Saturday, January 23, 2010

Obama drops a bomb on the market

Every week after the market closes on Friday I go to Barchart and use the same methodology to gauge what happened to the market in the previous week and plan what my strategy will be for the next week. Things started out fine early in the week but then our Prez dropped a bomb when he demonized the banks and everything on Wall Street. Most of the middle class owns a mutual fund, has an IRA or a securities account and has a bank account and/or loans with a bank. The confidence that the middle class has in these institutions is the key to this economic recovery. The balance and direction of the stock market is tied to the confidence people have in the banks and securities firms. I find it hard that he did not know the consequence of his attacks. Enough of that let's see what kind of damage he did.

Value Line Index -- contains 1700 stocks so it is much broader than the S&P 500 or the very narrow Dow 30 -- 20 DMA is sensitive and signaling caution
  • The Index was down 3.37% for the week and is down .61% for the month
  • The Index closed below its 20 day moving average but is still above the 50 and 100 DMA
  • Barchart's 13 technical indicators signal a short term 60% sell signal but an overall hold

Barchart market momentum -- contains 6000 stocks -- the percentage of stocks trading above their daily moving averages for various time frames -- 20 DMA also signaling caution

  • 20 DMA -- only 33.90% trading above their DMA -- that's less than half!
  • 50 DMA -- 55.50% trading above their 50 DMA
  • 100 DMA -- 69.20% trading above their 100 DMA

The ratio of stocks hitting new highs to stocks hitting new lows for various time frames -- above 1.0 bullish, 1.0 neutral, below .99 bearish -- all 3 time frames bearish

  • 20 day new high/new low ratio -- 484/2347 = .21
  • 65 day new high/new low ratio -- 272/327 = .83
  • 100 day new high/ new low ratio -- 208/229 = .91

Summary and strategy: The stock market has taken a blow to the gut given by the person who is supposed to be leading the recovery. He sees the key as new jobs but he is attacking the institutions that can lend the money and raise the capital to make those new jobs possible. This next week I will trim any stocks failing to maintain a price above its 50 DMA but will not be replacing in my portfolios until I see the Value Line Index recover above its 20 DMA. I don't spit into the wind.

Wall Street Survivor results: I took it on the chin this week. The market as measured by the S&P 500 down 2.09% month to date and the leader Anthony Miraydari is up 30.14% so far this month. I'm down in the 7th out of 8th place with a loss of 3.61% month to date -- maybe next week.

Jim Van Meerten is an investor who writes on financial matters here and on Financial Tides. Please leave a comment below or email

Friday, January 22, 2010

Estee Lauder: Just make-up on a pig?

Sometimes a stock comes up on my Barchart screening for stocks hitting new highs just out of the blue. Estee Lauder (EL) might be more than just shear illusion and might actually be a thing of beauty. We all have heard the name and if you look in your wife's cabinet you will probably find the products. Before you think I'm sexist they also make Aramis; and I've been using those products since I was in college. So maybe I change my title to "Just make-up on a boar"

Estee Lauder Co. manufacturers and marketers of skin care, makeup, fragrance and hair care products. Brand names include Estee Lauder, Clinique, Aramis, Prescriptives, Origins, M.A.C, Bobbi Brown essentials, La Mer, jane, Aveda, Stila, Jo Malone and Bumble and bumble. The company is also the global licensee for fragrances and cosmetics sold under the TommyHilfiger, Donna Karan and Kate Spade brands. You can't walk through Nordstroms without being sprayed with one of their products.

I first noticed the stock because all of Barchart's 13 technical indicators signaled a 100% buy rating. The stock hasn't closed below its 50 day moving average since back in October of last year and has had a 30.77% price appreciation in the last 65 days.

On a fundamental basis analyst expect the stock to have a 5.3% increase in revenue next year and a 15.7% earnings increase. The best part is they expect that EPS increase to continue for the next 5 years at that same rate. There are 6 major buy recommendations and 9 analysts have increased their earning projections in the last week alone.

On other sites Wall Street Survivor readers give the stock a 5/5 Survivor Sentiment followed by a 4/5 fundamental rating and a 5/5 technical rating. Motley Fool CAPS members think the stock will out perform the market by a vote of 123 to 7 with the All Stars in agreement 40 to 15.

Warren Buffett always says he doesn't buy stocks he buys companies he understands and that he will want to hold for a lifetime. This company has seen a lot of competitors come and go and is still around to make us all appear a little bit above average.

Recommendation: Buy Estee Lauder below 55 with a stop loss no lower than 48.

