Market Outlook – Week of 12/26/16
By Frederic Marsanne
Published on December 26, 2016
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 (12/23) U.S. stocks ended marginally up.
Healthcare led the market higher. Other group hardly moved.
Gold and gold mines also ended slightly up.
The S&P 500 now sports a P/E of 26.04, 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 appear neutral or undecided overall. Over the past month, the weekly insider transactions ratio has been neutral, with the proportion of insider sales to buys reaching between 10:1 and 15:1 (after reaching a peak of nearly 30:1 at the end of October and an underwhelming trough in the second week of November). Last week the ratio reached a very neutral 15:1. Insider purchases at Wynn Resorts (WYNN), Inovalon Holdings (INOV), Rovi Corp. (ROVI), Abbott Labs (ABT), Viacom (VIAB), Akamai Technologies (AKAM), and Foresight Energy (FELP) are most notable.
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. 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 is also one of the promising areas. Biogen (BIIB) seems to present investors with real long-term appreciation potential at current prices. (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, if not slightly under.) So do 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 its advance (after underperforming for years). Similar value can be delineated in some areas of retail. J C Penney Company Inc (JCP), Macy’s, Inc. (M), Dollar General (DG) and Under Armour (UA) may still be worth investigating.
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.
Wynn Resorts (WYNN), Inovalon Holdings (INOV), 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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