Morning News: January 13, 2016
Posted by Eddy Elfenbein on January 13th, 2016 at 6:33 am

Gundlach Paints Bearish Outlook for 2016 Investing, Economy

Oil Rebounds From Below $30 as Threat of Further Drop Persists

RBS Warns: Sell Everything

Chinese Exports Post First Annual Decline Since 2009

China Trade Surprise Brings Relief

Russia Mulls Budget Cuts and Bank Stake Sales

Nigeria State Oil Company Holds First IPO by 2018

MetLife Unit’s SIFI Off-Ramp Seen Pressuring AIG as Icahn Looms

Yum Shares Rise After December Gain in China Same-Store Sales

PC Sales Drop To Historic Lows

Qualcomm, TDK Join Forces in $3 Billion Radio-Chip Venture

Big Beer’s Plan to Sell to Consumers Who Hate Them

’Bellwether’ G.M. Trial Opens Over Defect Claim

Cullen Roche: The Bear Market Playbook

Jeff Carter: What Skills Will People Need In The Future?

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Our Buy List Nearly Doubled the Market Today
Posted by Eddy Elfenbein on January 12th, 2016 at 5:02 pm

Today was an excellent day for our Buy List. Of course, I stress the benefits of looking at the long-term so we shouldn’t get too excited about one good day. But it was a very good day. Our Buy List gained 1.54% today which nearly doubled the S&P 500’s gain of 0.78%.

Seven trading days into the year, we’ve opened up a small lead against the overall market. Or more accurately, we’re down but not by quite as much. Through today, our Buy List is down 4.02% YTD compared with a loss of 5.14% for the S&P 500.

Cognizant Technology Solutions (CTSH) was our top performer today. The stock gained 6.28% in today’s session. There’s been some horrible flooding in India and Cognizant wanted to update investors on their status. The good news is that Cognizant won’t be financially impacted by the floods. The company reiterated their 2015 full-year guidance for earnings of at least $3.03 per share. That means they expect Q4 earnings of at least 77 cents per share.

“Cognizant extends its gratitude to its employees, business partners, government agencies, and others involved in recovery efforts that helped in quickly bringing our business operations back to normal,” said Gordon Coburn, President of Cognizant. “We are also grateful to our clients for their understanding of the circumstances, and their support of our Business Continuity Plan actions taken during the flood to successfully ensure continued delivery of services.”

After the closing bell, Ford Motor (F) announced a special 25 cent dividend. This is on top of their regular 15 cent quarterly dividend. The dividend will be paid on March 1 to shareholders of record on January 29. The automaker also said it expects record profits for 2015 and equal or better profits for 2016. The stock is down about 3% in the after-hours market.

Also after the bell, Stryker (SYK) narrowed its full-year range for 2015. The previous range was $5.07 to $5.12 per share. Now it’s $5.09 to $5.12 per share. This is the third revision to their full-year range. The initial guidance was for $4.90 to $5.10 per share, then it went to $5.06 to $5.12 per share. Earnings are due out on January 26.

High Yielding Dividend Aristocrats
Posted by Eddy Elfenbein on January 12th, 2016 at 2:06 pm

Thanks to the recent market selloff, many good stocks are going for decent prices. Here’s a list of Dividend Aristocrats that are currently yielding over 3%. To become a Dividend Aristocrat, a company needs to have raised its dividend for the past 25 years in a row.

Also on our Buy List, Ford and Wells Fargo both yield over 3%, while Microsoft and AFLAC aren’t far away.

Biogen’s CEO on CNBC
Posted by Eddy Elfenbein on January 12th, 2016 at 12:57 pm

Morning News: January 12, 2016
Posted by Eddy Elfenbein on January 12th, 2016 at 7:09 am

European Stocks Rise as Commodities Pare Drop, China Stabilizes

`Murderous’ Yuan Rate Jolts Hong Kong as Top Currency Hub

Following The U.S Shale And Saudi Arabian Chess Match, Saudi Arabia Just Yelled ‘Checkmate’

China Car Sales Growth Slows Further

African Sunshine Can Now Be Bought and Sold on the Bond Market

Arch Coal Files for Bankruptcy in Latest Blow to U.S. Miners

Ford Chairman: ‘We Are In An Experimental Stage’

Airbus Beats Boeing in 2015 Order Race, Lags On Deliveries

Starbucks Plans Thousands of New Stores in China

The New Republic Is For Sale Again

China Tech Billionaire Buys Gay Dating App Grindr

Tinder Is Internally Ranking Its Users Based on ‘Desirability’

Why Corporate America Should Ditch the Script During Quarterly Earnings Calls

Joshua Brown: The Death of a Brokerage Firm

Roger Nusbaum: 2016 Opens With a Kick to the Throat

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Oil at $31.13 per Barrel
Posted by Eddy Elfenbein on January 11th, 2016 at 6:21 pm

It’s not that oil is down — we know that. It’s that it keeps dropping. Today was another down day. Spot crude closed at $31.13.

