Outlook and Strategy for June 7, 2017.

Sell-offs or market adjustment in high-flying tech and semiconductors is noticable. Stocks such as ATVI, EA, ADBE, RHT, ADSR, MU, PYPL, NVDA, LRCX, and AVGO have had the fastest run-up and are at the greatest risk for a sell-off or correction. Howver, the bigger name FAAMG stocks that include Google, FB, Netfix, and Amazon have led the sell-off. Questions to ask are 1) are these stocks over valued, 2) what are the implications for the rest of the market, and 3) what do stock and market fundamentals tell us.

I’ll address these three questions in order. First, no, these stocks still have high rates of earnings growth and do not seem overvalued on that basis. Moreover, overall stock earnings are still strong and earnings should to continue their strong rates of growth. July earnings season will be what to watch. Second, the overall market is now driven by earnings growth in travel and leisure (millennial spending on experiences), health care expenditures on insurance, hospitals, biotech and pharmaceuticals, capital investment in emerging markets (a strong area of growth), oil and gas derivatives, the “stay-at-home” economy where expenditures on content streaming and video games is strong, the military defense sector thanks to the N. Korean problem, aerospace, housing where demand exceeds supply, e-commerce due to a change in consumption patterns, and banks due to modest FED tightening. The only weak sectors are autos and traditional retail. Thus, the overall market has more positives than negatives concerning economic growth drivers. Third, market history tells us that late stage market expansion tends to occur in tech and semiconductors, thus we must be concerned that a sell-off in these might lead to a broader sell-off. Also, technical chart analysis shows a tightness in the trading range of the major stock indexes. This implies increased volatility ahead. The risk is that negative news out of Washington leads to a negative break out and wide-spread selling. So read the blog post entitled “Look Out Below” for your own benefit in the event that military action against N. Korea occurs.

That about sums it up. Good Investing!

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July 21, 2017 market update:

We haven’t had a 5% – 10% correction in the S&P 500 for more than a year. some think that a major crash is due because we haven’t had one in 10 years. The crash scenario is unlikely because of the slow recovery that is now only beginning to accelerate, earnings reports are generally good and improving, we still have low interest rates, and consumer spending and expectations are strong.

The correction scenario would actually be good, allowing the bull market will remain as the major market thesis and will even become stronger because of it.

The only reason for a crash or recession would be an internal economic shock due to the Fed increasing interest rates too fast. This appears unlikely because Janet Yellen (the Fed chair) is a liberal dove. An external economic shock due a geopolitical event is not likely, but always a small possibility. That is why some hold gold or cash. Unfortunately, a geopolitical catastrophe is not predictable, hence why recessions are also not predictable. Thus, the best market strategy now is to continue to buy good stocks such as my weekly picks on any dip or pull-back.

Buy Silver Eagles – In Stock, Ships Fast!

The post July Stock State: Outlook and Market Strategy first appeared on MarchéEconomics.

June 2, 2017 update:

Markets are gaining momentum. As of this Thursday and Friday, a risk-on appetite from strong labor market data and positive expectations among businesses and consumers led to put more money into smaller, riskier growth stocks. This is a good sign. Moreover, it reinforces the prospects for a continuation of the current bull-market in stocks.

Except for the stock market, the economy has been on a recessionary trend the last 8 years. It is the improvement in economic outlook that has changed and not so much a stock market that was slowly deteriorating due to declining earnings and profits. The change in economic prospects since the election has simply revived the stock market and provided a foundation for it to continue its upward ascent. All this is new. Within this long-run growth context, continue to look for US politics and geopolitical events to offer short-run buying opportunities. Good investing!

June 9, 2017 market update: Consumer expenditures are strong, earnings are strong, and the labor market is improving. Political noise is much less important than economic and market fundamentals and small cap, risk-on investment is reasserting dominance. All signs are bullish, accept for the Trump agenda.

Fast run-ups in tech equals fast run-up in risk. Expect a slow down or correction before the tech run-up continues. Also, sector rotation into EU small and midcap value and growth stocks will continue so buying into that will keep you ahead of the game. Defensive minded investors can look at US utilities, keep cash on hand, and hedge their bets with inverse beta stocks. Good Investing!

Monday, June 9, 2017 update: The previous week is the last haul of stuff from Oklahoma to my daughter in California.

Hope you decided to buy on the tech dip last week. In particular, my two recommendations UCTT and SOXL are excellent choices and are both up strongly today. I’d add in FB, WB, BABA and LRCX as well. The Schumpeter tech wave has a long run ahead.

June 22 update: Buy Weibo (WB) on the big dip. The license issue is little more than noise relative to a very high rate of revenue and profit growth.

Update for the last week of the June and the second quarter: Portfolio managers will be busy rebalancing their portfolios this week and especially toward the end of the week. Look for pull backs that lead to buying opportunities. The bull market charges ahead and that means there is always a profit opportunity by going long somewhere in the market. Take my earlier advice on the EU as the target for sector rotation and buying my recommended stocks of the week. Remember, in the long-run noise is much less important than the market or stock fundamentals. Good Investing!

