By Guest Author Frank Owen
It was announced earlier in the week that Apple has lost its ranking as the most valuably publically traded company in the world. With the technology giant’s share prices plummeting, Exxon Mobil surged into pole position after a good performance last year. Apple may only be a few billion dollars behind the US oil company, but columnists all over the world seem to be suggesting that the California based brand has had its day.
The question then is whether or not this is an opportunity to go short on Apple, to leave it for dead, or to invest in the hope that its fortunes will change. To answer this question, we’ve got to look at competitors, and the reasons that Apple appears to be in decline.
It wasn’t that long ago that Apple seemed to be unstoppable. It had the best products available, a huge market share, and one of the best rated brands in the world. If analysts are to be believed, it is in decline for the very same reasons that its competitors lost out. Nokia, Research in Motion and a variety of other companies seemed to be at the top of the game, until they failed to notice changes in the technology market. The same has apparently happened to Apple, meaning rivals like Samsung are suddenly leading innovation and sales. Even Nokia are finding that their fortunes might be changing.
It seems that those who are writing off Apple as a company to invest in have very little faith in the brand’s ability to recover. There are others however, who realise that Apple’s power is not in its twilight; it is still one of the strongest companies in the world, with huge reserves to call upon. If there is any company that can turn its fortunes around, it is most certainly Apple.
There are a great many different strategies open to Apple, depending on where they believe they need to focus efforts. They are certainly going to go head to head with other technology giants such as Google when it comes to mobile operating systems, but Apple has the resources to ensure a high level of profitability.
The conclusion is that it seems far too early to write off Apple. Much of the current negativity is based upon just one quarter, and we’ve seen other huge companies such as Facebook, Amazon and Google suffer disappointing periods, only to recover.
Many investors will certainly have been scared off; there’s no avoiding that. Forex trading experts have even asserted that we could see risk aversion as a result of the company’s unexpected downturn, meaning investors move to havens such as the dollar and yen. For now at least, Apple is still worthy of investment, so much so that going short might only be worthwhile in the very short term. Only after a prolonged period of disappointment can the company really be regarded as past its prime.
Stock Manipulation Is Real, Types Of Scams
The following article courtesy of ForexTraders.com..
“Buy on the rumor, sell on the news” is an overused phrase in the investment community, but before an investor takes this advice to heart, he should also verify the sources and confirm the validity of the messages that he receives. This last part of prudent counsel often gets lost in the shuffle of buy and sell orders, but it may be the only protection that an investor has when it comes to detecting obvious stock manipulation techniques employed by those bent on deceit.
Stock manipulation is also a favorite topic of the “talking heads” on financial news channels. Fraud openly exists, despite the efforts of regulatory and law enforcement officials to stamp it out. A sad testimony to risk management efforts is that fraud can never be completely eliminated, but must be tolerated at an acceptable level as a cost of doing business. The forex market is, perhaps, the only market we have that is less prone to manipulative tactics due to its shear volume, now at $4 trillion a day and counting. Even the largest hedge funds with their sophisticated forex trading platforms or even central bankers are unable to artificially drive the market in one direction or another, though their efforts to do so are widely publicized.
Read Entire Post “Stock Manipulation Is Real, Types Of Scams” Here
I’ve talked quite a bit about the head and shoulders top formations in the Dow and S&P500 in recent weeks and it looks like we might get confirmation of those topping formations soon, based on early trading action today. What that means is that there is going to be an abundance of ways to play this market on the short side and I have one to keep an eye on today. The company is Green Mountain Coffee Roasters (GMCR).
The maker of single cup coffee brewers has been on a tear in the last couple years with the stock vaulting from 8 to 60 in a little less than three years. Earnings increased 60% in 2007, 48% last year and is expected to increase 81% this year. Yes, the company isn’t showing any signs that the growth is slowing with 4 straight quarters of accelerating sales growth. While this is a company that should continue to do well as more people save money by brewing coffee at home, it’s well overdue for a correction and the pieces are in place for a healthy downward move.
Read Entire Post “Green Mountain Coffee (GMCR) Head & Shoulders Top” Here
Just when you thought Greenspan rode off into the sunset on his white horse and enjoyed life a bit, there he was on CNBC talking about the current state of the economy (for which Mr. Artificially Low Interest Rate continues to take no credit for). We all know that when Greenspan talks people tend to listen and the market tends to react. Now, I’m not saying Greenspan’s comments were the catalyst for the late day sell off, but it’s a half way decent explanation, so I’ll go with that tonight.
