Tuesday
May202008

Ben Franklin Speaks From The Grave

Quote of the Day: "Certainty? In this world nothing is certain but death and taxes and higher oil prices." -- Benjamin Franklin

Tuesday
May202008

Largecap, Midcap and Smallcap Performance

As we did yesterday with growth versus value, below we highlight the performance of large, mid and smallcap indices over the entire bull market and since the correction started last October.  As shown in the first chart, largecap stocks (as measured by the S&P 500) have lagged mid and smallcap stocks significantly since October 2002.  The S&P 500 is up 83.7%, the Smallcap 600 is up 129.2%, and the Midcap 400 is up 136.3% since 10/9/02. 

Since the October 2007 top, smallcap stocks have fared the worst and are still down 11.45%.  The S&P 500 is down 8.85%, while the Midcap 400 is down just 3.95%.

Largemidsmalllong

Largemidsmall

 

Tuesday
May202008

Strategist Price Targets of the S&P 500

Below we highlight the updated S&P 500 price targets of equity strategists surveyed by Bloomberg.  After weeks and weeks of analysts lowering price targets, a firm finally upped its price target earlier this month.  Merrill Lynch recently raised its 12-month price target for the S&P 500 from 1,430 to 1,500.  The average price target of all analysts surveyed is now 1,519, which is 6.49% above the current level of the S&P 500.  At the start of the year, the average price target was 11.12% above the S&P 500.

Spxpricetarget_3   

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Monday
May192008

Mid-Day Sell Off

Given that some of the hottest stocks of the last few weeks sold off sharply this afternoon, you would think that today's reversal was simply profit-taking after a big rally.  However, when we looked at the average intraday sell off of stocks in the S&P 1500 grouped by deciles according to their performance since the March lows, we found that not only were investors selling their winners, but they were selling their losers too.  The two groups of stocks that had the biggest reversal off their highs of the day were the 150 stocks that have performed the best and the 150 stocks that have performed the worst since the March lows.  Each of these groups closed an average of 2.5% off of their intraday highs.

Intraday_reversal_0519 

Distance_from_52week_high_2 While the S&P 1500 is currently 6.1% off of its 52-week high, the average stock in the index is currently sitting more than 26% below its 52-week high.  As has been the case since last Summer, large cap stocks are holding up the best (down an average of 22.5%), while small caps have been hardest hit (-30.9%).

On a sector basis, even though the Consumer Discretionary sector has been one of the better performing sectors this year, they also fell the furthest from their highs last year.  For that reason the average stock in the sector is 31.1% off its 52-week high.  Financials and Technology round out the top three, with average declines of 29.3% and 29.1%, respectively.  Putting things into perspective, even though the Energy sector hit a 52-week high today, and the individual stocks seem like they are up every day, the average stock in the sector is currently 16.9% off of its high.  So even in the hottest of sectors, not every stock is close to 52-week highs.

Distance_from_52week_high_sectors05

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Monday
May192008

Growth Vs Value Performance

Since the bull market began on October 9th, 2002, the S&P 500 is up 84.4%, the S&P 500 Value index is up 102.8%, and the S&P 500 Growth index is up 68.2% (not total return).  Since the October 9th, 2007 peak in the S&P 500, however, growth stocks have handily outperformed both the S&P 500 and the S&P 500 Value index.  As shown in the second chart below, the Growth index is down 4.93%, while the Value index is down 11.99%.  If the market ends up making new highs before hitting the -20% bear market threshold (keeping the longer-term bull market intact), will the second act be led by growth instead of value?

Valuegrowthperf

Valuegrowthperf1

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Monday
May192008

P/E Divergence Between Growth and Value Stocks -- The Wrong Way

Recently, growth and value stocks have seen a big divergence in valuations.  One index has an as-reported P/E ratio of 33.66, while the other is at 18.92.  The only problem is that it's the value stocks that have the 33.6 P/E, while the growth stocks have the 18.9 P/E.  Below we highlight a historical chart of trailing 12-month P/E ratios for the S&P 500 Growth and Value indices.  As shown, the Value P/E has spiked significantly in recent months, as supposed value names that typically pay high dividends (financials, etc.) have seen a big drop in earnings.  This isn't the first time the divergence has happened, however.  After growth valuations spiked during the tech bubble, value stocks followed with their own surge in P/E ratios in late '01 and '02.  Ironically, growth stocks have held their value much better than value stocks have in 2008.

Growthvalue_2 

Monday
May192008

Transports At New Highs; A Look At Its Members

Below we highlight a one-year chart of the Dow Jones Transportation Index.  As shown below, the Transports have been on fire recently, even with JetBlue, Continental Airlines and AMR part of the 20-member index.

Dowtransport

As shown, 16 of the 20 stocks that make up the Transports index are up on the year, with Ryder Systems (R) up the most at 63%.  CSX, BNI, GMT, NSC, LSTR and JBHT are all up more than 30% as well.  The average estimated '08 P/E ratio of members in the index that have P/E ratios is 21.24.  The stock with the lowest estimated P/E is OSG at 10.28, followed by GMT (14.72) and ALEX.

Transportmembers 

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Monday
May192008

Bespoke's Sector Snapshot

Along with our commodity snapshot, we start off the week with our sector snapshot that highlights the one-year trading ranges of the S&P 500 and its ten sectors.  The top of the red area is two standard deviations above the sector's 50-day moving average, and the bottom of the green area is two standard deviations below.  All sectors except for Financials and Health Care are currently trading in or above the red zone.  Energy, Materials and Technology are the most overbought sectors at the moment.  Since the March lows, most sectors have developed nice short-term uptrends, but at current overbought levels, sectors could see a pullback to the bottom of their upward sloping channels.

