Saturday, May 29, 2010

Market in slight recovery mode

Each weekend on Financial Tides I take stock of the market by ignoring the headlines and using Barchart to find the data for my 3 stock market yard sticks. I use 3 because no single yardstick seems to be accurate all the time. Looking at all 3 gives me more complete feeling of the true direction the market took in the last week. Let's see what the results were.

Value Line Index -- Contain 1700 stocks so its much broader than the S&P 500 or much narrower Dow 30 -- Index not strong but in recovery
  • Index actually rose by 1.57% last week -- That's up 3 out of the last 5 weeks and up 3 of the last 5 months
  • 40% Barchart technical sell -- 2 buys, 4 holds and 7 sells
  • Index closed Friday below its 20, 50 & 100 day moving average

Barchart Market Momentum -- Percentage of stocks closing above their moving averages for various time frames -- Above 50% is always good -- This week was better than last week but not as good as a month ago

  • 20 day moving average -- only 27.74% closed above -- 9.88% last week -- 48.96% last month
  • 50 day moving average -- only 24.80% closed above -- 17.98% last week -- 72.22% last month
  • 100 day moving average -- only 43.17% closed above -- 36.43% last week -- 80.10% last month

Ratio of stocks hitting new highs to new lows for various time frames -- 1.0+ bullish, 1.0 neutral, below .99 bearish -- This week almost neutral

  • 1 month ratio of new highs/new lows -- 191/195 = .98
  • 3 month ratio of new highs/new lows -- 118/132 = .89
  • 6 month ratio of new highs/new lows -- 107/89 = 1.20

Investment Strategy -- The market recovered but we still can't say that the market is in an upward trend. We are not attempting to call every little twist and turn in the market but if we miss just the top 10% and the bottom 10% of the major bear and bull markets there is plenty of money to be made in the remaining 80% of the middle. In sports and the stock market it's not always who hits the most home runs or the most 30 yard passes that wins, it's usually the team that made the fewest mistakes that gets the prize.

We want our portfolio to make money but we also want to be conservative and cut losses to a minimum. Next week, I'll trim some losers but I'll wait to replace until I see the market trading above it's 20 day moving averages again.

Jim Van Meerten is an investor who writes about investing on Financial Tides, Barchart and Seeking Alpha. Please leave a comment below or email

Disclosure: No positions mentioned

Friday, May 28, 2010

Tech seems to be where its at

Spreadtrum ( SPRD ) is a semiconductor company that designs, develops and markets baseband processor solutions for the wireless communications market. Spreadtrum combines its semiconductor expertise with its software development capabilities to deliver highly-integrated baseband processors with multimedia functionality and power management.

Wall Street has discovered this stock and has 5 buy and 2 hold recommendations published. Sales and earnings projections are off the chart with sales expected to increase 146.90% this year and 23.60% next year. Earnings are a similar story with estimates of increases in EPS to be 311.60% this year 18.70% next year and continue at an annual rate of 20.00% for the next 5 years. I like these numbers.

Investor sentiment is beginning to build with the CAPS members on Motley Fool voting 180 to 29 that the stock will beat the market and a similar vote is registered by the All Stars vote of 47 to 6.

The data on Barchart shows that this is a current momentum play with 12 new highs in 20 trading sessions and 4 new highs in the last 5 days. The monthly return on this stock has been 70.03%. All of Barchart's 13 technical indicators signal a buy for a 100% buy score.

I think this stock still has some room to run because:
  • Wall Street predicts double digit sales and earnings to continue
  • The stock is just beginning to build a positive investor sentiment
  • Each day the stock has increases in price appreciation

Jim Van Meerten is an investor who writes on investing on Financial Tides, Barchart and Seeking Alpha. Please leave a comment below or email

Disclosure: No positions in SPRD at the time of publication

Thursday, May 27, 2010

Get in the zone with Autozone

Autozone ( AZO ) is the nation's leading specialty retailer of automotive parts and accessories, primarily focusing on do-it-yourself customers. Each of the company's auto parts store carries an extensive product line for cars, vans and light trucks, including new and re-manufactured automotive hard parts, maintenance items, and accessories. Many of the company's domestic auto parts stores also have a commercial sales program, which provides commercial credit and prompt delivery of parts and other products to local repair garages, dealers and service stations.

