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

Stock Market

Stock Market Outlook & Prediction for 2014

Lombardi Publishing was established in 1986 as an investment newsletter providing stock market analysis to its readers. Today, we publish 26 paid-for investment letters, most of which provide stock market direction and individual stock picking analysis.

In 2001, Michael Lombardi started his famous daily economic newsletter Profit Confidential. Written by Lombardi Financial editors who have been offering stock market guidance for years to Lombardi customers, Profit Confidential provides a macro-picture on where the stock market is headed, what sectors are hot, and which sectors to avoid.

Over the years, Michael’s financial commentary and the accuracy of his economic predictions have garnered him global attention, and the confidence of over one million investors in more than 140 countries.

Michael Lombardi has been widely recognized as predicting five major economic events over the past 10 years.

1)      In 2002, he famously told readers to get into gold

2)      Told them to get out of the housing market in 2006

3)      Predicted the recession of late 2007

4)      Warned readers to get out of stocks in the fall of 2007

5)      Advised readers to get back into stocks in March 2009

In 2002, Michael’s Profit Confidential famously advised readers to buy gold-related investments when gold bullion traded under $300.00 an ounce. “I’ve been pushing gold bullion and gold shares for over a year now. Back in January 2002, I personally started buying gold shares.” (As published in Profit Confidential, December 13, 2002.)

In 2006, Profit Confidential “begged” its readers to get out of the housing market years before it plunged. Michael started warnings abut the coming U.S. housing crisis right at the peak of the boom. On August 2, 2006 Michael Lombardi predicted, “I’m getting very worried about the state of the U.S. housing market and its ramifications on the economy. The U.S. could be headed for its first annual decline in home prices on record, adjusted for inflation. And, I really believe this could be a catastrophe for the U.S. economy.”

Michael was also one of the first to predict the U.S. economy would be in a recession by late 2007. On March 22, 2007, he warned, “Over the past few weeks, I’ve written about subprime lenders and how their demise will hurt the U.S. housing market, the economy, and the stock market. There’s no escaping the carnage headed our way because the housing market and subprime business are falling apart. The worst of our problems, because of the easy money made available to borrowers, which fuelled the housing boom that peaked in 2005, has yet to arrive.”

At the same time Michael wrote this, former Federal Reserve Chairman Alan Greenspan was quoted as saying, “The worst is over for the U.S. housing market, and there will be no economic spillover effects from the poor housing market.”

Michael Lombardi also warned his readers in advance of the crash in the stock market of 2008. On November 29, 2007, Michael Lombardi predicted, “The Dow Jones Industrial Average, the S&P 500, and the other major stock market indices finished yesterday with the best two-day showing since 2002. I’m looking at the market really of the past two days as a classic stock market bear trap. As the economy gets closer to contraction, 2008 will likely be a most challenging economic year for America.”

The Dow Jones peaked at 14,279 in October, 2007. A “sucker’s rally” developed in November 2007, which Michael quickly classified as a bear trap for his readers. One year later, the Dow Jones Industrial Average was at 8,726.

And, Profit Confidential turned bullish on stocks in March of 2009, and rode the bear market rally from a Dow Jones Industrial Average of 6,440 on March 9, 2009, to 12,876 on May 2, 2011, a gain of 99%.

But, Michael is not resting on his laurels from the past 10 years.

In 2013, Michael predicts the devaluation of the U.S. dollar that started in early 2009 will accelerate as the U.S. economy deteriorates, that gold prices will continue to rise, and that the euro is done. Michael also predicts that inflation will be a big, big problem for the U.S.; probably for the rest of the decade. Finally, Michael believes 2013 will be a poor year for stocks.

It’s not all doom and gloom, though. He also has ways investors can protect their holdings, and even make money off the weak economy.

Why Exposure to Healthcare Sector Is a Must

By for Profit Confidential

How These Companies Celebrate a Great QuarterIn what is on par with the course in today’s stock market, biotechnology firm Amgen Inc. (AMGN) posted double-digit revenue and earnings growth while raising its full-year outlook.

