Author Archives: Scalper1

Heavy Construction, Automakers Among 10 Groups Up 20% in Four Weeks

The market has had a nice five-week run. So have oil prices. The S&P 500 on Tuesday traded as high as 13.6% above its Feb. 11 low of 1810.10 and back on positive ground for the year. West Texas Intermediate crude was 53% above its February low — its best move since a nine-month, 62% climb to near $115 a barrel in 2010-11. That combination had, on Tuesday, driven 10 industry groups to gains of more than 20% over the past four weeks. Three of those groups were oil-related: International Exploration and Production, U.S. E&P, and Field Services. But the biggest gains did not come from oil. At the top of the list, Metal Products-Distributors had hammered out a 45% gain over the past four weeks. The group is up 73% from a January low, although still 45% below its high mark set in April 2014. Olympic Steel ( ZEUS ) and Norway’s Norsk Hydro ( NHYDY ) are a few of the names that have been around for decades. The only stock in the group with a Composite Rating from IBD above 90 is the relatively newer  Park-Ohio Holdings ( PKOH ), which trades a far-too-thin 51,000 shares a day. The next biggest gain — a 30% rise — comes from the automakers group. No surprise that the star here is Tesla Motors ( TSLA ). Tesla put in a 70% advance off its Feb. 9 low of 141.05, retaking support at both its 10- and 40-week moving averages.  The stock’s chart is volatile and sloppy, but arguably is presenting a deep cup base with a 243.73 buy point. This setup comes just ahead of Tesla’s release of its mass market Model 3 , slated for late next week. India’s Tata Motors ( TTM ) is also below a cup-base buy point. But, while analysts expect Tesla’s EPS to rebound sharply this year and next, consensus views see Tata’s earnings losing ground again this year (down 44% to $1.97 a share) before a projected 199% rebound in 2017. Steel producers and specialty steel makers took two of the top five gains among industries. Big moves by specialty steel heavyweights Carpenter ( CRS ) and Allegheny ( ATI ) helped power the group’s 29% advance. But the fundamentals of both stocks have much work to do before making the leadership grade. On the strictly steel products side, Nucor ( NUE ) and Steel Dynamics ( STLD ) are basing. Both are still fundamentally weak, although Steel Dynamics’ EPS are forecast to rebound 78% this year and 29% in 2017. In the Building-Heavy Construction group, big-bore builders Fluor ( FLR ) and Aecom Technology ( ACM ) helped drive the advance. Thinly traded Granite Construction ( GVA ) broke out of a cup-with-handle base at 44.93 on Tuesday. Analyst consensus projects that the road and highway builder’s EPS will jump 31% this year and 35% in 2017. Metal ore miners swept up 23% in the past four weeks. A sharp rebound in iron ore prices, sparked by pledges of reduction in China’s steel industry production, fueled advances by both large and small players in the group. But few in the industry see conditions truly improving until late this year, or early in 2017.    

Norway ETFs In Focus Post Rate Cut

In its latest meeting, Norway’s central bank lowered its key interest rate to an all-time low of 0.5% from 0.75%. This move was highly anticipated given a history of rate cuts and weak outlook. The outlook for Western Europe’s biggest crude producer, Norway, has gone from bad to worse in the last couple of months, thanks to persistently low oil prices. Norway is among the top 10 nations famous for oil exports and, with its comparatively low population, oil forms a key part of the country’s GDP. The central bank stated that the developments in the Norwegian economy have been weaker than expected, with unemployment expected to go northward from the current level of 4.5%. Negative Interest Rate on Radar The Norwegian central bank also hinted at further rate cuts and warned that it could even go to negative territory in order to revive the economy. Meanwhile, several other countries are also following a strategy of monetary easing, which generally comes in the form of an interest rate cut to boost growth. Earlier this month, the European Central Bank (ECB) came up with a more intensified economic stimulus and opted for multiple rate cuts and the expansion of its quantitative easing program to boost the economy. Apart from ECB, Norway’s neighbors Sweden and Denmark have also adopted this policy. Another European country – Switzerland – has lowest rates across the world and held the rates steady in March. Meanwhile, the Fed has also maintained its dovish stance. The central bank now expects the federal funds rate to rise to 0.875% by the end of the year, as compared with the previously expected 1.375%, implying only two rate hikes as compared to the previously expected four rate hikes. Although rate cuts are expected to boost economic activity, the Norwegian central bank noted that rock-bottom rates could hamper the profitability of commercial systems and affect the financial system adversely. A Closer Look at 2 Norwegian ETFs In the light of these developments, we highlight two ETFs – the Global X MSCI Norway ETF (NYSEARCA: NORW ) and the iShares MSCI Norway Capped Investable Market Index ETF (BATS: ENOR ) – that have gained 0.5% and 0.9%, respectively, in the last 5 days. Both have a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook. NORW This is the most popular ETF tracking the Norwegian market with AUM of $59.4 million and average daily volume of almost 62,000 shares. The fund tracks the FTSE Norway 30 Index, holding 57 securities in its basket while charging 50 bps in annual fees from investors. The product is somewhat concentrated in both sectors and securities. The top three firms account for almost one third of total assets, while from a sector point of view energy dominates the fund’s assets with 30% share. The fund has a tilt toward large-cap stocks at 61%. ENOR This ETF follows the MSCI Norway IMI 25/50 Index, holding a basket of about 55 companies that are based or do most of their business in Norway. The product puts about 67.7% of total assets in the top 10 holdings, suggesting concentration. Although a capping methodology is applied, limiting the weight of any single stock to a maximum of 25% of total assets. Large caps are pretty prevalent, as these make up 61% of assets. With respect to sector holdings, energy again takes the largest share at 29.6%, followed by financials (20.1%) and consumer staples (15.3%). The product has amassed $17.9 million in its asset base while it trades in volumes of around 23,000 shares. It charges 53 bps in fees per year from investors. Original Post