Listed below
are notes from the author's weekly analysis.
The Sector
Trends blog does not make forecasts and does not cheerlead with its commentary.
The perspective offered is on current trends in the market, which sectors and
groups are rotating, and which stocks from these groups are likely to perform
best in a neutral/positive environment. Readers need to provide their own
assessment of market health, employ their own risk management strategies, and
trade accordingly. In a declining market nearly all equities will suffer,
including those found listed here.
All data and
charts displayed here are the property of MarketSmith, and are published here
with their permission.
Market Overview:
The table
below shows price performance for key markets and sectors over the trailing 26
weeks, and is sorted high to low by 5 week performance. The green and
red shading denotes relative performance +/- to the SP 500 for the time period
in question.
Industry Group
|
1 Week Gain
|
2 Week Gain
|
3 Week Gain
|
5 Week Gain
|
13 Week Gain
|
26 Week Gain
|
Pboe Oil Service Index
|
2.3%
|
4.4%
|
8.0%
|
16.8%
|
16.3%
|
13.0%
|
Philadelphia Housing Index
|
-1.6%
|
0.9%
|
3.2%
|
12.5%
|
13.9%
|
40.6%
|
Dow Jones Transportation Index
|
-0.2%
|
2.8%
|
5.1%
|
12.2%
|
14.6%
|
15.2%
|
Philadelphia Semiconductor Index
|
1.2%
|
2.4%
|
4.4%
|
11.6%
|
13.0%
|
7.8%
|
Russell 1000 Energy Index
|
0.9%
|
2.8%
|
5.1%
|
10.9%
|
8.7%
|
9.7%
|
Russell 2000
|
0.7%
|
2.1%
|
3.5%
|
9.5%
|
11.9%
|
15.6%
|
DJIA
|
0.8%
|
2.6%
|
3.9%
|
8.3%
|
7.0%
|
7.0%
|
KBW Large Cap Bank Index
|
1.1%
|
2.3%
|
2.9%
|
8.2%
|
9.3%
|
18.8%
|
SP 500
|
0.7%
|
1.8%
|
2.8%
|
7.9%
|
7.0%
|
8.8%
|
Nasdaq Composite
|
0.9%
|
1.4%
|
1.7%
|
7.4%
|
6.6%
|
7.1%
|
Philadelphia Utility Index
|
0.8%
|
2.6%
|
3.3%
|
6.0%
|
0.4%
|
-4.6%
|
Cboe Technology Index
|
1.0%
|
-1.7%
|
-1.9%
|
2.4%
|
-0.1%
|
-2.8%
|
Philadelphia Gold/Silver Index
|
0.7%
|
-5.8%
|
-7.0%
|
-5.4%
|
-15.1%
|
1.1%
|
Monday
through Thursday the market seemed to struggle as the major indexes declined
slightly in elevated volume. That all changed quickly after Friday's employment
data as the markets rallied sharply to finish the week with solid gains. While
earnings news will continue to affect stocks on an individual basis, last week
the market seemed to revert to giving economic
data preeminence.
Economic
data last week was mixed, although the market's reaction to the data suggested investors
are now biased towards seeing the glass as half full.
On Monday durable
goods orders exceed expectations and suggested manufacturing may be gaining
momentum. Expectations for new orders were 1.6%, actual was 4.6%. Backing out
transportation expectations were for a 0.4% increase, actual was 1.3%. Monday's
Dallas Fed manufacturing survey also came in ahead of expectations at +5.4% vs.
consensus 4.0%; the report also indicated price and wage pressures were
increasing. On Thursday Chicago PMI came in at 55.6 vs. consensus 50.5, and on
Friday the ISM Manufacturing Index was 53.1 vs. consensus 50.7. As with the
durable goods orders report, the Dallas Fed survey, Chicago PMI and Friday's
ISM report all showed strong growth in new orders.
Monday also
saw the release of the pending home sales index, which showed a fairly sharp
drop off at -4.3% vs. consensus -0.3. However, the drop off was driven by a
shortage of lower priced homes, and while this suggests a tougher road for the
housing market it could be an overall positive for the economy as appreciating
housing prices create a "wealth effect" for existing home owners. Appreciating
home prices were confirmed on Tuesday when the Case-Shiller home price index
(HPI) indicated a M/M increase of 0.6%, and a Y/Y increase of 5.5%, the highest
rate of increase since the 2006 bubble. However, this combined with the
Tuesday's
consumer confidence reading missed badly at 58.6 vs. a consensus of 65.1, and
marked the second consecutive month of sharp decline (Nov. - 71.5, Dec. - 65.1,
Jan. - 58.6). While some of the decline may be attributed to the averted debt
ceiling debate, it likely also reflects the burden of consumer's recently
increased tax load. However, the report was contradicted by Friday's consumer
sentiment report which read 73.8 vs. a consensus expectation of 71.5.