While Greenspan acknowledged that the economy has shown great resiliency for the most part, he also mentioned in the same breath that we’re living through a "once-in-a-century" crisis and that that housing was nowhere near a bottom. However, this is the same guy that said on June 13th, the worst of the financial crisis was over, so as is the custom with anyone appearing on CNBC, take it with a grain of salt. Mr Artificial Rate, it’s time.. time to enjoy the personal fruits of your excessive rate cuts on a beach in a far away land.
The market didn’t get off on the right foot this morning either, as GDP came in a bit lighter than expected at 1.9% (economists predicted 2.3%) and no doubt propped up a bit by that stimulus check. Let’s see where those GDP numbers are towards the end of the year. Weekly jobless claims rose again as well, marking the 3rd time in the past 5 weeks. The monthly jobs data tomorrow morning will certainly be a market mover.
All in all, it wasn’t that bad today.. at least not as bad as the price plummet headline would have you believe. Once again there wasn’t much conviction behind the move.. that is, not a lot of volume on the sell side. I still view this current market as buy on the pull backs environment, so if we get another 100 or 200 on the downside tomorrow, keep an eye on your watch list and if one or two pull back and offer a decent entry, take a chance on it.
I do think there is some decent upside potential left in this market and I’ll discuss the important resistance levels I’m watching in the weekend report on Sunday, but with Jim Cramer starting to call a bottom in housing and the market… nah, even though Cramer is the ultimate contrarian indicator, I still think this market has some pop in it still. Let’s see how the market reacts to the jobs number tomorrow.
Why I’m still out of Mastercard and Visa
Visa was the biggest IPO in US history when it began trading back in March. On April 3rd I highlighted the breakout and initiated my first position in the company after it broke out of a very bullish looking triangle formation. http://selfinvestors.com/si/visabreakout
Less than one month later, after vaulting more than $20 bucks, I decided to lock in my profits. Way over hyped, way overbought. At 9:09AM on April 3rd I sent the following to my Gold & Platinum members:
(04/30/08 9:08:58 AM): Ok, I’m going to go ahead and take profits in Visa (V). Lots of giddy people out there with big Visa profits, but this is a stock that is WAY overbought. Considering we are still in a bear market and I’m up 30% in just a couple weeks, I’ll take the gift and sit tight for awhile. I really believe I can get back in at a significantly lower price, particularly when the lock up period
expires and this market pulls back. If you’re a long term holder with a multi year time horizon it probably makes sense to ride it out. I am not. I trade based on current market conditions and the
action in individual stocks over a shorter time period. I’m avoiding the greed in Visa and out at 83.67 as it breaks the bullish formation on the 5 min intraday chart.
As it turns out, the stock ramped up another 6 bucks or so before the run died and it spent the next two months carving out a large, bullish wedge formation. One day before the holiday, on July 3rd it broke that bullish formation setting it up for a much larger cup base which it is forming now. I haven’t had time to analyze the earnings reports of both Visa and Mastercard but I know how the market reacted. Despite beating EPS estimates, both were hit hard on heavy volume setting both up for a deeper correction. These companies are absolutely not immune to a faltering economy and until the deceleration of growth in both earnings and revenues for both companies stabilize, it pays to watch on the sidelines and wait for the next base to form.
As many of you probably know, oil speculator extraordinaire T Boone Pickens has a plan, a plan to save the world from itself in the form of clean energy (well sorta, more on that later). Mr. Pickens, I applaud you for your efforts and for stepping up at a time when government agrees to disagree on just about every issue including investments in green energy solutions.
The Pickens Plan was announced a few days ago and its aim is simple, at least on paper. Decrease our dependence on foreign oil and do it now with the use of wind power and powering vehicles with natural gas, both of which Pickens claims is abundant in our backyard. Pickens calls the US "The Saudi Arabia of Wind Power" and bases that statement on the fact that studies from around the world show that the Great Plains states are home to the greatest wind energy potential in the world with North Dakota having the potential to power more than a quarter of the country. Will wind power be to North Dakota what oil has been to Dubai? Uh no..but if Pickens has his way and the government cooperates, wind power barons might just replace the farmers of America. Pickens says his plan won’t interfere with farming and grazing and that could certainly be possible but I can’t imagine it will be all that easy logistically.