Jim Van Meerten is an investor who write about financial matters here and on Financial Tides. Please leave a comment below or email

Disclosure: No positions in EL at the time of publication

Thursday, January 21, 2010

Conference Board gives a thumbs up

The Conference Board's Leading Economic Index (LEI) has increased for the 5th month out of the last 6. For those of you who follow me you know that I try to have a very disciplined approach to investing. My approach has 4 components:
  • Know what the economy is doing
  • Know what the stock market is doing
  • Only buy stocks hitting new highs in at least 50% of the recent trading sessions
  • Manage the portfolio you own by selling at your predetermined maximum loss point

To know how the economy is doing I ignore all the daily and sometimes hourly news reports on the economy and wait for the Conference Board's monthly report that usually comes out the third week of the month. The reports are simple with an analysis of just 21 indicators divided up into leading, coincident and lagging indicators. In my mind I picture a roller coaster with cars in front, the middle and trailing behind. I want to know if the leading cars are on the way up, down or about to reverse direction. I've included a link to the report itself but I'll summarize for those who don't want to read the whole report.

  • 12 of the 21 indicators are up with 2 others holding steady
  • Leading Economic Index up 1.1% -- 8 of 10 up -- average work week and new orders still down
  • Coincident Economic Index up .1% -- 3 of 4 up
  • Lagging Economic Index down .2% -- 1 up (that's the labor cost per unit) the other 6 still down

Now that's component number one; know what the economy is doing and each weekend after the market closes on Friday I'll publish how I determine what the market is doing.

Please let me know what you think of my approach.

Jim Van Meerten is an investor who writes on financial matters here and on Financial Tides. Please leave a comment below or email

Biggest Loser: NutriSystem?

There is a special situation you all need to monitor. There is something going on with NutriSystem (NTRI) and I'm not sure what it is. NutriSystem is a provider of weight management products and services. They offer an at-home weight loss program based on portion-controlled, lower Glycemic Index prepared meals, weight loss plans, and private telephone and online support. Well that's the company's line anyway.

What they really offer is a hope and a prayer and maybe a shoulder to cry on. I don't think there is a person in America that doesn't understand that if you want to loss weight you just need to eat less and exercise more but their ads tell you otherwise. They offer the promise of success. So do the analysts following this stock.

The more analysts that jump on board this stock the lower the price goes. There will be a profit to be made here for those that know what they are doing and are nimble enough to execute the proper trades.

Analysts have 3 buy ratings out there and Zacks recently came out with a strong buy. The consensus is that sales will grow by 13.2% next year and earning by a whopping 56.6%, Estimates of a 5 year compounded growth rate of 16% make this a stock to watch.

On some sites like Wall Street Survivor their readers give the stock a 5/5 Survivor Sentiment rating. On Motley Fool the CAPS members think the stock will out perform the market with a vote of 815 to 97 and the All Stars have a similar vote of 215 to 23.

So why aren't I on board with the rest of the world? Barchart has this stock rated as a short term sell. The stock has lost value in 11 of the last 20 trading sessions and is down 28.07% in the last 20 sessions. This is why I'm not following the rest of the lemmings. Here's my recommendation:

I think the stock has promise. Watch the price carefully and buy on the dip. Place a protective stop loss very closely on your position in case the pundits are wrong.

Jim Van Meerten is an investor who writes on financial matters here and on Financial Tides.

Please leave a comment below or email

Disclosure: No positions in NTRI at the time of publication

Wednesday, January 20, 2010

Operate on profits

Health care is on center stage these days. It doesn't matter whether you believe in universal health care, public or private, individually insured or tax payer funded; there will always be people that need surgery. Stryker (SYK) does everything imaginable in the surgical arena.

Stryker Corporation develops, manufactures, and markets specialty surgical and medical products, including orthopaedic implants, bone cement, trauma systems used in bone repair, powered surgical instruments, endoscopic systems, craniomaxillofacial fixation devices, specialty surgical equipment used in neurosurgery and patient care and handling equipment for the global market and provide outpatient physical and occupational rehabilitation services. Stryker products will be in almost every operating room you will find.

The stock has a large following and there are 11 buy recommendations out there from major brokerage firms. Analysts predict a 7.8% increase in sales next year and an 11.6% increase in earnings per share. A compounded 5 year EPS growth rate of 11.11% is expected.

On a technical basis Barchart has a buy signal on 12 of its 13 technical indicators for an overall buy rating of 96%. The stock has had month over month price appreciation in the last 5 months and just keeps on truckin'.

Other sites like Wall Street Survivor readers give the stock a 5/5 Survivor Sentiment rating. Motley Fool CAPS members feel the stock will out perform the market by a vote of 1344 to 37 with the All Stars in agreement 500 to 9.

