Tag Archives: seeking-alpha

Faltering Thursday – Here Come Those Tears Again

Summary The S&P is still knocking on that 2,000 line. Our Option Opportunity Portfolio ends month 2 up 15.1%. A quick review and a look at a couple of trade ideas we’re still hot on. And the struggle continues. As you can see from Dave Fry’s SPY chart, this is the worst kind of ” rally ” where we get big volume sell-offs followed by low-volume, bot-driven pump jobs aimed to sucker the retailers into buying the dips so the guys driving the tradebots can dump more shares on them. Wash, rinse and repeat until the big boys are all cashed out (we already are!) and then they pull the rug out and crash the market . The crashing part will be easy – all they have to do is not prop it up but, for good measure, ” THEY ” can always send their minions out to TV stations with a few well-placed downgrades to really send things into a tailspin. Suddenly, Russia bombing Turkey Syria, China’s collapsing economy, Europe’s slow economy, the refugee crisis, Fed raising rates, terrible US Jobs and Manufacturing numbers, Brazil or Venezuela’s collapsing economies, Greece (again) or even our Debt Ceiling (again) will suddenly matter and the markets will quickly drop 10%. I was on Benzinga’s Pre-Market Show yesterday morning talking about my value reasons for being short up here (S&P 2,000): It’s not that we’re all bearish – we have a lot of material stocks and our portfolios are at record highs this week so THANK YOU manipulators – it’s just that we think the stocks we already cashed out of have further to fall before they are ” correctly priced ” – like the many material stocks we stuck with when we cashed out the rest. Having a materials-heavy portfolio this past week turned out to be the perfect way to play this bounce. In fact, today is the end of month 2 for our Option Opportunities Portfolio over at Seeking Alpha, where our goal is to make $5,000 a month (5%) in a $100,000 portfolio and I’m very happy to say that our closed positions are, in fact, up $14,905 (14.9%) after 60 days: (click to enlarge) As you can see, we only had to close 12 positions, averaging better than $1,000 per position with an average hold time of just over 2 weeks but, as we do that, we’ve been putting some of our profits back into longer-term positions that are much more relaxing to manage but still give us those great monthly returns. If you are interested in this kind of trading, you can check out our open positions by signing up here and, if you don’t like our strategy after looking – SA has a generous satisfaction guarantee. (click to enlarge) One of our long positions, Lumber Liquidators (NYSE: LL ) is going to be having a good day as they settled up with the justice department over their importation of wood that violated EPA standards by paying a $10M fine . “Ow, my wrist” said a LL spokesman! This fine is NOT related to their flooring issues but it lets investors know that fears of fines that break the company are almost certainly unfounded (which was our investing premise back on 9/25). The stock should be up 10% this morning so even if you didn’t use our option play – which is on the way to a 100% gain – it’s still a pretty good return for 2 weeks, right? This is what we mean by ” Option Opportunities ” – we seek out mispriced stocks and then use options to make hedged and leveraged bets to take advantage of the situation. You can always just play the stock – but it’s way more fun with options! Our OOP Members also have access to our Live Weekly Webinars (Tuesday’s 1pm, EST) and you can view a replay of this week’s here , where we had a wide-reaching conversation about the current market situation and our featured trade idea was for NLY – which then did this: (click to enlarge) We’re value investors and that means we know how to find opportunities in any kind of market – even the ones we’d rather not play in like this one. Still, my overriding concern about the S&P’s ability to take out the 2,000 line is keeping us ” Cashy and Cautious ” in our 4 Member Portfolios, as we wait to see how the situation resolves itself. As I noted at Benzinga yesterday, I think we fail here and leg back down to 1,850 but that is good and health and we’ll be happy to do a bit more buying down there (we already have an offer on AAPL at around $100, but using short put options to drop our net entry to $75). As we come into earnings season, there are going to be tons of fun short-term trades we can take. Just yesterday we did a hedged short on Netflix (NASDAQ: NFLX ) for our OOP and our short play on oil using the Ultra-ETF (NYSEARCA: SCO ) is going well as yesterday’s inventories were a bust. There’s always something to trade – that’s why we have no fear keeping our portfolios 90% in cash – if we can make 15% in 2 months using just 10% of our cash – why risk exposing ourselves to the downside?

