Charles Kirk to Interview Me Live at 5 PM ET Today

October 28th, 2010

I am excited to announce that Charles Kirk of The Kirk Report will be conducting a live interview with me at 5:00 p.m. ET today for one hour.

The format of the interview is text-based and Charles typically includes a healthy dose of questions from the audience, so I encourage anyone who is interested to join us at this link – and bring along some questions in your back pocket.

Since I live only about five miles by kayak from AT&T Park, I am acutely aware of tonight’s World Series game, but I have it on good authority that our interview will not run into extra innings and put fans in some sort of Heidi Game dilemma.

So bring your questions and I will bring the lumber, dig in, and be sure not to take any pitches, no matter how far out of the strike zone they may be…

Related posts:

Disclosure(s): none



Read more here:
Charles Kirk to Interview Me Live at 5 PM ET Today

Uncategorized

European Confidence the Highest Since 2007

October 28th, 2010

As we draw closer and closer to the FOMC meeting next week, the clearer the markets believe they are to figuring out what the FOMC might do with regards to quantitative easing (QE)… So, I found some quotes from bond king, Bill Gross, and analyst, Mark Gilbert, regarding what they see. You won’t want to miss their quotes!

The currencies and precious metals are seeing some healing this morning. The US traders haven’t been kind to these risk assets lately, so it’s certainly possible that the US traders remove the tourniquets, and halt the healing. The big news this morning surrounds QE… Apparently the Fed Heads are asking dealers to estimate the scale and impact of QE… Hmmm… Yes siree Bob! Bloomberg got a hold of the survey given to NY bond dealers…

Actually, I like the idea of surveying bond dealers, but five days before your meeting? Shouldn’t this have been done a couple of weeks ago when the FOMC first indicated they would be implementing QE once again? Oh well…

I gave an interview to US News & World Report yesterday, and told the writer there that each $500 billion of QE would be equivalent to a 50 or 75 BPS Fed Funds Rate Cut… Fed Head, William Dudley, who is vice chairman of the Fed, said he expects the FOMC to announce $500 billion in “initial buying”…

Here’s the problem I see with doing the QE in smaller pieces… The FOMC would do this in an attempt to pull the wool over the markets’ eyes… But, for the last couple of weeks, the markets have believed the amount would be $1 trillion (I think $2 trillion, and Goldman thinks $4 trillion)… So, if the FOMC comes out next week and says something less than $1 trillion, the markets will be disappointed, and begin to wonder just how deep this QE is going to be when it’s all said and done!

Here’s Mark Gilbert from Bloomberg last night on QE…

Albert Einstein defined insanity as doing the same thing repeatedly and expecting different outcomes. The crazy gang at the Federal Reserve should heed those words when debating how much more market manipulation to inflict on the world of fixed income.

The worrisome thing about so-called quantitative easing – a concept still novel enough to mean whatever the Humpty-Dumpty’s in central banking want it to – is that its consequences remain unquantifiable, and the perceived need for more central-bank purchases of securities should make investors uneasy.

And here’s Bond King, Bill Gross on QE…

We are, as even some Fed Governors now publicly admit, in a “liquidity trap”, where interest rates or trillions of QEII asset purchases may not stimulate borrowing or lending because consumer demand is just not there. Escaping from a liquidity trap may be impossible, much like light trapped in a black hole.

Bill Gross then went on to say, “Check writing in the trillions is not a bondholder’s friend, and, if truth be told, somewhat of a Ponzi scheme.”

WOW! Both Bill Gross and Mark Gilbert doing their best Aaron Neville, and telling it like it is!

OK… How about we stop with the QE talk for today? It’s beginning to give me a rash!

Yesterday, we saw both Norway’s Norges Bank and the Reserve Bank of New Zealand keep their powder dry, and pass at this meeting at a chance to raise rates. First, the Norges Bank left rates unchanged, but the Norges Bank Governor said at a press conference that “Norway’s normal rate is 5%.” So, if that’s what he truly believes, he has some work cut out for him!

The Reserve Bank of New Zealand (RBNZ), Governor Alan Bollard said, “Despite some data turning out weaker than projected, the medium-term outlook for the New Zealand economy remains broadly in line with that assumed at the time of the September Monetary Policy Statement.”

You might recall that the September MPS in New Zealand was the thing that got me all lathered up about another rate hike… So, something is keeping Bollard from hiking rates, and I think I know what it is… In fact, I think Bollard took a swipe at the US/FOMC and their plans for QE… Let’s listen in, and see if you hear what I hear… “Downside risks to the outlook for global growth continue, with high public and private debt inhibiting recovery in many developed economies. Moreover, it is unclear how further policy support would impact on the outlook for growth in our Western trading partners. Offsetting this weakness, strong growth continues in China, Australia and emerging Asia.”

You tell ’em, Allan!

Well… I saw this yesterday, and just shook my head in disgust… Finance chiefs from South Korea & South Africa signaled that they may act to slow gains in their currencies… Hmmm, didn’t the G-20 just agree, no pledge, to NOT do this? I guess if you’re not a part of G-20, then you’ve got no problem selling your currency to keep it weak!

OK… the euro (EUR) is a bit stronger this morning, actually, very near where it was yesterday morning, when I came in, but then saw it lose ground all day… The single unit received some wind for its sails this morning when the latest Business Confidence, as reported by the think tank IFO, printed, and showed a rise to a 12-month high (index # .98, with the consensus at .79)…

And overall for the Eurozone, the outlook is feeling like it’s getting better, according to the latest European Confidence and Economic Outlook reports. Eurozone manufacturing, led by Germany, was very strong in October, which is a good thing, given that the euro was inching higher all month. The European Confidence Index rose to 104.1 from 103.2… That’s the highest this index has been since December of 2007!

