Tuesday Thoughts

A few of my thoughts as the work day progressed. Hopefully this will, at the very least, make you google something. 

For the last year it has seemed like the equities market is over-bought, too high, due for a correction, blah blah blah. It has been on my radar, seemingly with many other people as well. As we sprint into 2018 with a vengeance the market seems higher than ever and due for a setback. But are we?

Even though the major markets RSI’s are above 80 and there seemingly hasn’t been a down day since the start, 2018 is a year poised for continued growth.

Fourth Quarter Earnings

Two schools of thought.

1. "The new tax plan is going to lower the effective corporate rate and boost companies earnings. Repatriation will be big along with share buybacks, increased dividends, and other tools to increase EPS."
This was my first idea and I clung to it with vigor. I went in on depressed companies who would greatly benefit from this tax rate. GE in particular comes to mind. The first week of 2018 made me even more confident and I preached it like Joel Osteen.

2. "Remember, the first earnings report is going to be Q4. A number of companies are going to realize their tax bill will be much lower in 2018 and thus buy and expense as much as they can for the end of 2017. The beginning of the year is going to be poor."
My good friend, my much-smarter-than-me friend, pointed this out to me. The headlines are starting to show that the first earnings of 2018, which will be Q4 of 2017, are going to show a huge expense. GE is getting slammed, a few of the big banks say they are going to owe billions. The market looks poised to continue to increase but maybe earnings season number one will be slower than originally expected.

Friday Thoughts

Yield Curve
The yield curve has started flattening. When comparing January curve to December curve you can see a significant move towards horizontal. In some circles the yield curve is very impressionable.

     Why is the yield curve important and why is it [usually] sloping upward? Think about the Expectation Theory. For starters, yield is on the y-axis and maturity on the x-axis. Short term is inherently less risky meaning the interest you receive on bonds will be lower. When you start moving out - 10 years, 20 years, 30 years - the yield will increase to account for the risk of time. Most cases you'll see a fairly significant difference between the 10 year and the 30 year. Why, besides time risk?

If I Bought Everything I've Analyzed...

I figure now is as good a time as ever to go through my track record and see how I have been doing. I started posting last October and the stocks that I have analyzed have done pretty well since then. I will start from the beginning and go from there, looking at all the stocks I have analyzed and presenting the return of each since the post date.

1. Chipotle analysis on October 20, 2016. The stock price at the time was $405.10 and I said it represented a "beautiful buy point." Before market open today (6/15/17) the price is $459.69. The total return over this time has been 13.43%.

2. SolarCity analysis on October 21, 2016. The stock price at the time was $20.15. It was bought by Tesla and since converted into Tesla shares. At the time of the conversion, shares of SolarCity reached $20.34 and were converted to 0.11 shares of Tesla - which was $184.52. The conversion happened on November 21, 2016. Lets say you have $987.35 invested in SolarCity at $20.15. That'd buy 49 full shares. Those 49 shares would be converted into 5.39 shares of Tesla. Since the merger, Tesla has gone from the $184.52 price mentioned earlier to $380.66 before market open today (6/15/17). That would mean your position as appreciated by 105.74%.

Cara Therapeutics

Cara Therapeutics [CARA]

Cara is trying to do big things to combat the opioid epidemic that has been a problem in the United States for quite some time. Opiates are considered an analgesic drug - or one that relieves pain. The most common are in the forms of morphines and heroin. Then there are the synthetic and semi-synthetic opiate drugs being Percocet, Vicodin, OxyContin, and fentanyl. From the Wikipedia page Opioid epidemic, there were 52,000 drug overdose related deaths in the United States. Of those overdose related deaths, 33,000 were from opioids. Clearly there is an opioid problem.

Nu Skin Enterprises - [NUS]

This is the first time I have heard of Nu Skin and to be honest I am a fan.

"Nu Skin Enterprises is a $2.0 billion plus direct selling company that markets premium quality personal care, nutrition, and technology products through a global network of approximately 1 million Actives and Sales Leaders." -Investor Relations on Nu Skin Website

First things first is their fairly consistent dividend since the beginning of 2001. They missed a few quarters here and there, but it has grown at a steady pace to reward their investors. However, besides the dividend I don't know if I would plan on investing in them long term because I have only been watching it for a couple days. Though they've been in business since 1984 and traded publicly since late 1996, I haven't looked into their business and how they stack up to competitors yet. So why don't we look!

BUD tracking the 50 day moving average

Anheuser-Busch InBev SA/NV  [BUD]    

Slow and steady wins the race. Since their rapid drop in stock price back in October/November of 2016 it has been tracking upward, slowly but surely. It has bounced off the 50 day moving average twice now and is creating a pattern.

Ever Hear of NQ Mobile?

NQ Mobile [NQ]  - all numbers and information about company come from finviz.com

I'm sure you haven't. If you have, then you are better than me. NQ Mobile - used to be NetQin Mobile - is headquartered in Beijing making it a Chinese stock. The basis of their business is supplying mobile internet services to the people of China. They have products under their umbrella in the fields of mobile security, privacy, optimization, cloud stuff, and family protection. 

SNAP Stinks

A couple things I learned and then some of my own thoughts as to why Snap stinks.  

