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

Technology Stocks

Stocks that are involved in the development of new technologies fall into this category. This can involve both hardware and software firms. Electronics, computers, services that develop new software, and periphery businesses all fall under the heading of technology stocks. Technology is being used increasingly in all sectors of the economy, which is why this sector is a growing field. New developments in hardware and software are being made every day and innovation continues to enhance our society.

What These Two Large-Cap Techs Are Saying About the Upcoming Quarter

By for Profit Confidential

What These Two Companies Signal for Tech Stocks This QuarterYou know another earnings season is right around the corner because Oracle Corporation (ORCL) and Adobe Systems Incorporated (ADBE) always report their fiscal results just ahead of the calendar quarter end.

Both technology stocks are bellwethers, and while they are mature enterprises, they do help set the tone in sentiment. It’s exactly what the marketplace needs now so investors can have something else to worry about over geopolitical events.

Oracle’s been going through its own issues trying to generate top-line growth. Revenue and earnings the last several quarters have been very modest.

And so have Adobe’s numbers, but Wall Street analysts have been boosting their earnings estimates for the company in 2015 and the stock has doubled over the last 18 months.

Oracle is definitely more of a value play, and the company pays a dividend. Adobe is expensively priced and while much smaller, still boasts a stock market capitalization of approximately $34.0 billion.

In previous quarters, it was pretty obvious what the Street was looking for in terms of earnings results. At the beginning of 2013, investors just wanted to know that corporate earnings would hold up. Then they were happy with modest growth so long as dividends were increased.

This quarter, there doesn’t seem to be a financial metric that the market is looking for just yet. The choppy trading action is a reflection of all the uncertainty in the world, but also a market that hasn’t experienced a material price correction since 2008/2009, which is a long time to go.

As much as a broad stock market correction would be a healthy development for the long-run trend, … Read More

Former Momentum Stocks Signpost to Sell?

By for Profit Confidential

Price Momentum Suggests Portfolio RebalancingA good amount of speculative fervor has come out of this market so far this year, but there’s still quite a bit of valuation froth around.

Across the board, 3D-printer stocks have come back. 3D Systems Corporation (DDD) still boasts a trailing price-to-earnings (P/E) ratio of around 150.

Tesla Motors, Inc. (TSLA) is still going strong. It’s one of few super-hyped stocks that made a strong recovery in January after a material sell-off months before. (See “Buy High, Sell Higher: Top Investment Strategy for Buoyant Markets?”) The position just bounced off $265.00 per share. Next year, Wall Street estimates the company will do more than $5.0 billion in sales.

Looking at the stock market currently, there’s a lot of indecisiveness and geopolitical events are overshadowing the action.

Watch large-cap biotechnology stocks (or the NASDAQ Biotechnology Index) for their trading action specifically. This group of stocks reaccelerated strongly in February and is very much overdue for a material correction.

I’ve noticed several key momentum stocks within the group have started rolling over. This should be a strong contributing indicator to the short-term action unrelated to specific events happening in Ukraine.

Gold is holding up well with the geopolitical tensions, and oil prices are too, but to a lesser degree.

Stocks are due for a break. What looked like the makings of a material correction in January, equities reversed direction after the Federal Reserve, once again, reiterated its willingness to be highly accommodative to capital markets.

This kind of market (after such a strong 2013 for stocks) warrants a significant degree of caution. I wouldn’t be jumping onto any bandwagons. … Read More

Should Your Portfolio Strategy Focus on Geopolitical Events?

By for Profit Confidential

Are Geopolitical Events Now the Catalyst for StocksStocks have been choppy since the beginning of the year and geopolitical events are now the near-term catalyst.

It’s a good reminder that it’s worthwhile to review investment risk to equities and what you can tolerate in terms of potential downside with stocks.

As these pages are focused on the equity market, investment risk is always a priority. Portfolio risk can get lost in a bull market, but it’s still a huge part of the equation in terms of overall strategy.