I know, and realize that confidence doesn’t exactly feed into economic activity, but Shoot Rudy, if you’re not confident, how are you going to spur activity? So… I like this number from the Eurozone…

And in Japan… The land of QE and stimulus… The Bank of Japan (BOJ) left rates unchanged last night, and set out details of their next attempt to stimulate their economy with 5 trillion yen QE… You may recall me telling you that they had approved this at their last meeting… I would have to think that Mark Gilbert’s comment above about Einstein’s definition of insanity would apply to the BOJ, eh? I mean, come on… the BOJ has been implementing QE for over a decade… Sure has worked out well for them, eh?

Gold really took it on the chin yesterday, with silver following… But, as I said at the top, they are seeing some healing today. I have to say that I truly believe that the weakness we’ve seen in the currencies and metals this past week is directly tied to investors, traders, hedge fund managers, etc., taking off their dollar short positions ahead of the QE announcement next week, for they just don’t know what to expect from the FOMC…

So… What that does is give everyone that was on the sidelines a chance to pick up their fave currency or metal at cheaper prices! For the negativity toward the dollar has backed off… For now… Of course that’s just my opinion of what’s going on, as I view it from the cheap seats… I could be wrong…

My beautiful bride of 34 years will tell you that she can’t believe I would say that “I could be wrong”… HA!

Today’s data cupboard only has the Weekly Initial Jobless Claims on its shelves… Tomorrow, we get to see the first estimate of third quarter GDP, which the experts are forecasting to be right at 2%… I’m of the thought that it will be south of that number…

Then there was this… Ahhh… you knew this would happen, right? Here’s the skinny… Yesterday, I told you that CFTC member, Bart Chilton, said that, “there have been repeated attempts to influence prices. There have been fraudulent efforts to persuade and deviously control that price.” So, knowing this… The lawsuits against the banks many feel are to blame for these allegations are beginning…

Two large banks (I won’t mention their names) were sued by an investor claiming they manipulated silver futures and options prices in violation of US antitrust law by placing “spoof” trading orders.

For those of you who have never heard of “spoof” trading orders… They are “the submission of a large order which is not executed but influences prices and is then withdrawn before it reasonably can be executed.”

It’s just beginning folks… Bart Chilton opened Pandora’s Box of law suits… Not his fault, he was only stating the facts as he found them! In fact, I think that Bart Chilton should get a medal for his bravery, for it couldn’t have been easy to make those statements…

To recap… The currencies and precious metals are seeing some healing this morning, knowing all too well that the US traders have not been kind to these two risk assets lately. The Fed has passes around a survey to NY bond dealers, regarding QE… Chuck did a long interview with US News & World Report yesterday on QE and currencies, for it’s all about QE these days… 24/7!

Chuck Butler
for The Daily Reckoning

European Confidence the Highest Since 2007 originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
European Confidence the Highest Since 2007




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

OPTIONS, Uncategorized

European Confidence the Highest Since 2007

October 28th, 2010

As we draw closer and closer to the FOMC meeting next week, the clearer the markets believe they are to figuring out what the FOMC might do with regards to quantitative easing (QE)… So, I found some quotes from bond king, Bill Gross, and analyst, Mark Gilbert, regarding what they see. You won’t want to miss their quotes!

The currencies and precious metals are seeing some healing this morning. The US traders haven’t been kind to these risk assets lately, so it’s certainly possible that the US traders remove the tourniquets, and halt the healing. The big news this morning surrounds QE… Apparently the Fed Heads are asking dealers to estimate the scale and impact of QE… Hmmm… Yes siree Bob! Bloomberg got a hold of the survey given to NY bond dealers…

Actually, I like the idea of surveying bond dealers, but five days before your meeting? Shouldn’t this have been done a couple of weeks ago when the FOMC first indicated they would be implementing QE once again? Oh well…

I gave an interview to US News & World Report yesterday, and told the writer there that each $500 billion of QE would be equivalent to a 50 or 75 BPS Fed Funds Rate Cut… Fed Head, William Dudley, who is vice chairman of the Fed, said he expects the FOMC to announce $500 billion in “initial buying”…

Here’s the problem I see with doing the QE in smaller pieces… The FOMC would do this in an attempt to pull the wool over the markets’ eyes… But, for the last couple of weeks, the markets have believed the amount would be $1 trillion (I think $2 trillion, and Goldman thinks $4 trillion)… So, if the FOMC comes out next week and says something less than $1 trillion, the markets will be disappointed, and begin to wonder just how deep this QE is going to be when it’s all said and done!

Here’s Mark Gilbert from Bloomberg last night on QE…

Albert Einstein defined insanity as doing the same thing repeatedly and expecting different outcomes. The crazy gang at the Federal Reserve should heed those words when debating how much more market manipulation to inflict on the world of fixed income.

The worrisome thing about so-called quantitative easing – a concept still novel enough to mean whatever the Humpty-Dumpty’s in central banking want it to – is that its consequences remain unquantifiable, and the perceived need for more central-bank purchases of securities should make investors uneasy.

And here’s Bond King, Bill Gross on QE…

We are, as even some Fed Governors now publicly admit, in a “liquidity trap”, where interest rates or trillions of QEII asset purchases may not stimulate borrowing or lending because consumer demand is just not there. Escaping from a liquidity trap may be impossible, much like light trapped in a black hole.

Bill Gross then went on to say, “Check writing in the trillions is not a bondholder’s friend, and, if truth be told, somewhat of a Ponzi scheme.”

WOW! Both Bill Gross and Mark Gilbert doing their best Aaron Neville, and telling it like it is!

OK… How about we stop with the QE talk for today? It’s beginning to give me a rash!

