Market Outlook – Week of 2/6/17
By Frederic Marsanne
Published on February 4, 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 (2/3/17) U.S. stocks advanced. Financials led the market higher. Consumer discretionary bucked the trend. Small caps gapped up.Gold inched up, as did mines.
The S&P 500 now sports a P/E of 25.79 (vs. 25.76 a week earlier) and remains more than 60% above the mean of 15.64 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 three to four weeks ago, have recently become more bearish. The weekly insider transactions ratio, i.e., the proportion of insider sales to buys, shot up to a record 59:1 10 days ago and has remained high since, in the vicinity of 30:1 (a far cry from the more neutral reading of 10:1 to 20:1 encountered weeks before). Purchases have perked up a bit over the past few days, but sales have increased dramatically. Time for caution. Still, American Outdoor Brands Corporation, formerly Smith & Wesson Holding Corporation (AOBC), Dell Technologies Inc (DVMT), Nicholas Financial, Inc. (NICK), Lions Gate Entertainment Corp. (LGF), Six Flags Entertainment (SIX), Occidental Petroleum (OXY), Wynn Resorts (WYNN), Virtu Financial Inc (VIRT), Amicus Therapeutics, Inc. (FOLD), Vera Bradley, Inc. (VRA), Rovi Corp. (ROVI), Abbott Labs (ABT), Viacom (VIAB), Akamai Technologies (AKAM), and Foresight Energy (FELP) have seen some notable buys recently.
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. Interestingly, Barron’s noted a week ago that “Today’s stock prices are well supported by corporate earnings and economic growth. In fact, if President Trump can avoid stumbling into a trade war – or a real war – the Dow could surpass 30,000 by the year 2025.” Well, it surely is an aggressive take, but far from non-sensitical. By definition, long-term investors shall anyhow 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. (Interestingly, insiders have lately been selling banking and financial institutions stocks rather aggressively, think JPMorgan Chase, BBT, U.S. Bancorp, and Morgan Stanley, to name a few). 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) (despite recent setbacks), 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) (which gapped down following reporting recent results), 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.
Arconic Inc., formerly Alcoa Inc. (ARNC), Calamos Asset Management, Inc (CLMS), Alliance Data Systems Corporation (ADS), Eagle Bulk Shipping Inc (EGLE), Swift Transportation Co (SWFT), Mirati Therapeutics, Inc. (MRTX), Heron Therapeutics Inc (HRTX), Dell Technologies Inc (DVMT), American Outdoor Brands Corporation, formerly Smith & Wesson Holding Corporation (AOBC), Seritage Growth Properties (SRG), Regeneron Pharmaceuticals Inc (REGN), Retractable Technologies, Inc. (RVP), Loxo Oncology Inc (LOXO), Nicholas Financial, Inc. (NICK), Lions Gate Entertainment Corp. (LGF), 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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