The kicker for this stock and its recent price strength was the news that the company plans to cut 12%–15% of its global workforce (2,400 to 2,900 employees) and close four of its facilities in Washington and Colorado. A lot of the job cuts will be to middle management, according to Amgen’s Securities and Exchange Commission (SEC) Form 8-K.

The company’s second-quarter sales grew 11% to $5.18 billion on strong sales and better margins on “ENBREL,” which is a treatment for arthritis. GAAP (generally accepted accounting principles) earnings grew 23% to $1.55 billion, while adjusted earnings per share grew 25% to $2.37.

On the back of such a strong earnings performance, you’d think the company would be hiring. But such is the marketplace with large corporations and large institutional investors.

Amgen has finally broken out of a 12-year price consolidation on the stock market and is set for more capital gains.

A share split wouldn’t be a surprise and the company is well positioned to provide shareholders with another dividend increase at the beginning of next year.

While Wall Street earnings estimates are going up for this company, I would say that a lot of good news (and drug development expectation) is built into the share price. Still, I don’t see Amgen as overpriced considering its business plan for the next few years. The company’s new restructuring plan is substantial and is likely to be rewarding to stockholders.

Healthcare related stocks are … Read More

How It Pays to Play the Momentum Stocks

By for Profit Confidential

Why Making This Mistake Was a Good MoveI have been following social media company Twitter, Inc. (NYSE/TWTR) since the stock debuted to heightened fanfare on November 7, 2013. The hyped-up momentum play spiked to just over $74.00 on superlative enthusiasm and pure insanity, prior to its subsequent sell-off.

I must admit that Twitter intrigued me as a trade but only if the stock price broke below $30.00, as I have suggested in these pages before. Well, on May 7, Twitter declined to a low of $29.51.

For those of you who picked up some shares at this low, it was the correct decision; Twitter surged 25% on Wednesday morning on news that the company had easily beat on revenues and earnings estimates. Revenue growth was impressive at 124%, as the company was able to monetize its user base just as Facebook, Inc. (NASDAQ/FB) has done.

Twitter Inc Chart

Chart courtesy of www.StockCharts.com

Twitter grew its user base at a faster pace than the stock market expected and better yet, it was able to make advertising money from these efforts, which is what you want from social media stocks.

With these results, we are seeing numerous rating and price target upgrades for Twitter from Wall Street, which has been anxious to do something in an otherwise boring stock market.

As a trader in the stock market, I would be looking to buy Twitter on downside weakness—after all of this hoopla has faded. At this time, the valuation continues to be obscene.

The reality is that what happened with Twitter indicates the strong upside potential in Internet stocks that can be achieved for aggressive traders in the stock market. You may make … Read More

The Era of Financial Insanity

By for Profit Confidential

What Happens Next for the Stock MarketMy colleague Robert Appel (BA, BBL, LLB) issued a research paper to the subscribers of one of his financial advisories earlier this week. I thought it important that all my readers be aware of and understand the crux of what Robert is saying about our current economic situation and where it will eventually lead.

Here it is:

“The actions of the Federal Reserve (how far they went to ‘stabilize’ the economy) after the Credit Crisis of 2008 is unprecedented in American history. Of course, I’m talking about the Federal Reserve printing nearly $4.0 trillion in new U.S. dollars while keeping interest rates artificially low for almost six years now.

These actions have caused an ‘era of financial insanity’ that penalizes seniors, savers, and prudent investors, while rewarding borrowers, those who leverage, and risk-takers.

It encourages public companies to doctor their own bottom lines by borrowing money (at cheap interest rates) to repurchase their own shares. This reduces the denominator of their earnings numbers—giving only the illusion of prosperity—and also reduces share float, thereby putting upward pressure on stock prices since more money is suddenly chasing fewer shares.

Articles have appeared in several well-known financial publications, with sources, citing central banks around the world have injected $29.0 trillion into equity markets because they themselves simply could not manage a return at the very same rates they were inflicting on others!

The prime beneficiaries of these insane monetary policies are the banks themselves and the government itself. Because low interest rates allow Washington (and other, similar, fiat regimes) to manage debt payments that could not otherwise be managed in a ‘normal’ interest … Read More

The Problem With Reality in 2014

By for Profit Confidential

U.S. Economy Halfway to a Recession AlreadyEarlier this month, Jeremy Siegal, a well-known “bull” on CNBC, took to the airwaves to predict the Dow Jones Industrial Average would go beyond 18,000 by the end of this year. Acknowledging overpriced valuations on the key stock indices are being ignored, he argued historical valuations should be taken with a grain of salt and nothing more. (Source: CNBC, July 2, 2014.)

