Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

Buying Opportunity

A buying opportunity in a stock occurs when a short-term fluctuation allows for the security to be mispriced. Value is relative to an investor’s own criteria. An example is a one-time problem, such as a strike at a mine, which results in the shares of the firm being sold off. This selloff might offer a long-term investor the opportunity to buy shares of the mining company at a favorable value. Buying opportunities occur for various reasons, but the goal of any investor is to accumulate assets at favorable levels. If an asset is selling at below market value and an investor believed that the business would recover, this would be a great example of a buying opportunity.

Only Up From Here for This World-Class Internet Stock?

By for Profit Confidential

World-Class Internet StockWhat began as a relatively simple idea for communicating across computers or mobile devices has, in little more than a decade, become an iconic American symbol in social media.

Of course, I’m talking about Mark Zuckerberg’s start-up Facebook, Inc. (NASDAQ/FB), which traded at a new record-high of more than $81.00 on Tuesday morning, equating to a colossal market value of $210 billion. (Amazing what can come from the dorms of Harvard.)

Facebook is now arguably the top social media stock in the world with its more than one billion users, based on my stock analysis. A pretty big feat, though the company still hasn’t been able to crack into the highly regulated Chinese market.

As my stock analysis might suggest, getting its foot into China and India could generate even more staggering growth metrics for a company that is already beginning to deliver results by monetizing its user base.

For all those who thought Facebook was just another overhyped company with very little substance, they have so far been proven wrong.

Luckily, I was not one of those bears, as I couldn’t ignore the one billion pairs of eyes, especially if the company evolved and began to make money from its user base.

While the social media space is highly competitive with the likes of chief rival Twitter, Inc. (NASDAQ/TWTR), my stock analysis indicates that Facebook currently has the upper hand as the early entrant.

Facebook Inc Chart

Chart courtesy of www.StockCharts.com

Of course, the proof is in the financials, as my stock analysis suggests. How about revenue growth of 55% to $7.87 billion in 2013? More importantly, how about the superlative growth … Read More

Strategies for Investing in These Chaotic Markets

By for Profit Confidential

Strategies for Investing

Here we go again. Just when the stock market is moving lower and forecasting a potential correction, we see buying emerging, driving the bears back to the woods.

The reality is that I was looking for the S&P 500 to potentially correct 10%, down to around 1,792, something that has not materialized in about two years. It would, in my view, represent a good buying opportunity to accumulate shares at a discount. Yet despite declining as much as seven percent, the S&P 500 just couldn’t give up, staging a bounce-back.

So here we are with the S&P 500 breaking back above its key 200-day moving average (MA) of around 1,906. This appears to be encouraging the market, making it somewhat optimistic.

The way I see it is the recovery of the 200-day MA by the S&P 500 was key, but I would be more impressed if the S&P 500 could retrace the 50-day MA of around 1,966. Of course, this move could easily occur, as the S&P 500 was a mere 20 points away on Wednesday.

What’s also interesting is the comeback in both the technology and small-cap areas.

Technology has been strong over the past several sessions with the NASDAQ bouncing back to above its 200-day MA and coming within 1.49% of its recent high. If technology can regain its luster and offer some leadership to the broader stock market, we could see the S&P 500 move back to above 1,700 in the best-case scenario; albeit, it will take some work for this to happen.

Small-caps have fared the best in October, largely due to some technically oversold buying … Read More

About That Referendum in Switzerland…

By for Profit Confidential

Demand Shock for Gold Market Coming SoonOn November 30, Switzerland’s citizens will cast a very critical vote.

Through a referendum, they will vote for or against the Swiss National Bank increasing its gold bullion reserves to 20%, the central bank halting the selling of gold, and the storing of gold bullion in the country. (Source: Kitco News, September 30, 2014.)

If the results are in favor of the referendum, it will mean Switzerland’s central bank will be forced to buy a significant amount of gold bullion.

According to the most recent data from the World Gold Council, Switzerland has 1,040 tonnes of gold bullion in its reserves, equal to only 7.8% of its total reserves. (Source: “World Official Gold Holdings,” World Gold Council web site, last accessed October 16, 2014.) To bring its gold bullion holdings to 20% of total reserves, the central bank of Switzerland will have to buy 1,600 more tonnes of gold, or about 60% of all global mine output this year. Will the gold market be able to handle this kind of demand shock? I highly doubt it.

And if the central bank of Switzerland stops selling gold, a significant amount of gold will come off the market.

Finally, the vote on gold being stored in the country is just another example of the increasing appetite for the precious metal. We saw this phenomenon happen in Germany not too long ago when the country asked the U.S. for its gold back (the U.S. was “storing” it), but Germany was told it would have to wait seven years to get it.

The big picture: Since 2009, central banks around the world have bought … Read More

Former Wall Street Tech Favorite Set for a Comeback

By for Profit Confidential

How This Former Wall Street Tech Star Is Making a ComebackThe financial media and analysts are talking endlessly about the state and fragility of the stock market and whether a bottom may be near. I discussed the vulnerability to the downside in my last article. If you missed it, you may want to go back and read what I said. (See “Strategies to Protect Your Capital While Investing in This Market.”)

While stocks appear to be heading to negative ground in 2014, I view continued weakness as a buying opportunity to accumulate some stocks at a discount.

For the majority of you, I would advise staying away from the higher-beta small-cap and momentum stocks at this time and wait for things to settle down. In other words, I want to see some sustained buying support emerge to show some evidence the downside selling is coming to an end.

In the meantime, take a look at some of the bigger S&P 500 and DOW stocks that have moved lower to much more attractive entry points.

In the technology area, I like what’s happening at former Wall Street darling Microsoft Corporation (NASDAQ/MSFT) under the stewardship of CEO Satya Nadella.

While Nadella recently said some disparaging remarks on females in the workforce, what he has done at Microsoft since taking over from former CEO Steve Ballmer has been encouraging.

The rise in the stock price in Microsoft has even allowed Ballmer to pay an obscene $2.0-billon-plus for the LA Clippers. Ballmer’s failure to recognize and fully understand the big impact the mobile sector has on the technology space helped to make Microsoft insignificant for years.

MSFT Microsoft Corp Chart

Chart courtesy of www.StockCharts.com

Nadella has shifted his … Read More

Strategies to Protect Your Capital While Investing in This Market

By for Profit Confidential

How Investors Can Deal with the Current MarketThere are no secrets to dealing with the current stock market malaise. The key is to simply understand, manage, and deal with the inherent risk. I’m not talking just about the domestic risk, but also the economic risk from Europe and China, along with the geopolitical risk in Syria and Ukraine.

As you probably all know, the stock market hates uncertainty and there’s plenty of it. Until the uncertainties dissipate, the stock market will be vulnerable to a correction.

This is not difficult to understand as the stock market, with the exception of the small-cap segment, has not recorded a correction of six percent or more for quite some time. The reality is that the key stock market indices are only down less than three percent from their highs, so we could see additional selling.

Given that the technical picture is bearish, with the key stock market indices trading below their respective 50-day moving averages (MAs), we could be in for more downside moves.

In fact, failure to attract support at the 200-day MA would be negative, based on my technical analysis.

The S&P 500 could trade down to below 1,900 should the stock market correction hold in place. At that point, I would be looking to add to positions if support surfaces.

The fact is that I want to see some chaos develop in the stock market as situations like this usually provide an excellent buying opportunity. Simply put, panic means opportunities.

While the near-term trend is down and the intermediate trend is fragile, as long as the long-term trends remain in place, I would be looking to buy … Read More

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