Yesterday, we saw both Norway’s Norges Bank and the Reserve Bank of New Zealand keep their powder dry, and pass at this meeting at a chance to raise rates. First, the Norges Bank left rates unchanged, but the Norges Bank Governor said at a press conference that “Norway’s normal rate is 5%.” So, if that’s what he truly believes, he has some work cut out for him!

The Reserve Bank of New Zealand (RBNZ), Governor Alan Bollard said, “Despite some data turning out weaker than projected, the medium-term outlook for the New Zealand economy remains broadly in line with that assumed at the time of the September Monetary Policy Statement.”

You might recall that the September MPS in New Zealand was the thing that got me all lathered up about another rate hike… So, something is keeping Bollard from hiking rates, and I think I know what it is… In fact, I think Bollard took a swipe at the US/FOMC and their plans for QE… Let’s listen in, and see if you hear what I hear… “Downside risks to the outlook for global growth continue, with high public and private debt inhibiting recovery in many developed economies. Moreover, it is unclear how further policy support would impact on the outlook for growth in our Western trading partners. Offsetting this weakness, strong growth continues in China, Australia and emerging Asia.”

You tell ’em, Allan!

Well… I saw this yesterday, and just shook my head in disgust… Finance chiefs from South Korea & South Africa signaled that they may act to slow gains in their currencies… Hmmm, didn’t the G-20 just agree, no pledge, to NOT do this? I guess if you’re not a part of G-20, then you’ve got no problem selling your currency to keep it weak!

OK… the euro (EUR) is a bit stronger this morning, actually, very near where it was yesterday morning, when I came in, but then saw it lose ground all day… The single unit received some wind for its sails this morning when the latest Business Confidence, as reported by the think tank IFO, printed, and showed a rise to a 12-month high (index # .98, with the consensus at .79)…

And overall for the Eurozone, the outlook is feeling like it’s getting better, according to the latest European Confidence and Economic Outlook reports. Eurozone manufacturing, led by Germany, was very strong in October, which is a good thing, given that the euro was inching higher all month. The European Confidence Index rose to 104.1 from 103.2… That’s the highest this index has been since December of 2007!

I know, and realize that confidence doesn’t exactly feed into economic activity, but Shoot Rudy, if you’re not confident, how are you going to spur activity? So… I like this number from the Eurozone…

And in Japan… The land of QE and stimulus… The Bank of Japan (BOJ) left rates unchanged last night, and set out details of their next attempt to stimulate their economy with 5 trillion yen QE… You may recall me telling you that they had approved this at their last meeting… I would have to think that Mark Gilbert’s comment above about Einstein’s definition of insanity would apply to the BOJ, eh? I mean, come on… the BOJ has been implementing QE for over a decade… Sure has worked out well for them, eh?

Gold really took it on the chin yesterday, with silver following… But, as I said at the top, they are seeing some healing today. I have to say that I truly believe that the weakness we’ve seen in the currencies and metals this past week is directly tied to investors, traders, hedge fund managers, etc., taking off their dollar short positions ahead of the QE announcement next week, for they just don’t know what to expect from the FOMC…

So… What that does is give everyone that was on the sidelines a chance to pick up their fave currency or metal at cheaper prices! For the negativity toward the dollar has backed off… For now… Of course that’s just my opinion of what’s going on, as I view it from the cheap seats… I could be wrong…

My beautiful bride of 34 years will tell you that she can’t believe I would say that “I could be wrong”… HA!

Today’s data cupboard only has the Weekly Initial Jobless Claims on its shelves… Tomorrow, we get to see the first estimate of third quarter GDP, which the experts are forecasting to be right at 2%… I’m of the thought that it will be south of that number…

Then there was this… Ahhh… you knew this would happen, right? Here’s the skinny… Yesterday, I told you that CFTC member, Bart Chilton, said that, “there have been repeated attempts to influence prices. There have been fraudulent efforts to persuade and deviously control that price.” So, knowing this… The lawsuits against the banks many feel are to blame for these allegations are beginning…

Two large banks (I won’t mention their names) were sued by an investor claiming they manipulated silver futures and options prices in violation of US antitrust law by placing “spoof” trading orders.

For those of you who have never heard of “spoof” trading orders… They are “the submission of a large order which is not executed but influences prices and is then withdrawn before it reasonably can be executed.”

It’s just beginning folks… Bart Chilton opened Pandora’s Box of law suits… Not his fault, he was only stating the facts as he found them! In fact, I think that Bart Chilton should get a medal for his bravery, for it couldn’t have been easy to make those statements…

To recap… The currencies and precious metals are seeing some healing this morning, knowing all too well that the US traders have not been kind to these two risk assets lately. The Fed has passes around a survey to NY bond dealers, regarding QE… Chuck did a long interview with US News & World Report yesterday on QE and currencies, for it’s all about QE these days… 24/7!

Chuck Butler
for The Daily Reckoning

European Confidence the Highest Since 2007 originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
European Confidence the Highest Since 2007




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

OPTIONS, Uncategorized

More Upticks in Economic Data vs. Expectations

October 28th, 2010

Today was the first week since the end of August that both the initial claims and continuing claims for unemployment were lower than consensus expectations.

While one week of noisy data should not substantially embolden the bulls, there has been a noticeable uptick in positive reports since the beginning of September – one that just so happens to coincide with the upturn in stocks.

I last updated the chart below at the beginning of the month and since that time, the pattern of positive surprises has continued. Note that housing and construction continue to provide the most consistent positive surprises, while the consumer appears to have a turned a corner at the end of August, giving a boost to stocks.

If the data are painting any sort of discernable picture, from my perspective the canvas looks like a story of slow but steady improvement – and more slow than steady at this stage.