June 30, 2017 Market Update: Nothing fundamental, such as earnings, have changed or deteriorated among the tech stocks. The sell-off or pull-back is therefore a short-run or temporary phenomenon. Better still, it presents an opportunity to profit. Just buy the dip. The bottom is always hard to determine but fundamentals and future earnings mean that things must turn around at some point and these stocks will go back up. That said, semiconductors are typically weak in July so the rebound in some stocks could be slower in coming. Good Investing!

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The post June Stock State: Market Strategy and Outlook first appeared on MarchéEconomics.

April 2017 Base Stock Performance

Weekly stock picks for April outperformed all 3 major stock indices by a wide margin. Those with dividends exhibited a greater return than simple appreciation (or depreciation) suggests. This is especially important for those with minor decreases in value but that paid substantial dividends. The following chart illustrates the Weekly Stock Pick Performance in terms of only capital appreciation or depreciation.

April 2017 Weekly Stock Picks Performance

The post April 2017 Stock Pick Perfomance first appeared on MarchéEconomics.

Many investors tend to take profits from their good stocks (i.e., let their good dogs go) and keep their poorly performing stocks (i.e., their sick dogs) which means they will get nowhere. That said, if a stock gets too rich (a dog is too fat to run anymore) then sell it and hook up a new dog that is ready to run.

My own stock portfolio consists of the following stocks that are listed in order of their relative weight: FB, BRK-B, BABA, GOOG, AMZN, ALK, ARE, AWK, NGLOY, AMAT, AAOI, BA, CRHM, COR, KNOW, TZA, DPS, IFLY, EVE, EVV, ETE, FDL, GE, GNTX, HCP, HBM, IBM, IPHI, IDCC, SNOW, INTU, DVY, PHG, LTC, LRCX, MU, T, MKSI, VVD, ESNT, TSRO, UCTT, MPW, MSFT, MB, OHI, OME, OMI, PTC, PYPL, RCS, PAA, SPHD, QRVO, O, RIO, GG, RGLD, ROK, KRE, SDY, SCHW, SCHA, SCHD, XLK, SWKS, SNA, PSL,V, S, STAG, STM, RUN, TER, TSRO, TLLP, TXN, MMM, TCX, VLP, VIG, VTR, WFC, WPX, TEAM, CZZ.

Here are my recommended “sled dogs” of the week (February 6 – 10): DPS, KLIC, ZEN, TTML, and OSUR.  These are stocks I have in my own portfolio or that I plan to add.  I won’t tell you more about them (or the stocks in my own portfolio) because you MUST research them yourself before you decide to hook them up to your sled. That way, I am not responsible for how these “sled dogs” perform or how fast your sled might run. Be sure to retire them only after they get too fat and can no longer perform. Also, if a stock misses its expected top-line revenue or its expected earnings per share it may look like its being “mauled by a bear” (or perhaps a great many bears). If the long-run prospects don’t appear to outweigh the short-term damage, that stock (or sled dog) should be sold and replaced by a healthier one.

Recommended stocks to buy for the week of February 13 – 17:  VMW, NEWR, SKYY, FLEX, DE, WB, TASR, and CALB.  Stocks I sold:  NGLOY and HDSN.  My rationale for selling these two stocks is that base materials prices are being bid up by expectations and supply shortages rather than by demand.  There is also no new or increased demand from China.

I also added to my cash reserves and to my inverse beta stock TZA.  But, this is only because TZA was down at the time.  I plan to sell it when the market is down and TZA is up, otherwise I tend to accumulate too much at decreasing values as the market trends upward.

Recommended stocks to buy for the week of February 21 – 24 (Monday is President’s Day):  First, I want to recommend some stocks and funds that I use as a diversified foundation in my own portfolio.  In order of weight these are:  BRK-B, FB, AMZN, IBM, GE, MSFT, ALK, KNOW, PYPL, KRE, and SKYY.  I think that if you build a portfolio around these stocks you can’t go too far wrong . . . at least until they no longer perform, which for most of them, is a risk that is far into the future.  Second, stocks with high potential but that are also a bit more speculative are:  XCRA, CLIR, NMIH, and ELF.  Although each of this last group of stocks appear to have good long-run potential, please do your own research before hitching them to your sled.  I had recommended FANG but I am no longer doing so. The gas and oil sector is too week and even though Diamond Back is one of the best producers in the sector, sometimes that just isn’t good enough.

Also, I unloaded some of my precautionary inverse beta TZA while the markets were down and plan to add more at lower prices when the market is up.  “Look for low and outside, but watch out for in your ear.”

Recommended stocks for the week of February 27 – March 3: I intend to buy (or buy more of) the Chinese stocks WB and BABA, and BIDU. Also, I want to buy MELI, RP, EBS, OA, and ACIA. Good investing!

The post Discover February’s Weekly Top Stock Picks — All Free first appeared on MarchéEconomics.