Morning News: January 3, 2013
Posted by Eddy Elfenbein on January 3rd, 2013 at 7:19 am

Some Breaks for Industries Are Retained in Fiscal Deal

Moody’s Says ‘Fiscal Cliff’ Deal Doesn’t End Credit Downgrade Risk

Dollar Rises As U.S. Budget Deal Optimism Wanes

CEOs Pan Fiscal Cliff Deal, Vow to Continue Debt Fight

Basel Becomes Babel as Conflicting Rules Undermine Safety

UK Construction Hits a Six-Month Low

Spain Sees Jobless Total Fall In December

Al Jazeera Seeks a U.S. Voice Where Gore Failed

China Poised for 2013 Rebound as Debt Risks Rise for Xi

Global Natural Catastrophe Losses Fell in 2012, Munich Re Says

Avis Will Buy Zipcar For $500 Million

Starbucks to Open First Store in Vietnam

Google Said Poised to Resolve FTC Antitrust Probe Today

What’s Inside America’s Banks

Jeff Miller: Analyzing the Fiscal Cliff Outcome

Stone Street: Down So Long It Looks Up – Zipcar

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Cyclicals Continue to Lead
Posted by Eddy Elfenbein on January 2nd, 2013 at 11:08 am

Here’s a look at the Morgan Stanley Cyclical Index ($CYC) relative to the S&P 500.

The cyclicals grabbed the lead right after Mario Draghi said that the ECB would do “whatever it takes” to save the euro. As I said before, today is a high-beta rally. The Russell 2000 ($RUT) and the Equal Weight S&P 500 are at all-time highs.

2013 Is Off to a Strong Start
Posted by Eddy Elfenbein on January 2nd, 2013 at 10:52 am

For the last few weeks I’ve cautioned investors to ignore the hype about the Fiscal Cliff. Eventually, I believed, some deal would be reached, and late last night, that’s exactly what happened. Here are the details.

It wasn’t pretty and not everybody got what they wanted, but compromise is the cornerstone of democracy. Plus, there will be more battles ahead on the debt ceiling.

The good news is that the markets are responding very well this morning. The S&P 500 has been as high as 1,457.53 this morning. That’s a 2.2% jump and it brings the index just eight points shy of its highest close since 2007. On our Buy List, Oracle ($ORCL) is up to an 18-month high this morning.

Today’s rally is what’s called a high-beta rally which means that the leaders are small-cap stocks plus industries like tech (like Oracle), finance and cyclicals. High-beta rallies usually (but not always) tend to pull along lower-quality stocks with them. There are lots of sketchy names among small-cap tech stocks. Since our Buy List is concentrated among high-quality stocks, we tend to lag the broader markets on days like this. The Russell 2000, which is a popular index of the small-cap sector, is up to an all-time high this morning.

Still, our Buy List is beginning 2013 on a strong note. Every stock but Ross Stores ($ROST) is higher today. I was pleased to see that CR Bard ($BCR) was upgraded by JPMorgan today. (The Buy List is so new I haven’t had time to enter in comments for the new additions. I’d better get on that.)

On the economic front, the ISM Index for December rose to 50.7. If you recall, the number for November was 49.5 which was a dud. Any reading above 50 means the manufacturing sector is expanding. Below 50 means it’s shrinking. The worry zone doesn’t really kick in until the ISM drops to 45 or so. The next big report will be Friday’s jobs report.

Morning News: January 2, 2013
Posted by Eddy Elfenbein on January 2nd, 2013 at 6:49 am

U.S. Fiscal Cliff Deal Prompts Broad Global Market Rally

Bipartisan House Backs Tax Deal Vote as Next Fight Looms

Bond Tab for Biggest Economies Seen Falling $220 Billion

Senate Plan Undoes Most of $600 Billion in Budget Changes

Euro-Zone Manufacturing Shrinks in December

Macau Casinos End Year on a High

Malls Blossom in Russia, With a Middle Class

Tech Giants Brace for More Scrutiny From Regulators

Arcelormittal To Sell $1.1bln Stake In Canadian Unit

Hyundai, Kia Forecast Slowest Growth in Seven Years

Middleby Buys Appliance Maker Viking For $380 Million

Buffett Combines BofA With Buybacks to Beat S&P 500

Crime Forfeiture Pays for U.S. Attorney’s Office (Sometimes in Dinosaur Bones)

Joshua Brown: Binary Sunset, Revisited

Phil Pearlman: Crushing It Is a Process

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BW: How Your Buy Order Gets Filled
Posted by Eddy Elfenbein on January 1st, 2013 at 9:18 am

Here’s a cool graphic from Business Week on how your buy order gets filled.

