Weekly Market Recap - W/E 10/8

Time for that weekly reality check where we let our 3 yard sticks tell us what really happened.  I'll always use 3 because no single yard stick is right all the time.  Each measures the momentum of the market but each in a slightly different way.  The data is provided by Barchart.

Value Line Index -- Contains 1700 stocks so its broader than the S&P 500 or the very narrow Dow 30 -- Upward trend this week

• 96% Barcahrt technical buy signal
• Up in 12 of the last 20 sessions
• Up 1.79% for the week, Up 8.40% for the month
• 14 day Relativee Strength Index at 66.89% and rising

Barchart Market Momentum -- Contains approximately 6000 stocks -- Percentage of stock closing above their Daily Moving Averages for various time periods -- Above 50% is good

• Friday over 79.98% closed above their 20 DMA, over 84.90% closed above their 50 DMA, over 82.18% closed above their 100 DMA
• Last week over 79.79% closed above their 20 DMA, over 82.27% closed above their 50 DMA, over 78.14% closed above their 100 DMA
• Last month over 77.74% closed above their 20 DMA, over 82.27% closed above their 50 DMA, over 58.85% closed above their 100 DMA

Ratio of stocks hitting new highs/new lows for various time frames -- 1.0+ bullish, 1.0 neutral, below .99 bearish - very bullish this week

• 1 month new highs/new lows -- 1233/137 = 9.00
• 3 month new highs/new lows -- 812/45 = 18.04
• 6 month new highs/new lows -- 378/34 = 11.12

Summary and Investment Strategy -- This week had definite upward momentum and seemed very solid.  Next week is earnings week.  We can expect some stocks that do not meet estimates to drop.  Hopefully, there will be others that beat estimates and soar.  Last earnings season Reuters wrote that 85% of all consensus estimates were wrong.  This was more a function of bad analysis than it was a bad economy.  I'll close out positions that drop too far and not be afraid to replace them with new stocks that show recent upward momentum.

Jim Van Meerten is an advisor to Marketocracy Capital Management who uses his model portfolios not only to manage their mutual funds but also their clients Separately Managed Accounts. You can read his blogs about those model portfolios and investing here and on Barchart Portfolio Blogs. Please leave a comment below or email JimVanMeerten@gmail.com.

Disclosure: Jim Van Meerten through Marketocracy Capital Management has an interest in the stocks mentioned in this blog.

VMWare - VM - deleted 10/7

I deleted VMWare (VMW) for the Barchart Van Meerten New High portfolio.  It's ironic that the when Ken Kam asked me about my best performing stocks in the Barchart Van Meerten New High portfolio my top holding was VMWare (VMW). I bought the stock back on March 9th at 54.69 when it came up on my stock screening, meeting all of my buy criteria.  I watched it climb steadily staying above its 50 and 100 day moving averages till on 9/20 it hit a high of 89.30.

That week it started to stall and by 10/7 lost its price support and dropped below it's 20 and 50 day moving averages.  I had sell signals on several of the technical indicators I follow and the 14 day Relative Strength Index dropped to 36.52 and was falling.

I put in my sell order the day the article hit Forbes and was able to close at 77.31 which was 13.22% off it's high.  Buying at 54.69 and selling at 77.31 made a 41.36% gain on the position. I held for 7 months.  That would be an annual return of around 71%.  I wish I could do that with all my positions.

Jim Vab Meerten Interview by Forbes

If you didn't catch the article here's the liim and copy:

http://blogs.forbes.com/schifrin/2010/10/07/vmware-and-two-other-best-buy-stocks-from-a-momentum-master/


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VMware And Two Other Best Buy Stocks From A Momentum Master

By KEN KAM

posted by KEN KAM

Marketocracy.com



Momentum investors do well when market trends tend to persist for a while. But for much of the past 10 years, sectors have come into and fallen out of favor so quickly that many momentum investors have been whipsawed.



