Investment Advice
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Why You’ll Want to Spend More Time Gardening, Less Time Stock-Picking This May
By George Leong, B.Comm. for Profit Confidential
It has been a great five months so far for stocks, as we get set for the blooming of the flowers in May. Unfortunately, the rebirth of your garden and everything that comes along with spring and summer doesn’t coincide with the best months for investing in the market, according to my stock analysis.
April tends to be characterized by rain, but it could also be the final leg of the current six-month bull cycle from November to April that has historically resulted in the best gains, according to the Stock Trader’s Almanac and its founder Yale Hirsch.
Just take a look at the recent five months from November. The S&P 500 has reported gains in five straight months, with a combined gain of 9.4%, based on my stock analysis.
According to the Stock Trader’s Almanac, the upcoming May–October period is considered the weakest six months for stocks, which is why you will soon begin to hear the common phrase, “Sell in May, and go away.” The historical records reflect the cycle. In the past half-century, the Dow moved up, on average, less than one percent from May to October but averaged over seven percent in the other six months, based on my stock analysis.
My stock analysis suggests that while the historical tendency is not foolproof, if I were a betting man, I might wager on the cycle proving itself once again this year as the stock market is currently stalling. (Read “Market Action Driven by Headlines; Investors Should Be Nervous.”)
Take a look at the chart of the S&P 500 below. Note the three blue circles that highlight the approximate May to October periods in 2010, 2001, and 2012. Note the decline during this bearish cycle, versus the market rally prior to this period, according to my stock analysis.
Could we be in for another decline this year? My stock analysis indicates the current stalling by the S&P 500 suggests this.
Chart courtesy of www.StockCharts.com
And while I’m n… Read More
Yes, Housing Has Bottomed; but Housing Stock Advance Overblown
By George Leong, B.Comm. for Profit Confidential
The housing market has clearly reached a bottom and is turning upward. After years of dismal sales, a lot of foreclosures and short sales, and declining home prices, there’s strong optimism, which has resulted in a sizzling demand for homebuilder stocks.
The current situation has vastly improved to the point where housing stocks are hot.
Triggering the buying has been a combination of historically low mortgage interest rates, lower home prices, and renewal in the jobs market. (Read “What the Government Doesn’t Want You to Know About Jobs Creation.”) And as more people work, I expect the housing market will continue to strengthen, as shown by the strong housing starts and building permits trend. In February, there were an impressive annualized 917,000 starts, which was above the Briefing.com estimate of 905,000 and the 910,000 in January. The reading was still below the annualized 954,000 reported in December.
Also lending support to the housing market recovery was a strong building permits reading of 946,000 in February, above the Briefing.com estimate of 915,000 and the 904,000 in January. The strong reading indicates builders are expecting a good flow of buying in the housing market, and this could only bode well for homebuilder stocks.
The S&P/Case-Shiller 20-City Home Price Index, comprising the 20 largest U.S. metropolitan cities, increased a better-than-expected 6.8% in December, representing the 11th straight up month. While the reading is positive, Gary Shilling is not as optimistic toward the recovery. In an interview posted on Yahoo! Finance, Shilling said, “It may have bottomed, but I am not sure it has a strong recovery,” and “I think the risks are on the downside.” (Source: Curtin, S., “Housing Will Limp Along at Best: Gary Shilling,” Yahoo! Finance, March 19, 2013.) Again, the housing market has bottomed and is improving, but th… Read More
Play the Travel Space with This Former Highflier
By George Leong, B.Comm. for Profit Confidential
The online travel market segment is projected to account for nearly one-third of the total global travel market by 2012, according to the Global Online Travel Report 2012 by yStats.com, and provides a good investment opportunity. The report suggests that while the U.S. is the top online travel-booking market in the world, emerging economies in the travel segment, such as China, India, and Brazil, are growing and are a good investment opportunity.(Read “Why China Is Hot for Travel Stocks.”)
The top investment opportunity in the online travel segment is priceline.com Incorporated (NASDAQ/PCLN), which with a stock price of nearly $700.00 and a market-cap of $40.0 billion, is by far the “best of breed” in the online travel segment. Expedia, Inc. (NASDAQ/EXPE) is the second-largest player, but with a market-cap of $8.7 billion, it’s well behind priceline.com.
