Tuesday
May062008

That Was Fast: Oil Back to New Highs

In just ten trading days, oil hit a high, corrected by more than 5%, and then rallied back to hit a new all-time high of $119.97 yesterday.  Since its low in 2001 of $17.45, there have been only five other periods where oil hit a high, corrected by at least 5% and then rallied back to new highs in such a short period.  In those five periods, the average one week and one month returns were losses of 3.9% and 4.5%, respectively.

Oil_roundtrips

Subscribe to Bespoke Premium to receive more in-depth research from Bespoke.

Monday
May052008

Updated Year-End S&P 500 Price Targets From Wall Street Strategists

Below we highlight the most recent year-end S&P 500 price targets from strategists gathered weekly by Bloomberg.  Morgan Stanley and Gallatin recently stopped providing price targets, so we've crossed them out from the table below.  The average price target currently stands at 1,513, which is 7.52% higher than the current level of the S&P 500. 

Bespoke readers might remember that Goldman got rid of bullish strategist Abby Cohen when the market was cratering in March.  Cohen had a 2008 price target of 1,675 for the S&P 500, and after replacing Cohen at the market's bottom, Goldman's new strategist (David Kostin) lowered the firm's year-end S&P 500 price target from 1,675 to 1,380. 

Below is an excerpt from an article written at the start of earnings season:

Goldman Sachs’ new strategist told clients that the S&P 500 is likely to decline further in the coming weeks as a number of U.S. corporations, which are reporting first-quarter financial results, are likely to lower their 2008 earnings guidance.

“Although only a few firms have reported first-quarter results, early signs are awful. … We expect generally disappointing results and a swath of lowered profit guidance that will drive the S&P 500 lower in coming weeks,” Goldman Sachs U.S. strategist David Kostin wrote today in the note to clients. “Our message to investors is stick to the fundamentals … pay close attention to the conference calls of these firms to gauge the state of the U.S. economy,” Mr. Kostin also wrote.

Mr. Kostin last month replaced Abby Joseph Cohen, Goldman’s longtime investment strategist who had been bullish on the S&P 500 outlook for 2008, expecting the benchmark index to end the year at 1,675.

Since Goldman's shakeup in strategist land, the S&P 500 has risen back above Kostin's 1,380 target to 1,407.  Only time will tell if Goldman's decision to go bearish was actually the best time to buy all year. 

UBS and Deutsche Bank still have the highest price targets at 1,650, followed by Lehman at 1,630.  Goldman and Credit Suisse are the two firms that have year-end price targets that are currently lower than the S&P 500's current price.

Pricetargets505_2

Subscribe to Bespoke Premium to receive more in-depth research from Bespoke. 

Monday
May052008

Overbought and Oversold ETFs

Each day over at Bespoke Premium, we publish our ETF Trends report along with a downloadable Excel file with technical information for more than 200 ETFs.  Below we highlight the ETFs from our report that are currently the furthest above and below their 50-day moving averages.  As shown, China, Brazil and Energy ETFs top the overbought list, with GXC leading the way at 13% above its 50-day.  FXI and EWZ are both 12% above, while OIL is 11.6% above.  India's ETN (INP) is also close to the top of the list. 

On the oversold side, precious metals ETFs are the furthest below their 50-day moving averages.  GDX is 11% below, while DBS and SLV are 8% below.  Currency ETFs like FXF and FXY are also on the list, although they're barely below their 50-days.  It's also notable that most Fixed Income ETFs are trading below their 50-day's at the moment.

Etfabove

Etfbelow

Subscribe to Bespoke Premium to receive more in-depth research from Bespoke. 

Monday
May052008

Countdown to Primaries

As the North Carolina and Indiana primaries approach, most people (well maybe not the press and Republicans) are hoping that the results in these two states will help bring some clarity to who the democratic Presidential nominee will be.  While both candidates seem to have similar views in their big picture beliefs, there are key differences in how they say they would address some major issues, which The New York Times did a good job of highlighting this Sunday.  We would recommend that all serious investors make themselves familiar with these issues as the views of the eventual nominee will ultimately have an impact on individual companies.

For example, Senator Clinton's proposal for the creation of a windfall profits tax for major oil companies would almost certainly have negative effects on the energy sector.  Regarding capital gains, while both candidates have suggested that they will raise the capital gains tax (negative for the stock market), based on their rhetoric, it appears as though Senator Obama would be the democratic candidate that would raise the rate to a higher level.

Democandidates_3

Subscribe to Bespoke Premium to receive more in-depth research from Bespoke.

