The chase by Frances Horodelski:
Trouble...Trouble, trouble, trouble, trouble; Trouble been doggin' my soul since the day I was born; Worry...Worry, worry, worry, worry; Worry just will not seem to leave my mind alone. – Ray Lamontagne
Here’s what is of interest to me: The CNN fear/greed index is down to 25. The percentage of stocks trading below their 50 day moving average (in the S&P 500) is running at 68%. On the TSX that number is 70%. There is a lot of damage done. It might get a little tenser. Greece talks are a mess. Tsipris is going to Russia on Friday (and speaking in Parliament today saying any deal should not prolong uncertainty but that the IMF has ‘criminal” responsibility). Everyone is entrenched (although the majority of Greeks are said to want to stay in the union). Who will blink? Germany? They may have the most to lose as a revival of the Deutschemark would be lousy for trade. We have quadruple witching on Friday and the quarterly S&P 500 and Russell 3000 rebalancing also. Before that we have Dr. Yellen and her gang with the monetary statement and press conference. Lots of trouble and worry to get through before – be careful and nimble but there are many opportunities to zig when the market zags.
Meanwhile in Toronto, the birds are being fed. PrairieSky is selling 5.76 million shares at $31.25/share while Goldcorp is exiting its position in Tahoe Resources, selling its entire 25.6% stake at $17.20 (versus THO’s close yesterday at $18.47).
In China, where there are 25 IPOs pending, stocks started and are continuing the week in negative territory. Interestingly, while the Shenzhen index has outrageous valuations (some stocks trading at 500x plus), the Shanghai index trades at a more reasonable 19x (versus the S&P’s 17.5x). Many stocks in China are cheaper than the most expensive U.S. names. For example, Under Armour. It was announced yesterday that to protect the founder’s control, the company is doing a stock split issuing non-voting C shares which will be used for acquisitions and employee compensation. UA trades at 84x forecasted earnings (with a p/e to growth ratio of more than 3x). Jim Grant from the Grant Interest Rate Observer noted that Michael Kors traded with a similar p/e a few years ago. Today, KORS trades at 10x. Other expensive stocks using 2015 forecasted earnigns and their PEG ratios include Netflex (203x, 7.3x), Amazon (95x, 2.6x), Salesforce.com (93.5x, 4x), Autodesk (54x, 3.3x). Under Armour’s 2015 forecasted earnings are 67x.
What about gold? I mentioned yesterday that often times the chump, or dud, or sector in the cellar for three years or more often becomes the champ, stud or stellar performer in the next three years. Gold has been in a slump since 2011’s peak with bullion down 38% and the XGD (gold stock ETF) is down 66%. Is there an opportunity here? We’ll be speaking with CanaccordGenuity’s strategist about his new overweight gold position.
In the news today we have executives from SunLife and Bentall Kennedy on BNN this morning to discuss the acquisition by the former of the latter bringing SunLife’s real estate assets under management to $97 billion. We have economic statistics to review including confidence numbers across Europe which slumped (German expectations index dropped from 31.5 from 41.9). In the U.S., housing and building permit data. Toyota is buying back 600 billion yen (about $4.5 billion) worth of stock to reduce the impact of dilution. FYI – some of the smartest people I read are very bullish on Japan. This is NOT a mainstream view. Something worth considering. Finally, we’ll talk about Alberta and the implications of rising taxes in that province and waiting for royalty changes. We’ll also look into The Gap and its announced intentions to close 175 stores.
Today’s feature on BNN will be three interviews with three CEOs where the street’s rankings are full-on bullish. Bankers Petroleum (14 buys, one hold), Dominion Diamond (nine buys, one hold) and Raging River (17 buys and one hold).
And just by the way, some of the best big cap companies in the U.S. right now are trading close to their 52-week lows – names like Wal-Mart, Johnson & Johnson, American Express and Procter & Gamble. A shopping list for activists?
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