SPY

Market Yawns at Government Shutdown

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It finally happened Monday night. After weeks of discussing the possibility of a government shutdown, the US government came to a standstill over the Affordable Healthcare Act and the budget, forcing governmental agencies to shutter doors and not pay employees on Tuesday. The shutdown impacts the Department of Defense most, where 400,000 workers out of the total 800,000 on leave are employed. The Department of Energy, Department of Commerce, and Department of Transportation are all also meaningfully impacted. At this time, the duration of the shutdown is unknown. It may not last long.   We think most market participants are not expecting a prolonged shutdown. Political parties should be sufficiently embarrassed, pride will be swallowed, and a deal will eventually … Read more

Keeping Some Dry Powder

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A young cowboy named Billy Joe grew restless on the farm A boy filled with wonderlust who really meant no harm He changed his clothes and shined his boots And combed his dark hair down And his mother cried as he walked out Don’t take your guns to town son Leave your guns at home Bill Don’t take your guns to town — Johnny Cash “Don’t Take Your Guns to Town” << What does it mean to have “dry powder”? Valuentum pursues a standard quarterly report update cycle, and our latest update of companies in the Electrical Equipment industry was quite informative. This group includes many companies that operate within the heart of the industrial economy but fall short of … Read more

The Fed Won’t Taper

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Wednesday afternoon, Federal Reserve Chairman Ben Bernanke stunned the consensus and announced the continuation of quantitative easing. Nearly every major investment bank expected the Fed to taper bond purchases in September, so Bernanke’s surprise announcement ignited a rally in both the stock market and Treasury bonds. Why not taper? According to the Fed, the economy has not performed up to expectations over the past year, and more importantly, the Fed reduced its growth outlook for 2014. However, in our view, the real reason is that the Fed is concerned about another bout of incompetence from Congress stalling economic progress. The following words came from Bernanke during his post-policy announcement press conference: “A government shutdown, and perhaps even more so a failure … Read more

Summers Bows Out

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Equity markets jumped higher Monday as Federal Reserve Chairman frontrunner Larry Summers ended his pursuit of the position. The news suggested Summers had been President Obama’s preferred successor to current Chairman Ben Bernanke, but several Democratic senators opposed the nomination, and Summers may be bowing out to avoid any chance of embarrassment. With Summers out of contention, Fed Vice-Chair Janet Yellen is the clear frontrunner. As we’ve mentioned before, Yellen is viewed as a consensus builder and receives credit for predicting the housing bubble. Powerful Democratic Massachusetts Senator Elizabeth Warren, who sits on the Senate Banking Committee, supports Yellen and indicated that she would be able to gather the necessary votes for her nomination. Regardless of the politics behind the decision, … Read more

Headline Risk Entering the Market

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The summer months have been relatively uneventful, with the exception of concerns relating to the Federal Reserve’s coming tapering of its bond-buying program and quibbles between hedge fund giants over a company that makes protein shakes—we’re talking about Herbalife (HLF) in the latter example. Even the sequester proved to be a largely underwhelming event so far through 2013. As a result, the market has focused on fundamentals, awarding strong performance and punishing poor performance (almost irrespective of valuation parameters). However, the market remains fully valued at current levels, with the forward price-to-earnings ratio on S&P 500 companies in-line with its 10-year average at 14.1 times, and the distribution of our Valuentum Buying Index ratings tilting decidedly negative. The forward price-to-earnings … Read more

Market Swoons in Late Trading Friday

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All data in this article is as of the published date, May 31, 2013. Reiterating Our View As we had outlined in our May 23 piece, “The Market Doesn’t Go Straight Up,” we identified a number of reasons why the risk-reward ratio had tilted against the investor: increased market volatility, the significant imbalance in the Valuentum Buying Index rankings (click here), and unfavorable relative/comparable market value comparisons versus historical trends. As such, we opened a put option on the broader market ETF, the SPDR S&P 500 Trust (SPY), in our Best Ideas portfolio for added downward protection ($160 strike, Dec 2013 expiration) well in advance of the sell-off Friday (we already have roughly a 30%+ cash position in our Best … Read more

Fiscal Cliff Averted; Aerospace Rallying

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After a volatile December, two of our favorite aerospace names, Astronics (click ticker for report: ) and EDAC Technologies (click ticker for report: ), are rallying significantly after a deal was finally reached to avert the fiscal cliff. Precision Castparts (click ticker for report: ), which had steadily moved higher during the fiscal-cliff ordeal thanks to optimism surrounding its planned acquisition of Titanium Metals (TIE), is also seeing strength today. We assumed both profit taking and overblown fears of defense cuts were the culprit behind the increased volatility, and it seems as though that could be the case. We continue to see substantial upside at these firms thanks to the massive, multi-year commercial aerospace backlogs of the large airframe makers. Our Best Ideas portfolio … Read more

You Are Ahead of the News As a Valuentum Member

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Remember When We Said Economic Prognosticators Were Off Their Rockers? From the September 2012 edition of our Best Ideas Newsletter (see page 2), released September 15, 2012: “Could you imagine if you had listened to bond-king Bill Gross (please note he is not the equity king), Marc Faber (author of the Gloom, Boom & Doom report) or the Economic Cycle Research Institute (ECRI), which called for a recession in September 2011 – some 30% in the S&P 500 ago (yes, 30%!). Aside from being incorrect, bearish economic prognosticators fully admit that their expectations have little to do with what may happen to the equity markets in the future (as Bernanke’s unlimited QE has shown). Still, such admissions do not stop … Read more

How Do We Use the Valuentum Buying Index?

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How Do We Use the Valuentum Buying Index (VBI)? By Brian Nelson, CFA   Hi everyone,     Hope you are doing great!  We often receive questions about how we use the Valuentum Buying Index (VBI) rating system, one of the key metrics we use to source ideas for our members, but we think it is equally important to mention up front that the VBI is only one of the many facets of our website and services. For example, if you haven’t checked out the Dividend Cushion ratios on the stocks in your portfolio or the dividend growth product (from individual reports to the newsletter and beyond), surely you are not maximizing your membership! Don’t forget about the Economic Castle rating, … Read more

Valuentum Exclusive Yearly Round Up

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Select the following link to access the Annual Exclusive Call. Select HERE to Access the Exclusive Call Recording ———- Transcript Provided Below. President of Investment Research Brian Nelson: Ladies and Gentlemen, Thank you for your attendance. Today marks three years since we first launched the Exclusive publication. The Exclusive is our premiere offering for sophisticated investors and builds upon our successes of the past, not only in establishing one of the first methodologies that successfully blends enterprise valuation with behavioral valuation and technical and momentum indicators, but also in making such a process available to individuals, financial advisors and institutional investors in full transparency. The Exclusive publication is in many ways an extension of the strong performance of both the … Read more