There’s just so much beyond your control as an individual investor. At the end of the day, with stocks, it’s an investment in a business commensurate with a bet that its per-share worth (which is only definitive in the event of a buyout) will be recognized by a marketplace ruled by fear, greed, and emotions.

In late 1999, The Procter & Gamble Company (PG) had an earnings miss and the stock was basically cut in half, as the hype related to technology stocks was coming apart. It took five full years for Procter & Gamble’s share price to recuperate from the sell-off; and while the company was still paying its dividends, that’s a long time for any equity investor.

Stocks always correct themselves eventually, but excessive pricing (like in other asset classes) can last for quite a while. Procter & Gamble’s long-term stock chart is featured below:

PG Procter Gamble Company Chart

Chart courtesy of www.StockCharts.com

In terms of portfolio strategy related to stocks, a multi-faceted investment strategy is key. This means varying holdings among industries, stock market capitalizations, dividend paying stocks, and pure-play bets.

An individual investor certainly doesn’t have to be the … Read More

Why the NASDAQ Will Outperform the Other Major Indices in 2014

By for Profit Confidential

Why 2014 Bodes Well for Blue ChipsSo far this year, the NASDAQ Composite Index has outperformed the other large-cap averages, and this is a positive indicator.

At the beginning of last year, blue chips shot out of the gate with uncommon capital gains, and as confidence in the rally grew, investors slowly felt more comfortable with more speculative issues, which are often listed on the NASDAQ.

After a pronounced consolidation during the summer of last year, large-cap NASDAQ stocks, like Microsoft Corporation (MSFT), Juniper Networks, Inc. (JNPR), and even Intel Corporation (INTC), reaccelerated.

I view the price reacceleration in large-cap technology stocks as a combination of attractive valuations and yields and improved expectations for growth. Microsoft’s fourth-quarter sales are expected to grow some 10%.

While blue-chip strength is always helpful, large-cap technology stocks must be a big part of the long-term trend, as they are such a large part of the daily economy now.

The Russell 2000 Index of small-caps is also holding up extremely well and is another positive indicator for the broader market. While stocks are very much in need of a correction, it won’t happen without a major catalyst, and trading action among large-cap technology and small-caps is reason enough to expect more capital gains. The chart of the Russell 2000 Small Cap Index is featured below:

Russell 2000 Small Cap Index Chart

Chart courtesy of www.StockCharts.com

Also not to be forgotten is the Dow Jones Transportation Average, which is still just a hair off its all-time record-high. Transportation stocks are always a leading indicator, and if you attribute any worth to the performance of airline stocks, their year-to-date performance is also a positive signal.

Given current information, … Read More

“Need to Know” Info About the Coming Retrenchment

By for Profit Confidential

equity marketThere are lots of companies but very few stocks I like in this stock market, because stocks have already gone up in value so tremendously.

Countless large-caps provided excellent returns this year, and many of them are old brands that still offer meaningful dividend yields. What’s transpired with the equity market this year has been truly amazing and practically, I don’t think the run is over just yet.

Cracker Barrel Old Country Store, Inc. (CBRL) has a 52-week trading range of $60.07 to $118.44 and a forward price-to-earnings (P/E) ratio of 18.46, according to Thomson Reuters. And guess where the stock is now—right at its all-time record high, up approximately 84% (not including dividends) since this time last year. All this from a mature restaurant brand.

Johnson & Johnson (JNJ), one of my key benchmark stocks and the kind of company that’s welcome in any long-term equity market portfolio, has had a really good year. Its capital appreciation is reminiscent of its performance in the late 90s.

Many blue chips trade similarly to Cracker Barrel and Johnson & Johnson: they go through long periods of consolidation providing minimal capital gains, and then they explode in trading action, typically associated with technology stocks. (See “Why I Like This Blue Chip So Much [55th Dividend Increase Just Announced].”)