Related posts:

Disclosure(s): none



Read more here:
More Upticks in Economic Data vs. Expectations

Uncategorized

More Upticks in Economic Data vs. Expectations

October 28th, 2010

Today was the first week since the end of August that both the initial claims and continuing claims for unemployment were lower than consensus expectations.

While one week of noisy data should not substantially embolden the bulls, there has been a noticeable uptick in positive reports since the beginning of September – one that just so happens to coincide with the upturn in stocks.

I last updated the chart below at the beginning of the month and since that time, the pattern of positive surprises has continued. Note that housing and construction continue to provide the most consistent positive surprises, while the consumer appears to have a turned a corner at the end of August, giving a boost to stocks.

If the data are painting any sort of discernable picture, from my perspective the canvas looks like a story of slow but steady improvement – and more slow than steady at this stage.

Related posts:

Disclosure(s): none



Read more here:
More Upticks in Economic Data vs. Expectations

Uncategorized

Get Down Under With Australia ETFs

October 28th, 2010

Ron Rowland

See if you can guess the country …

• Straddles two different oceans

• Part of the British Commonwealth

• Huge wilderness area

• English-speaking

• Democracy

• Capitalist

• Technologically and industrially advanced

• Huge natural resource reserves

Did you think about Canada? If so, you’d be correct. But another country also fits the description: Australia. However, here in the U.S. we aren’t as familiar with Australia. Few of us have been there, and it’s a long way from home.

Investors need to check out what is happening down under because Australia has some amazing investment opportunities. You can take advantage of them with exchange traded funds (ETFs), too. Let’s take a closer look.

Australia: Better than Canada?

I love Canada and all things Canadian. I’ve made some good money over the years by investing with our neighbor to the north. But right now, being neighbors with the U.S. isn’t so attractive.

The border won't protect Canada from our recession.
The border won’t protect Canada from our recession.

You see, the border can’t protect Canada from all our economic problems. Parts of the Canadian economy are shrugging off the U.S. recession. Inevitably, though, weakness here means weakness there.

The Aussies also have deep ties to the U.S. and the industrialized West, but there are important differences. The same oceans that make it seem so remote also insulate Australia from the trouble we’re going through — and put it that much closer to fast-growing China and Southeast Asia.

Think about it this way: Australia is to China as Canada is to the U.S. So if you believe (as I do) that China is going to overtake the U.S. as the world’s largest economy in the coming decades, Australia is likely to do far better than Canada.

Vast Area, Vast Potential

Australia certainly has plenty of room to grow — and I mean that literally. People forget how big it really is!

Here’s a good comparison: The continental U.S. has a land area of about 3.1 million square miles. Australia’s land area? Just a bit smaller at 2.9 million square miles.

Now compare population: The U.S. has about 300 million people. Australia, with almost as much land mass, has a population of only 22 million — and most of them are concentrated in a few big cities near the coast. The interior “Outback” is vast, largely unpopulated, and filled with all kinds of mineral riches.

Australia's outback is vast, unsettled and rich.
Australia’s outback is vast, unsettled and rich.

The Asians certainly see potential in Australia. For instance just this week, Singapore Exchange Ltd. made an $8.3 billion offer for ASX, Australia’s primary stock exchange. The potential combination could create a regional trading powerhouse.

So how can you get involved in Australia? You can certainly look at individual stocks, but I prefer the convenience and diversification of ETFs. American investors can consider two ETFs devoted to Australian stocks:

  • iShares MSCI Australia (EWA) holds 74 of the largest, most liquid stocks domiciled in Australia. Mining giant BHP Billiton (BHP) is the largest holding, but the biggest sector in this ETF is actually financial services. When expressed in U.S. dollars, EWA has posted a total return of 140.6 percent since the March 2009 market low.
  • IQ Australia Small Cap (KROO) is a newer choice and has a different focus. KROO tracks an index of small-cap Australian stocks, with a heavy emphasis on materials, consumer discretionary and industrial issues.

There is little or no overlap between EWA and KROO, so you could benefit from holding both. Just be aware that they’ll still be highly correlated to each other.

You might also want to check out two other ETFs that are closely related to Australian stocks:

  • CurrencyShares Australian Dollar (FXA) follows the exchange rate between the U.S. dollar and the Australian dollar. The greenback has been losing ground to the Aussie buck for quite some time, a trend that has picked up momentum in the last few weeks. FXA is a good way for Americans to hedge their currency exposure.
  • iShares MSCI New Zealand (ENZL) is a new ETF, just launched in September of this year. New Zealand, as you know, is an island nation near Australia with close economic ties. Whenever Australia prospers, you can expect ENZL to share in some of the good fortune.

As always, be cautious when trading international ETFs. Due to time zone differences, they are subject to large opening gaps — both up and down — when morning reaches the U.S.

Best wishes,

Ron

Related posts:

  1. Six Beaten Down ETFs in the Southern Hemisphere
  2. Seven New ETFs Cover New Ground
  3. Diversify Out Of U.S. Dollars With ETFs

Read more here:
Get Down Under With Australia ETFs

Commodities, ETF, Mutual Fund, Uncategorized

Get Down Under With Australia ETFs

October 28th, 2010

Ron Rowland

See if you can guess the country …

• Straddles two different oceans

• Part of the British Commonwealth

• Huge wilderness area

• English-speaking

• Democracy

• Capitalist

• Technologically and industrially advanced

• Huge natural resource reserves

Did you think about Canada? If so, you’d be correct. But another country also fits the description: Australia. However, here in the U.S. we aren’t as familiar with Australia. Few of us have been there, and it’s a long way from home.

Investors need to check out what is happening down under because Australia has some amazing investment opportunities. You can take advantage of them with exchange traded funds (ETFs), too. Let’s take a closer look.

Australia: Better than Canada?

I love Canada and all things Canadian. I’ve made some good money over the years by investing with our neighbor to the north. But right now, being neighbors with the U.S. isn’t so attractive.

