Tuesday, April 18, 2017

So, What Now?

OK, so I'm no Warren Buffett.  I'm not even Jimmy Buffett, but I do like Chinese buffets - so, I have that going for me - which is nice.  However, I do keep up with things, and I have opinions, which is why I do this.  But I digress.

It's earnings season - again. Seems like it comes around every three months - because it does.  It's junk food for market geeks like me, and I enjoy hearing the reports, especially when they don't involve stocks that I own or markets that I follow.  So, what's going on?

Today, Goldman Sachs (a.k.a. Golden Slacks or ticker symbol GS) reported a less than stellar quarter, and predictably the stock got hammered, to the tune of a 4.7% loss. Since the Dow Jones is a weighted average, their loss was the market's loss, and the DJ Index took a 113-point hit.  The pessimist could look at it as a clobbering.  The optimist can look at it as a buying opportunity.  I say, wait three days and allow the big institutions to sell-out of the stock before you jump in, if you're inclined to jump in.  As for me, I'm inclined to stay on the sidelines, because the banks are going to struggle, and the banks like GS who depend on market conditions to thrive will struggle even more.  Keep your money in your pocket.  Why?

Because Trump hasn't gotten anything done that he promised.  The bank stocks jumped after November 8, 2016 in the anticipation of some reform or other that he had promised.  Meanwhile, all we have so far are a lot of Executive Orders, and no real laws or changes in the tax code, which is what the banks were counting on.  And, the Federal Reserve has merely promised two or three more rate hikes, but until we see it, we have yet to believe it.

Visa (V) reports on April 19, and Bank of America (BAC) reported so-so earnings last week. MasterCard (MA) reports on the 26th - so watch the skies.

If a bank that collects 22% interest and pays out 1% can't make money, what hope is there?  Exactly.  These next two weeks will tell us a lot about what the economy will give investors over the rest of the year.  The meager quarter of a percent interest hikes that will (or may) come will do something, but I wonder if the excitement over "the bank stocks" has played itself out?

I suspect that the rest of the banks' earnings for this quarter will be less than stellar, and it appears that "the market" is looking for any excuse to drive it down.  Perhaps the best strategy at this stage is to keep money on the sidelines, and wait for what I anticipate, which is a big correction - a.k.a. DUMP to the downside, which should provide long-term investors with that great buying opportunity.  You can switch-on the big time machine and go back to November 2016 to grab some of these great companies that will be on sale.

Retail?  No.  There is a paradigm shift going on that is driving big retail either (a) out the door or (b) scrambling to try to figure out how to compete with Amazon and other online retailers who are kicking their butts now. Walmart might be able to beat them, but only by sheer size, and the idea that consumers want to touch stuff and get it at a lower price. The Home Depot is another good choice, since they sell things that Amazon cannot, which is where the safety is. CarMax, McDonald's, and stand-alone stores that can't touch Amazon's giant market share.  Make your own choices.

Technology?  Maybe.  You have to pick your spots.  Facebook appears to be fully valued, and even with their competitive edge on Snapchat and Twitter, they are trading so far above their fair value that they are "priced for perfection," which is difficult to execute.  Be careful. And at that, are they even "Technology," or are they just media plays?  To me, technology is Micron (MU) Intel (INTC) and Nvidia (NVDA) which is where the money is - microchips and the stuff that runs them.  Amazon? It's retail, and you may think it's expensive until it continues to go up, in which case you'd wish you bought it a year ago. Such is life.

Utilities? Maybe.  Rising interest rates will put pressure on utility stocks, whose saving grace is their dividend yield.  Once rates rise to the 2% range, utilities will be seen as too risky when investors can get a guaranteed 2% without breathing hard.

Gold?  It goes up and down (no kidding) but inevitably, rises with the threat of inflation.  As I have said here, the president's "Hire American, Buy American" theme will drive prices up, and those who support this mantra will be forced to pay for it.  The safe haven is gold, and maybe Municipal Bonds. Those areas of the investing spectrum appreciate when there is spending on infrastructure and inflation.  Those things, you can depend on - it says here.

Everywhere else?  It's a gamble, and you don't like to gamble, do you?  OK if you do - here are a few that I have found ON MY OWN - so, as they say, buyer beware.  Go get 'em:

Rocket Fuel (symbol FUEL) They provide data to marketers to anticipate where users are going to shop.  It's called "predictive marketing," and they just entered into a partnership with IBM to provide information to their users.  They are already working with BirdsEye, Bridgestone, Toshiba, and Buick.  It's invasive, but it's the future.

Sirius Satellite Radio (symbol SIRI) If you know anyone who has a new car, they have Sirius XM satellite radio.  The stock rose 20% when they announced the renewal of Howard Stern's contract, but there is so much more to it than that. Net income has risen 20% over the past year, and the stock has more room to run from here, as users realize the value of the services Sirius offers.

Del Taco Restaurants (symbol TACO) The second-largest Mexican restaurant chain in the United States has been under pressure lately, as a few independent law firms have accused management of inflating earnings.  That's usually bad news, but the stock has rebounded from it, which tells me that the claims are specious.  Do your own research, but for me, I continue to hold this stock.  They have announced expansion plans into Georgia, and it's a matter of time before the company gets out of the Southwest and becomes as common a name as Taco Bell. I remember when Best Buy was a limited retailer, too.

Two pure Speculative Stocks:  Limelight Networks (LLNW) and Highpower International (HPJ):
Limelight provides cloud services and content delivery services to companies worldwide. It is looking to report its first break-even quarter on April 24.  If that happens, and they have something positive to say about their future, it's the place you want to be.
Highpower is a Chinese company that manufactures batteries.  The stock is up over 100% since February, and they just signed an agreement with DJI, which manufactures drones.  So, I suspect something other than pure battery power is going on here.  If you're like me, every f**king thing you own runs on batteries, and companies that make the things should be able to make money. Go figure.

Anyway - be fruitful and multiply.  Do your homework.

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