So with the huge price moves, the case for a major retrenchment/correction/consolidation in the equity market is very solid. But there needs to be a catalyst for this to happen. The equity market is overbought and looking tired, but there is still a strong willingness on the part of institutional investors to … Read More

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What These Two Large-Cap Techs Are Saying About the Upcoming Quarter

By for Profit Confidential

What These Two Companies Signal for Tech Stocks This QuarterYou know another earnings season is right around the corner because Oracle Corporation (ORCL) and Adobe Systems Incorporated (ADBE) always report their fiscal results just ahead of the calendar quarter end.

Both technology stocks are bellwethers, and while they are mature enterprises, they do help set the tone in sentiment. It’s exactly what the marketplace needs now so investors can have something else to worry about over geopolitical events.

Oracle’s been going through its own issues trying to generate top-line growth. Revenue and earnings the last several quarters have been very modest.

And so have Adobe’s numbers, but Wall Street analysts have been boosting their earnings estimates for the company in 2015 and the stock has doubled over the last 18 months.

Oracle is definitely more of a value play, and the company pays a dividend. Adobe is expensively priced and while much smaller, still boasts a stock market capitalization of approximately $34.0 billion.

In previous quarters, it was pretty obvious what the Street was looking for in terms of earnings results. At the beginning of 2013, investors just wanted to know that corporate earnings would hold up. Then they were happy with modest growth so long as dividends were increased.

This quarter, there doesn’t seem to be a financial metric that the market is looking for just yet. The choppy trading action is a reflection of all the uncertainty in the world, but also a market that hasn’t experienced a material price correction since 2008/2009, which is a long time to go.

As much as a broad stock market correction would be a healthy development for the long-run trend, … Read More

Former Momentum Stocks Signpost to Sell?

By for Profit Confidential

Price Momentum Suggests Portfolio RebalancingA good amount of speculative fervor has come out of this market so far this year, but there’s still quite a bit of valuation froth around.

Across the board, 3D-printer stocks have come back. 3D Systems Corporation (DDD) still boasts a trailing price-to-earnings (P/E) ratio of around 150.

Tesla Motors, Inc. (TSLA) is still going strong. It’s one of few super-hyped stocks that made a strong recovery in January after a material sell-off months before. (See “Buy High, Sell Higher: Top Investment Strategy for Buoyant Markets?”) The position just bounced off $265.00 per share. Next year, Wall Street estimates the company will do more than $5.0 billion in sales.

Looking at the stock market currently, there’s a lot of indecisiveness and geopolitical events are overshadowing the action.

Watch large-cap biotechnology stocks (or the NASDAQ Biotechnology Index) for their trading action specifically. This group of stocks reaccelerated strongly in February and is very much overdue for a material correction.

I’ve noticed several key momentum stocks within the group have started rolling over. This should be a strong contributing indicator to the short-term action unrelated to specific events happening in Ukraine.

Gold is holding up well with the geopolitical tensions, and oil prices are too, but to a lesser degree.

Stocks are due for a break. What looked like the makings of a material correction in January, equities reversed direction after the Federal Reserve, once again, reiterated its willingness to be highly accommodative to capital markets.

This kind of market (after such a strong 2013 for stocks) warrants a significant degree of caution. I wouldn’t be jumping onto any bandwagons. … Read More

Should Your Portfolio Strategy Focus on Geopolitical Events?

By for Profit Confidential

Are Geopolitical Events Now the Catalyst for StocksStocks have been choppy since the beginning of the year and geopolitical events are now the near-term catalyst.

It’s a good reminder that it’s worthwhile to review investment risk to equities and what you can tolerate in terms of potential downside with stocks.

As these pages are focused on the equity market, investment risk is always a priority. Portfolio risk can get lost in a bull market, but it’s still a huge part of the equation in terms of overall strategy.

There’s just so much beyond your control as an individual investor. At the end of the day, with stocks, it’s an investment in a business commensurate with a bet that its per-share worth (which is only definitive in the event of a buyout) will be recognized by a marketplace ruled by fear, greed, and emotions.

