Think BIG

INTC, HPQ Downgraded

Bespoke — Wed, 08 Sep 2010 19:04:32 +0000

UBS analysts downgraded both Hewlett Packard (HPQ) and Intel (INTC) from Buy to Neutral this morning. The overall market is having a strong day on the upside, but the downgrades have caused both HPQ and INTL to sell off. But should these stocks be down just because someone lowered his/her rating on the stock? Before blindly selling a name because of a downgrade, it's important to at least look back at the prior recommendations of the analyst making the call.

UBS seems to have a pretty good record on Hewlett in recent years. In late 2008 and early 2009, UBS had a Neutral rating on HPQ, but the firm upgraded the name from Neutral to Buy on March 11th 2009 right near its lows. While HPQ has gone from the mid-$50s down to $40 over the last couple of months, the stock was up quite a bit over the entire "Buy" period. We'll see where it goes from here.

In regards to Intel, the firm has had a Buy rating on the stock since at least 2006, over which time the stock has gone from $21 to $17. There were no changes in recommendations on Intel throughout the entire market decline or recovery, so this is a big change for UBS. After being dead money for multiple years now, it appears the firm has given up on the Buy call.

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Restaurant Stocks Shoot Higher

Bespoke — Wed, 08 Sep 2010 17:20:45 +0000

Below is a list of the 30 biggest restaurant stocks in the Russell 3,000 run through our trading range screen. The rally in McDonald's (MCD) has received a lot of attention recently because it is the biggest of the bunch, but the entire group has been doing very well. As shown below, only 2 of the 30 names listed are currently trading below their 50-day moving averages (Sonic and Red Robin), while 23 are trading in overbought territory. Well-known names like Buffalo Wild Wings (BWLD), Chipotle (CMG), Brinker (EAT), PF Changs (PFCB), Panera (PNRA), and Yum! Brands (YUM) are all trading more than 2 standard deviations above their 50-days. While the S&P 500 is still down for the year, the average stock in this group is up 24.25% in 2010. Chipotle (CMG) is up the most at 88.97%, followed by Domino's Pizza (DPZ) and DineEquity (DIN). Sonic (SONC) is down the most at -22%.

Year-End Consensus S&P 500 Price Target Drops to 1,205

Bespoke — Wed, 08 Sep 2010 15:31:10 +0000

A number of Wall Street strategists have recently lowered their year-end S&P 500 price targets in Bloomberg's weekly survey. This has caused the average target to drop to 1,205, which is 20 points below where it started the year. Five of the twelve strategists have now lowered their targets after raising them earlier in the year. At 1,205, the consensus is still looking for a gain of 9.47% from current S&P levels to the end of 2010. Have a look below at all the changes that have been made to the target throughout the year. It's bad enough to try to predict where the market will be a year from now, and now they have to go changing them all the time?

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Stocks with the Highest Short Interest

Bespoke — Tue, 07 Sep 2010 21:31:03 +0000

Below is a list of the stocks in the Russell 1,000 with the highest short interest as a percentage of float (SIPF). For each stock we also provide its year-to-date change as well as its change since the start of the month. Generally when the market is rising, the most heavily shorted stocks outperform, and we've seen that so far this month as well.

In the Russell 1,000, AutoNation (AN) has the highest short interest as a percentage of float at 40.74%. With a gain of 25%, AN has hit the shorts pretty hard year to date. Alliance Data Systems (ADS) and MGM Resorts (MGM) rank second and third in terms of short interest and are the only other names with SIPF above 30%. SunPower (SPWRA) and Sears Holdings (SHLD) round out the top five with SIPF of 27.65% and 26.05% respectively.

Netflix (NFLX), MBIA (MBI), and Las Vegas Sands (LVS) are all on the list as well, and the shorts have gotten killed in these names this year. All are up more than 100% year to date. Shorts have had a field day this year with SunPower (down 52%), Comstock (down 48%), and ITT Education (down 43.7%). Some other notable names on the list include Green Mountain Coffee (GMCR), US Steel (X), First Solar (FSLR), Jefferies (JEF), AIG, Newell Rubermaid (NWL), and Garmin (GRMN).

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595 Days Into Obama's Presidency

Bespoke — Tue, 07 Sep 2010 15:58:27 +0000

President Obama has been taking heat from all sides lately on his handling of the economy, and the Democrats now appear to be in jeopardy of losing their majorities in both the House and Senate after the November elections. Instead of trying to defend their handling of the economy, maybe the Obama administration should be pushing the performance of the stock market since he took office in January 2009. Regardless of how or why it has done what it has done (we're not looking to get into a political debate here), the Dow has done well since Obama took office. Through last Friday (595 days since the close before Inauguration Day), the Dow was up 26.16%. Since 1900, Obama ranks fifth in terms of stock market performance at this point in the first term of a Presidency, handily beating the average Dow performance of 8.87% 595 days in.

The Dow was down 20.4% at this point in Obama's predecessor's first term, while it was up about 20% at this point in Clinton's first term. Ford, Coolidge, Harding, and FDR are the Presidents that rank ahead of Obama in this regards, with FDR way on top with a Dow gain of 76.26% from 3/4/1933 to 10/19/1934.