The border won't protect Canada from our recession.
The border won’t protect Canada from our recession.

You see, the border can’t protect Canada from all our economic problems. Parts of the Canadian economy are shrugging off the U.S. recession. Inevitably, though, weakness here means weakness there.

The Aussies also have deep ties to the U.S. and the industrialized West, but there are important differences. The same oceans that make it seem so remote also insulate Australia from the trouble we’re going through — and put it that much closer to fast-growing China and Southeast Asia.

Think about it this way: Australia is to China as Canada is to the U.S. So if you believe (as I do) that China is going to overtake the U.S. as the world’s largest economy in the coming decades, Australia is likely to do far better than Canada.

Vast Area, Vast Potential

Australia certainly has plenty of room to grow — and I mean that literally. People forget how big it really is!

Here’s a good comparison: The continental U.S. has a land area of about 3.1 million square miles. Australia’s land area? Just a bit smaller at 2.9 million square miles.

Now compare population: The U.S. has about 300 million people. Australia, with almost as much land mass, has a population of only 22 million — and most of them are concentrated in a few big cities near the coast. The interior “Outback” is vast, largely unpopulated, and filled with all kinds of mineral riches.

Australia's outback is vast, unsettled and rich.
Australia’s outback is vast, unsettled and rich.

The Asians certainly see potential in Australia. For instance just this week, Singapore Exchange Ltd. made an $8.3 billion offer for ASX, Australia’s primary stock exchange. The potential combination could create a regional trading powerhouse.

So how can you get involved in Australia? You can certainly look at individual stocks, but I prefer the convenience and diversification of ETFs. American investors can consider two ETFs devoted to Australian stocks:

  • iShares MSCI Australia (EWA) holds 74 of the largest, most liquid stocks domiciled in Australia. Mining giant BHP Billiton (BHP) is the largest holding, but the biggest sector in this ETF is actually financial services. When expressed in U.S. dollars, EWA has posted a total return of 140.6 percent since the March 2009 market low.
  • IQ Australia Small Cap (KROO) is a newer choice and has a different focus. KROO tracks an index of small-cap Australian stocks, with a heavy emphasis on materials, consumer discretionary and industrial issues.

There is little or no overlap between EWA and KROO, so you could benefit from holding both. Just be aware that they’ll still be highly correlated to each other.

You might also want to check out two other ETFs that are closely related to Australian stocks:

  • CurrencyShares Australian Dollar (FXA) follows the exchange rate between the U.S. dollar and the Australian dollar. The greenback has been losing ground to the Aussie buck for quite some time, a trend that has picked up momentum in the last few weeks. FXA is a good way for Americans to hedge their currency exposure.
  • iShares MSCI New Zealand (ENZL) is a new ETF, just launched in September of this year. New Zealand, as you know, is an island nation near Australia with close economic ties. Whenever Australia prospers, you can expect ENZL to share in some of the good fortune.

As always, be cautious when trading international ETFs. Due to time zone differences, they are subject to large opening gaps — both up and down — when morning reaches the U.S.

Best wishes,

Ron

Related posts:

  1. Six Beaten Down ETFs in the Southern Hemisphere
  2. Seven New ETFs Cover New Ground
  3. Diversify Out Of U.S. Dollars With ETFs

Read more here:
Get Down Under With Australia ETFs

Commodities, ETF, Mutual Fund, Uncategorized

5 Stocks Under $5 for 2011

October 28th, 2010

5 Stocks Under $5 for 2011

As cliche as the term “stocks on sale” has become, there's still something exciting about grabbing a great stock for less than five bucks a share. They just seem well equipped to dole out bigger rewards — in terms of percentage gains — than their higher-priced counterparts.

With that as a backdrop, here are five sub-$5 equities you may want to consider as we head into 2011.

1. Cincinnati Bell Inc. (NYSE: CBB) – Cincinnati Bell earned more in 2008 than it did in 2007, and earned more in 2009 than it did in 2008. Now that the economy is out of the rut, however, this regional telecom is anticipated to post less income this year than it did last year.

Respectfully, to the analysts, please notice the trend.

While rampant growth has never been the company's strong suit, that's not a fault of Cincinnati Bell — that's just telecom. The trade-off is amazing value. Priced at only 5.7 times trailing earnings and 6.6 times earnings projections for the next twelve months, it's a bargain by most standards. And remember, those are highly reliable earnings.

The icing on the Cincinnati Bell cake is the recently-swollen short interest. At 13.8% of the float, all those traders who drove the stock down lately may end up spurring a short-covering rally.

2. Mizuho Financial Group Inc. (NYSE: MFG) — Believe it or not, there are other investment-worthy countries in the Far East besides China. Try Japan, where the banks are apparently coming out of the balance-sheet-blasting credit crunch much faster than their U.S. counterparts. Though the official results aren't in yet, Japan's top three banks are expected to have more than tripled their profits in the past six months on a year-over-year basis. As more bad debt is shed from the books, bottom lines should continue to grow.

Are the numbers the real ones, or just the published ones? Great question, though it may not really matter. If the investing public believes in the results, they'll respond in kind. That's good news for the likes of Mizuho Financial Group, especially now that the company is looking to expand internationally.

3. LSI Corp. (NYSE: LSI) — After seven earnings beats and no misses in the past 14 quarters (and three beats in the past four quarters), the market should start to recognize that this semiconductor manufacturer is underestimated. The fact that the company is on pace to grow earnings by +37% this year and +8% next year is just gravy.

As it stands right now, LSI Corp. shares are priced at about nine times 2011's anticipated earnings, which is stunningly low by tech stock standards against that kind of growth.