As the consumer cuts back and drives their cars longer before a trade-in auto parts companies should see an increase in sales. Autozone's marketing plan in 2 pronged. First of course directly to the do it your selfer but they are trying to also focus on sales directly to the independent mechanics that are flourishing across the country through a financed sales program.

The stock had increases in 4 of the last 5 trading sessions for an increase of 8.07% in the last week. Barchart's 13 technical indicators all signal buy for a 100% buy signal. The stock trades around 191.99 with a 50 day moving average of 179.85.

The general investing public as measured by Motley Fool CAPS members feel the stock will beat the market by a vote of 302 to 153 with the more experienced All Stars agreeing 89 to 41. Fool notes that of the Wall Street columnists Fool follows articles have been positive 15 to 0.

Brokerage firms also have high hopes and predict double digit earnings increases of 18.60% this year, 12.20% next year and expect that EPS increase to continue at the rate of 13.20% annually for the next 5 years. Sales also are expected to increase this year and next.

3 reasons to buy Autozone:
  1. Recent price increases with a 100% Barchart technical buy signal
  2. Positive investor sentiment
  3. Wall Street buy recommendations based on expected increases in sales and earnings

Jim Van Meerten is an investor who writes on investing on Financial Tides, Barchart and Seeking Alpha. Please leave a comment below or email

Disclosure: No positions in AZO at the time of publication

Forward Industries -- FORD

FORWARD INDUSTRIES, INC. ( FORD ) is engaged in the business of designing, manufacturing and selling of custom soft-sided carrying cases and advertising specialties. All of those portable electronic devices everyone is buying needs protection and carrying cases. That is what FORD does. You might not see their name on their products because most of their sales are on a contract basis for manufacturers of the products they protect.

This is a pure momentum play so keep your stop losses in place. The stock trades around 5.03 with a 50 day moving average of 3.57.

The stock has increased in price in 12 of the last 20 trading sessions and was 5 for 5 during the last week. The stock has appreciated 66.23% in the last month so please keep those stop losses tight. Barchart's technical indicators have 12 of a possible 13 indicators signaling a buy for a 96% buy signal.

Wednesday, May 26, 2010

Munro Muffler & Brake just keeps on truckin'

Financial Tides notices the positive investor sentiment on Monro. Monro Muffler/Brake, Inc. ( MNRO ) is a chain of company-operated and dealer-operated stores providing automotive undercar repair services in the United States. Monro's stores provide a full range of services for exhaust systems, brake systems, steering and suspension systems and many other vehicle maintenance services. The company's stores typically are situated in high-visibility locations in suburban areas and small towns, as well as in major metropolitan areas.

Wall Street is forecasting double digit growth in both sales and earnings. They have given their clients 4 strong buy and 1 hold recommendations based on expected sales increases of 18.30% this year and 13.40% next year. EPS is projected to increase 31.70% this year, 20.90% next year and continue for 5 years at an annual compounded rate of 20.90%. Share price appreciation should be similar.

The stock has been up in 3 of the last 5 sessions and Barchart shows a technical buy on 10 of 13 technical indicators for an overall 72% buy score.

The general investing public is starting to notice this stock with the CAPS members on Motley Fool voting that the stock will beat the market 57 to 10 with the All Stars in agreement 19 to 1. Wall Street columnists have written 3 positive articles recently.

If you're interested in an S&P 600 small cap stock that already has been noticed remember:
  1. Wall Street likes the possibility of increased sales and earnings
  2. The general investing public has also taken notice
  3. Recent price momentum could give you a short term pop

Jim Van Meerten is an investor who writes on investing matters on Financial Tides,

Seeking Alpha and Barchart. Please leave a comment below or email

Disclosure: No positions in MNRO at the time of publication

Adc Telecommunication sees growth in China

Financial Tides has noticed all the new contracts Adc Telecommunications has signed by their Network Solutions division in the Chinese markets. ADC Telecommunications ( ADCT ) is a leading global supplier of broadband network equipment, fiber optics, software and systems integration services that enable communications service providers to deliver high-speed Internet, data, video and voice services to consumers and businesses worldwide.

