Investor Sentiment
Investor sentiment is the view of the market by investors. This is the combined view of all investors at any one time. Since this is not static, but rather always changing, investor sentiment is usually seen in three general categories: extremely optimistic (bullish); extremely pessimistic (bearish); and neutral or equal in number of optimists and pessimists. The view of investor participants can be based on either fundamental or technical reasons. Investor sentiment is seen as moving the main indices, which will push individual stocks in its wake. For example, a company might not be a great stock, but if the investor sentiment for the overall index is extremely bullish, this optimism will push up the price of most, if not all, stocks. Many view extreme market sentiment readings as a contrary indicator; when most people are bullish (optimistic), the market is close to a short-term top and vice versa.
Stock Market Fake-Out: Where Is the Retrenchment?
By Mitchell Clark, B.Comm. for Profit Confidential
This is unbelievable.
Johnson & Johnson (NYSE/JNJ) jumped about 23% since the beginning of the year, not including its dividend payment.
This upside on the stock market from such a mature brand is striking. And here’s the thing: the company actually delivered with its earnings results.
Companies like PepsiCo, Inc. (NYSE/PEP), Kraft Foods Group, Inc. (NASDAQ/KRFT), Colgate-Palmolive Company (NYSE/CL), The Walt Disney Company (NYSE/DIS), and even McDonalds Corporation (NYSE/MCD) performed similarly.
I can’t recall a time of such coordinated stock market strength from blue chips.
Of course, the stock market breakout has been all about the safest names. Institutional investors wanted to buy this market, but they needed the earnings safety to do it.
Over the last two weeks, the NASDAQ Composite saw a turnaround from its little slump, based on good earnings news. This broadening of the stock market breakout is definitely necessary for price strength to continue.
Oddly, there hasn’t been a correction yet.
Quite often on Wall Street, when you get groupthink or a group expectation about an event taking place in the financial markets, it doesn’t happen. There has been no correction so far, and this is truly amazing.
Without question, an abundance of caution is appropriate considering where the stock market just came from.
First-quarter earnings season is winding down, and a lot of smaller companies are reporting now.
Companies like LKQ Corporation (NASDAQ/LKQ), Alaska Air Group, Inc. (NASDAQ/ALK), Qlik Technologies Inc. (NASDAQ/QLIK), Global Medical, Inc. (NASDAQ/GMED) and NeuStar, Inc. (NYSE/NSR) reported improved earnings results. (See “Old Economy Auto Parts Stock a Better Play Than Any Tech Stock?”)
I consider the stock … Read More
Why Cash Is No Longer King
By Mitchell Clark, B.Comm. for Profit Confidential
With employment figures the big news of the day, the business of human resources (HR) is still a good one.
Technology is changing the HR landscape, and I believe that exposure to this industry is useful as part of a stock market portfolio—but at the right price.
Automatic Data Processing, Inc. (NASDAQ/ADP) out of Roseland, New Jersey is the blue-chip payroll and HR outsourcing firm that many regard as a technology stock. The company is a great barometer on employment, investor sentiment, and the stock market.
Like many blue chips, Automatic Data Processing (ADP) did nothing for 10 years after 2001. The stock broke out of its sideways trend in 2011.
For such a mature enterprise, ADP has significantly increased in price over the last two years. I like this business, but I view it as fully priced, given current earnings.
The Ultimate Software Group, Inc. (NASDAQ/ULTI) from Westin, Florida struggled initially to find its stride, but the stock (which is more than fully priced) has certainly found it now.
This firm is a cloud provider of HR services and has a lot of growing corporations as customers. As an enterprise, this is exactly what you want.
First-quarter 2013 earnings saw revenues grow 25% to $97.9 million.
Generally Accepted Accounting Principles (GAAP) earnings were $4.5 million, or $0.16 per diluted share, compared to first-quarter 2012 GAAP earnings of $1.0 million, or $0.04 per diluted share.
Non-GAAP earnings excluding stock-based compensation were $9.2 million, or $0.32 per diluted share, compared to $3.7 million, or $0.13 per diluted share year-over-year. Cash and marketable securities grew to $79.0 million from $68.0 … Read More
Investor’s Manifesto: Five Motivations for Beating Market Chaos and Risk
By Mitchell Clark, B.Comm. for Profit Confidential
The stock market is close to double-digit growth so far this year, as corporations continue to report modest earnings results.