Monday
May052008

Q1 Sector EPS Growth vs Estimates

Q1epsgrowthIn the table at right, we highlight year-over-year Q1 earnings growth for the S&P 500 and its ten sectors.  As shown, Energy and Technology earnings growth has been the strongest at just over 22%.  These two sectors are followed by Materials, Consumer Staples and Telecom, which have all seen earnings growth of more than 10%.  Utilities, Industrials and Health Care are all in positive growth territory so far for the first quarter as well.  Only two sectors have seen negative earnings growth -- Consumer Discretionary and Financials.  Unfortunately, these two sectors have been a big enough drag to pull earnings growth for the index as a whole down 12.70%.

At the start of earnings season, estimates for S&P 500 EPS growth were at -12.8%, so analysts have been pretty much spot on so far.  On a sector basis, Financials and Consumer Discretionary have actually come in worse than analysts were expecting, but a number of sectors have reported much stronger than expected.  In the chart below, we highlight the difference between actual earnings growth and estimated earnings growth at the start of the quarter.  As shown, the Tech sector has been the strongest versus expectations, followed by Materials, Telecom, Consumer Staples and Health Care.  While Energy has seen the strongest earnings growth this quarter, it's actually worse than the 24.1% that analysts were expecting.

Q1actvsest

Monday
May052008

Russell 1,000 Stocks Up and Down the Most Since the 3/10 Bottom

Below we highlight four stock filters based on performance and overbought/oversold levels.  The first two tables show the Russell 1,000 stocks that are up and down the most since the market bottomed on March 10th.  As shown, MLNM is up the most at 93.84%, followed by VRTX, WMG, SGMS and CLR.  Other notables on the list of winners include NTRI, FSLR, FRE, BRCM, X, AAPL, FNM, MA, F and CMI.  BSC, LNG, NCC, CROX and UAUA top the list of losers.

Upmost

Downmost

We also provide tables of stocks that are trading the furthest above and below their 50-day moving averages.   

Overbought

Oversold

Subscribe to Bespoke Premium to receive more in-depth research from Bespoke.   

Friday
May022008

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

Below we provide the titles and thumbnails 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: Earnings Season Update (how Q1 earnings have stacked up), Sector Earnings Growth (which sectors are doing better or worse than expected), A Poor Picture of Housing (a look at CME's housing futures), Chinese Stocks (comparing multi-listed Chinese firms and ADRs), It's the First of the Month (strong returns on the first trading day of the month), Thursday's ISM Report (a look at trading on report days), May Seasonality (the best and worst performing stocks in May), Fed Days (how to trade Fed days), The End of Easing Cycles (a look at market performance when the Fed pauses), Playing a Dollar Rally (stocks and sectors to buy for those bullish on the dollar), Tomorrow's Consumer Confidence Report (typical trading patterns based on Confidence reports).

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

Bigtip1 Bigtip2 Bigtip3 Bigtip4 Bigtip5 Bigtip6 Bigtip7 Bigtip8 Bigtip9 Bigtip10 Bigtip11

Friday
May022008

Oil Volatility: Not As Wild As You Think

It seems like every time you blink your eyes, the price of oil is either up or down $3 or $4 per barrel.  While the big swings in price make it seem like the commodity is as volatile as ever, a historical look at its high/low spread highlights that it's not as wild as you would think.  Based on the 50-day average of the daily spread between its high and low price (in percentage terms), oil volatility is currently right about at the average of the last ten years.  Since the price of oil is so high these days, the swings in dollar terms are bigger, but in percentage terms, it's no different than usual.

Oilvolatility

Friday
May022008

Berkshire Hathaway (BRK/A) Annual Meetings

Berkshire Hathaway is considered by many to have the most loyal shareholder base of any publicly traded company in the world.  Leading up to this year's meeting, there has been no shortage of coverage of the event by both the mainstream media and bloggers.  As just one example, this year the company expects a record crowd of more than 30,000 people making the trek to Omaha.  The event is so big for the city that even the after party for this year's meeting is highlighted on the webpage of Omaha's Department of Tourism.  The party is billed as a place to "join Omaha's fashionitas and social mavens for globally inspired cocktails and music."  For attendees who have had enough Buffett talk for a day, though, there is always the Nebraska Belly Dance Spectacular, which is also being held this weekend at the Quality Inn.

Given the strong loyalty and feelings of ownership on the part of Berkshire Hathaway shareholders, we wondered whether they leave each year's rally meeting feeling so good about the stock that they want to buy more.  To measure this, we tracked the performance of Berkshire stock in the month before and after each of the last fifteen annual meetings.  As shown, in the month leading up to each year's meeting, the average return for Berkshire stock is 0.17%.  In the month after each year's report, Berkshire has averaged a gain of 1.62%, with only four years of negative returns.   

Berkshire_annual_meeting_2

Subscribe to Bespoke Premium to receive more in-depth research from Bespoke.