5 Sector Favorites For Q3 Earnings And Their Hot ETFs

The Q3 earnings season has just kicked in and investors are worried about the impact that the China-led global growth concerns will have on the earnings picture. Adding to the woes were some Q2 issues like sluggishness in other developed and developing economies, lower oil prices, a strong dollar, uncertain timing of the rates hike, and a slump in commodities that spilled over into Q3. All these factors would continue to heighten the financial market instability and could dampen earnings growth. This is especially true as Q3 earnings estimates have fallen substantially over the past three months from a decline of 2.7% to decline of 5.6% as per the Zacks Earnings Trend . This is worse than earnings decline of 2.2% reported in Q2. Revenues are also expected to decline by 5.5% versus the 6.5% decline in Q1. While the earnings weakness seems broad based with energy being the biggest drag, autos and transportation are the only sectors with double-digit growth. Further, the earnings growth rates for medical, construction and financial sectors are strong (read: 2 ETFs Rising to Rank #1 This Earnings Season ). Given this, we have highlighted five ETFs – each from these expected winning sectors – that investors should definitely tap this earnings season. Not only are these picks far better in today’s investment world, they are also likely to outperform the overall market in the coming weeks. Automotive The U.S. automotive sector has been riding high with the overall industry on track to record its best year of sales since 2000. Increased consumer spending, lower gasoline prices, rising income, high demand for light trucks, a plethora of new models, need to replace aging vehicles and the easy availability of credit at lower interest rates are adding adequate fuel to the industry. These attributes will lead to a strong auto earnings growth of 21.2%, making it the best sector of the third quarter despite the big Volkswagen scandal. Investors could ride the earnings growth potential with a pure play – First Trust NASDAQ Global Auto Index ETF (NASDAQ: CARZ ) – that provides global exposure to the 37 auto stocks by tracking the NASDAQ OMX Global Auto Index. Japanese firms dominate the fund’s portfolio with more than one-third share and the top five holdings account for at least 8% share each. CARZ is under appreciated as indicated by its AUM of only $32.5 million and average daily trading volume of under 8,000 shares. The product charges 70 bps in fees per year and has a Zacks ETF Rank of 2 or ‘Buy’ rating with a High risk outlook. Transportation The transport sector is expected to report earnings growth of 17.0% year over year for the third quarter. While a strong dollar is eating away the profits of big transporters, the sector remains the biggest beneficiary of cheaper oil prices, and increasing consumer confidence and spending. Further, higher demand for the movement of goods across many economic sectors acts as a major catalyst for earnings growth. One way to play this trend is with the iShares Transportation Average ETF (NYSEARCA: IYT ) , which tracks the Dow Jones Transportation Average Index and holds 20 stocks in its basket. The fund is highly concentrated on the top firm – FedEx (NYSE: FDX ) – at 11.8% while other firms hold less than 8.1% of assets. Air freight & logistics takes the top spot at 29% while railroad, trucking and airlines round off to the next three spots with double-digit allocation each. The product has accumulated nearly $846.7 million in AUM while sees a good trading volume of more than 418,000 shares a day on average. It charges 43 bps in fees and expenses and has a Zacks ETF Rank of 3 or ‘Hold’ rating with a High risk outlook. Medical/Health Care Though the twin attacks of the recent global market rout and Hillary Clinton’s tweet might dampen the bottom lines of the health care companies, the sector is still expected to report solid earnings growth of 8%. This is primarily thanks to solid industry fundamentals, including rising mergers & acquisitions, emerging market expansion, positive demographic trends and innovation of new products. Investors could find the largest and ultra-popular Health Care Select Sector SPDR ETF (NYSEARCA: XLV ) an exciting pick to benefit from the current trends. The fund follows the S&P Health Care Select Sector Index, holding 57 stocks in its basket. It is largely concentrated on the top two firms – Johnson & Johnson (NYSE: JNJ ) and Pfizer (NYSE: PFE ) – at 10.3% and 8%, respectively. Other firms hold less than 5.7% of assets. Pharma accounts for 38.8% share from a sector look, followed by biotech (24.3%), health care providers and services (19.4%), and equipment and supplies (13.7%). The fund manages about $13.5 billion in its asset base and trades in heavy volume of more than 11.3 million shares. Expense ratio came in at 0.15% annually. It has a Zacks ETF Rank of 1 or ‘Strong Buy’ with a Medium risk outlook. Construction The housing sector emerged relatively unscathed by the recent global market turmoil, which has hit almost every corner of the investing world. The major strength came from the industry-specific fundamentals such as growing demand for homes and affordable mortgage rates. The sector is expected to post 7.5% earnings growth for Q3. Investors seeking to ride this growth could consider the iShares U.S. Home Construction ETF (NYSEARCA: ITB ) . This fund provides a pure play to the home construction sector by tracking the Dow Jones U.S. Select Home Construction Index. It holds a basket of 41 stocks with double-digit allocation going to D.R. Horton (NYSE: DHI ) and Lennar (NYSE: LEN ). Homebuilding takes the top spot at 64.6%, followed by 14.9% in building products and 9% in home improvement retail. The product has amassed $2.1 billion in its asset base and trades in heavy volume of around 3.7 million shares a day on average. The ETF charges 43 bps in annual fees and has a Zacks ETF Rank of 2 with a High risk outlook. Financials This sector also offers opportunities of healthy returns to investors this earnings season with an expected earnings growth rate of 7.5%. Better expense management, rising fees from surging M&A activity, lower litigation charges, solid loan growth, steadily improving credit quality, growing trading businesses and improving balance sheets are fueling optimism in the broad sector. A broad way to play this trend is with Financial Select Sector SPDR ETF (NYSEARCA: XLF ) , having AUM of $17.1 billion and average daily volume of around 35 million shares. The ETF tracks the S&P Financial Select Sector Index, holding 90 stocks in its basket. The top three firms – Berkshire Hathaway (NYSE: BRK.B ), Wells Fargo (NYSE: WFC ), and JPMorgan Chase (NYSE: JPM ) – account for over 8% share each while other firms hold less than 5.8% of assets. In terms of industrial exposure, banks take the top spot at 36.3% while insurance, REITs, capital markets and diversified financial services make up for double-digit exposure each. The fund charges 15 bps in annual fees and has a Zacks ETF Rank of 2 with a Medium risk outlook. Link to the original post on Zacks.com

