Market Sector
Businesses are grouped in a market sector, which denotes that they all provide a similar good or service. Grouping businesses together allows investors an easier opportunity to research and investigate each company amongst its peers. An investor can then compare earnings ratios, price-to-book ratios, and other metrics all within one defined sector of the economy. It’s difficult to compare businesses in separate industries, as they would have unique growth prospects. A mature industry such as that of railroad companies can’t expand at the same rate as Internet companies and therefore the fundamental metrics are not the same and can’t be compared at face value.
Japan Not Home-Free Despite Strong GDP
By George Leong, B.Comm. for Profit Confidential
In these pages, I recently discussed the amazing returns in the benchmark Nikkei 225 index in Japan and how the country is following America’s example, printing money to fuel the economy.
The fact is that Japan is finally beginning to see some results from Prime Minister Shinzo Abe’s aggressive strategy to inject $2.4 trillion into the Japanese economy over the next decade.
Maybe this time it’s for real. Previous attempts to drive Japan’s economy out of its economic tailspin have failed. Of course, it will take some time, and success will depend on the continued weakness of the yen and a pickup in the global economy, especially with the country’s key trading partners in China.
If the first quarter was any indication, the despair in Japan may be finally coming to an end after decades of disappointment; but again, it’s only one quarter.
Japan saw its gross domestic product (GDP) surge 0.9% in the first quarter or an annualized rate of 3.5%, according to data from Japan’s Cabinet Office. (Source: “Japan GDP Rises 0.9% On Quarter In Q1,” RTTNews, May 15, 2103.)
What’s also interesting is the rise in private consumption in Japan, which contributed to 2.3% of the 3.5% GDP growth. The upward move in consumer spending is critical, as a large part of the economic renewal in Japan will be dependent on consumer spending as is the case in the United States. According to Trading Economics, consumer spending accounted for about 60% of GDP in Japan, so it’s essential.
While it’s still way too early to see if Japan is on the path to growth, the country’s … Read More
It’s the Final Out: RIM Better Hit a Home Run
By George Leong, B.Comm. for Profit Confidential
Research In Motion Limited (NASDAQ/RIMM; TSX/RIM) appears to be rising from the ashes, as investors dive back into the stock of the once-fabled maker of the “BlackBerry.” For Research In Motion (RIM), it has been quite the journey after the investment community, including myself, thought the end was near for this former Wall Street star.
Since the emergence of Apple Inc. (NASDAQ/AAPL), the BlackBerry and RIM’s “Playbook” tablet have proved to be horrible failures, based on my stock analysis.
But something strange is happening in the equities market, as RIM has surged 168% since trading at $6.43 on September 21, 2012; Apple, on the other hand, has declined 29% in the same period, according to my technical analysis.
My stock analysis shows an opening gap on the RIM stock chart on January 22 on a bullish moving average convergence/divergence (MACD) as indicated by the circles; while this is bullish, be wary of the stock’s overbought condition.
Chart courtesy of www.StockCharts.com
The smartphone and tablet markets continue to be extremely competitive, and I expect this competition will heat up further, based on my stock analysis.
My stock analysis suggests that Apple dominates the tablet market, but there is strong competition from Google Inc.’s (NASDAQ/GOOG) “Nexus” tablet and Samsung Electronics Co. Ltd.’s “Galaxy” series. (Read “Why Apple Needs to Refocus Its Energy.”)
Some believers are also surfacing as RIM gets ready to launch new its new line of devices, powered by its “BlackBerry 10” (BB10) operating system, on January 30. Based on what I have seen that has leaked out on the Internet, the new BlackBerry has the familiar … Read More
Will Housing Stocks Crash?
By Sasha Cekerevac, BA for Profit Confidential
One of the most often talked about parts of the economy is the real estate market sector. Because real estate is such a large and important part of the economy, naturally, many eyes are focused on whether or not this market sector can and will rebound from its deep decline.