In late 1999, The Procter & Gamble Company (PG) had an earnings miss and the stock was basically cut in half, as the hype related to technology stocks was coming apart. It took five full years for Procter & Gamble’s share price to recuperate from the sell-off; and while the company was still paying its dividends, that’s a long time for any equity investor.

Stocks always correct themselves eventually, but excessive pricing (like in other asset classes) can last for quite a while. Procter & Gamble’s long-term stock chart is featured below:

PG Procter Gamble Company Chart

Chart courtesy of www.StockCharts.com

In terms of portfolio strategy related to stocks, a multi-faceted investment strategy is key. This means varying holdings among industries, stock market capitalizations, dividend paying stocks, and pure-play bets.

An individual investor certainly doesn’t have to be the … Read More

Why the NASDAQ Will Outperform the Other Major Indices in 2014

By for Profit Confidential

Why 2014 Bodes Well for Blue ChipsSo far this year, the NASDAQ Composite Index has outperformed the other large-cap averages, and this is a positive indicator.

At the beginning of last year, blue chips shot out of the gate with uncommon capital gains, and as confidence in the rally grew, investors slowly felt more comfortable with more speculative issues, which are often listed on the NASDAQ.

After a pronounced consolidation during the summer of last year, large-cap NASDAQ stocks, like Microsoft Corporation (MSFT), Juniper Networks, Inc. (JNPR), and even Intel Corporation (INTC), reaccelerated.

I view the price reacceleration in large-cap technology stocks as a combination of attractive valuations and yields and improved expectations for growth. Microsoft’s fourth-quarter sales are expected to grow some 10%.

While blue-chip strength is always helpful, large-cap technology stocks must be a big part of the long-term trend, as they are such a large part of the daily economy now.

The Russell 2000 Index of small-caps is also holding up extremely well and is another positive indicator for the broader market. While stocks are very much in need of a correction, it won’t happen without a major catalyst, and trading action among large-cap technology and small-caps is reason enough to expect more capital gains. The chart of the Russell 2000 Small Cap Index is featured below:

Russell 2000 Small Cap Index Chart

Chart courtesy of www.StockCharts.com

Also not to be forgotten is the Dow Jones Transportation Average, which is still just a hair off its all-time record-high. Transportation stocks are always a leading indicator, and if you attribute any worth to the performance of airline stocks, their year-to-date performance is also a positive signal.

Given current information, … Read More

“Need to Know” Info About the Coming Retrenchment

By for Profit Confidential

equity marketThere are lots of companies but very few stocks I like in this stock market, because stocks have already gone up in value so tremendously.

Countless large-caps provided excellent returns this year, and many of them are old brands that still offer meaningful dividend yields. What’s transpired with the equity market this year has been truly amazing and practically, I don’t think the run is over just yet.

Cracker Barrel Old Country Store, Inc. (CBRL) has a 52-week trading range of $60.07 to $118.44 and a forward price-to-earnings (P/E) ratio of 18.46, according to Thomson Reuters. And guess where the stock is now—right at its all-time record high, up approximately 84% (not including dividends) since this time last year. All this from a mature restaurant brand.

Johnson & Johnson (JNJ), one of my key benchmark stocks and the kind of company that’s welcome in any long-term equity market portfolio, has had a really good year. Its capital appreciation is reminiscent of its performance in the late 90s.

Many blue chips trade similarly to Cracker Barrel and Johnson & Johnson: they go through long periods of consolidation providing minimal capital gains, and then they explode in trading action, typically associated with technology stocks. (See “Why I Like This Blue Chip So Much [55th Dividend Increase Just Announced].”)

So with the huge price moves, the case for a major retrenchment/correction/consolidation in the equity market is very solid. But there needs to be a catalyst for this to happen. The equity market is overbought and looking tired, but there is still a strong willingness on the part of institutional investors to … Read More

These Exciting Possible IPOs Should Be on Your Radar

By for Profit Confidential

IPOIn the late 90s, the anticipation of an initial public offering (IPO) was the hottest thing on Wall Street for traders. Get in on the pre-IPO allotment, and chances are you would make tons of money. I still recall the frenzy that surfaced after an IPO, especially from technology stocks.