Sadly, it’s not only Jeremy Siegal who has this point of view. Many other stock advisors who were previously bearish have thrown in the towel and turned bullish towards key stock indices—regardless of what the historical stock market valuation tools are saying.

We are getting to the point where today’s mentality about key stock indices—the sheer bullish belief stocks will only move higher—has surpassed the optimism that was prevalent in the stock market in 2007, before stocks crashed.

At the very core, when you pull away the stock buyback programs and the Fed’s tapering of the money supply and interest rates, there is one main factor that drives key stock indices higher or lower: corporate earnings. So, for key stock indices to continue to make new highs, corporate profits need to rise.

But there are two blatant threats to companies in the key stock indices and the profits they generate.

First, the U.S. economy is very, very weak. While we saw negative gross domestic product (GDP) growth in the first quarter of this year, the International Monetary Fund (IMF) just downgraded its U.S. economic projection. The IMF now expects the U.S. economy to grow by just 1.7% in 2014. (Source: International Monetary Fund, July 24, 2014.) One more … Read More

Three Retail Stocks Showing Impressive Growth This Earnings Season

By for Profit Confidential

Three Retail Stocks That Are Nailing the Second QuarterIt wasn’t too long ago that NIKE, Inc. (NKE) reported another great quarter of solid growth in its business.

The company’s fiscal fourth-quarter numbers beat Wall Street consensus, and its sales from continuing operations grew 11% to $7.4 billion, or 13% on a currency-neutral basis.

In this market, double-digit growth is significant no matter if it’s in the top or bottom line.

Like the last several earnings seasons, corporations are typically only beating consensus on one financial metric (either earnings or revenues). But this is enough to keep investors buying.

Under Armour, Inc. (UA) blew the doors off of Wall Street consensus and the stock shot strongly higher.

The company reported a surge in new apparel sales. Total revenues grew a whopping 34% over the second quarter of last year to $610 million.

Breaking it down, the company’s apparel revenues grew 35% to $420 million, while footwear sales grew 34% to $110 million on new product offerings. The company experienced significant sales growth of 30% in North America, while international sales doubled (representing approximately 10% of total revenues).

Previous guidance for 2014 was for sales growth of between 24% and 25% over 2013. Management boosted this guidance to between 28% and 29%, with operating income expected to grow between 29% and 30% over last year.

This time last year, Under Armour was trading around $35.00 per share. It’s doubled since then, and the position has further momentum in this market.

It is pricey, however, with a forward price-to-earnings ratio of around 60. But the stock is likely to stay this way; the business has operational momentum, and that’s what … Read More

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The Great Crash of 2014

A stock market crash bigger than what happened in 2008 and early 2009 is headed our way.

In fact, we are predicting this crash will be even more devastating than the 1929 crash…

…the ramifications of which will hit the economy and Americans deeper than anything we’ve ever seen.

Our 27-year-old research firm feels so strongly about this, we’ve just produced a video to warn investors called, “The Great Crash of 2014.”

In case you are not familiar with our research work on the stock market:

In late 2001, in the aftermath of 9/11, we told our clients to buy small-cap stocks. They rose about 100% after we made that call.

We were one of the first major advisors to turn bullish on gold.

Throughout 2002, we urged our readers to buy gold stocks; many of which doubled and even tripled in price.

In November of 2007, we started begging our customers to get out of the stock market. Shortly afterwards, it was widely recognized that October 2007 was the top for stocks.

We correctly predicted the crash in the stock market of 2008 and early 2009.

And in March of 2009, we started telling our readers to jump into small caps. The Russell 2000 gained about 175% from when we made that call in 2009 to today.

Many investors will find our next prediction hard to believe until they see all the proof we have to back it up.

Even if you don’t own stocks, what’s about to happen will affect you!

I urge you to be among the first to get our next major prediction.
See it here now in this just-released alarming video.

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