While we have certainly seen a strong bounce off the bottom, there are still many concerns for the future of both the real estate market sector and housing stocks, specifically. Investors in housing stocks are definitely ahead of the curve, as many housing stocks have increased substantially. With gains in excess of 100%, the question on many people’s minds is: will the real estate market sector continue its upward trajectory or are housing stocks teetering on the edge of a massive decline?
I think recent comments by the CEO of D.R. Horton, Inc. (NYSE/DHI), Donald Tomnitz, can illuminate a lot. Tomnitz stated in a conference call that he was quite concerned that the lack of jobs might lead to lower home sales next year. D.R. Horton is, by volume, the largest homebuilder in America. One of the most sobering moments was when Tomnitz stated, “I also see the fact that there are potential layoffs in a number of industries, especially the defense industry.” (Source: “D.R. Horton Falls as CEO Cautions on Job Growth Next Year,” Bloomberg, November 12, 2012.)
The question isn’t the current level of the real estate market sector. For the fourth quarter, which ended September 30, 2012, D.R. Horton reported net income of $100 million, a massive increase of 180% from the prior year’s quarter. Revenue … Read More
Hurricane Sandy, and the Stocks Helping Rebuild the East Coast
By Sasha Cekerevac, BA for Profit Confidential
The tragic results from Hurricane Sandy are now starting to become apparent. With the death toll continuing to rise, both from the Caribbean nations as well as America, it is truly a sad event, and my hopes and prayers go to the families of those affected.
When a natural disaster such as Hurricane Sandy occurs, it is a stark reminder of the fragility of life. With the damages running into the multibillion-dollar range, the rebuilding effort from Hurricane Sandy will be extensive and costly. Early estimates have the economic costs at over $20.0 billion. (Source: Bloomberg, October 30, 2012.)
Two of the main stocks in the rebuilding market sector that will help citizens and businesses damaged by Hurricane Sandy include Lowes Companies, Inc. (NYSE/LOW) and The Home Depot, Inc. (NYSE/HD).
While the immediate thought is to first rescue any individuals in harm’s way, the next step is rebuilding life along the East Coast and resuming some semblance of normalcy. The home and business repair market sector, epitomized by both Lowes and The Home Depot, will certainly see an influx of business.
In preparation for Hurricane Sandy, many people and businesses have bought generators, batteries, rope, and other essential supplies. Once Hurricane Sandy has passed, this could mean additional large-item sales to replace what has been damaged. This is one market sector that is truly needed in this time, helping people rebuild their lives following a devastating natural event.
Chart courtesy of www.StockCharts.com
In the home rebuilding market sector, even before Hurricane Sandy hit, The Home Depot is a clear outperformer. This is because of the rebound in the housing market… Read More
Why Investors Are Now Running to These Traditionally Safe Stocks
By Michael Lombardi, MBA for Profit Confidential
Historically, when the economy is recovering from a recession and heading into a cyclical growth phase, the market sectors that traditionally do well are the technology and semiconductor industries.
Investors buy the stocks in these areas because earnings growth for these companies usually rises rapidly as the economy enters a growth phase. Yes, many argue that the U.S. economy is in a recovery phase. But the semiconductor and technology market sectors have been underperforming the general stock market. This underperformance is a key indicator.
Follow what the market does, not what people say.
Usually, when the economy is about to enter a recession, the defensive market sectors outperform other stock market sectors. Those defensive market sectors are utilities, consumer staples, and health-care stocks.
I highlighted recently how the defensive market sectors were outperforming the rest of the stock market. This key indicator is a strong sign that the U.S. economy and the stock market are in trouble and have more downside to them.
Last week, something happened with the defensive market sectors. You can see it in the following charts:
Chart courtesy of www.StockCharts.com
Chart courtesy of www.StockCharts.com
Chart courtesy of www.StockCharts.com
Not only are these market sectors outperforming, but they have also started hitting new highs!
I believe these key indicators are continuing to signal that the U.S. economy is headed into a recession (see: The 2013 U.S. Recession). The new highs suggest that more and more investors are worried about the recession in Europe and the slowdown in China hitting the U.S. economy hard, hence money is moving into utility, consumer staples, and health-care … Read More
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