Wednesday
delivered a weak Q4 GDP report which came in below expectations at -0.1% vs. consensus of
+1.0%, the first negative reading since 2009. The main determinants of the miss
were a pullback in private inventories and a reduction in Federal Government
spending. Increases in personal consumption expenditures and private fixed
investment suggested the weakness would be temporary, and Wednesday's Fed
announcement stated economic activity
had "paused" due to weather and "other transitory factors".
The ADP
employment report was also released Wednesday and indicated a 192K gain in private employment, 20K above the
consensus number. While representing only an incremental gain it nonetheless marked
the sixth consecutive month of improvement. Friday's employment report showed a
157K gain vs. 175K consensus, but November and December were revised 86K and 41K
higher respectively indicating job growth has been stronger than previously
thought.
Among
companies reporting earnings last week winners included Valero Energy +17.9%,
Hess +16.1%, Skyworks +15.1%, CVR Refining +13.3%, Core Laboratories +13.1%,
and Fortinet +13.1%. The biggest losers among this same subgroup were Liquidity
Services -20.5%, VM Ware -20.1%, Fusion-Io -18.8%, Elizabeth Arden -15.1% and
Cabot Corp. -14.3%.
This week
sees reports from 324 companies including building suppliers Louisiana Pacific,
USG, and Eagle Materials. In autos Delphi Automotive reports, along with Toyota
and Cummins. Internet sector companies LinkedIn, Akami and Baidu all report, as
well as software providers Cerner, Nuance and Ultimate Software Group. Other companies
reporting include IXIA, Trimble, Opentable, Fleetcor, Visa, Shutterfly,
Transdigm, Agrium, Chipotle, Panera and Team Health Holdings.
Group Themes:
The tables
below show commodity, technology and defensively related group's price
performance over the trailing 1, 2, 3, 5, 13 and 26 week periods.
33 Commodity
Oriented Groups:
|
1 wk
|
2 wk
|
3 wk
|
5 wk
|
13 wk
|
26 wk
|
# in the
top 50 groups (out of 197)
|
8
|
6
|
4
|
10
|
11
|
9
|
# in the
bottom 50 groups (out of 197)
|
8
|
8
|
10
|
5
|
7
|
5
|
28 Technology
Oriented Groups:
|
1 wk
|
2 wk
|
3 wk
|
5 wk
|
13 wk
|
26 wk
|
# in the
top 50 groups (out of 197)
|
6
|
10
|
6
|
6
|
5
|
2
|
# in the
bottom 50 groups (out of 197)
|
9
|
9
|
10
|
8
|
5
|
11
|
30 Defensively
Oriented Groups:
|
1 wk
|
2 wk
|
3 wk
|
5 wk
|
13 wk
|
26 wk
|
# in the
top 50 groups (out of 197)
|
7
|
5
|
9
|
6
|
3
|
4
|
# in the
bottom 50 groups (out of 197)
|
3
|
6
|
4
|
12
|
12
|
11
|
This week there were no clear
patterns of rotation between the three different industry group
themes. Performance of the defensively oriented groups is tame.
Industry Group Performance:
Energy: Last week's analysis noted the
strength in the Oil&Gas-Drilling group (G1381), Oil&Gas-Field
Services group (G1380), and Oil&Gas-Refining/Mktg group (G2900) groups.
This past week the Oil&Gas-Refining/Mktg
group (G2900) group gained 4.9% to rank #2 on the 1 week price performance
list. 25% of the group reported earnings last week and investors responded
bullishly. The table below lists those companies from the group that reported
earnings last week, and ranks their weekly price performance against all the
other 377 companies reporting; green highlighting indicates performance in the
top quartile. Obviously investors liked what they heard from these firms.
