Stock picking. It’s working again… The market is fun again – not like last summer where every tick in the Euro made oil go up or down and there was mindless, algorithmic buying or selling. Let’s go over the weekly analysis of our Market Leaders so we can decide how to handicap the horses before the race:
(Stocks are sorted by Friday’s % change)
GOOG: I don’t care if Google Chrome does track my entire life. After all, they give me free access to the sum of all human knowledge. Let ’em learn the intimate details of my life. They deserve that right just so long as they stick with not being evil. Chrome seems to use RAM more efficiently than Safari while running Silverlight based stock charts on my desktop. My MacBook runs Silverlight fine in Safari. Look at the weekly. Is this something you want to sell right now? At resistance but showing no signs of a technical reversal as it closed out at the high. Looking in the journal for April 14, we see that we were very unassured by his lack of presence on the last call. At least this alleviates that. Don’t count GOOG out just yet. It’s not Microsoft (MSFT) or Yahoo! (YHOO). They are the ones that won the search battle after all. Maybe it’s time we start giving Google respect. When I was younger, I mouthed off to my broker about how he let some guy buy Google. I rattled off how there was no growth in search… Ha! Did you see that ARG? Sick. Old dog just did a backflip. Who needs F5 (FFIV) for growth if you’ve got something non-hardware like GOOG. Building all that equipment in China is so old school. See what happened to Oracle (ORCL)- making lower low after it purchased a hardware company. Polar opposite is IBM, who is shedding hardware and going services. But even one-time service revenue is looking like another tired tech business model in comparison to CRM’s recurring revenue model (that doesn’t have the upfront costs of licensing so it’s more appealing to customers).
CRM: Probable weekly expansion for Salesforce.com. No, I don’t want to sell all, but I wish I’d bought more at $150. It expensive. No doubt about it. Disruptive technology can be expensive if it is going to take market share from the big dogs in tech. It’s also more inherently risky so frame your expectations accordingly.
BHI: Same. Don’t want to sell. Do you want to sell before you see if it resolves to the upside out of this volatility squeeze on the weekly? Look at daily, and we see it re-established it’s long term trend line, and it’s general trend is up.
WYNN: No way. Not a seller. How many other stocks look this strong- breaking out of a flag above the 50dma? But if you’re buying up here you have a higher tolerance for risk or else you are not taking a meaningful starter position- both are OK if you’re speculating in accordance with Graham’s distinctions between investing and speculation on pages 57-68 in the classic 1940 second edition (Do the homework! Not thrilling like Reminiscences or Confessions of a Street Addict, but required reading as it will really give you an appreciation for what fundamental analysis is and learn why we have to rely so heavily on technical analysis).
HAL: No way. Not a seller. Broke above resistance and holding the breakout level. Every single water truck in Gasland was a red Haliburton water truck. Speaking of hydrofrac, take a look at Carbo (CRR) -sick.
SLB: Same.
VMW: Strong. Not a seller. Everybody’s a VMware reseller or partner. They’re sick. We gotta give them a bullish bias. Their ARG is in the same league as FFIV, CRM, and… now GOOG!?
FCX: In flag formation above 50dma. I want to see if it resolves to the upside. I’m not a seller until it doesn’t. Here is convincing information on the long term prospects for copper.
AAPL: Strong. Broke out off flag. But at resistance. Most disrupting, innovative company in the market. Look what it did to notebook sales and smart phones and see the ripples that sent through all of tech? It’s evident that innovation is by definition rendering something else obsolete. Very powerful secular trends to be aware of when framing world view. Take a look at CRUS by the way. Great house across the highway from public housing.
CLF: Looks strong. Trailing stop is keeping your profits running. Coal Age give you no real advantage to game the demand for iron ore or coal so we can only trust the market knows what it’s doing here. Joy Global (JOYG) did say good things and maybe CAT will say something about BUCY on Friday.
CAT: Want to see if it breaks out. Not a seller. Call on Friday. Go over the annual report for Dow components. It helps with forming our bias so we don’t have to resort to adopting group behavior by listening to talking heads in the new 6-square.
CVX: Trailing stop working while it’s in flag-like consolidation. I continue to believe that we are in the beginning stages of a rush to control natural resources the likes of which the world hasn’t seen since the international land-grab of the 1970’s.
NDX: Holding. That’s what it looks like it’s doing so sellers are probably loosing steam. Google is the lead dog of this sled.
LULU: No idea. Confuses me but looks strong. Not a buyer.
WLT: Assigning attribution theory, we can have a bullish bias. So it’s OK to speculate that this is the low and keep a tight stop beneath $109. Again, the stuff in Coal Age is all very upbeat industry stuff so we have to be aware of that and not totally buy in. China is exporting coal. That is different from before so we have to pay attention to the run it’s had instead of where it is going cause we don’t have an edge from fundamental homework. Rely on the technicals.
AMZN: Not a seller. I Want to see if it breaks out of flag so we are not sellers. I talked to a guy at Atkins Park about doing a discounted cash flow analysis of AMZN vs. WMT last weekend. You will get a compound return of 9% in 5 years using 30% CAGR for 5 years of free-cash flow on Amazon.
DECK: Looks like we have our definition of risk. Strong. Not a seller. I don’t know fashion so fundamental analysis is limited to accepting it’s low PE to growth ratio and make decisions on the technicals.