Jim VanMeerten (track record) is a rare momentum investor who has done well in a choppy market. Jim started his model mutual fund portfolio at Marketocracy on March 3, 2005 and for more than 5 years now he has averaged about 12% a year while the S&P 500 averaged about 1%.



While his record may not be as impressive as some other investors I track like Mike Koza and others featured in The Warren Buffetts Next Door, Jim has the kind of track record it takes to be a Marketocracy Master. [Disclosure: I make Jim's portfolio available to clients of registered investment advisors through a separately managed account.]



According to the detailed trading records I keep, Jim makes money on 42% of his stock picks. However, when he is right about a stock, he makes 1.7x the money he loses when he is wrong. In other words, Jim cuts his losses off quickly while they are small, and lets his winners run. That’s how he avoided getting whipsawed during the past 5 years.



By way of background Jim was born in Chicago and raised in Fort Lauderdale, FLA. He spent many years as a certified public accountant but eventually became a financial advisor. He currently lives in Charlotte, North Carolina and invests full-time.



I asked Jim to tell me how his investment discipline led him to the stocks that are among the top holdings.

Here’s what Jim said:



All of my top holdings look alike. This is because all the stocks in my portfolio have to meet the same criteria and they will stay in the portfolio as long as they meet my criteria but not one day longer.



I want to invest when the economy is healthy and the market is heading up. There is no single indicator that tells me when it’s a good time invest, so I want to see as many indicators in my favor as possible. I’d rather be approximately right than precisely inaccurate.



To judge the health of the economy, I use a consensus of 21 economic indicators. To see where the market is heading, I review over 25 technical indicators every day. If the winds are favorable then I use over 27 technical indicators to screen 12,000 stocks, ADRs, closed-end investment companies and ETF’s to find those few that meet all of my technical criteria.



At this point, I usually end up with a list of about 10 stocks that meet all my criteria. Some days none pass the screening so I won’t buy anything – I don’t spit in the wind.



My last step is to review 4 graphs containing moving averages and turtle channels that include the latest trading activity in 5 minute intervals. If a security can pass all those tests I might consider buying it.



The final and ultimate test is a 3 fold hurdle:



•The price has to have appreciated in 50% of the last 20 trading sessions

•Wall Street brokerages must have published buy reports based on expected increases in sales and earnings

•And last, there has to be a wide and positive retail following

I don’t buy because Wall Street and the general public likes a stock but I realize if 10 Wall Street firms have sell reports out, then there are a lot of brokers asking all their clients for sell orders and I would be foolish to think my pick will swim against that out flowing tide.



Now the picks:



VMWare Inc ( VMW) – Virtualization and cloud infrastructure software. Competes with Microsoft. [Yesterday VMW and other cloud computing stocks fell hard when a vendor lowered its sales projections. The notes below reflect VMW stats before the sell off.]



•Wall Street has 14 buy and 19 hold recommendations

•Analysts expect Sales to increase 37.30% this year, 19.40% next year

•Analysts estimate EPS to increase 39.00% this year, 21.60% next year

•May have become over valued as my momentum indicators are neutral and the 14 day relative strength index in 45.27%

•Short interests are very slightly increasing

•Positive investor sentiment

Aberdeen Asia Pacific Income Fund ( FAX ) – Holds sovereign debt of mainly Australia.



•Wall Street firms do not make recommendations of closed end funds but are pushing recommendations to clients to acquire sovereign debt and most view Australia favorable

•My technical indicators have 11 positive and 2 neutral signals at present

•Short interests are decreasing

•14 day Relative strength 72.16%

•Positive investor sentiment

Trina Solar Ltd ( TSL) – Produces monocrystalline ingots, wafers and cells for use in solar panels. Competes with companies like JA Solar.