Fast-forward a decade, and the market anticipation for IPOs is not as frenzy-like. Now traders are more careful to buy into IPOs after their initial debut.

The key to success in investing in IPOs today is patience. Even if an IPO skyrockets after its debut, it is often prudent to wait for a pullback or for the lock-in period to expire before buying, as this is when the initial investors, such as funds and institutions, can sell their shares in the stock market.

A great example of a former IPO star that opened at a high price but subsequently faltered was Internet stock Groupon, Inc. (NASDAQ/GRPN); the stock traded above $30.00 on its November 4, 2011 debut, but fell to as low as $2.60 a year later on November 12, 2012. I looked at the stock as a decent risk-to-reward play, and now the stock has been sizzling on the charts, up 332% from its November 2012 low. (Read “Why There’s No Stopping the Internet Sector.”)

Another example of a highly anticipated Internet IPO was Facebook, Inc. (NASDAQ/FB), which traded as high as $45.00 on its debut on May 18, 2012, and subsequently plummeted to $18.80 on October 19, 2012. But with over one billion subscribers, I considered Facebook to have excellent potential—if the company could monetize its … Read More

How Extraordinary Growth in Bakken Oil Is Revitalizing Railroads

By for Profit Confidential

Extraordinary Growth in Bakken Oil Is Revitalizing RailroadsChange in the railroad business is not something you expect, but it is happening with Bakken oil.

The Association of American Railroads (AAR) is the industry group for North American railroad stocks, and while all trade groups are to be taken with a grain of salt, you can garner insight on the U.S. economy by reading the AAR’s data.

Even if you aren’t interested in railroad stocks, business conditions for railroads are still very relevant. They remain the backbone of North America and the industrial economy.

According to the AAR, U.S. Class I railroad stocks originated a record 97,135 carloads of crude oil in the first quarter of 2013. This represents a gain of 20% from 81,122 carloads in the fourth quarter of 2012 and a substantial increase of 166% from 36,544 carloads originated in the first quarter of 2012.

While the shipment of oil—Bakken oil, in particular—is the source of renewed growth for railroad stocks, the numbers also reveal a flatness that coincides with the rest of the U.S. economy.

The AAR reported that in the first 21 weeks of 2013, U.S. railroad stocks reported volume of 5.8 million total carloads, down 1.8% from the comparable period in 2012. Total U.S. traffic for the first 21 weeks of 2013 was 10.8 million carloads and intermodal units, up 0.8% comparatively.

For the same period, Canadian railroads reported volume of 1.6 million carloads, up 2.3% comparatively, and 1.1 million intermodal units, up 4.7%.

Volume on Mexican railroads came in at 315,377 carloads, up nine percent, with 192,060 intermodal units, down 0.3% from last year.

Railroad stocks have been on a … Read More

Technology Stalling, but for How Long?

By for Profit Confidential

Technology StallingTechnology stocks underperformed the S&P 500 and Dow in the first quarter of the year, but that’s no big deal, as I continue to see technology as a market leader.

The month of April saw some buying return to technology stocks, with the NASDAQ managing to outperform the S&P 500—that’s a start.

While we have seen momentum dissipate from technology stocks and Apple Inc. (NASDAQ/AAPL) lose some of its shine, I remain bullish toward technology stocks.

The chart of the Technology Select Sector SPDR (NYSEArca/XLK) below shows the current sideways trading channel for this index and the current test at the upper resistance line, as indicated by the top blue line.

If my technical analysis is correct, I expect technology stocks to take a run at the resistance.