XOM: (Always thought of “Bessie” to remember XOM but that’s the defunct Bethlehem Steel’s ticker nick name!) Not a seller. Sold at $84 and wanting it back. Second stock I ever bought. It’s OK to attach emotion to some stocks. Cramer’s short XOM, long HES trade idea has been miserable to all but those on the other side (HES is high beta and firming up however. Take a look at BEXP if you want to see a Williston Basin name that doesn’t send you to drink).
ISRG: Holding 50dma. Not a seller. Once upon a time, PG bought Gillette .
IBM: iBeam flag. IBM’s salesforce is of a different breed. They don’t wear blue suits, white shirts, and wing tips any more but every guy that’s in charge of a territory created the new unspoken dress code. Never count out Big Blue. They already went through growing pains that Cisco (CSCO) is now experiencing. IBM will be around for a long time in more-or-less of the same business model. The same cannot be said for CSCO. New technologies like virtualization, network attached storage, hosting, and the move away from the sever-client model are disruptive to CSCO’s traditional switching business so we want to stay away from CSCO.
RUT-X: Selling pressure could be over. Bullish bias warranted.
SPX: It’s OK to be bullish.
D30: OK to be bullish.
CSX: Good definition of risk. Not a seller. All the rails are firming so we can assume it’s a sector thing and have more confidence in buying here, or adding to a position.
GS: Maybe it could bounce with support estimated at $129-$130. We all have skeletons in the closet. Everybody everywhere has one of these in some scale in their portfolio but nobody’s stupid enough to go back for more now. Throw in an element of a spirit of contrarianism in for good mesure and we can give in to our masochistic tendencies and not sell. It could be worse: we could be buying CSCO. Keep your mistakes small in magnitude. $130 looks to be significant support so we don’t have to through in the towel as long as a loss on one of the dogs is manageable by being small in magnitude.
CMI: Don’t you want to see if it has an upside resolution to a flag consolidation at 50dma? I bet it will. Building a starter is OK if you haven’t any industrials. But that island reversal scares me so I’m sticking with DE as I’ve been following it for a long time and am OK making a more trusting commitment to this American company that has lasted, thrived, through two, multi-century cycles. DE still has more than half it’s sales in the US but it is bringing production on line overseas and collaborating overseas on functions like R&D which should lead to further efficiencies.
NFLX: People ragging on Netflix for its content costs, pricing changes, and valuation is akin to old-school record company guys that snuffed iTunes. Old dudes don’t get it. I’m sick of Herb Greenberg and his smirk when he raggs on NFLX. That smirk is his tell. Imagine sitting across from that smirk if you’re holding a pair of 10s on a big pot. You’d raise. I’m a buyer at the 50dma. Gotta love that’s it’s holding break out above $250.
UNP: Looks good. Holding $100. Again, like CSX. A sector wide thing. Get some rails. I have a piece coming up that breaks out all the different lines and their operators from Trains magazine.
CMG: Not buying but nobody looks to be selling. So why should you if you’re long. I thought YUM was tapped out and that turns out to be way, way off base. Their business is strong and CMG has barely expanded to Europe. They could make their way East before the next major correction comes. Why not keep some 1/4 position on the table?
DJ20: Holding break out above previous down trend. Bullish signal so I’m interpreting it as bullish.
ABT: Glad to see this one being checked. It forming a lower resistance level than it’s previous at $54. More inclined to be a seller so when we look at PFE later we’ll see that we kind of want this “leader” to cool down.
WFC: Don’t want to touch it. Learned our lesson on these dogs. Bearish bias.
BMY: not looking like it wants to break out of resistance like most of those flag patterns do at the top of the leader board. Again, we can have a bullish bias by this cooling.
HUM: Same.
BAC: Skip it. It blows.
PFE: Sold it in long term account. Collected dividend for a long time and profitable. But don’t like companies that have a “shrink to grow” strategy (although COP holder are benefiting well from their’s).
JPM: Skip. They had a good quarter and nobody cares. Just like AA. Even if we like these we can’t bet on them. Pick another horse.
ESRX: Questioning abandoning it as a leader. This is similar to what has become of TEVA- great story, and there’s no reason it should trade this low for so long but it does. Copaxone is an old story. But look what happened to Forest Labs (FRX). We gave up on that (as our leaps have long expired!) a long time ago, and that was wrong. We didn’t have enough conviction (aka patience) on Forest or Teva. FRX, like Atlantis, took off on it’s final launch into orbit. That’s where the analogy ends as I don’t think FRX comes back down as a publicly traded stock. Maybe same will be true for TEVA and ESRX. But no way around it- this looks ugly.
WLP: Glad it’s going down. Maybe we can infer that budget cuts will lead to less elderly able to pay for as many visits? My grandfather goes to the doctor all the time. I’m like, he’s 88. What’s the point of going to the dermatologist? I’m glad he moved in. I’ve been more grounded. I haven’t ever had time to spend with the grandparents I had a better connection with because they lived in India. I’m glad I at least get to spend time with one of the ones I didn’t.
And that rounds out the leader board. It’s OK to be bullish. Look at who’s on top and bottom. This is a good sign and we’ve got to be positioning for it. We can build positions in good stocks within uptrends and possessing sound fundamentals. Maybe it’s OK to let hope be part of the equation some times. Maybe it’s OK, like in The Beatles Blue Album, to hope that you don’t get let down. If you’ve done the home work and you’ve been following the fundamentals of the big Dow components and YUM and GOOG you can form a bullish bias even though there are obvious macro concerns. That just means we have to temper our bullishness and in so doing, take smaller positions or tighter stops to control risk. Let’s not be spectators. We get paid to play so we gotta play smart.