The 2nd part of the Pickens Plan calls for the use of natural gas as the primary fuel for our transportation needs. According to the California Energy Commission, natural gas greenhouse emissions are 23% lower than diesel and 30% lower than gasoline and according to Pickens comes with a much lower price tag of under $1/gallon in places like Utah and Oklahoma. Unfortunately the infrastructure isn’t in place to make this feasible for most people and the $1/gallon is the exception to the rule. I just checked out a map of natural gas fueling stations around Portland, Oregon and the nearest station is a solid hour away out in the boondocks! The price: $2.53 gallon. Not exactly a buck a gallon. If this plan gains a footing (only 150,000 vehicles in US currently use natural gas) expect those prices to come more in line with what we’re paying at the pump now.
His natural gas transportation plan just doesn’t make much sense to me in terms of cost and environmental impact, but we have to remember that Pickens is a businessman first and the added benefit to the environment would just be icing on the cake. He did tell the Guardian in April "Don’t get the idea that I’ve turned green. My business is making money and I think this is going to make a lot of money (referring to his wind power investments). There’s also the bit about him not putting any wind turbines on his 68,000 acre ranch but preferring to pay royalties to other Texas ranchers (A farmer who gives up a quarter of an acre to a wind farm can earn $10,000 a year from it – some 3 per cent of the value of the electricity it produces. If he planted corn for ethanol he would earn $300). Kids, pack your bags, we’re moving to Sweetwater Texas to build a windfarm!
I still think that electric cars or a hybrid/electric is the best approach, but many think that electric cars are a bit of a pipe dream and that the battery technology will never allow for 100% electric cars, but this is where the research money should go. Is natural gas a better approach? In my opinion, converting infrastructure for natural gas fueling stations is a BIG mistake. The plan is to harness the power of the wind to generate electricity, which frees up the natural gas for our transportation needs, but last time I checked natural gas is still a scarce resource and emissions are ONLY 30% less.. cleaner but far from clean.
At any rate, while the plan has some problems (yeah most plans do) I do applaud Pickens for having a plan rooted in some reality… and it does create discussion, awareness and ideas for change. Long Pickens, short Al Gore.
Now that the rambling out of me is done, let’s get into some profitable ideas that may emerge from the Pickens Plan. Focusing on Wind and Natural Gas transportation there are a few that I can think of, but hopefully this post will bring out the creative genius in some of you and yield a few more ideas. Here’s my take:
There are few, if any pure wind play opportunities out there. Most of them are overseas, but you’re in luck because two Wind ETF’s just launched providing diversified exposure to global wind energy companies and I prefer the First Trust Global Wind Energy ETF (FAN). It’s only been trading a month and as you can see it’s been mostly down. In fact most clean energy funds are down big over the past several months and I think that provides a fantastic opportunity for the patient investor over the long haul. FAN is carving out a large base currently and I’m waiting for it to continue carving out a bottom, then stage some kind of breakout from a cup or double bottom base, although may add an initial small position if it comes back into the 27 range.
My second trade idea for profiting from the Pickens Plan happens to be on the short side, in Fuel Systems Solutions (FSYS). This is a company that provides the necessary components for a car to run on natural gas, so if Pickens Plan proliferates, FSYS stands to benefit in a big way. Ah, but there is a problem. Not in the company itself. This is a company that has seen a huge surge in revenue and profit as overseas customers convert their vehicles to the cheaper natural gas fuel. If that trend catches on in the US, expect FSYS to continue to profit big. However, this is a stock that has quadrupled in just a few months and from a technical standpoint, this is a mighty bearish looking double top (full disclosure: yes I am short on this). It’s a short right here with a stop above 42.50. If it fills the gap around 20, I’m a believer on the long side in this Pickens Plan play.
The other play in this space is Clean Energy Fuels (CLNE), which happens to be controlled by… you guessed it, Mr. Pickens! See, he really does have a plan and it includes profits. CLNE provides compressed natural gas (CNG) and liquefied natural gas (LNG) for use in vehicles. Where FSYS provides the conversion, CLNE is there with the fuel. Some kind of relationship between the two companies seems likely at some point, but that’s for another article.
This is a stock that has run up 40% in the past month right into major resistance (much of that after the Pickens Plan was announced). Wait for the euphoria to wear off and the stock to come back to earth for a longer term play or trade the breakout once it clears the downtrend above 14.
