Market Outlook – Week of 1/9/17
By Frederic Marsanne
Published on January 8, 2017
Every once in a while, the market does something so stupid it takes your breath away.
Indecision and delays are the parents of failure.
Nothing is worth more than this day.
Only those who have patience to do simple things perfectly ever acquire the skill to do difficult things easily.
Eighty percent of success is showing up.
I don’t want to achieve immortality through my work. I want to achieve it through not dying.
Image courtesy of Stuart Miles
(Cambridge, MA) — Last Friday (1/6) U.S. stocks ended up. Tech led the market higher. Real estate lagged. Gold and gold mines retracted.
The S&P 500 now sports a P/E of 26.20 (vs. 25.76 a week earlier), more than 60% above the mean of 15.63 that the market has experienced since 1870 – not cheap by any stretch. There surely is room for pain if the market wanted to inflict it.
Insiders, who appeared neutral or undecided until last week, have become bearish for the first time in two months. Over the past week, the weekly insider transactions ratio, i.e., the proportion of insider sales to buys, shot up to 25:1 (after oscillating between 10:1 and 20:1 for weeks). Purchases have dried up. Prior to this recent development, Six Flags Entertainment (SIX), Occidental Petroleum (OXY), Wynn Resorts (WYNN), Inovalon Holdings (INOV), Rovi Corp. (ROVI), Abbott Labs (ABT), Viacom (VIAB), Akamai Technologies (AKAM), and Foresight Energy (FELP) had seen some notable buys.
What’s next? Well, always remember that nobody knows for sure. Timing the market is next to impossible. It is thus best to show humility. Plus, earnings season gets underway, with many banks in particular reporting next week. The possible repeal of ObamaCare by a Republican-controlled senate may also add uncertainty — and volatility. But by definition, long-term investors shall remain committed to the market. After their recent advances, it is tougher to find value in the financial and energy sectors, but we don’t see them as particularly overpriced. Healthcare also remains one of the promising areas. Biogen (BIIB) seems to present investors with real long-term appreciation potential at current price. (An insider bought a massive amount of BIIB on 10/22 and 10/23/2015; more than a year later, the shares trade at about the same price.) So do Gilead Sciences (GILD), Illumina (ILMN), Alexion Pharmaceuticals (ALXN), Alnylam Pharmaceuticals (ALNY), Intrexon (XON), and a few others. Casino stocks led by Wynn Resorts (WYNN) (which has been consolidating for months now) may soon resume their advance (after underperforming for years). Similar value can be delineated in some areas of the cyclical consumer, apparel and retail sectors. Hanesbrands (HBI), J C Penney Company Inc (JCP), Dollar General (DG) and Under Armour (UA) may still be worth investigating. Shares of Alibaba Group Holding Ltd (BABA) have reclaimed their 50-day and 200-day averages, which may augur well for a company that has demonstrated solid EPS-generating capabilities.
Food for Thought (Updated)
Here is a select list of companies that have recently seen large insider purchases (usually, at least $250,000), which I provide as a starting point for research, i.e., food for thought. Some of these stocks may offer unique long opportunities.
FNB Bancorp (FNBG), Transenterix Inc (TRXC), Bonanza Creek Energy Inc (BCEI), Spark Energy Inc (SPKE), Kindred Biosciences Inc (KIN), International Tower Hill Mines Ltd (THM), Och-Ziff Capital Management Group LLC (OZM), Infinity Pharmaceuticals Inc. (INFI), Virtu Financial Inc (VIRT), Amicus Therapeutics, Inc. (FOLD), Vera Bradley, Inc. (VRA), Wynn Resorts (WYNN), Inovalon Holdings (INOV), Six Flags Entertainment (SIX), Occidental Petroleum (OXY), Rovi Corp. (ROVI), Abbott Labs (ABT), Viacom (VIAB), Akamai Technologies (AKAM), and Foresight Energy (FELP)
- The author of this article owns shares of some of the equities mentioned above. But remember: you can never trust a madman.
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Check out the following two videos; they capture some of the spirit…
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