XLK Technology Select Sector SPDR stock chart

Chart courtesy of www.StockCharts.com

According to FactSet, earnings growth for the information technology (IT) sector is estimated at 0.2% in the first-quarter earnings season—if Apple is excluded. FactSet is optimistic the sector will rally in the second half of this year, with an estimated growth rate of 12.0% in the third quarter and 11.2% in the fourth quarter. (Source: “Earnings Insight,” FactSet, April 19, 2013.)

Of course, if Apple rebounds, the growth rate will likely rise.

If we exclude Apple, FactSet estimates the IT sector will grow at 10.0% and 12.4%, respectively, for the third and fourth quarters. These are pretty darn good numbers.

My top areas for growth going forward include the mobile, Internet, communications, networking, IT, and cloud computing sectors.

I suggest adding both small and large companies across different businesses, which will add diversity, making your tech holdings less … Read More

Facebook the Next Big Winner?

By for Profit Confidential

260213_PC_leongGoogle Inc. (NASDAQ/GOOG) traded above $800.00 on February 19, and I still can’t believe I missed out on an early investment opportunity when the stock first debuted at $100.00 in August 2004. The company has become the king of the Internet space and the favorite of retail and institutional investors in the equities market. In fact, Google now appears to be the new Apple Inc. (NASDAQ/AAPL), which has disappointed investors and is sliding downward on the chart. (Read “Mr. Cook Better Have a ‘Plan B’ for Apple.”)

The comparative stock movement of Google versus Apple in the equities market is obvious on their stock charts. While Apple has continued to slide lower since trading at over $700.00 in September 2012, Google has moved in the opposite direction, with its recent breakout above $800.00, based on my technical analysis.

aapl-apple-inc

Chart courtesy of www.StockCharts.com

Going back to September 2012, Wall Street was so hyped up on Apple in the equities market that several analysts started to assign a $1,000 price target to the company, suggesting Apple would be the first $1.0-trillion company in the history of the equities market. Of course, it didn’t quite pan out that way.

On the other hand, just as we had seen with Apple in September, we are now seeing euphoric analysts jumping all over Google, highlighted by a $1,000 price target from Bernstein Research.

While I’m not convinced Google can reach this magical peak within a year, I do feel the stock will inevitably trade at $1,000, unless the company decides to split the stock. But then again, co-founders Lawrence Page and Sergey Brin … Read More

So Many Technology Stocks, but Just One to Own for the Next Five Years

By for Profit Confidential

Just One to Own for the Next Five YearsTechnology stocks are not for the faint of heart. The business cycle exists, and companies have to continually re-invent themselves or get left in the dust, especially among technology stocks, where consumers will pay almost anything for innovation. The smartphone industry is the perfect example. BlackBerry (NASDAQ/BBRY;TSX/RIM), formerly Research In Motion Limited, dropped the ball on what was an outstanding leading position in the smartphone revolution. How about personal computers (PCs)? Dell Inc. (NASDAQ/DELL) is now a partial contributor to its own operational weakness because of the extreme commoditization of the PC that it helped foster. But Dell’s been struggling on the stock market for the last five years.

Among technology stocks, I’d steer clear of the retail landscape, because the competition is intense; due to the unpredictability of innovation, the corporate advantage changes too quickly. If I was to build a position in only one technology company for an investment lasting greater than three years, I’d choose Oracle Corporation (NASDAQ/ORCL) on any major price weakness.

I like Oracle because of the business that it’s in—selling database and cloud software and hardware to well-heeled corporate and government clients that pay their bills on time. Unlike many technology stocks, Oracle isn’t expensively priced on the stock market, and it pays a small dividend. Finally, I like Oracle because of its excellent long-term track record on the stock market. In my view, an investor is doing well if he or she can double their money every six years or so. Oracle comes close to fitting that bill. The company’s long-term stock chart is below:

ORCL Oracle Corp. Nasdaq Gs stock chart

Chart courtesy of www.StockCharts.com

Like many technology stocks, … Read More

Best Stock Market Gamble—Small-Cap Techs or U.S.-Listed Chinese Stocks?