4. Graphic Packaging Holding Co. (NYSE: GPK) — While most investors are thinking of the obvious ways to play the rebounding economy, the savvy way to play it may well be with a group that's too obvious to notice, like packaging, signage and printing companies. In fact, the profit of $0.08 per share Graphic Packaging Holding is expected to announce in early November would be a record-breaker for the company.

Graphic Packaging Holding has already proven it's taking advantage of the recovery by swinging back to profitability five quarters ago, and staying there ever since. The year-over-year comparisons have been nice increases that entire time as well, with the biggest one yet slated with the third quarter's estimates.

5. Art Technology Group Inc. (Nasdaq: ARTG) — Trading at a little more than 18 times projected earnings for the next four quarters, one would be hard-pressed to say Art Technology Group is a “cheap” stock. On the other hand, you have to pay for quality and reliability, and this company definitely falls into that category.

The company, in simplest terms, offers e-commerce solutions. Apparently it's a good business to be in. Though income was reeled in slightly during the early part of the recession, Art Technology Group never dipped into the red ink at any point in the past four years.

How so? The nature of the business is heavy on recurring revenue; income growth comes from adding new customers/revenue streams. And now that the economy is on measurably firmer footing, new customers should be easier to find. Given 2011's earnings estimates of a record $0.24 per share, analysts seem to agree.

Action to Take –> There's a difference between “cheap” and “undervalued.” Cheap stocks are on the low end of the price scale for a reason, so being priced under $5 doesn't mean you should ease up on your selection standards. These five names are undervalued, and also just happen to be trading under the $5 mark. That could change in a major way, however, over the course of the coming year.


– James Brumley

P.S. –

Uncategorized

5 Stocks Under $5 for 2011

October 28th, 2010

5 Stocks Under $5 for 2011

As cliche as the term “stocks on sale” has become, there's still something exciting about grabbing a great stock for less than five bucks a share. They just seem well equipped to dole out bigger rewards — in terms of percentage gains — than their higher-priced counterparts.

With that as a backdrop, here are five sub-$5 equities you may want to consider as we head into 2011.

1. Cincinnati Bell Inc. (NYSE: CBB) – Cincinnati Bell earned more in 2008 than it did in 2007, and earned more in 2009 than it did in 2008. Now that the economy is out of the rut, however, this regional telecom is anticipated to post less income this year than it did last year.

Respectfully, to the analysts, please notice the trend.

While rampant growth has never been the company's strong suit, that's not a fault of Cincinnati Bell — that's just telecom. The trade-off is amazing value. Priced at only 5.7 times trailing earnings and 6.6 times earnings projections for the next twelve months, it's a bargain by most standards. And remember, those are highly reliable earnings.

The icing on the Cincinnati Bell cake is the recently-swollen short interest. At 13.8% of the float, all those traders who drove the stock down lately may end up spurring a short-covering rally.

2. Mizuho Financial Group Inc. (NYSE: MFG) — Believe it or not, there are other investment-worthy countries in the Far East besides China. Try Japan, where the banks are apparently coming out of the balance-sheet-blasting credit crunch much faster than their U.S. counterparts. Though the official results aren't in yet, Japan's top three banks are expected to have more than tripled their profits in the past six months on a year-over-year basis. As more bad debt is shed from the books, bottom lines should continue to grow.

Are the numbers the real ones, or just the published ones? Great question, though it may not really matter. If the investing public believes in the results, they'll respond in kind. That's good news for the likes of Mizuho Financial Group, especially now that the company is looking to expand internationally.

3. LSI Corp. (NYSE: LSI) — After seven earnings beats and no misses in the past 14 quarters (and three beats in the past four quarters), the market should start to recognize that this semiconductor manufacturer is underestimated. The fact that the company is on pace to grow earnings by +37% this year and +8% next year is just gravy.

As it stands right now, LSI Corp. shares are priced at about nine times 2011's anticipated earnings, which is stunningly low by tech stock standards against that kind of growth.

4. Graphic Packaging Holding Co. (NYSE: GPK) — While most investors are thinking of the obvious ways to play the rebounding economy, the savvy way to play it may well be with a group that's too obvious to notice, like packaging, signage and printing companies. In fact, the profit of $0.08 per share Graphic Packaging Holding is expected to announce in early November would be a record-breaker for the company.

Graphic Packaging Holding has already proven it's taking advantage of the recovery by swinging back to profitability five quarters ago, and staying there ever since. The year-over-year comparisons have been nice increases that entire time as well, with the biggest one yet slated with the third quarter's estimates.

5. Art Technology Group Inc. (Nasdaq: ARTG) — Trading at a little more than 18 times projected earnings for the next four quarters, one would be hard-pressed to say Art Technology Group is a “cheap” stock. On the other hand, you have to pay for quality and reliability, and this company definitely falls into that category.

The company, in simplest terms, offers e-commerce solutions. Apparently it's a good business to be in. Though income was reeled in slightly during the early part of the recession, Art Technology Group never dipped into the red ink at any point in the past four years.

How so? The nature of the business is heavy on recurring revenue; income growth comes from adding new customers/revenue streams. And now that the economy is on measurably firmer footing, new customers should be easier to find. Given 2011's earnings estimates of a record $0.24 per share, analysts seem to agree.

Action to Take –> There's a difference between “cheap” and “undervalued.” Cheap stocks are on the low end of the price scale for a reason, so being priced under $5 doesn't mean you should ease up on your selection standards. These five names are undervalued, and also just happen to be trading under the $5 mark. That could change in a major way, however, over the course of the coming year.


– James Brumley

P.S. –

Uncategorized

Capture +20% Growth While This Stock is on Sale

October 28th, 2010

Capture +20% Growth While This Stock is on Sale

My colleague David Sterman recently wrote a piece about the challenges investors face when they spot a company they would love to own, but the stock is just too darn expensive. [Read Dave's article here]

The basic takeaway is to keep a close eye on the stock in hopes that an opportunity arises to pick it up at a more appealing valuation.