The decline is simply remarkable. Some on Wall Street are talking about $20 oil.

New Small-Cap Low
Posted by Eddy Elfenbein on January 11th, 2016 at 12:04 pm

The Russell 2000 just dipped below its low from October 15, 2014. The index is at its lowest point since October 9, 2013.

The Russell 2000’s relative performance against the S&P 500 peaked on March 4, 2014. It’s been downhill ever since.

Buy List Updates
Posted by Eddy Elfenbein on January 11th, 2016 at 9:46 am

Here are a few news items from the past week about our Buy List stocks that I wanted to pass along:

Undervalued Pick of the Day: Stericycle

Alliance Data Announces New Stock Repurchase Program

Cerner Upgraded by RBC Capital Mkts

Wells Fargo Upgraded by Citigroup

Microsoft Stock Poised For Yet Another Winning Year

Is Microsoft CEO Nadella’s Turnaround Strategy Working?

Ford Changes Pension Reporting, Sees Rise in 2015 Profit

Ford’s Chairman Is on Quest to Reinvent Auto Maker

Goldman upgraded Wells Fargo to “buy” from “neutral.”

Looking at Market Correlations
Posted by Eddy Elfenbein on January 11th, 2016 at 8:35 am

Here’s some data I’ve been working on that I thought I’d share with you. Below is a table showing the correlations of the daily changes of the 10 S&P 500 sectors. (I apologize for the crowded data.) I’ve also included the daily changes for the S&P 500 and for our Buy List. The data only covers calendar year 2015.

A few things to note.

First is how strongly stocks are correlated with one another. At least in the near-term. Even a low daily correlation is around 60% or 70%. This means that just by being a stock, you’ll get tossed around with whatever the market’s doing that day. This is actually good news for stock-pickers because it means that good stocks can get knocked down with everything else, thereby creating good bargains. The shorter the time period, the greater the impact of the overall market.

I also think it’s interesting how the Industrials have the highest correlation with the broader S&P 500. I’ve noticed this in previous years as well. In other words, the Industrials stand out by being the most similar to everyone else.

Oddly, I find that this makes sense yet I’m not sure why. Perhaps it’s that the Industrials lie at the middle C of the economy. While sectors like Energy or Finance can diverge from the broader economy, the Industrials are unlikely to because…well, that is the economy. I’m not exactly sure, but it’s not due to size. Industrials are big but not the biggest.

But this also means that if you wanted to build a cheap-but-somewhat-decent index, you could probably use as few as five major industrial stocks. By this, I mean companies like DuPont or 3M. Sure, it would be far from perfect, but considering how small it is, it would be pretty darn good.

Naturally, over the short term, a stock will reflect the broader market and its sector. But as time goes on, the value specific to each company would gradually move to the surface and the higher categories would lose importance. On the table, you can see how strongly correlated the Buy List is with the S&P 500 on a daily basis, yet after 12 months, we had no trouble separating ourselves from the market last year.

It’s interesting to see sector relationships in the market. For example, Energy and Materials are often closely related, yet Materials are usually closer to Industrials than Energy is. Staples and Healthcare are often close, but not so much last year. Tech is often a lone wolf, not much correlated with anyone. In that regard, it’s the opposite of Industrials.

I suspect that the numbers on the table for Utilities are unusually low. Last year was probably an aberration for the Ute sector. Typically, I’d expect a higher correlation with defensive sectors like Staples and Healthcare.

Finally, don’t overthink this table. I think it’s interesting but only in the sense that it gives us a glimpse at how the market behaves. None of these correlations is stable. The major lesson is that a powerful market trend can carry off any stock.

Morning News: January 11, 2016
Posted by Eddy Elfenbein on January 11th, 2016 at 7:04 am

Chinese Stocks Slip Again, Deepening Worries Over Beijing’s Handle on Crisis

EU Orders Belgium to Claw Back $763 Million Illegal Tax Breaks

Rand Slump May Force More Aggressive SARB Action as Risks Climb

Oil Seen Heading to $20 by Morgan Stanley on Dollar Strength

Insurers Say Costs Are Climbing as More Enroll Past Health Act Deadline

Yahoo’s Brain Drain Shows a Loss of Faith Inside the Company

Month After G.E. Deal Falters, Electrolux Chief Says He’ll Retire

ChemChina Buying KraussMaffei, a German Machinery Company, for $1 Billion

Ford’s Revolutionary FordPass App Aims Do For Mobility What iTunes Did For Music

Uber to Drop Prices in 80 Cities in the U.S. and Canada

Drugmakers Raise Prices Despite Criticisms

Chipotle Outbreaks Send Wall Street Searching for Price Bottom

Volkswagen Starts Down Difficult Road of Winning Back Americans

Jeff Miller: Is It Time To Buy The Dip?

Howard Lindzon: My 2016 Guesses…and of Course the Crash of 2016

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