Playing a market at an all-time high is tough. It makes me think a lot more about risk, portfolio strategy, and how to consider new positions—if any at all.
As a stock market investor/speculator, here are five motivations to keep in mind:
1. Business
When you buy one share of common stock in a corporation, you are officially a businessperson. You are the CEO of your own investment corporation—the pinnacle of capitalism. In order for any business to be successful over time, it must do what works. You can have a view, you can be totally outraged, but doing what works is what makes money. Buying, selling, and speculating in the stock market is business. Approach it as such.
2. Risk and Control
Investment risk is more important than potential return in any transaction. There is no rush to get in—ever. Be deliberate, cautious, diversified, informed, and skeptical. Most people would not go out and purchase a home or a company in an unfamiliar jurisdiction without doing a lot of research. The stock market is a secondary market. The founders of a listed corporation have already sold. As a businessperson, think constantly about how all the fundamentals in the world can hurt each one of your holdings. Risk in your portfolio is always something you wished you had spent a lot more time on after a shock.
3. Stock Market Action
Doing what works makes money. Being an individual investor, everything in the marketplace is beyond your control: the money … Read More
One Company, Two Vital Themes for Investors to Consider
By Mitchell Clark, B.Comm. for Profit Confidential
McCormick & Company, Incorporated (NYSE/MKC) offers two crucial stock market attributes that are important right now—stability and consistency.
This is why the company perfectly illustrates the dilemma investors are facing in this stock market. Is the company’s modest, but consistent growth in revenues and earnings worth the big run-up?
McCormick is the famous spice and seasoning manufacturer that’s been around since 1889. It’s a very solid business, but meaningful earnings growth for the company is elusive.
On the stock market, the company’s shares appreciated about 20 points over the last 12 months. The position just bounced off its all-time stock market high and has been running strong since its breakout at the end of 2011.
In the company’s first-quarter earnings report for fiscal year 2013, total sales grew three percent to $934 million. Earnings inched slightly higher to $76.0 million from $74.5 million. Management reaffirmed this year’s sales growth of between three and five percent with the expectation that demand from quick-service restaurants in the U.S. and China will improve.
The company’s 20-year stock chart is featured below:
Chart courtesy of www.StockCharts.com
For such a mature business, McCormick has been a very solid stock market holding. The company’s earnings growth is modest, however, and its stock market strength is due to an expansion of valuation for consistency and stability.
Institutional investors have been buying the safest, most consistent names, including many blue chips; however, there can’t be a bull market unless stock market participation expands into more groups.
McCormick is a low-beta stock that has proven that it’s worth accumulating when it’s down.
The stock is pricey, compared to its … Read More
Some Big Company Earnings Look Good, but Market Set for a Correction
By Mitchell Clark, B.Comm. for Profit Confidential
First-quarter earnings season is here, and the takeaway so far is business is better at home. The stock market has modest momentum, but earnings are mixed.
There certainly is weakness internationally, as FedEx Corporation’s (NYSE/FDX) earnings showed. International airfreight hurt the company’s bottom line. Caterpillar Inc. (NYSE/CAT) reported a big drop in its Asia-Pacific sales.
Williams-Sonoma, Inc. (NYSE/WSM) blasted higher on the stock market after beating on earnings and revenues. The company boosted its quarterly cash dividend by 41%, and it’s planning a new $750-million share buyback. Clearly, business isn’t bad for this retailer.
Adobe Systems Incorporated (NASDAQ/ADBE) also gained on the stock market after beating its own forecast and Wall Street’s earnings consensus. The company is transitioning to a subscription-based business model, and it was widely expected that revenues would be a bit lower this quarter. They actually fell four percent to just over $1.0 billion. But management backed its full-year outlook, and the company beat consensus for the second quarter in a row.
General Mills, Inc. (NYSE/GIS) broke out on the stock market significantly in early February. The company’s fiscal third quarter beat on revenues and earnings. Although rising raw material costs could hurt the company’s margins going forward, General Mills’ management forecast high single-digit earnings-per-share growth in its next fiscal year. Very solid for such a mature business.
Oracle Corporation (NASDAQ/ORCL) was the stock market disappointment this week. It’s an important benchmark for enterprise information technology (IT) spending and a long-term play that I like. The company missed on earnings per share by a penny, and constant currency revenues were flat. (See “So Many Technology Stocks, … Read More
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