Weekly Hotline Update 12-05-06 #5
Welcome to December, only 19 shopping days till
Christmas
Since the 21st of November our portfolio has remained about
63% invested with 9 positions while the market has gone through a couple weeks
of consolidation. Our portfolio had a good week and now shows a 4.45% return on
invested funds and a total portfolio return of 2.77%. That is better than or in
line with the benchmark averages. We are adding some exposure this week.
The Market: Volatility has increased over the past week. While
that may seem alarming or unsettling, the important thing is the volatility is
going both ways. Big down moves are being offset with big up moves. The end
result is a stagnate market but the character of the action remains consistent
with that of a larger consolidation within the strong multi-month advance from
the summer lows. Once the consolidation runs its course the market should move
higher and we continue to expect a positive December.
Over the next few weeks we will see a lot of talk about holiday shopping
trends. Wall Mart is saying things do look that good while Target is telling us
things look great. A new Wall Mart just opened in my area. After going there a
few times, (Note: I am not a big shopper) I can understand why Target's numbers
look good while Wall Mart's numbers don't. I may not be the best reference
point on this, but I would rather shop at Target than Wal-Mart.
I anticipate that when all is said and done, this holiday shopping season
will go down as a pretty good one. After all, the US economy is virtually at
full employment, a bunch of auto-workers were just given huge sums of money,
and the number one movie is an amusing tail about a dancing penguin. (read: The
US is in a pretty good mood.) If we don't see good results in this environment,
then we've got serious problems.
Turning to the PRS_3 time plane, there are no signs of the type of
divergences typically seen before important and meaningful market pullbacks
take place. If and or when we start seeing behavior similar to recent peaks, we
will tighten up our exit criteria. For now there is no need to do that.
Over the past week, six stocks have reached our entry
criteria. Note: CASS is a very low volume stock, caution is warranted there.
ICLR, NOVN, and OMCL were reviewed last week and look good.
CASS (Cass Information Systems Inc) is a very small and thinly traded
stock. It has a market cap of just over $300 million and average daily trading
volume of just 9,000 shares. The chart looks great, it has an IBD EPS rank of
86, and it is in a very strong group. CASS provides payment and information
processing services to manufacturing, distribution, and retail enterprises in
the US.
The company has shown excellent earnings growth, but IBES does not have any
estimates. It looks good, but this is a small and that does not trade a
significant amount of volume.
SYX (Systemax Inc) www.systemax.com
Markets PCs, Servers, Disks and various industrial products via 22 specialty
catalogs and 7 ecommerce websites. Being the computer geek that I am, one of
their subsidiary websites is www.tigerdirect.com,
which I use from time to time as it is a very competitive site.
It has an IBD EPS rank of 99 so we know the company has solid earnings growth.
Their annual earnings have been growing strongly since 2001. The stock wasn't
doing much for a long time, then in September it burst higher and remains in
the spotlight. However, My IBES screen does not show any earnings estimates for
SYX.
The stock was on a runaway tear when they announced they would delay their
earnings report, and the stock got slammed. However, in this case, the setback
looks like an opportunity. Going above $14 and breaking the obvious down trend lines is bullish.
Over the past week, with a healthy bout of volatility, we
saw some or our Open Active positions weaken. The top four in the table, GIL,
IBCA, STXN, and CECE, reached their exit criteria on Monday, so their exit date
will go down as today 12/5/06, and the exit price will be revised to today's
close. There are a 18 stocks that reached our exit criteria, and three of them
closed out with gains of 160% or higher. CBK is the only really bad one. CBK
moved higher but gapped lower several times. Had CBK been in our model
portfolio, we would have closed the position long before it reached its actual
exit criteria.
Only GIL, CECE, and BUCY were not shown as Red "Under Review"
stocks in either the last weekly update or the December Monthly repot. All
three saw their PRS_12 fall due to a lack of 12-month upside progress as
opposed to near-term weakness.
All exits since the last weekly update are in the table above. All are
pre-live positions.
The Table below shows Current Open Actives that are Green, meaning
they have once again reached our entry criteria window. The red stocks are Open
Active Positions whose PRS12 is below 80. Our exit criteria is below 75. The
red stocks are "under review" so to speak. They are in danger of
falling off the Open active list.
Aside from the two new portfolio positions, I like OMCL,
NUVO, and OCN.
Today we are adding two
stocks to our model Portfolio.
- Add the following Positions
- Add 200 shares of SPSX @ 35.40
(new active 11-17 @ 34.93)
- Add 200 shares of ICLR @ 36.00
(new active 11-28 @ 35.93)
- This brings our portfolio up near 80%
total exposure.
While we may see some choppy action over the balance of December, there
should be an underlying positive tone to the overall action. This should prove
to be optimal conditions for our strategy as folks continue to gravitate to the
strongest and most attractive stocks in a somewhat stagnate market.
And with that, it is time to sign off. I am adding my own unique twist here.
Some letters end with an eloquent quote from T. S. Elliott or Dickenson. Others
end with a deep Chinese proverb or saying. Personally, I don't like to having
to think that hard regarding words of wisdom. So, I have decided to end these things
with some (probably) not so famous words from a famous Calypso poet. Some will
be profound, some very appropriate, and sometimes....well, once the work is
done I am pretty laid back. For this first one, I don't want to set the bar too
high.
And
across from the bar there's a pile of beer cans
Been there Twenty-seven years
Imagine all the heartaches and tears
In twenty-seven years of beer
Jim Patterson
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