Again, we could all debate forever on why the market has done what it has done in recent years, but from a pure numbers standpoint, the stock market is up about 26% since Obama took office. If we all sent ourselves back to early 2009 and were asked if we would take +26% by September 2010, most of us would probably accept.

Summer (and slow trading?) Comes to an End

Bespoke — Fri, 03 Sep 2010 20:37:28 +0000

The trading desks will begin to fill back up next week as the unofficial summer comes to an end this weekend. This usually means market activity starts to pick up again, and we could be in store for a new trend to emerge over the last four months of the year. If you enjoy reading this site and have yet to make the trip over to our premium website, below we provide explanations and samples of some of the unique reports we release to Premium members on a daily basis (click on thumbnails to view samples). For a look at the complete list of products included with a Bespoke Premium subscription, please visit our Products page. And don't forget, we also release our in-depth Week in Review newsletter each Friday that includes a complete look at our Model Stock Portfolio. Have a great Labor Day weekend!

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Rally Winners

Bespoke — Fri, 03 Sep 2010 19:00:23 +0000

The S&P 500 is up a little more than 5% over the last 3 days. Below we highlight how the index's ten major sectors have performed since the start of September, along with sector performance during the prior pullback from 8/9 to 8/31. Unsurprisingly, the sectors that were down the most during the pullback are up the most during the rally. Industrials, Financials, and Technology got hit the hardest in the back half of August, and they have bounced quite a bit this week. Consumer Discretionary is the one sector that outperformed (slightly) during the pullback and is also outperforming over the last three days. The defensives -- Consumer Staples, Utilities, and Telecom -- all held up well as the market fell in August, but they're only up modestly on the bounce.

The same holds true on an individual stock basis. Below we have broken the S&P 500 into deciles (ten groups of 50 stocks) based on stock performance during the pullback from 8/9 to 8/31. As shown, the 50 stocks that held up the best during the pullback are only up an average of 2.7% since the start of September. The 50 worst performing stocks from 8/9 to 8/31 are up an average of 9.4% since 9/1.

Below are the 30 stocks that have done the best over the last three days. As shown, Office Depot (ODP) is up the most with a gain of 17.60%, followed by Nordstrom (15.18%), Jabil Circuit (14.44%), and E*Trade Financial (14.15%). Other notables on the list of winners include SanDisk (SNDK), Harley Davidson (HOG), Monster Worldwide (MWW), Amazon.com (AMZN), and Broadcom (BRCM).

2010 Country Stock Market Performance

Bespoke — Fri, 03 Sep 2010 17:29:53 +0000

Below we highlight the year to date performance of the major stock market indices for 82 countries around the world. The average year to date change for all 82 countries is 5.39%, while the median change is 2.23%. The S&P 500's year to date change of -1.24% is obviously below both of these. The US currently ranks 53rd out of 82 in terms of 2010 performance. At the top of the list is Sri Lanka with a 2010 gain of 73.69%. Bangladesh ranks second at 49.37%, followed by Estonia (41.94%), Ukraine (40.86%), and Latvia (40.26%).

India has been the best performing BRIC country so far this year with a gain of 4.33%. Russia ranks second at 1.42%, Brazil ranks third at -2.43%, and China is down the most at -18.97%. Canada is currently the top G7 country with a gain of 3.26%. Germany and Britain are the other two G7 countries that are up year to date, while Japan is the G7 country that is down the most year to date (-13.58%). Overall, Bermuda has seen the biggest losses this year with a decline of 38.25%. Greece is the second worst at -24.56%.

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Key ETFs Farthest Above 50-Day Moving Averages

Bespoke — Fri, 03 Sep 2010 14:23:39 +0000

Below we highlight the key ETFs that we follow that are currently trading the farthest above their 50-day moving averages. As shown, the Internet stock ETF (HHH) is currently on top of the list at 10.31% above its 50-day. Malaysia (EWM) ranks second at 9.29%, followed by Base Metals (DBB), Australia (EWA), and then REITs (IYR). A lot of times we'll see ETFs from one asset class clustered at the top of the most overbought list, but it is currently pretty diverse.

Below is a chart of the Internet ETF (HHH) that is currently trading 10% above its 50-day. As shown, the ETF has made a huge move over the last four days. We also provide a table of the stocks that make up HHH. As shown, Amazon.com (AMZN) and eBay (EBAY) collectively make up about 60% of the ETF. Both have been soaring lately and are now trading more than two standard deviations above their 50-days. They're the reason HHH has done what it has done this week.

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Employment Report Stats

Bespoke — Thu, 02 Sep 2010 19:47:04 +0000

Ahead of tomorrow's employment report we wanted to highlight some interesting trends ahead of the release. The first chart below highlights the average magnitude of the surprise in non farm payrolls (NFP) relative to expectations for each month of the year. For this chart, we took the absolute average of the difference between the actual and estimated change in NFP for each month since 1998. As shown in the chart, reports in September (for month of August) are actually where economists have been closest to estimating the actual change in NFP. On average, economists either under or overestimate the actual number by 46K. The next closest month is November (for month of October) where the average margin of error is 58K. October has historically been the worst month for economists in predicting the change in NFP for the prior month. The consensus forecast for reports released in the month of October are typically 80K above or below the actual reported number.

In terms of the average performance of the S&P 500, the index has risen an average of 0.11% on the day of the August employment report (released in September). This puts September right in the middle in terms of performance on NFP fridays.

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