Thoughts for the coming week and Stock picks
I'd like to consider 3 things
1. Aggressiveness in LiveRocket
2. Upcoming week - what to expect
3. Stock Picks
LIVEROCKET INVESTMENT STYLE- AGGRESSIVE OR NOT AGGRESSIVE ENOUGH
When it comes to stockpicking, I don't think LiveRocket is very aggressive if you define aggressive as risky. I select stocks with demonstrable earnings track record and opportunities to outperform. If anything, I am very risk averse and will leave a company at the first whiff of trouble. (Like WFMI which hasn't met expectations for 3 quarters and which has a P/E higher than its growth rate).
Also, I do not play with options in this portfolio. For example, in my personal account, I bought TIE options in April. I paid ~$6 for Sept 55s and I sold them at ~$30.
Apart from the investment instruments, I am aggressive at portfolio management. That is, I am more likely to pull the trigger than a buy-and-hold investor.
To me, a more aggressive portfolio, which I'll call LIVEROCKET TURBO, would include more risky stocks, include stocks as well as puts and calls, and possibly more frequent trading.
WHAT TO EXPECT THIS WEEK
Going forward, the market wants inflation friendly news. This week, we won't have a lot.
There is a consumer confidence report and a revision of Q1 GDP. But no major Fed meeting. The only thing that I see as pivotal will be the housing report on Friday.
Most folks tie a slowdown in housing to future consumer spending and future interest rate hikes. It's like Goldilocks. If the market cools too fast, then economists fret that consumer spending will plummet on loss of asset wealth. If the market stays hot, then economists fret that the Fed will raise rates higher.
My view: housing is a bubble and it will start popping by the end of the summer. Imagine a glass of water with a straw in it. The water fills 2/3 of the glass. Low interest rates drove speculators into the market much like blowing air through that straw. The resulting froth at the top made the glass look full. As speculators disappear, the froth disappears and the glass returns to what it was: 2/3 full. Prices will reflect the fact that the market for primary housing is strong but not that strong once speculators leave. And that means at least 20% price drops or more depending on where you live.
With the cost of borrowing also going up >30% over 2 years, housing prices must adjust. And it will be painful but painful for the wealthy and upper middle class.
However, the Fed will allow that pain to occur because the economy seems strong. And because most of the risk was sold to foreigners: US banks don't hold the paper.
STOCK PICKS
The last week was a gift for stock buyers. When markets turn bearish, fundamentals don't matter and sometimes the biggest dogs get hit the hardest. We have excellent opportunities to load up. I will be buying even amounts: ~$9K each.
ET - Pick. Assets grew by ~$2B and account trading was up 8% in April vs 5% for Schwab.
JLG - Big pick. And big opportunity. JLG is in the commercial construction sector which is still flying high. It's competitors released great earnings. Analysts expect a 50% earnings growth, which would make JLG a big winner. All equipment makers are down, and that's something worth noting.
JOYG - Big Pick. Margins and profits keep growing, backlog is strong. Commodities would have to drop 50% before the orders get cancelled.
MDR - Big Pick. They just blew apart expectations and raised guidance.
1. Aggressiveness in LiveRocket
2. Upcoming week - what to expect
3. Stock Picks
LIVEROCKET INVESTMENT STYLE- AGGRESSIVE OR NOT AGGRESSIVE ENOUGH
When it comes to stockpicking, I don't think LiveRocket is very aggressive if you define aggressive as risky. I select stocks with demonstrable earnings track record and opportunities to outperform. If anything, I am very risk averse and will leave a company at the first whiff of trouble. (Like WFMI which hasn't met expectations for 3 quarters and which has a P/E higher than its growth rate).
Also, I do not play with options in this portfolio. For example, in my personal account, I bought TIE options in April. I paid ~$6 for Sept 55s and I sold them at ~$30.
Apart from the investment instruments, I am aggressive at portfolio management. That is, I am more likely to pull the trigger than a buy-and-hold investor.
To me, a more aggressive portfolio, which I'll call LIVEROCKET TURBO, would include more risky stocks, include stocks as well as puts and calls, and possibly more frequent trading.
WHAT TO EXPECT THIS WEEK
Going forward, the market wants inflation friendly news. This week, we won't have a lot.
There is a consumer confidence report and a revision of Q1 GDP. But no major Fed meeting. The only thing that I see as pivotal will be the housing report on Friday.
Most folks tie a slowdown in housing to future consumer spending and future interest rate hikes. It's like Goldilocks. If the market cools too fast, then economists fret that consumer spending will plummet on loss of asset wealth. If the market stays hot, then economists fret that the Fed will raise rates higher.
My view: housing is a bubble and it will start popping by the end of the summer. Imagine a glass of water with a straw in it. The water fills 2/3 of the glass. Low interest rates drove speculators into the market much like blowing air through that straw. The resulting froth at the top made the glass look full. As speculators disappear, the froth disappears and the glass returns to what it was: 2/3 full. Prices will reflect the fact that the market for primary housing is strong but not that strong once speculators leave. And that means at least 20% price drops or more depending on where you live.
With the cost of borrowing also going up >30% over 2 years, housing prices must adjust. And it will be painful but painful for the wealthy and upper middle class.
However, the Fed will allow that pain to occur because the economy seems strong. And because most of the risk was sold to foreigners: US banks don't hold the paper.
STOCK PICKS
The last week was a gift for stock buyers. When markets turn bearish, fundamentals don't matter and sometimes the biggest dogs get hit the hardest. We have excellent opportunities to load up. I will be buying even amounts: ~$9K each.
ET - Pick. Assets grew by ~$2B and account trading was up 8% in April vs 5% for Schwab.
NTRI - Pick. Very resilient. Established its floor. It is a heavily shorted stock and I think shorts are getting squeezed hard.
TIE - Big PickTRN - A new pick. Part of the infrastructure for transporting chemicals and other commodities by railroad. TRN makes the railcars. I like their story and am a bit late to the party.
RFMD - Pick. A risky stock but I could see 25% growth here. I love the margin growth from 30% to 35%.
DIS - Pick. Major releases are forthcoming: Pirates, Cars, even a Toy Story 3. Plus they are selling on iTunes. Short term investment - not an exact fit for the LR portfolio.
AMX - Pick. Cell phone in Mexico, Brazil and Latin America. They have 60M subscribers today. Short term investment - not an exact fit for the LR portfolio.
WCC
ISIL
PARL
GRP - Big Pick. With a 23 P/E in the face of 150%+ earnings growth, this is a no brainer.
JLG - Big pick. And big opportunity. JLG is in the commercial construction sector which is still flying high. It's competitors released great earnings. Analysts expect a 50% earnings growth, which would make JLG a big winner. All equipment makers are down, and that's something worth noting.
JOYG - Big Pick. Margins and profits keep growing, backlog is strong. Commodities would have to drop 50% before the orders get cancelled.
MDR - Big Pick. They just blew apart expectations and raised guidance.
posted by Andrew at
11:03 AM
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