•Wall Street has 21 buy and 4 hold reports published

•Analysts look for Sales to increase 75.60% this year and 12.90% next year

•Analysts estimate EPS to increase 64.30% this year and continue at an annual rate of 20.00% for the next 5 years

•Technical indicators have 10 positive and 3 neutral signals

•14 day Relative Strength Index is 55.14%

•Short interests decreasing

•Positive investor sentiment

See, they all look alike:



•Positive price momentum

•Wall Street recommending buys based on increases in sales and earnings

•Positive investor sentiment

The rest of my portfolio looks very similar statistically.



To receive a free email update when Jim VanMeerten and other Marketocracy Masters change their top holdings, click here.



Disclosure: Ken Kam is the portfolio manager for mutual and hedge funds advised by Marketocracy Capital Management, an SEC registered investment advisor. Before relying on the opinions expressed in this article, you should assume that Marketocracy, its affiliates, clients, and Ken have financial interests in these stocks and may hold or trade them contrary to these opinions when, in our view, market conditions change.





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Gold, Sliver or Copper? How about all 3?

When you can't decide which commodity to buy, why not buy all 3 in one company?  Freeport-McMoRan (FCX) is engaged in mineral exploration and development, mining and milling of copper, gold, and silver in Indonesia, and the smelting and refining of copper concentrates in Spain and Indonesia. They are the world's lowest-cost copper producer and one of the world's largest producers of copper and gold. FCX's operations are conducted through its subsidiaries, P.T. Freeport Indonesia (PT-FI), P.T. IRJA Eastern Minerals Corporation (Eastern Mining) and through Atlantic Copper, S.A. (Atlantic).

Wall Street has some great projections for this company.  They estimate sales will be up 17.40% this year and 6.50% next year.  Earnings are expected to be robust with an increase of 28.00% this year, 15.50% next year and continue at an annual rate of 10.60% for the next 5 years.  Those projections have caused them to issue 13 buy, 7 hold and no negative recommendation to their clients.

The soaring prices of gold, silver and cooper have taken the company's stock along with it.  The stock has a 100% Barchart technical buy signal and is up 18.59% in the last month alone.  The company recently traded at 93.40, far above its 50 day moving average of 77.41.  This stock hit 12 new highs in the last 20 sessions and has a 14 day Relative Strength Index that is 90.97%.

The great press has brought wide attention to this ssecurity and the CAPS members on Motley Fool think it will beat the market with a vote of 5,291 to 199 with the All Stars in agreement with their vote of 1,640 to 27.  Fool notes that Wall Street columnists have written positive articles 19 to 0,

Points to consider:

• The company is in all 3 of the commodities that are on the move
• They are a very low cost producer of copper - A good place to be in a recovering economy
• Wall Street has issued buy recommendations to their clients based on estimates of increases in sales and earnings
• There is a very wide and positive following of the stock
• Barchart's technical indicators say now is the time to be in this stock

Jim Van Meerten is an advisor to Marketocracy Capital Management who uses his model portfolios not only to manage their mutual funds but also their clients Separately Managed Accounts. You can read his blogs about those model portfolios and investing here and on Barchart Portfolio Blogs. Please leave a comment below or email JimVanMeerten@gmail.com.

Disclosure: Jim Van Meerten through Marketocracy Capital Management has an interest in the stocks mentioned in this blog.

Has Pepsi lost its fizz?

PepsiCo, Inc. (PEP) consists of widely know brands like Frito-Lay, Pepsi-Cola, Tropicana, Quaker Oats and Gatoraide.  I can find all of their brands in my pantry and you probably can in your's too. PepsiCo brands are among the best known and most respected in the world and are available in countries and territories throughout the world. PepsiCo's success is the result of superior products, high standards of performance, distinctive competitive strategies and the high integrity of its people.

They have been acquiring back some of their largest bottlers and hope to see $400 million drop to the bottom line through integrated costs savings.  That, plus a 10% growth rate in the Frito-Lay division makes for a nice future.  They are not ignoring the tremendous growth opportunities in China and India and are jumping into those markets with both feet.