The following post is provided exclusively to readers of SelfInvestors.com by the good folks at TheCorrectCall.com. I agree that medical and drug stocks are showing some resiliency.. some even showing very bullish action, but being a technical trader myself I personally would hold off on Boston Scientific until it gets back above key resistance levels of the 50 and 200 day moving averages. Perhaps its upcoming earnings report will be just the catalyst to do so.
Boston Scientific (BSX) makes a variety of medical devices that are used in several areas of interventional medicine across the globe. The company has three main focus areas: Cardiovascular, Endosurgery, and Neuromodulation.
BSX got some great news recently as its Xience V stent received FDA approval. It is partnering with Abbott Labs on the stent. This could give Boston Scientific a nice shot in the arm as sales of stents have declined lately due to safety concerns. In fact, Fitch raised BSX’s outlook to stable from negative due to its progress in the drug-coated stent market.
The company will report second-quarter earnings on July 22. Analysts are expecting 11 cents per share, which would represent 37% growth over last year’s results. BSX has dramatically exceeded expectations in each of the past three quarters, so it wouldn’t be unreasonable to expect it again. One analyst has raised his estimate just over the past week for this quarter.
We like the company’s valuations at these levels. It is only trading at 1.25x book value, which is a huge discount to several of its peers. Likewise, its price/sales ratio is low at 2.31. It is also changing hands at 18.7x next year’s earnings. This is below its expected growth of 22% for next year. With all of the positive developments, we see the stock at $15 in the next 3-to-6 months.
The timing could be right too. In our weekly review of industry performance and chart analysis, all things healthcare appear to be on the march forward. BSX’s chart reveals limited downside and a reliable buy signal.
Suggested Stop: $11.56
Last year I traded CRDC for a quick 45% profit and I believe it may be offering such an opportunity here again as it attempts a breakout from a bullish triangle formation. This is a highly volatile, speculative swing trade so play accordingly and please do your own research.
For you brave souls looking for a little momentum on the long side, I’ve unearthed a couple plays to put on the radar – Medifast (MED) & Netezza (NZ). I have no idea what these companies do and no idea what the fundamentals are and I don’t care… because they are momentum swing trades meant to be held for a few days up to a couple weeks. Nothing more.
Remember though, we are still in correction mode with the possibility of further declines. Do your own research please and consider smaller positions with tight stops.
MED is carving out a bullish triangle formation – I’m setting an alert above 6.15 and may trade the breakout from this pattern.
NZ is digesting a big ramp up with record volume and based on the dry up in sell volume may get ready to run again soon. I’m looking for a breakout from the downward trends as entry signal. I think it will settle out around 11.50 before ramping up again.
Disclaimer: I own no position in either.
Small Caps Moving: Watch CTS Corp (CTS)
The following is exclusive content from The Correct Call provided to readers of SelfInvestors.com. Enjoy!
Every week The Correct Call analyzes more than 500 sector, index and ETF charts looking for emerging up or down trends. Once we have a feel for the big picture, we can then look under the hood to discover the stocks that have the engine purring or squealing.
Small cap stocks look like they could outperform in the weeks and months ahead.
CTS Corporation (CTS) is a small cap stock we believe could provide investors with a eye-catching 20%+ return in the next 3-to-6 months.
CTS Corporation designs, manufactures and sells a broad line of electronic components and sensors and is a provider of electronics manufacturing solutions to the automotive, computer, communications markets, medical, defense & aerospace, and industrial markets
On April 29th, CTS reported earnings that exceeded Wall Street’s expectations by 20% and all 3 analysts who cover CTS have raised their estimates for the remainder of 08 and for all of 2009. Yet the stock price remains unchanged. The Correct Call sees this as an invitation to buy a growing company for a reasonable price.
- CTS trades at .52 its sales to earnings; meaning for every dollar CTS does in sales, their stock is worth 52 cents. The average company in their industry trades at 1.46 times sales.
Based on the 2008 full year estimate of 81 cents per share, CTS is trading at a forward P/E of 11.56. At the industry average P/E of a hair under 16; CTS’ share price would approach $13.
Apparently this bargain has been recognized by the CTS’ management. Three insiders purchased shares in the open market within the last 2 weeks between $10.46 and $10.70 per share. The Correct Call loves insider buying as management rarely lies with their wallets.
CTS’ chart leads us to believe the next move should be up.
Suggested Stop: $10.22