Dow 14009.79 is the big news item this week....
Dow UP 1000 points in 5 weeks.....not in the news?
S&P 500 @ 1513.17 is also in the news...
VIX @ 12.90 is a news item also.....VIX call buying @ record level
Bull Bear ratio @ near low for individual Investors reading...Bears only 20%.....
All this sound ominous for a "major slump".........
BUT that may not be @ hand......
What is supporting this market......
-New money flow from Bond to equity
-New money flow for 2013 allocation to equity
-Retail investors feeling left out & jumping IN......
-Funds Managers "leveraging UP in equities"......
-Short covering by those betting against this market....
All of the above is happening @ the same time, which IS extremely bullish
BUT @ the same time, we have NOT taken out S&P 500 all time high of 1576.09 which took place on October 11, 2007..which has been in history books for over 5 years ago.......
Based on current momentum, this run may not be over in the short term until we conquer 1576.09....
1600 in S&P 500 looks like a short term target.......then maybe a minor correction of 5%.......
As a famous football coach once said "it Ain't over till its over"........
Some other relevant quotes are "never fight the TAPE"
"Never fight the Fed"
"markets can remain IRRATIONAL for a long period of time"
All of the above quotes may be the-best guide for now.......
BLOG does NOT give buy or sell.
Saleem
14 comments:
Hey Saleem,
The market has defied many people's prognostications on this run to 1513. The question is whether we will pause or just keep going. I don't know either way, but I'm hoping for a pullback to do some rebuying (as many are probably!). I wrote up some ideas and commented on your prior post.
Stocktrader
Hi Stocktrader,
Sometimes it is important to let market decide what it wants to do...
Market has too many things going for it & it has NOT gone into OVERDRIVE yet......
A strong bull market generally pulls back after a "blowout TOP with humongous volume"......it is far from that.....
I am using history as a guide..closest one is run from 1998 to 2000..it kept going UP & UP & UP defying / destroying many skeptics & shorts.
Saleem
Hey Saleem,
Well we got that first dip I wanted...
Bought CLF @ 37.9275 - Iron ore prices remain stubbornly high and that bodes extremely well for CLF given the high leverage to those prices and the fact that people were expecting a dividend cut--I don't think that happens now, especially as CLF has reduced capex expectations.
Bought AXLL @ 55.72306 - The recent combination of GGC and PPG's commodities chemical business creates a powerhouse in that field and can realize massive syngergies. Add the fact that DOW announced an exit from some of this business in its CC last week and you have even more reason to buy. There is also high leverage to the housing market here.
Bought PANW @ 54.02459 - Great earnings from FTNT and the growing need for network security makes this a nice play here, especially with the recurring revenue stream and recent large-scale wins taking share from legacy vendors (from last CC). I think recent announcements from ORCL and IBM in security puts them behind the curve still.
How about that buyout of APKT by ORCL today--quite a surprise to me! Despite some of the related names up today also, I think this is actually a negative for those companies if a juggernaut like ORCL wants to enter the space which is becoming more commoditized.
After further research on STZ this weekend, I realize I don't have enough grasp of the industry or the expected transaction to make an informed investment here.
I am still evaluating names for purchase. It feels good to be able to add on down days...
Stocktrader
Hey Saleem,
Bought more CLF @ 38.05 based on the strength today coupled with the thesis outlined above.
Stocktrader
Hey Saleem,
Added a little CSOD @ 33.07 on the pullback to make it one of my more top holdings after I've grown more familiar with it.
Stocktrader
Hey Saleem,
Bought SPLK @ 33.54221 and CRUS @ 27.72818.
Stocktrader
(Sorry for all the transaction posts, but I feel bad if I don't post them in realtime.)
Hi Stocktrader,
Your realtime post of purchases is a good idea for those who may be evaluating entry on those names.
Nice well known diversified approach.
Saleem
Hey Saleem,
Added to PFPT @ 12.94 after a very impressive CC. They are positioned perfectly in security SaaS and have a partnership with MSFT that drives large deals (and makes them a potential buyout candidate).
I'm looking at adding to PRU possibly given the chart consolidation for a couple weeks at these levels as well as earnings Wed PM.
On another note, I remain confident in FIO as they are still the revolutionary technological leader and I feel they gave trough guidance. Their recent pullback makes them attractive from a buyout standpoint also.
I believe CRUS also gave trough guidance and has new large accounts lined up for summer with just the product announcements needed (and so they couldn't elaborate due to privacy issues). I think their buyback program will also prove perfect at these levels.
CSCO looks attractive to me at these levels given the new momentum in their business lines and the fact that business IT spending should look good in the first half of the year after being frozen pre-fiscal cliff resolution. I'm not sure if/how I'll play CSCO, but it's on my mind.
Stocktrader
Hi Stocktrader,
CRUS has used up their buyback @ average cost of $30.95......they have to announce another buyback before they can buy.
PRU could be a good long term hold as i personally believe that Financials will outperform till 2015...thus my overweight in BAC.......
Good luck with your well thought out strategy.
Saleem
Hey Saleem,
It seems CRUS still has some dry powder left.
***
From the conference call transcript:
Andrew Huang - Sterne Agee
Okay, got it. And then I guess one last question on the share repurchase, it looks like you guys did buyback some stock during the quarter, I guess, during the December quarter. Are there any restrictions? Or what are the restrictions in terms of when you cannot continue to do that program?
Jason Rhode - President, Chief Executive Officer
Well, our general view is that we should be pretty conservative from an implementation of a buyback point of view. We are opportunistic about it. When we believe that the fundamentals are really disconnected from the sentiments that’s out there in the market, we see that as a good opportunity, which is why we announced and then executed part of the buyback. In terms of when during the quarter, there are certain things that are legal restrictions and other things that are just kind of what we view as optical restrictions that, we don’t, like for example, if we’re as a company, we don’t think it’s appropriate to be buying right through our earnings call, for example, so we try to stay away from the end of the quarter and all that. Yes, we’re not in any fundamental great hurry about it either. But we get a lot of questions about use of cash, dividends and investments and acquisition, et cetera, et cetera.
***
Stocktrader
Hey Saleem,
To clarify further, they repurchased 1.5M shares @ 30.96 in the quarter. The total authorized buyback is $200M, so they have roughly $154M left.
It is on page 5 of this quarter's shareholder letter from their website (not sure why the link is so long):
http://files.shareholder.com/downloads/ABEA-4YASE4/2148737894x0x630595/3b19db0b-0876-4a47-8d46-7f8c1fb7140e/Q3_FY13_Shareholder_Letter_.pdf
Stocktrader
Hi Stocktrader,
I do not know why i got the impression from listening to cc, that they have completed their available buyback....
I do hope that you are right & they have $$$ left for buyback...hope they are using some $$$ today....
Saleem
Hey Saleem,
Yeah, it definitely seems like a good day to be buying.
Other than that, have you looked at ADNC lately? I've learned from these audio chip companies that you need to buy when things look bad, not when things are rosy. I hope it works in my favor this time with CRUS, because I worked it exactly backwards last time with ADNC.
Stocktrader
Hi Stocktrader,
ADNC had great earning report & guidance & is upbeat about its business.......Shares are reflecting that.....
CRUS has been suffering due to its lacluster guidance...hope all is discounted by now.....
Saleem
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