Don’t Miss Your Opportunity To Prepare For A Dollar Crisis (Video)

By Samuel Bryan Dr. Ron Paul hosted Peter Schiff on his Liberty Report this week. They discussed the failures of the Federal Reserve and how its policies have subsidized an irresponsible federal government. While the long-term effects are going to be disastrous for the U.S., Americans still have a chance to protect themselves from an inevitable currency crisis. If they prepare wisely, they may even profit from the coming collapse. “I do believe this window of opportunity will be rapidly closing. People need to act quickly to get out of U.S. dollars, to accumulate foreign assets in places like Switzerland or Singapore or New Zealand, to buy some gold , buy some mining stocks. Do that before the bottom really drops out of the dollar, when everybody else finally wakes up to the reality, instead of the fantasy world they’ve been living in…” Highlights from the interview: Peter: I’m surprised [this dollar crisis] hasn’t happened already. But I think it’s because the rest of the world has just been so brainwashed by the mainstream media, by the central bankers, by Wall Street, that they just haven’t figured out the problems that the Federal Reserve has created over the last seven years, with three rounds of quantitative easing and zero-percent interest rates. I think the U.S. economy is poised on a much bigger cliff than the one we went over in 2008. You and I know it was the Federal Reserve that laid the foundation for that crisis. Now, with the same policies – only worse, they’ve laid the foundation for a much greater crisis… I do believe this window of opportunity will be rapidly closing. People need to act quickly to get out of U.S. dollars, to accumulate foreign assets in places like Switzerland or Singapore or New Zealand, to buy some gold, buy some mining stocks. Do that before the bottom really drops out of the dollar, when everybody else finally wakes up to the reality, instead of the fantasy world they’ve been living in… Dr. Paul: It seems like there are so few of us out there emphasizing the Fed… What’s the ultimate solution to the Fed? Peter: You’re a medical doctor. When you have a cancer, there is no superficial treatment. You’ve got to remove that cancer or the patient is going to die… We need to get to the root cause of the problems. We need major surgery… The Federal Reserve is at the heart of it, because the Federal Reserve is enabling government. It’s subsidizing it. It’s making it possible to run all these deficits. It’s propping up Wall Street. It is basically giving us the novocaine to numb the pain, so we can let the disease get worse without actually doing anything about it… Dr. Paul: Some people approach me with the question, “What should we do? Keep our money here and work it out here? Or go overseas and do some investing overseas?” Some people will even say Europe is a shaky place… What’s your answer to that? Peter: Fortunately, the world is a big place. It’s not all just U.S. and Europe. We are underweight Europe too. I am cognizant of the problems in Europe. I just think ours are even bigger… Ours are being obscured by the fact that the dollar is still the world’s reserve currency, so we get to profit by everybody else’s mistakes for now. Everybody buys dollars when they’re worried about problems, even though our problems are bigger than the ones they’re worried about in Europe. Because the dollar is overpriced, we get to buy imports cheaper. We can keep these artificially low interest rates. We get to live beyond our means. There are countries you can invest in. In Europe, there’s Switzerland… They’re not doing everything perfect, but they’re in a much better shape than the Eurozone or the U.S. We invest in places like Singapore, countries like New Zealand. Nobody is doing it perfectly. You have to figure out which countries are making the fewest mistakes, which countries have the most economic freedom, the fewest regulations, the lowest taxes, the soundest fiscal policies, the less reckless central banks. No one’s on a gold standard – it’s all fiat money. But it’s a question of degree… To hedge ourselves against all countries, we buy gold… The average investor doesn’t have anything in gold, and I think that’s completely foolish. You have to be completely ignorant as to economic history to be so complacent as to have no money in gold… Dr. Paul: In Austrian economics we’re taught that it’s harder to predict the exact timing. You and I would be convinced that we don’t know exactly what the price of gold will be tomorrow or one week from now. We do know trends. We do know that low interest rates and artificially inflating the currency has consequences. Nevertheless, I’m sure you’re asked and you have to plan for it, and I’m asked this all the time – I want to know: when it’s going to happen. There are bubbles out there, but it’s different now… Do you ever get a little more specific? Peter: You always get in trouble when you try to put a time on it. More often than not, you overestimate the ability of everyone else to figure out the problem. I obviously know we’re a lot closer to the endgame than we were a few years ago. I think there’s a lot of signs that we’re getting closer, based on the fact the Fed has backed itself into this box… I tell people you got to be early. If you’re not going to prepare early, you’re not going to prepare at all. You’re not going to finesse it perfectly. So if you’re not too early, you’re too late. You can’t afford to be too late. Currency crises come quickly. The value is lost, and it can never be retrieved…