: +8.0%), Whole Foods Market (WFM: +3.4%), GoPro(GPRO: +3.9%), Gilead Sciences (GILD:+2.8%), Tesla Motors (TSLA:+2.1%) and Alibaba (BABA:+1.0%). Growth is not dead; investors are just rotating into new leadership.
BMR Stocks - Thoughts & Commentary*
Whole Foods Market
From the moment you walk into a Whole Foods Market, you can see, smell, touch and taste the reason why these guys are on top of the retail market for organic foods. Success has attracted competition, and earnings the last two years have flattened. But Whole Foods is fighting back with better pricing and 13 new retail stores it calls “365 By Whole Foods Market.” Organic food sales are growing over 15% nationwide and Whole Foods is capable of growing as fast as the industry.
Here is a classic example of great company that was selling for more than 65 times earnings back in 2013. After the earnings stumble the stock fell from an all-time high of $65 in 2013 to its January 2016 low of $28. Since then the stock has been a pure winner rising 25% to yesterday’s close of $34. There is still a long way for the stock to go.
Qualcomm
The stock has been a star, rising over 26% from its February $43 low to close yesterday at $54. What is behind the move? Qualcomm announced that its processors will power Samsung’s latest flagship phones, the Galaxy S7 and S7 Edge. Considering Samsung’s brand value in the Smartphone market and its unquestioned popularity, the news is a major positive for Qualcomm, holding significant potential as a revenue driver. Last year, Samsung rejected Qualcomm, resulting in a massive drop in shipments. Qualcomm also has the lead in the burgeoning market for fifth generation Smartphone technology.
Gilead Sciences
The stock got a nice boost last weekend from a mention in Barron’s. Here is the essence of their comments: “Gilead's HIV franchise will likely benefit from strong demand and market uptake of combination therapies of both next-generation TAF-containing products in the near term and those based on GS9883 in the mid to long term.” Translated into English, the stock will go still higher. The Wall Street consensus upside for the stock is $125. That is a cool 40% above yesterdays close of $90.
Tesla Motors
The old adage about the dangers of trying to catch a falling knife is good investing advice 99% of the time. The 1% is where Tesla Motors comes in. How is this for price volatility: From an all-time high of $283 in July of 2015, the shares tumbled 49% to a February 2016 low of $144. Since then, in less than a month, the shares have risen 42%. Of course over the last year lots of little things have affected the stock, like delays in delivery of the high end SUV Model X. The low end Model 3 that will be unveiled shortly has raised questions about its competitiveness against established carmakers like GM, Ford and Toyota. However investors in Tesla Motors are amazingly patient. Finally they are getting some relief. And investors are remembering that the electric vehicle market has such potential, that neither delays or competition really matter. Tesla builds quality vehicles with tremendous consumer appeal and that’s what matters most.
Well, that’s it for our first edition of What You Need to Know. Please send your comments and suggestions to us at Info@BullMarket.com.
Contributing to this article:
James Waggoner
Bull Market Report Research Analyst
Todd Shaver, Editor
The Bull Market Report
*For The Full Story on these companies, please see our individual reports.