Wall Street brokerages think sales will grow 32.60% this year and 7.50% next year.  Their earnings per share estimates are an increase of 12.10% this year, 11.30% next year and an annual EPS growth rate of 8.87% for at least the next 5 years.  These projections are the reason they have 13 buy and 2 hold recommendations published for their brokers to push as a core holding.

Recent price momentum has been good with 11 new highs in the last 20 sessions for a 3.22% increase in price last month.  Barchart's technical indicators have 13 out of 13 signalling a buy.  The stock recently traded around 67.68 well above it's 50 day moving average of 65.70.  The 14 day Relative Strength Index is presently 65.21% and rising.

The recent price increase plus the Wall Street recommendations may be the reason this stock has such a wide and positive investor following.  On Motley Fool the CAPS members vote 3,929 to 127 that the stock will beat the market with the All Stars voting 1,192 to 18 for the same thing.  Fool notes that articles about the stock are positive 21 to 1.

This stock has it all:

• World wide brand name recognition
• Wall Street recommendations based on projected increases in sales and earnings
• 100% Barchart technical buy signal -- can't get any better than that
• Very popular core holding with the general investing public

Jim Van Meerten is an advisor to Marketocracy Capital Management who uses his model portfolios not only to manage their mutual funds but also their clients Separately Managed Accounts. You can read his blogs about those model portfolios and investing here and on Barchart Portfolio Blogs. Please leave a comment below or email JimVanMeerten@gmail.com.




Disclosure: Jim Van Meerten through Marketocracy Capital Management has an interest in the stocks mentioned in this blog.

The 3 best stocks in my portfolio

When I was asked what I liked about my 3 best holdings I could answer right away:  They all look alike.  That may sound strange but I feel that once you decide what you want out of your portfolio then all the holdings should look alike.

Today too many talking heads say buy and hold is dead and this is the era of the stock picker.  I've worked in the financial services industry for more than 40 years as an accountant, attorney and financial advisor and I've never seen a job requisition for a stock picker.  I've seen a lot for a portfolio manager and that's what I feel I am.

As a portfolio manager it shouldn't matter if you are a growth investor, income investor, value investor or like me a momentum investor, every holding in your portfolio should look alike but like Lake Wobegon it should be above average.  The trick is not to find stocks that meet your criteria; that's really the easy part.  The real trick is to buy stocks you like and hold them as long as they meet your criteria but not one day longer.  Knowing when to sell is the trick.  That's what portfolio management is all about.

Ron Prichard, the editor of MSN Money Central told me I write like a Data Head.  I hope he meant that as a complement because I love data.  I live and breath the stock market and read everything I can.  I have all the TVs in the house on different channels: CNBC, Bloomberg and Fox Business news.  I read the Financial Times, Value Line Research Center and screen stocks on Barchart.  When I find stocks that meet my statistical criteria I further research them on Yahoo Finance, Motley Fool and because I'm a top contributor to Seeking Alpha I have complementary access to over a dozen more financial websites.

I do a top down analysis to get as many indicators in my favor as possible  I'd rather be approximately right than precisely inaccurate..  I want to see an expanding economy and use a consensus of 21 economic indicators.  I want to see an upward trend to the overall stock market and use over 25 technical indicators every day to see where the market is heading.  If the winds are favorable then I use over 27 technical indicators to screen 12,000 stocks, ADRs, closed-end investment companies and ETF's to find those few that meet all of my technical criteria.  By the time I do this I usually end up with a list of about 10 stocks that meet it all.  Some days none pass the screening so I won't buy anything - I don't spit in the wind.

My last step is to review 4 graphs containing moving averages and turtle channels that include the latest trading activity in 5 minute intervals.  If a security can pass all those tests I might consider buying it.