About a decade ago, a specialty apparel retailer had a stock that qualified as a small cap and flew under the radar screen of most investors. But between about 2003 and 2006, the market began to take note of its stellar growth prospects, and sent the shares up more than ten-fold.

Like Dave describes in his article, I thought I missed the boat, as the stock has risen only slightly and the valuation has remained rich, which means there have been only a few brief opportunities to pick up the shares on the cheap. One of those opportunity exists now, because the stock is bumping along its lows of the past year, which I atribte simply to the fact that retail, as an industry, remains out of favor with investors.

The stock in question is Urban Outfitters (Nasdaq: URBN), best known for its trendy namesake store base, consisting of about 160 stores, the vast majority of which operate in the U.S., but are also found in Canada and Europe. Urban Outfitters stores cater to young adults between 18 and 30 years of age, selling clothing and an eclectic mix of homegoods and media that qualify as “edgy” and “urban.” Its origins in university towns speak to its original target market.

The company also operates 145 Anthropologie stores, again with the same location mix, but focuses instead on women between 30 and 45 years of age. The merchandise mix is eclectic, but less edgy and perhaps more suburban, especially compared to the namesake stores. Other sales channels include a small number of Free People and Terrain stores, as well as the wholesaling of the Free People brand to department stores and other specialty retailers.

Urban has proven itself a standout in the retailing industry, as it has been largely able to avoid volatility in same-store sales trends. It's little secret that consumers are fickle, and it's extremely difficult to predict which fashion will become popular with shoppers. Urban has, for the most part, been able to stay ahead of the curve with both of its primary concepts, which is probably due to the fact its stores do look and feel different from most competing store chains.

The proof of this success is in the numbers. Total sales grew steadily throughout the credit crisis and subsequent plummet in consumer spending. The top line has grown more than +21% each year for more than a decade, and management continues to target annual sales growth of more than +20% over the longer term.

Urban is also very profitable overall, and has a goal of reporting in excess of 20% operating margins. Sales growth and a focus on profits have allowed earnings growth to exceed +25% annually in the past 10 years. Profits fell -11% during 2007 as the credit crisis was reaching a fever pitch, but quickly recovered.

More recently, during Urban's fiscal second quarter, same store sales rose +9% at the namesake stores, and a more impressive +13% at Anthropologie. The company's net sales improved +20%, which is on pace with management's long-term goals, while earnings skyrocketed nearly +45% to $0.42 per diluted share. Given this stellar performance and appealing outlook, it's difficult to see why the share prices have been weak.

It's also worth pointing out the firm's impressive ability to generate cash flow. Last year, free cash flow reached about $1.26 per diluted share, or just slightly lower than diluted earnings per share. Better yet, even with the rapid growth, Urban generates more capital than it needs to expand. As a result, management is repurchasing shares, which further boost per share results. During its most recent quarter, Urban Outfitters bought back $68 million in stock at an average price of $33.72 per share.

Action to Take —> Consensus earnings expectations call for $1.68 in per share earnings for Urban's full fiscal year. At the current share price, the forward P/E is 18.5. This isn't a bargain-basement multiple in absolute terms, but it is the lowest multiple Urban has seen in some time, given the shares have drifted to their lowest levels in the past year.

And given the rapid sales and earnings growth being targeted by management, this isn't an excessive multiple at all. I don't usually advocate paying up for growth, especially considering many other retail rivals trade for much lower earnings multiples. But in this case, Urban Outfitters could be worth it, as there are very few retailers able to grow more than +20% annually.

– Ryan Fuhrmann

A graduate of the University of Wisconsin and the University of Texas, Ryan Fuhrmann, CFA, adheres to a value-based investing viewpoint that successful companies…

Uncategorized

Capture +20% Growth While This Stock is on Sale

October 28th, 2010

Capture +20% Growth While This Stock is on Sale

My colleague David Sterman recently wrote a piece about the challenges investors face when they spot a company they would love to own, but the stock is just too darn expensive. [Read Dave's article here]

The basic takeaway is to keep a close eye on the stock in hopes that an opportunity arises to pick it up at a more appealing valuation.

About a decade ago, a specialty apparel retailer had a stock that qualified as a small cap and flew under the radar screen of most investors. But between about 2003 and 2006, the market began to take note of its stellar growth prospects, and sent the shares up more than ten-fold.

Like Dave describes in his article, I thought I missed the boat, as the stock has risen only slightly and the valuation has remained rich, which means there have been only a few brief opportunities to pick up the shares on the cheap. One of those opportunity exists now, because the stock is bumping along its lows of the past year, which I atribte simply to the fact that retail, as an industry, remains out of favor with investors.

The stock in question is Urban Outfitters (Nasdaq: URBN), best known for its trendy namesake store base, consisting of about 160 stores, the vast majority of which operate in the U.S., but are also found in Canada and Europe. Urban Outfitters stores cater to young adults between 18 and 30 years of age, selling clothing and an eclectic mix of homegoods and media that qualify as “edgy” and “urban.” Its origins in university towns speak to its original target market.

The company also operates 145 Anthropologie stores, again with the same location mix, but focuses instead on women between 30 and 45 years of age. The merchandise mix is eclectic, but less edgy and perhaps more suburban, especially compared to the namesake stores. Other sales channels include a small number of Free People and Terrain stores, as well as the wholesaling of the Free People brand to department stores and other specialty retailers.

Urban has proven itself a standout in the retailing industry, as it has been largely able to avoid volatility in same-store sales trends. It's little secret that consumers are fickle, and it's extremely difficult to predict which fashion will become popular with shoppers. Urban has, for the most part, been able to stay ahead of the curve with both of its primary concepts, which is probably due to the fact its stores do look and feel different from most competing store chains.