By for Profit Confidential

Best Stock Market GambleSome of the most attractive opportunities right now in this stock market are in U.S.-listed Chinese stocks. If you like the buy low/sell high strategy, you have lots of choice among Chinese stocks—many of these companies are bouncing off their 52-week and all-time lows.

Of course, there’s a reason why so many Chinese stocks have been dumped on the stock market: business conditions worsened, and investors lost confidence in the entire group. Aside from the largest companies, institutional investors have abandoned smaller Chinese stocks. Naturally, this is a good place to be bottom-fishing in the stock market.

One company that I think is a standout turnaround opportunity is China Ceramics Co., Ltd. (NASDAQ/CCCL). This company makes ceramic tiles in China and sells them to the residential and commercial markets. Only about seven percent of the company’s products are exported overseas, and the company’s management recently signed a deal to become a strategic supplier to China’s largest real estate contractor. Here is China Ceramics’ stock chart:

CCCL China Ceramics Co.Ltd. Nasdaq stock market chart

Chart courtesy of www.StockCharts.com

On the stock market, China Ceramics has performed like most Chinese stocks—it’s been going down for the last two years, right along with the “engineered” slowdown in the Chinese real estate market. According to the company, its 2012 third-quarter revenues fell to $62.1 million, down from $63.4 million. Average selling prices, however, grew by 14%. Earnings in the third quarter of 2012 were $11.7 million, down from $11.8 million in the comparative quarter. Management previously forecasted a slowdown in business and a reduction in its backlog, which will result in a substantial decline in fourth-quarter revenues.

Like a lot of … Read More

U.S. Oil Gushing, Oil Stocks Getting Ready to Move

By for Profit Confidential

Oil Stocks Getting Ready to MoveThe stock market’s recent breakout has legs, and there’s more optimism for the economy and corporate earnings this year. The stock market had a very strong start to the year, with the Dow Jones Industrials leading the way. Transportation stocks have turned strong, and the NASDAQ Composite is moving solidly. Even the price of oil is slowly ticking higher—$100.00 oil is a near-term reality.

There is a renaissance taking place in the domestic U.S. oil and gas business, and there is a ton of money sloshing around in the system. Countless companies are drilling in Montana, North Dakota, and California, along with the traditional regions. There is a glut of natural gas on the market, and low prices are supplanting coal for electricity production. It won’t be long before the U.S. is actually energy independent, especially if natural gas is used in more applications (as T. Boone Pickens advocates). Plus, there’s a lot of oil and gas drilling going on outside of the U.S. market, and the big oil and gas services companies just reported great financial results.

On the stock market, resource investing is always cyclical. Even the fastest growth story (say, an oil producer with new discoveries and a verifiable production forecast) won’t move upward on the stock market without a commensurate move in oil prices. An oil producer not only has to find the commodity and get it to market; it also has to worry about the prices for that commodity, which are set by a marketplace beyond its control. It’s a different business from speculating among technology stocks, for example.

That being said, however, … Read More

Market Bias Bullish, but Resistance Won’t Be Easy

By for Profit Confidential

But Resistance Won’t Be EasyIt’s amazing how resilient the stock market has been in spite of the concerns toward the U.S. budgetary cuts and debt ceiling, the eurozone’s economic stalling and debt, and the overall earnings risk.

The New Year has started off with a bang, with small-cap stocks leading the pack, as the Russell 2000 is up 4.5% as of January 17. Small-caps will do well if the economy strengthens.

In technology, the NASDAQ was displaying a bearish death cross, with its 50-day moving average (MA) below its 200-day MA. But, with the recent moves, the NASDAQ is showing a bullish golden cross, as the 50-day MA moved above the 200-day MA, based on my technical analysis. In my view, technology stocks will continue to be a top growth area going forward. (Read “When You Need to Buy Technology Stocks.”