The final and ultimate test; and so few pass this one is a 3 fold hurdle:

• The price has to have appreciated in 50% of the last 20 trading sessions
• Wall Street brokerages must have published buy reports based on expected increases in sales and earnings
• And last, there has to be a wide and positive retail following

I don't buy because Wall Street and the general public likes a stock but I realize if 10 Wall Street firms have sell reports out, then there are a lot of brokers asking all their clients for sell orders and I be foolish to think my pick will swim against that out flowing tide.

Now the picks:

VMWare Inc ( VMW) - Prepackaged software.  - up 50.75% since purchase

• Wall Street has 14 buy and 19 hold recommendations
• Analysts expect Sales to increase 37.30% this year, 19.40% next year
• Analysts estimate EPS to increase 39.00% this year, 21.60% next year
• May have become over valued as my momentum indicators are neutral and the 14 day relative strength index in 45.27%
• Short interests are very slightly increasing
• Positive investor sentiment

Aberdeen Asia Pacific Income Fund ( FAX ) - Holds sovereign debt of mainly Australia - up 25.60% since purchase

• Wall Street firms  do not make recommendations of closed end funds but are pushing recommendations to clients to acquire sovereign debt and most view Australia favorable
• My technical indicators have 11 positive and 2 neutral signals at present
• Short interests are decreasing
• 14 day Relative strength 72.16%
• Positive investor sentiment

Trina Solar Ltd ( TSL) - Produces monocrystalline ingots, wafers and cells for use in solar panels - up 24.57% since purchase

• Wall Street has 21 buy and 4 hold reports published
• Analysts look for Sales to increase 75.60% this year and 12.90% next year
• Analysts estimate EPS to increase 64.30% this year and continue at an annual rate of 20.00% for the next 5 years
• Technical indicators have 10 positive and 3 neutral signals
• 14 day Relative Strength Index is 55.14%
• Short interests decreasing
• Positive investor sentiment

See, they all look alike:

• Positive price momentum
• Wall Street recommending buys based on increases in sales and earnings
• Positive investor sentiment

The rest of the portfolio looks very similar statistically.

Sprint to the finish?

Sprint Nextel (S) offers a comprehensive range of wireless and wire line communications services to consumer, business and government customers. Sprint is widely recognized for developing, engineering and deploying innovative technologies, including two robust wireless networks offering industry leading mobile data services; instant national and international push-to-talk capabilities; and an award-winning and global Tier 1 Internet backbone.

The competition in this sector is extremely intense and although Sprint isn't growing much in market share they are doing a good job in retaining the customers they have.  This higher retention rate has allowed them to spend less on marketing and control administrative costs.

Wall Street brokerages look for this cost containment to fall to the bottom line and looks of a 5.90% increase in earnings per share next year.  They have 4 strong buy, 10 buy and 13 hold recommendations distributed to their clients.

A good sign is the falling short interests.  Part of that is due to general market conditions over all but part is due to positive articles about the stock.  Since 5/28 short interests have fallen from a high of 102 million to only 31 million in the 9/15 reporting period.

Barchart has a 100% technical buy signal and the stock hit 11 new highs in the last 20 session.  The price was up 14.01% last month alone and the 14 day Relative Strength Index is a high 95.24%

The general investing public as measured on Motley Fool is high and positive with the CAPS members voting 1,656 to 419 that the stock will beat the market and the All Stars are in agreement by a vote of 386 to 89.  Fool notes that articles on the stock have been positive 19 to 2.

If you're looking for a core holding consider:

• Recent price appreciation has been consistent and positive
• Wall Street is recommending the stock to their clients based on increased earnings mainly due to cost containment
• There is a wide and positive general investor sentiment

Jim Van Meerten is an advisor to Marketocracy Capital Management who uses his model portfolios not only to manage their mutual funds but also their clients Separately Managed Accounts. You can read his blogs about those model portfolios and investing here and on Barchart Portfolio Blogs. Please leave a comment below or email JimVanMeerten@gmail.com.

Disclosure: Jim Van Meerten through Marketocracy Capital Management has an interest in the stocks mentioned in this blog.