Analysts on Wall Street have noticed this stock and has given their clients 7 buy and 7 hold recommendations. Although they estimate that sales will only increase by 6% next year they are predicting increases in earnings per share of 133.30& this year, 42.90% next year and an 11.83% 5 year annual compounded growth rate of 11.83% -- double digit is good!

Investor sentiment is positive with the CAPS members on Motley Fool voting that the stock will beat the market 332 to 31 with the more experienced All Stars agreeing 112 to 5. Of the Wall Street columnists Fool follows their articles have been positive 14 to 0.

The real story has been in the stocks recent price momentum with the stock up in 4 of the last 5 sessions for a 17.01% gain in only 5 days. Barchart's 13 technical indicators have 10 of 13 possible buy signals for a 72% technical buy score. The stock trades around 8.37 with a 50 day moving average of 7.83.

A momentum investment play with:
  • Recent upward price momentum of 17.01% in a week
  • Wall Street predicting increases in sales and earnings
  • Positive Investor sentiment

Jim Van Meerten is an investor who writes about investing on Financial Tides, Barchart and Seeking Alpha. Please leave a comment below or email

Disclosure: No positions in ADCT at the time of publication

Flash Memory Technology

Financial Tides thinks that Flash Memory Technology is the play of the day. Sandisk Corporation ( SNDK ) designs, manufactures, and markets flash memory storage products that are used in a wide variety of electronic systems. The company have designed flash memory storage solutions to address the storage requirements of emerging applications in the consumer electronics and industrial/communications markets. Its products are used in a number of rapidly growing consumer electronics applications, such as digital cameras, personal digital assistants, portable digital music players,digital video recorders and smart phones.

Sandisk has a leg up on all the other players with their products used in Apple's I-Pad, Amazon's Kindle and many of the widely used smart phones.

The stock is a 100% Barchart technical buy with all 13 technical indicators giving a buy signal. The stock has been up in all of the last 5 sessions and had a 11.55% price appreciation in the past week alone. The stock trades around 44.77 with a 50 day moving average of 38.53.

Wall Street analysts see fundamental strength in the numbers with increases in both sales and earnings forecasted. They have published 11 buy and 7 hold recommendations based on an expected sales increase of 35.70% this year and 10.40% next year. Earnings growth on a 5 year annual compounded basis is expected to be 17.50% per year.

The investing public has taken notice with the CAPS members on Motley Fool betting the the stock will out perform the market by a vote of 1649 to 142 and the All Stars agree 470 to 29.

The stock is a buy right now because of :
  • Recent and consistent price appreciation
  • A Barchart technical buy score of 100%
  • Wall Street recommending a buy to their clients and predicting increases in both sales and earnings
  • A wide and positive investor sentiment

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

Disclosure : no positions in SNDK at the time of publication

Monday, May 24, 2010

Apple - The most popular stock on the planet

There are times when a stock's popularity is just too big to ignore. IBM was such a company in the 70's as was Micrsoft in the 90's. For those 2 readers who don't know about them Apple (AAPL) designs, manufactures and markets personal computers and related personal computing and communicating solutions for sale primarily to education, creative, consumer, and business customers. To the rest of the world Apple will take us to places we have never even dreamed of going and do things we didn't even know were necessary. Apple just doesn't fulfill a need they create one.

Whenever I want to fell ancient I just go to an Apple Store and stand behind some 8 year old and watch them play with the new Apple products. I find myself talking like Steve Urkel but instead of saying" Did I do that?"; I find myself saying " I didn't KNOW I could do that!"

Why do I think Apple is the most popular stock on the planet? Over on Motley Fool 23,758 members have given an opinion on the stock -- more than any other. 21,803 are positive to the 1955 that think it can't beat the market. Even the experienced All Stars vote 4559 to 235 that it will beat the market. Fool notes that all 45 of the last articles about the company have been positive. If that isn't hero worship I don't know what is.