Friday
May022008

Brazilian Stocks on Fire

After the country's credit rating was upgraded on Wednesday, Brazil's benchmark Bovespa stock index has been the place to be over the last two days with a gain of 10%.  Following the gain, the Bovespa has broken out of its six-month trading range.

Brazil_bovespa

With the gains it has seen over recent years, it is no surprise that Brazil's currency (the Real), like every other global currency, has rallied against the US dollar.  However, taking longer perspective shows that even after the doubling of its currency versus the dollar in the last five years, the Brazilian Real is still worth 30% less today than it was ten years ago.

Brazilian_real

Subscribe to Bespoke Premium to receive more in-depth research from Bespoke.

Friday
May022008

Telecom, AXP and VZ

IndexsectorstreaksA couple things stuck out in our Daily Stock Odds report from yesterday.  The first is that the S&P 500 Telecom sector has now been up 10 days in a row -- something that hasn't happened any other time over the past 5 years.  The second is that AXP and VZ have both been up 7 days in a row.  When this has happened over the past 5 years, AXP has gone down on day 8 every time, while VZ has gone down 50% of the time.  The next best streak in the Dow 30 is AT&T at 3 up days in a row.

Subscribe to Bespoke Premium to receive more in-depth research from Bespoke.

Dow30daysrow

Friday
May022008

Overbought Breadth Levels

Below we highlight the percentage of stocks in the S&P 500 and its ten sectors that are currently trading above their 50-day moving averages.  As shown, 77% of stocks in the S&P 500 are currently above their 50-days, the highest level seen since last October.  While it's good to see markets doing well again, things have gotten overbought over the last week or so.

Currently, 85% of Financials, 80% of Industrials and 80% of Technology stocks are above their 50-days.  The only sectors with a downward trending breadth line are Energy and Materials.  After hitting a rough patch in recent days, the percentage of Material stocks above their 50-day moving averages has dropped to 54%.

Spx50day

Finlindu50day

Techenrs50day

Condcons50day

Hlthmatr50day

Utiltels50day

    

Thursday
May012008

Average Distance From 52 Week Highs; Financials Showing Improvement

Distance_from_52_week_high_indicesWhile today's rally in the market has brought the major indices to their highest levels since early January, the average stock still remains well below its 52-week high.  In the chart to the right, we calculated how much the average stock is trading below its 52-week high.  Overall, the average stock in the S&P 1500 is currently trading 27% below its high over the last year.  While small caps have been the hardest hit with an average decline of 31.1%, large cap stocks have held up the best with a more modest decline of 23.1%.

On a sector basis, it comes as little surprise that Consumer Discretionary stocks are the furthest below their 52-week highs (-35.0%) given that many of the market's problems can be traced back to the consumer.  Somewhat more surprising, however, are the Financial stocks, where the average stock is 29.2% below its 52-week high.  While the Financials were among the hardest hit late last year and early this year, there are now three other sectors (Telecom Services, Consumer Discretionary, and Technology) where the average stock is down by a larger margin.  Additionally, the average stock's decline from its 52-week high in the Financial sector is only 220 basis points more than the average overall decline of 27%.

Distance_from_52_week_high_sectors

Thursday
May012008

Oil Stocks Versus Oil

Below we highlight the historical ratio of the S&P 500 Oil and Gas group versus the price of oil over the last ten years.  When the red line is rising, oil stocks are outperforming the commodity and vice versa when the line is declining.  For the last year, the red line has been trending downward, meaning the commodity has been outperforming oil stocks.  The ratio got down to 5 in mid-March, which was the lowest level seen since March 2003.  At these levels, the ratio typically bounces and heads higher for awhile, meaning oil stocks would begin to outperform the price of oil.  This could mean oil prices rise less than oil stocks or fall at a faster pace.

Oilstocksoilratio

Thursday
May012008

It's the First of the Month

Yesterday, we sent out a B.I.G. Tips report to Bespoke Premium members titled "It's the First of the Month."  In the report, we calculated the cumulative change in the S&P 500 since the bull market began in late 2002 on the first trading day of the month versus the rest of the month.  The "first of the month" strategy buys the S&P 500 at the close on the last trading day of the month and sells at the close on the first trading day.  The "rest of the month" strategy buys at the close on the first day of the month and sells at the close on the last day of the month. 

Heading into today, the cumulative performance of the "first of the month" strategy was up 31.18% during the current bull market, while the "rest of the month" strategy was up 20.41%.  That means a whopping 60% of this bull market's gains have come on the first trading day of each month. 

With the market up another 1%+ today, the strategy once again seems to be working well.  Click the image below to view yesterday's report to Premium members.  If you would like to subscribe to receive our in-depth B.I.G. Tips reports on a regular basis, please click here.