Spxte

Finlindute_2

Inftenrste

Condconste   

Hlthmatrte

Utiltelste

Monday
May192008

Bespoke's Commodity Snapshot

Below we highlight our commodity snapshot using our one-year trading range charts.  The green shading represents two standard deviations above and below the commodity's 50-day moving average.

After breaking to new highs a couple of weeks ago, corn prices pulled back last week and broke below a tight trading range that had been in place since early April.  Corn had been one of the only other commodities to keep up with rising oil and natural gas prices after the correction experienced a couple of months ago. 

Metals rallied again last week for the first time in awhile.  Platinum prices had the best run, and it is now trading into overbought territory.  The double bottom it made earlier this month has proven to be an almost perfect technical setup on the long side.  Fortunately, wheat prices continue to decline, and last week they hit their lowest levels since December 3rd of last year.  Orange juice continues in its downtrend and coffee is trading right in the middle of its trading range.

Oilnatg

Goldsilv

Platcop

Cornwheat

Ojcof

    

Friday
May162008

This Week's B.I.G. Tips Reports at Bespoke Premium

Below we provide the titles of the in-depth B.I.G. Tips reports we released this week.  If any spark your interest, they are all available to our Premium subscribers.  These are anticipatory, ahead-of-the-curve research reports that cover markets, economies, stocks, commodities, housing and anything else related to making people money. 

This week's B.I.G. Tips reports: Bespoke's Torture Index (a bad sign for consumer), Earnings Estimate Revisions (stocks and sectors with the most upward and downward earnings revisions), May Options Expiration (typical market performance on May expiration days), Oil and Dollar Rallies (what happens when they both rally), Weekly Investor Sentiment Surveys (what is investor sentiment telling us), Sector ETF Technicals (a technical perspective of the ten S&P 500 sectors), Food Inflation (an in-depth look at food prices), Gold and Oil Splitting Up (what happens when the two commodities diverge), VIX Declines (market performance following large declines in the VIX), Retail Sales (market performance when Retail Sales is weaker or stronger than expected), Triple Play Charts (a look at the best stocks from this earnings season), Monthly Short Interest Report (sector and stock short interest analysis).

Click here to sign up for Bespoke Premium and begin receiving our B.I.G. Tips reports today.

Friday
May162008

Oil & Gas Equipment & Services ETF

We received a positive response to our post on the stocks that make up the Clean Energy ETF (PBW) yesterday.  Below we highlight the stocks that make up the S&P Oil & Gas Equipment & Services ETF (XES).  As shown in the chart below, XES is currently trading well above its 50-day moving average.  Obviously, its holdings are trading well into overbought territory as well.  Superior Energy (SPN) is the furthest above its 50-day moving average at 24.48%.  SPN is followed by FTI, PTEN and CAM.  TDW, ESV and RDC have the lowest estimated P/E ratios of the stocks that make up XES, while FTI, EXH and SLB have the highest.

Xes50day_2

Xesholdings_2

 

Friday
May162008

Donald Trump on Oil

CNBC viewers had the "privilege" to get Donald Trump's thoughts on the economy, oil and OPEC yesterday morning.  Click here to view the video.  One of Trump's proposals was to "tax the oil companies into oblivion" since they're making so much money now.  Joe Kernen eventually went on to ask Trump if he would support the same taxes on real estate if it was as hot as oil was right now.  Trump's response, "Yeah, but the fact is it's not hot like oil.  You know, oil's been hot forever...I tell people to go into the oil business because since I've been growing up, literally, it's never had a down tick.  I mean, it had one year where it was a little bit down, but basically it's never had a down tick."  Kernen went on to ask about the long periods when oil didn't go anywhere, but Trump wasn't having any of it.

Below we highlight the inflation adjusted performance of oil and new home prices from 1970 to 2000.  As shown, oil did nothing but tick down from 1981 to the late 90s, while real estate stayed in a pretty nice uptrend over the 30 year period.  We realize these are residential real estate prices, but the trend was pretty much the same in commercial, which Trump is involved in.  While oil has had its fun this decade, it definitely hasn't "never had a down tick."

Inflationadjusted

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Friday
May162008

Buffett: "Was It Something I Said?"

While Berkshire Hathaway typically does pretty well following the company's annual meeting in Omaha, the stock has taken a hit since this year's gathering at the start of the month.  After rallying 5.7% in the seven days leading up to the May 3rd meeting, BRK/A has since given it all back and then some, declining 8.87%.  While the company did have a disappointing earnings release right before the meeting, Warren Buffett must be asking himself, "Was it something I said?"  Actually, he's got about 62 billion reasons not to really care.

Brkaannual

Friday
May162008

The Enron Loophole -- Who Cares?

For those that listen to sports talk radio in the NYC area, you have definitely heard the "Close the Enron Loophole" advertisements calling for an end to the "speculation and manipulation of energy prices" in hopes of lower prices for consumers.  The "Close the Enron Loophole" lobbyists finally got their wish yesterday, and oil went down -- for about an hour.  Has all their time and money spent trying to get this through Congress already been washed away with oil back to record highs in no time?

Oil515

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Friday
May162008

Homebuilders When Housing Starts Are Stronger Than Expected

Today's Housing Starts report showed the strongest month-over-month gain in more than two years.  Does this mean investors should buy the homebuilders for a trade?  Not necessarily.  In the table below, we highlight the performance of the Homebuilder ETF (XHB) from the open to close on days when Housing Starts are released.  Since it started trading in 2006, the homebuilder ETF has done better from the open to close on days when Housing Starts were weaker than expected.  When the report is stronger than expected, the average return from open to close is 0.1%, but when Housing Starts come in weaker than expected, XHB averages a gain of 0.8%.

Xhb_on_housing_days_2

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