Wall Street is also in awe with 37 buy, 4 hold and only 2 under perform reports published. Sales increases of 61.60% this year and 16.80% next year are estimated with earnings increases of 46.70% this year, 15.10% next year and a 5 year compounded EPS growth rate of 16.47% expected.

There seems to be no doubt that Apple will grow but with all the herd following them are they worth their 20.4 price earnings ratio? The growth in I-Pad sales and new products that they always seem to create have analysts looking for a price between 400 and 480 in the next 5 years from the 250 where it is selling now.

The stock has lost 7.61% in the last 30 days but that is less than the 11.89% the market as measured by the Value Line Index has lost.

The stock is presently trading below it's 20 day moving average but still above its 50 and 100 day moving average.

Citibank and Bank of America may not be too big to fail but it seems that Apple may be too popular to fail.

Jim Van Meerten is an investor who writes on investing on Barchart Portfolio Blogs and Financial Tides. Please leave a comment below or email

Disclosure: No position in AAPL at the time of publication

Should you walk away from an underwater mortgage?

For those thinking of walking away from an underwater mortgage the man of the hour and most often quoted authority on the subject is Brent White of the University of Arizona Law School.

He has found that people who are walking away from home mortgages are not doing so for just financial reasons. Commercial property owners and companies default for financial reasons but not the American homeowner.

Abstract of his article:

Despite reports that homeowners are increasingly “walking away” from their mortgages, most homeowners continue to make their payments even when they are significantly underwater. This article suggests that most homeowners choose not to strategically default as a result of two emotional forces: 1) the desire to avoid the shame and guilt of foreclosure; and 2) exaggerated anxiety over foreclosure’s perceived consequences. Moreover, these emotional constraints are actively cultivated by the government and other social control agents in order to encourage homeowners to follow social and moral norms related to the honoring of financial obligations - and to ignore market and legal norms under which strategic default might be both viable and the wisest financial decision. Norms governing homeowner behavior stand in sharp contrast to norms governing lenders, who seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility. This norm asymmetry leads to distributional inequalities in which individual homeowners shoulder a disproportionate burden from the housing collapse.

Link to the entire white paper.

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

Disclosure: No positions mentioned

Are we headed for another crisis?

This weekend in Financial Times John Authers does an abstract of his new book: The Fearful Rise of Markets: Global Bubbles, Synchronized Meltdowns and How to Prevent Them in the Future.

Financial Times Link

The abstract is pure genius, I can't wait to read the book. To me a genius is anyone who can take complex subjects, boil them down and explain them in such simple language that even I can understand them.

He outline the problems with the markets as:

Other People's Money -- He explains how in the 1950's most people played the market with their own money. Only 10% of the NYSE volume was institutional. Now most money trading in the market is mangers playing with other people's money. Only there job and bonus is at stake.

Herding -- Professional investors all seem to go to the same investments and cause them to become overpriced. They all aim at the same bench marks thus limiting their investment universe.

Safety in Numbers -- Asset Allocation through diversification caused people to invest and take risks in investments they didn't understand. By forcing investment in assets that did not correlate to the rest of the market the new money rushing in caused a new correlation. Then when one sector fails they all fail.

Moral Hazard -- There was an impression that the markets were protected and all was safe. Someone was looking out at what was happening and someone would always bail out failures

He then goes on to offer suggestions on the solutions.

Moral Hazards -- Banks and financial institution either need to be broken up so that if they fail their smaller size makes it no big deal and go ahead and let then fail. If the shareholders are at risk, they might not allow risky ventures

Herd Mentality -- Change the way managers are paid. If they are paid on size and short term performance they will go along with what everyone else is doing.

Other People's Money -- You should not be able to take on a risk and then package it and sell to others. You should have to retain a piece of the risk so you have skin in the game.

This article and hopefully the book will be must reading for those few of you that really want to know why it fiasco happened and how we can prevent it in the future.

Jim Van Meerten is an investor who writes on financial matters on Seeking Alpha and
MSN Top Stocks. Please leave a comment below or email

Disclosure: No positions mentioned