     25% of all stock issued at IPO was promised to be held for one year. Snap and the underwriters - Morgan Stanley and Goldman Sachs - were able to convince individuals/institutions to agree to buy the stock and hold onto it for at least one year. It's very rare that companies are able to accomplish this and those companies are actually turning a revenue. These shares that are held for a year are going to help legitimize the company, which is useful since they lost $514.6 million dollars last year. 

CMG Moving Averages Cross

Chipotle  [CMG]     

     After a couple days into a down week I was scrolling through the charts I usually do. Today I noticed that Chipotle is showing a bullish signal which I find surprising amidst all the bad news surrounding them recently. The front cover of Barron's was promoting an article they wrote saying Chipotle could have a 20%-30% downside 2 or 3 weeks ago. And today it fell 1.65%, the equivalent of $6.78 and broke below any support from the 50 or 200 day moving average. 

Valeant [VRX] Reversing Trend

Valeant Pharmaceuticals International, Inc     [VRX]


I wish I had been able to post this on Monday when I saw this. Before the subsequent 12% trip up. Valeant had formed a reverse head and shoulders. 

Is Panera [PNRA] Forming Cup & Handle?

Panera   [PNRA]


     If they are, it's a smaller one. However, it's a bullish pattern nonetheless. For those of you unfamiliar with the term cup and handle there is an explanation on Investopedia I would recommend looking up. Here is the screenshot I took of the chart. I finally figured out how to draw on them. Lucky you.

Kroger [KR] 50 Day Breach

Kroger   [KR]

     Kroger is a prominent grocery store chain headquartered in Cincinnati, Ohio. In it's 2016 year, the company lost about -18% off the value of their stock. It was a down year for the company in that respect. Over the last 5 year period, they have gained 184.97% while the S&P gained 72.37%. Not only has it outperformed the market, but it has offered up a consistent dividend in between 1-1.5% yield. It was uncharacteristic for the stock to plunge almost -20% in one year after continual growth and expansion. That doesn't make a whole lot of sense when you pin it up next to them meeting or beating every quarterly estimate for Kroger's 2016 fiscal year. 

Caterpillar [CAT] - Last Infrastructure Stock

Caterpillar Inc.    [CAT]

     Caterpillar will be the last infrastructure stock I look at. At least for the time being and with the purpose of Trumps infrastructure spending boost. On Saturday the 14th, an article was posted on TheStreet along with a video from Cramer saying "Trump Could Make Caterpillar Great Again." 

United Rentals, Inc [URI]

United Rentals, Inc.   [URI]

     Coming from a little bit of a different direction with this one. It it still related to the other two, but they don't produce any materials or consult with any construction. Probably guessed it based on the company name, but they are as simple as an equipment rental company. They have general rentals which go towards the construction and industrial industry and a Trench, Power, and Pump segment. That one targets more of the underground work. Pretty self explanatory stuff based on names with this one. They have just under 900 rental locations in North America.

Vulcan Materials Company [VMC]

Vulcan Materials Company   [VMC]

     Vulcan Materials Company produces and sells construction materials, asphalt mix, and ready-mixed concrete to companies primarily in the United States. Those segments account for three of the four company segments with the fourth being calcium. These different parts of the company are used in the public sector to supply for the construction of highways, airports, and government buildings.

Infrastructure Stocks for 2017 - Aecom [ACM]

Aecom  [ACM]

     The infrastructure industry is a hot topic as we roll into 2017. The Trump administration has said part of the plan to 'Make America Great Again' is to fix the crumbling infrastructure. That being roads, bridges, water structures, and things of that nature. Estimates have placed the total cost to fix all the roads and bridges to be in the trillions of dollars. Trumps believes his plan will pay for itself. He'd offer 137 billion in tax credits to private companies hired to fix the problems. The money the private companies save from the tax credits is assumed to be made back in tax revenue from the increased wages paid out to the employees and the profits to the contractors. Whether that is true and capable of happening, it's clear that Trump and wants to spend some money on building some things. (Some info gathered from article here) 

Barnes and Noble Stinks...

Barnes and Noble    [BKS]

     Barnes and Noble has cut forecasts because they had a terrible holiday season. The same store sales were considerably lower this holiday season and causing B&N to become reactive and cut its outlook for the fiscal year. In the 9 weeks leading up to the last of the year, B&N reported a decrease in same store sales of 9.1%. This news came out this morning and today along with most other retail stocks taking a big hit as well. Over the last 5 days, the stock is down 8.73% and 5.58% of that is just from today.

Rising Tide Raises All Ships

     After Trump was voted President, there was a lot of talk about what he would do to the steel industry. He had been saying that China has been taking manufacturing jobs away from the USA and how he will bring them back. The reason China can do that is because they have subsidized the steel industry. And they have done it against the rules of any trade laws that had been made. Steel is so cheap that they are just dumping it into the US market leaving no market share for domestic manufacturers to gain. The question remains... How will Trump negotiate the trade laws so that he can bring back US manufacturing, in this case steel and iron, and how will it affect domestic manufacturing as a whole?

The Marijuana Market

        The marijuana market is the fastest growing market/industry in the world. After doing some research and reading online in an article written by Tirthankar Chakraborty, "The industry grew 24% to $5.7 billion last year," and "the industry is expected to grow by $7.1 billion this year," AND "that legal cannabis industry sales will grow more than 200% to $22.8 billion in the next four years" (4 Best Marijuana Stocks to Play the Green Rush, Zacks).