Morning News: January 1, 2013
Posted by Eddy Elfenbein on January 1st, 2013 at 7:45 am

U.S. Budget Compromise Deal Reached

Senate Passes Legislation to Allow Taxes on Affluent to Rise

Wall Street Ends 2012 Riding High On “Cliff” Deal Optimism

Debt Limit Reached, U.S. Moving To Avoid Default: Timothy Geithner

Yen Tipped To Underperform In 2013

China Manufacturing Index Shows Third Straight Expansion

Best and Worst Bond ETFs of 2012

Bond Craze Could Run Its Course in New Year

U.S. Mortgage Firms Said to Near $10 Billion Settlement

Tribune Co. Looks To Television After Bankruptcy

Best Buy Loses Two Board Directors

Elbit Drop Cut as Conflict Lifts Orders: Israel Overnight

Facebook’s Last Sell Rating Is Lifted

Cullen Roche: Lessons From 2012…

Roger Nusbaum: A New Year

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The 2013 Buy List
Posted by Eddy Elfenbein on December 31st, 2012 at 8:56 pm

Here are the 20 stocks for the 2013 Buy List. It’s locked and sealed and I can’t make any changes for 12 months.

For tracking purposes, I assume the Buy List is a $1 million portfolio that’s equally divided among 20 stocks. Below are all 20 positions with the amount of shares for each, and the closing price for 2012. Whenever I discuss how the Buy List is doing, the list below is what I’m referring to.

There are five new stocks and five stocks that I’m removing. The five new stocks are Cognizant Technology Solutions ($CTSH), FactSet Research Systems ($FDS), Microsoft ($MSFT), Ross Stores ($ROST) and Wells Fargo ($WFC).

The five stocks I’m removing are Hudson City Bancorp ($HCBK), Johnson & Johnson ($JNJ), JoS. A Bank Clothiers ($JOSB), Reynolds American ($RAI) and Sysco ($SYY).

The average market cap is $49 billion. That ranges from a high of $225 billion for Microsoft to $150 million for Nicholas Financial ($NICK). Moog ($MOG-A) is the second-smallest and it’s still 12 times the size of Nicholas.

Fourteen of the twenty stocks pay dividends. The average yield is 1.64%.

Only four stocks have remained on the Buy List for all seven years: AFLAC ($AFL), Bed Bath & Beyond ($BBBY), Fiserv ($FISV) and Medtronic ($MDT).

The 2012 Buy List
Posted by Eddy Elfenbein on December 31st, 2012 at 7:43 pm

The 2012 trading year has come to a close. I’m happy to report that our Buy List had another market-beating year. The 20 stocks on the Crossing Wall Street Buy List gained 14.56% while the S&P 500 gained 13.41%. This is the sixth year in a row that we have beaten the market.

Including dividends, our Buy List gained 17.85% compared with 16.00% for the S&P 500. The dividend yield for the Buy List worked out to 2.16% while it was 2.28% for the S&P 500. For the year, our beta was 1.0376.

Over the seven-year history of the Buy List, we’ve gained 62.30% to the S&P 500’s 32.65%. Our annual turnover has been just 25% which means we’ve only changed five stocks per year. The seven-year beta is 0.9591.

I’ll restate the rules of the Buy List. I choose a portfolio of 20 stocks at the beginning of the year. After that, the Buy List is locked for the year and I can’t make any changes until the following year. For tracking purposes, I assume that the Buy List is a $1 million portfolio equally divided among the 20 stocks. You can check the performance of the Buy List anytime at our Buy List page.

My goal is to show investors that by choosing stocks wisely and by sticking with high-quality stocks, they can beat the market—and that’s exactly what we’ve done. I try to beat the market by a few percentage points and to do it with less risk.

Our top-performing stock in 2012 was WEX Inc. ($WXS) which gained 38.85%. Other big winners were Harris Corp. ($HRS) up 35.85%, Fiserv ($FISV) up 34.54% and JPMorgan Chase ($JPM) up 32.24%.

Here’s how each stock performed:

Here’s how the Buy List performed throughout the year.

Two Thoughts As 2012 Winds Down
Posted by Eddy Elfenbein on December 31st, 2012 at 11:45 am

Here are two things that have been on my mind as the year winds down.

I’m curious if the March 2009 low in the S&P 500, now nearly four years old, marked the end of the brutal nine-year bear market that began in March 2000. That, of course, was the capstone of an 18-year bull market that began in 1982.

If so, it’s interesting that the bear run was about half the time of the bull run. We never know these things until a few years after they happen. I suspect that it was the low.

The other item on my mind is, did the bond market’s peak this past July of this year mark the end of its 31-year run? On July 25, 2012, the yield on the three-, five-, seven-, ten-, twenty- and thirty-year Treasuries all hit their lows. This was right at the time of Mario Draghi’s “whatever it takes” pledge.

Yields have risen since then but every prediction of the bond market’s demise — and there have been many — has been wrong. I’m fairly certain that stocks hit their low, but I’m not so sure about bonds.

NICK’s Special Dividend
Posted by Eddy Elfenbein on December 31st, 2012 at 11:27 am

A few of you have asked about Nicholas Financial‘s ($NICK) special dividend. I was expecting it to hit accounts today but haven’t seen it yet. I’m not sure why but I’m looking into it. I’m sure there’s no need to be alarmed. Like many of you, I just want to find out exactly what’s happening.

Update: The big dividend hit my personal account around 5:30 pm.