$COMPQ Nasdaq Composite stock market chart

Chart courtesy of www.StockCharts.com

The safer money will be with the blue chips, given the uncertainties, as the Dow is up nearly four percent in January.

The charts are showing promise and potentially more gains to come.

The NASDAQ, Dow, S&P 500, and Russell 2000 are all showing a bullish golden cross on their charts, with the 50-day MA above the 200-day MA.

The overall U.S. stock market is trending higher. About 72.3% of U.S. stocks are above their respective 200-day MAs, versus 60.8% a month earlier. On a short-term basis, 84.1% of U.S. stocks are above their respective 50-day MAs, versus 67.3% a month earlier.

Since breaking 1,400, the S&P 500 has been strong and is within 1.5% of a key level at 1,500.

Take a look at the … Read More

Fast Food Offers More Value Menus—and More Cash, Too

By for Profit Confidential

Fast Food Offers More Value MenusTrading action in this stock market is a little worrisome. We’re getting decent earnings, but the stock market just yawns. There’s been a few misses on revenues so far, but the bottom line is showing real strength.

Of course, some of the yawning is due to the fact that many of the brand-name companies already have done well on the stock market and earnings expectations were previously reduced. In today’s market, surprising news doesn’t always mean that a company’s share price is going to advance. It is the age of austerity, and a definite malaise has set in. I view the stock market’s reaction to corporate earnings so far as sounding something like, “Oh good, this thing hasn’t fallen apart just yet.”

The Wendys Company (NASDAQ/WEN) perfectly illustrates the kind of earnings season we’re having among non-financial companies. (The big banks are reporting excellent earnings based on better capital markets and strong cost control.) The company beat consensus on its bottom-line, but revenues came in just shy of consensus. According to the company, fourth-quarter revenues were $630 million, up 2.4% from $615 million in the comparable quarter. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) from continuing operations were $95.9 million, for a gain of about 19%. Wendys’ forecasts five- to eight-percent earnings growth in adjusted EBITDA in 2013, but it increased its quarterly dividend forecast by 100% to $0.04. Wendys’ stock chart appears below:

 

Wendys Group Inc Chart

 

Chart courtesy of www.StockCharts.com

So business is basically stable, according to Wendys. Same-store sales were down just slightly in the fourth quarter of 2012. Like many other companies, real economic growth is … Read More

What the Top Technology Stocks Are Telling Us About the Market

By for Profit Confidential

What the Top Technology StocksThe breakdown in Apple Inc.’s (NASDAQ/AAPL) stock market price continues to be significant, and if the position drops to the $500.00-per-share level, it will represent a 29% drop from its recent all-time high on the stock market. It’s fair to say that Apple’s profitability is now well entrenched, but every business goes through its own economic cycle, and revenues and earnings estimates for Apple are coming down for future quarters. The company reports its earnings results on January 23.

The “AGA” stocks are important indicators because of the size of their stock market capitalizations. AGA is my acronym for Apple, Google Inc. (NASDAQ/GOOG) and Amazon.com, Inc. (NASDAQ/AMZN). These three technology stocks represent approximately $880 billion in stock market capitalization at current share prices.

Amazon.com has been on a tear over the last three years. The stock has done very well, even though it is incredibly expensive. Wall Street analysts expect Amazon.com to increase its top-line growth about 30% in 2012 and another 30% this year. Earnings estimates from the Street are all over the map. The company’s stock market chart is featured below:

AMZN Amazon.com Nasdaq stock market chart

Chart courtesy of www.StockCharts.com

I would say that the stock market is quite vulnerable if fourth-quarter earnings results don’t surprise to the upside. Meeting expectations isn’t going to cut it with investors, especially since those earnings expectations came down so much during the last earnings season.

The NASDAQ Composite looks to have formed a perfect head-and-shoulders technical formation, which began in early 2012. Oracle Corporation’s (NASDAQ/ORCL) recent earnings were good, but we’ll likely see continued weakness in technology stocks, at least those that are more consumer-oriented. Apple’s … Read More

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