Symbol
|
Name
|
Industry Name
|
Weekly Gain
|
Rank
|
VLO
|
Valero
Energy Corp
|
Oil&Gas-Refining/Mktg
|
17.9%
|
1
|
MPC
|
Marathon
Petroleum
|
Oil&Gas-Refining/Mktg
|
11.4%
|
11
|
PSX
|
Phillips
66
|
Oil&Gas-Refining/Mktg
|
10.7%
|
13
|
APU
|
Amerigas
Partners Lp
|
Oil&Gas-Refining/Mktg
|
5.4%
|
53
|
UGI
|
U G I
Corp Hldg Co
|
Oil&Gas-Refining/Mktg
|
3.8%
|
84
|
NS
|
Nustar
Energy Lp
|
Oil&Gas-Refining/Mktg
|
2.7%
|
116
|
NSH
|
Nustar
Gp Holdings Llc
|
Oil&Gas-Refining/Mktg
|
2.1%
|
135
|
Inergy LP
(NRGY) is part of the Oil&Gas-Refining/Mktg group, and is scheduled
to release earnings Tuesday, 2/5/13, BMO. NRGY has formed a cup & handle pattern
with a 20.43 pivot. ROE 51%, yield 5.7%.
Hornbeck
Offshore Services (HOS) looks interesting here at current levels, breaking
higher out of an ascending triangle. Accumulation is heavy with an
accumulation/distribution ranking of "B+", 50 day up/down volume
ratio of 1.6, and a 25 day ratio of 1.7. FY '13 EPS are forecast +104%. HOS
announces earnings Wednesday 2/6/13 AMC, with the conference call scheduled 9
AM Thursday morning.
On Friday
Pacific Drilling (PACD) was mentioned in a Seeking Alpha blog post as a
potential takeover target of Seadrill (SDRL). While this blog is not endorsing
the content of the Seeking Alpha blog post, PACD gained 2.2% on 4x average volume,
and SDRL closed near the top of its daily range in volume 82% above average. PACD is 1% past its pivot out of a cup & handle, but as always perform your own due diligence...
Healthcare: The Medical-Ethical
Drugs group (G2830) has been an average performer with a MarketSmith
industry group rank of #112. That could be changing as the group has begun to
show strength on the shorter term price performance lists, ranking #16 over the
trailing week with a 2.9% gain, and #9 over the trailing 5 weeks with a 14.8%
pickup.
Jazz
Pharmaceuticals has a 57.99 pivot out of 16 week cup & handle base. JAZZ
trades at 13x earnings, with FY '12 EPS forecast +34%, and FY '13 +20%. JAZZ is
also seeing accumulation with an accumulation/distribution rating of
"A-", and institutional sponsorship increases of 353 > 379 >
417 > 419 over the trailing 4 quarters. The 50 day up/down volume ratio is
flat at 1.0, but the 25 day ratio is 1.3. SMR "A", ROE 148%.
Software: The Computer Sftwr-Gaming
industry group ranks #27 on the trailing 5 week price performance list with a
12.6% gain, and over the same period of time has jumped from #152 to #56 in MarketSmith's
industry group rankings.
Sohu.com
(SOHU) looks attractive on a breakout from this short 5 week consolidation, buy
point ~ 50.70. SOHU has an accumulation/distribution rating of "A-"
and a 50 day up/down volume ratio of 2.2. SOHU trades at 15x earnings, and FY
'13 EPS are forecast +41%, ROE 21%. SOHU is a Chinese ADR and as such comes
with a unique set of risks; perform your due diligence.
Finance: 6 of the 8 finance related
groups finished in the top 50 of the 1 week price performance list, and 5 of
the groups rank in the top 50 of the 5 week list. The Financial Svcs-Specialty
group (G6412) ranks #50 on the trailing 5 week price performance list with an
11.2% gain, and over the same period of time has jumped from #126 to #84 in MarketSmith's
industry group rankings.
Performant
Financial (PFMT) is a recent IPO under heavy accumulation. PFMT has an "A-" accumulation/distribution
rating and the 50 day up/down volume ratio is 3.2, RS is at a new high. FY '12 EPS are forecast
+113%, FY '13 +18%. Currently PFMT is 6% past its pivot, but watch to see if it
pulls back into the 5% buy zone.
Follow up: Michael Kors (KORS) was
listed here several weeks ago with a $54 buy point out of a descending trend
line break. On Monday it gapped up over a more traditional 58.62 pivot out of a
consolidation and was met with prompt selling, falling back below the pivot
within the first 5 minutes. KORS has closed near the bottom of its daily range
for the past 3 days, and appears to be waiting for earnings due 2/12.
Shutterfly
(SFLY) was highlighted here two weeks ago and has maintained is tight trading
channel since that time. The Bollinger Bands have tightened dramatically
setting up a volatility squeeze. Accumulation remains heavy with a
50 day up/down volume ratio of 1.8, and a 25 day ratio of 3.1. SFLY releases
earnings Tuesday, with the conference call scheduled for 5 PM.
Ocwen
Financial (OCN) and Nationstar Mortgage (NSM) still look attractive here.
No comments:
Post a Comment