If you’re looking for a small-cap investment opportunity in the sector and don’t mind the extra risk, then take a look at the sector’s poorer cousin Travelzoo Inc. (NASDAQ/TZOO),which has a market-cap of $324 million. What makes Travelzoo an interesting investment opportunity is its potential and current valuation. The stock is also well down from a high of $90.80 on July 19, 2011, so there could be a major investment opportunity here. The stock has underperformed the S&P 500, declining 18.2% over the past 52 weeks compared to a 10.6% advance by the S&P 500.
Founded in 1998, Travelzoo is an online provider of travel, entertainment, and local deals that works with about 2,000 companies from around the world. Products offered include airline, hotel, cruise line, and vacation packages. The company has over 250 “deal experts” who operate in 11 offices across North America (U.S. and Canada), Europe (France, Germany, Spain, and the U.K.), and Asia (Australia, Japan, and Hong Kong); its objectiv… Read More
Small High-Risk Biotech Offers Potential Big Returns
By George Leong, B.Comm. for Profit Confidential
The biotechnology sector provides some of the best investment opportunities for significant returns. This is especially true with the emerging smaller biotech companies that are in the early stages of clinical trials and commercialization. Yet the risk is high. Success in clinical trials from phases one to three could reap major price appreciation for shareholders. On the other hand, many drugs in the pre-clinical and clinical trial stages also fail and never reach commercialization. This is the risk; but in our view, success could easily compensate for taking a chance.
As an investor, you can simply invest in Pfizer Inc. (NYSE/PFE) with its proven track record and market-cap of $198 billion; but the upside investment opportunity, while positive longer-term, will not make you rich in the shorter term due to the lack of strong revenue growth. Just take a look at the Thomson Financial estimates: revenues at Pfizer are estimated by Thomson Financial to contract by 2.5% in 2013, followed by another 1.8% in 2014.
Pfizer is an excellent long-term investment opportunity for the conservative investor looking for income and some capital gains; but for us, most of the easy money has already been made. We want to see stellar growth and superlative price appreciation. Given this, companies such as Pfizer are out of the equation for us, unless you’re happy with small capital-gains potential and a 3.5% dividend.
When I search for emerging biotech stocks as an investment opportunity, I look for a strong drug pipeline. The ideal investment opportunity would be a company with at least one drug in commercialization or close to it, more drugs in late-stage phase three clinical trials, and even more drugs in development.
Sometimes, all three areas of the drug lifecycle are not available, especially to small biotech companies; but one small bio-tech company, Arena Pharmaceuticals, Inc. (NAS… Read More
Big Screens at IMAX Generating Big Profits
By George Leong, B.Comm. for Profit Confidential
There’s nothing better than watching an action-packed movie on a big screen supported by an astounding 12,000 watts of sound delivered via a network of over 40 speakers. The experience is incredible, and it’s beginning to pay dividends for investors of Canada-based IMAX Corporation (NYSE/IMAX) and its advanced theater technology for a movie screen as high as 98 feet. (Source: Brain, M., “How IMAX Works,” How Stuff Works, last accessed February 26, 2013.) We are talking colossal here as far as the screen size goes—and it could be a big investment opportunity, too.
Driving the excitement behind IMAX has been the movement of big-budget Hollywood movies to the IMAX experience in not only North America, but also Western Europe, Japan, China, and Russia. According to the company, it operated 643 IMAX theaters in 52 countries as of March 31, 2012.
China is a major area of growth and expansion, which is a major investment opportunity for IMAX. There are currently 92 IMAX theaters operating in China with another 133 theaters slated to open. With 1.3 billion people, the Chinese market is captivating.
Movie viewers want to see action movies on the big screens; so far, this has helped IMAX make big profits, suggesting the stock could be a good investment opportunity.
Recent blockbuster films include The Hunger Games, The Avengers, and The Dark Knight Rises. Films currently in IMAX theaters include The Hobbit: An Unexpected Journey and A Good Day to Die Hard. Soon to come will be Jack the Giant Slayer and Oz: the Great and Powerful.
While the move to the big screen has been strong, IMAX has been inconsistent with its revenues; it reported higher growth in 2009 and 2010 before a slight relapse in 2011. Revenues are estimated to grow 9.5% to $311 million in 2013, followed by 15.7% growth to $360 million in 2014, according to Thomson Financial consensus estimates. If IMAX can steadily rec… Read More
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