The smart boys, the short sellers have closed out positions since last year from a high of 12 million shares last February down to around 6.5 million at the end of the year.

Recommendation: SYK looks like a buy to me around 56 with a protective stop loss no lower than 52.

Jim Van Meerten is an investor who writes on financial matters here and on Financial Tides. Please leave a comment below or email

Disclosure: No positions in SYK at the time of publication

Tuesday, January 19, 2010

Citi: A fool and his money are soon parted

As I'm writing this article Citi (C) is the leading volume leader today and is out trading the second place stock by 6 to 1. They announced another loss and the stock goes up. I think it's time you all take a step back and look at what you're doing.

If I told you I had a stock that in December 2006 sold for 51.54 and last year in March sold for 97 cents, just announced that it lost 7.6 billion dollars in the last quarter, has negative cash flow, negative earnings, negative profit margins and negative return on investments but is a real buy you would laugh right in my face.

I keep reading about all the penny stock pump and dump stocks and I think this one qualifies. This time instead of a smokey back room with a bunch of kids fresh out of college with liberal arts degrees calling every sucker who has ever expressed an interest in the stock market we have some of the largest brokerage firms in the world endorsing this stock. There are actually 7 buys and only 4 sells out there by major firms. They all have this too big to fail mentality and they as selling it to all the sheep who are just dying to be slaughtered.

Let's look at the facts. I already mentioned the fundamentals and they stink. The stock is trading below it's 50 & 100 day moving averages and the 20 day moving average has been sliding down since last October. Barchart's 13 technical indicators have a sell signal on 8 of them for a 56% sell rating. There are approximately 6000 tradeable stocks to choose from and you think this is the best one you all can find?

My recommendation: A fool and his money can be parted if you think that Citi (C) is the best stock on the market. I am not a buyer of this stock and it would take a big, big change in the fundamentals of this sinking battleship to make me even take a flyer here. You really can't find a better stock to buy with your hard earned money?

Disclosure: I hold no position in Citi at the time of publication.

Jim Van Meerten is an investor who writes about financial matters here and on Financial Tides. Please leave a comment below or email

What about managed healthcare?

Health care has so many moving parts that sometimes it's hard to track them all. First there is access to health care professionals like doctors. nurses and EMT's. You don't feel well or you're having some emergency issue and need to see a professional fast. In the US we all seem to have initial access to these. Anyone can call 911, go to an emergency room or get an sick visit appointment with a doctor. If you are bleeding, having a heart attack or broken bones -- you will be treated. After a doctor has examined you and determined that you are really sick is when the problems start.

After the doctor has seen you, you'll need access to labs, MRIs, CAT scans and all those diagnostic tests that are used to find out what's wrong and how to fix it. Here's where the gate keepers come in. After this point your care will be determined by your ability to get the bills paid. If you don't have what Obama terms as a "Cadillac Health Plan" the tests you get may be prioritized not by your medical needs but your financial ability to pay. After your ailment is diagnosed, care boils down strictly to your ability to pay. In the treatment phase the money is where the rubber meets the road. So how can money be made?

Health care insurance and health care management is the gate keeper between your ailment and your treatment and Universal American (UAM) is involved in both. They offer all kinds of health insurance products mainly to the senior market. They offer both comprehensive co-payment and reimbursement insurance plans. Additionally they offer heath care management systems to other insurers, health care professionals and hospitals. I've read articles that claim over 20% of all health care costs are in these gate keeping administrative areas so we are talking big bucks here and I think they are poised to get more than their fair share of the market.

Analysts following this stock think that there will be a 2.3% increase in sales next year and an 18.5% increase in earning per share. The consensus is for an 8% EPS growth rate for at least the next 5 years. Positive sales and earning growth is what we look for.

I think the stock is undervalued and it shows in the recent 65 day price appreciation of 63.80%. All 13 of Barchart's technical indicators signal buy for a 100% Barchart buy rating. The stock has had price appreciation in 14 of the last 20 trading session and was 4 for 5 recently.

On other sites Wall Street Survivor readers give the stock a 5/5 Survivor Sentiment rating and Motley Fool members think the stock will out perform the market by a vote of 54 to 4. The All Stars confirm 26 to 1.

Recommendation: I recently sold Verizon (VZ) in my Wall Street Survivor portfolio due to deteriorating price performance and failure to maintain a price above its 50 day moving average. Universal American ( UAM) is in the center of the health care market and has been having positive price appreciation recently plus positive sales and earnings projections. I'm adding it to my WSS portfolio around 14 and will use a moving protective stop loss no lower than 11.50.

I hold no positions in Universal American at the time of publication

Jim Van Meerten is an investor who writes about financial matters here and on Financial Tides. Please leave a comment below or email