Indices closed UP on weak US GDP data, 1.8% vs expectations of 2.4%.
S&P 500 @ 1603.26, high 1606.83
RSI @ 45.93
CMF -0.046
Internals were :
UP volume led by 6.95 to 1 in NYSE & 2.70 to 1 in Nasdaq
Advancing stocks led by 3.14 to 1 in NYSE & 1.21 to 1 in Nasdaq
Net new 52 wk highs were leading by 3 in NYSE & 52 in Nasdaq
VIX Down 6.82% @ 17.21
Oil @ $95.50
Gold @ $1229.80
Stocks which were UP 2% or more included BBRY
LEN GMCR LULU TSLA AMZN POT M MU
BIDU WPRT CSIQ SPWR X MGA AGU...
AH ER BBBY UP .14%
AH Futures UP
AH Asian Markets UP
AH Oil & Gold UP
About market, Market tone was extremely impressive as weak GDP was taken as positive from QE 111 point of view. Weak data means Fed will not act in curtailing Bond purchase.First time in a long time i am seeing Green in Nikkei & Shanghai tonight. TAPE has turned for the better & may get another good close for Thursday.
BLOG does NOT give buy or sell.
Saleem
12 comments:
Hey Saleem,
I'm looking at a couple stocks this morning for purchase with my one remaining cash position:
WLT - very high quality metallurgical coal assets, highly oversold partially due to quarter-end effects, expectations for emerging market growth normalization, takeover potential due to depressed valuation and possibly defensive synergies
TRLA - deeper penetration with mobile searches on housing, cheap relative to peer Z, very nice base formation in past two months
Any thoughts on either?
Obviously I'm still looking at all my other watched stocks also but these seem interesting too.
Stocktrader
Hey Saleem,
Went with WLT at 10.11. I just feel like the potential for gains is high and immediate, but obviously I'll have to be careful here.
Stocktrader
Hi Stocktrader,
Sorry for the delay in replying...got up later than normal.
I have not followed any of the two stocks......
Good luck with WLT....
Saleem
Hey Saleem,
ORCL's multiple new partnerships I think really addresses a lot of their weakness in the cloud (although lots of catchup to do). Some of the biggest losers could be those standalone middle size players like CSOD.
Stocktrader
Hi Stocktrader,
I was thinking about ORCL's move into cloud & its impact......i am sure there are more than CSOD which can be impacted.
Saleem
Hey Saleem,
There definitely are--CSOD and WDAY just come to the forefront of my mind given their very close overlap in the space ORCL is addressing with the CRM/N/MSFT partnerships.
I think more problematic is the fact that the big boys are "fighting back". I wonder if we might see some multiple compression on a lot of software stocks due to competition fears. I'm considering selling some of my software names even if they aren't directly impacted by the ORCL partnership (including even PFPT which may be a slight beneficiary given its MSFT relationship).
I've been very careful in my selection process to try and avoid companies which have small competitive moats, but I'll be honest, a lot of these stocks could fall 20% just on sentiment problems in the sector. At the same time, they could just as easily maintain their march higher and then I'd be left behind--quite a dilemma.
Stocktrader
Hey Saleem,
A couple of other points:
1. Corporations might delay their software decisions while the landscape develops a little more. As we know, even a small hiccup in revenue trajectory can cause major stock price problems for these high growth stocks, so this is something to watch.
2. I'm not a perfect expert in this complicated space so I often hesitate to mention specific names here unless I am highly convicted.
3. I think ORCL's software and hardware strategy looks good going forward. It is definitely still a buy in my opinion.
Stocktrader
Hi Stocktrader,
Thank you for your detailed analysis & logical conclusion.
I am interested to get your deep analysis & names of potential impactees ..which you have clearly identified.....
I also wanted you to think about its "potential impact on some of the names you have been involved with".......
Saleem
Hey Saleem,
Clarification on my #2 above. I'm not always "highly convicted" (I shouldn't have put that), but I am careful to express my opinion with my measured amount of optimism and risk. For a lot of the small cap stocks, it's just hard to have the intimate knowledge to appropriately characterize the product space/potential and competitive concerns.
Stocktrader
Hi Stocktrader,
You have introduced me to many small cap names & have observed them with great interest......only reason i have never been involved in actual buying for two reasons.....
1-Generally no or low earnings & tiny Sales
2-Extremely low volume
BUT..i am trying to understand this IPO universe which you monitor so closely.
Saleem
Hey Saleem,
SPLK competes more with IBM and SAP but has a superior and targeted product (versus huge software/hardware packages from IBM/SAP). RALY competes some with IBM but has a targeted product. TXTR, MODN, and MDSO have no notable competition. PFPT competes with many, many players although each has a different solution.
As for valuation, ultimately you can see these companies through discounted cash flow metrics given the reliability of their revenues once a client is signed up. This means however that any small changes in long-term expected margin or growth rate impacts the valuation significantly. That's why you often see these companies +/- 10% easily after earnings.
Stocktrader
Hi Stocktrader,
Your in-depth knowledge of this sector has served you extremely well.
Thanks for your analysis.
Saleem
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