The proof of this success is in the numbers. Total sales grew steadily throughout the credit crisis and subsequent plummet in consumer spending. The top line has grown more than +21% each year for more than a decade, and management continues to target annual sales growth of more than +20% over the longer term.

Urban is also very profitable overall, and has a goal of reporting in excess of 20% operating margins. Sales growth and a focus on profits have allowed earnings growth to exceed +25% annually in the past 10 years. Profits fell -11% during 2007 as the credit crisis was reaching a fever pitch, but quickly recovered.

More recently, during Urban's fiscal second quarter, same store sales rose +9% at the namesake stores, and a more impressive +13% at Anthropologie. The company's net sales improved +20%, which is on pace with management's long-term goals, while earnings skyrocketed nearly +45% to $0.42 per diluted share. Given this stellar performance and appealing outlook, it's difficult to see why the share prices have been weak.

It's also worth pointing out the firm's impressive ability to generate cash flow. Last year, free cash flow reached about $1.26 per diluted share, or just slightly lower than diluted earnings per share. Better yet, even with the rapid growth, Urban generates more capital than it needs to expand. As a result, management is repurchasing shares, which further boost per share results. During its most recent quarter, Urban Outfitters bought back $68 million in stock at an average price of $33.72 per share.

Action to Take —> Consensus earnings expectations call for $1.68 in per share earnings for Urban's full fiscal year. At the current share price, the forward P/E is 18.5. This isn't a bargain-basement multiple in absolute terms, but it is the lowest multiple Urban has seen in some time, given the shares have drifted to their lowest levels in the past year.

And given the rapid sales and earnings growth being targeted by management, this isn't an excessive multiple at all. I don't usually advocate paying up for growth, especially considering many other retail rivals trade for much lower earnings multiples. But in this case, Urban Outfitters could be worth it, as there are very few retailers able to grow more than +20% annually.

– Ryan Fuhrmann

A graduate of the University of Wisconsin and the University of Texas, Ryan Fuhrmann, CFA, adheres to a value-based investing viewpoint that successful companies…

Uncategorized

4 Stocks That Could Plummet in the Weeks Ahead

October 28th, 2010

4 Stocks That Could Plummet in the Weeks Ahead

After a furious two-month rally that has pushed the major indices to yearly highs, it seems to be an appropriate time to look at stocks that have been receiving perhaps too much investor affection. When the market takes a breather, these are often the first stocks to be dumped by momentum investors.

So, I ran a screen for stocks that have risen at least +40% in the last three months and sport projected 2011 price-to-earnings (P/E) multiples above 40. There are surely some high-growth names here, but there are also low-growth stocks that, at least at first glance, don't merit such a strong move.

The logical rebounders
Some of these stocks are here simply because they were likely too undervalued earlier in the summer. Back in July, I suggested that Amazon.com (Nasdaq: AMZN), trading at $120, was due for a rally and predicted that “as investors start to once again embrace the company's robust long-term outlook, shares should eventually power past the $150 mark seen earlier this spring.” With shares now at $170, it's hard to find any appeal in this stock, as it now trades for 47 times next year's profits.

In a similar vein, health care information vendor athenahealth (Nasdaq: ATHN) also looked like the victim of too much pessimism early this summer. [Read my take here]

Now with a much loftier P/E multiple, which is nearly twice next year's sales growth forecast, it looks like too much optimism is the name of the game.

When the market gets carried away
I am among thousands of very happy Netflix (Nasdaq: NFLX) customers. The video delivery and streaming service continues to attract new subscribers at a stunning pace, and that's pushed its stock into the stratosphere, trading at more than 40 times projected 2011 profits. But I've seen this picture before. In 1999, Walmart (NYSE: WMT) sported a very rich multiple, as investors assumed that strong growth would continue forever. But growth started to decelerate and shares slowly lost that P/E premium. A decade later, shares of Walmart have gone nowhere, and still-rising sales were met with an ever-shrinking P/E. I fear a similar fate will befall Netflix.

But Netflix is also a company that cannot afford to stumble. One so-so quarter, and this stock is toast, as expectations are so high. If you own shares of Netflix, it may be time to part with a stock that has been a real winner for you.

Travelzoo's (Nasdaq: TZOO) growth spurt
This online travel site has surely posted impressive recent results. Profits for the September quarter were double the consensus forecast, as the company saw a +17% jump in revenue. Results were depressed in 2009, but demand for travel is clearly on the mend. Yet investors are clearly getting carried away, assuming that this company can grow at a very fast pace in the next few years. After all, the online travel market is largely mature, with formidable competition coming from the likes of Priceline.com (Nasdaq: PCLN) and Expedia (Nasdaq: EXPE).

Travelzoo's sales are likely to rise around +20% this year and +10% next year — logical assumptions in light of the +10% annualized growth posted in 2007, 2008 and 2009. So why do shares trade at 40 times next year's projected profits? Because investors are still reacting to recent strong results, and momentum investors smell a winning continuing trade.

I'd hate to be around when the momentum investors take profits. We may already be there. Shares surged strongly last week and on Monday, but are starting to drift back Tuesday.

Room to run?
Not all of these strong gainers look ripe for profit-taking. For example, micro-cap Cleveland BioLabs (Nasdaq: CBLI), which has doubled in the last three months, could rise much higher if it sees strong demand for its anti-radiation treatment. The U.S. government may eventually look to stockpile the company's drug in order to treat to the effects of a potential nuclear attack, such as with a dirty bomb. As with any small biotech, this stock remains speculative, and investors should do lots of homework before jumping in.

In a similar vein, Depomed (Nasdaq: DEPO) is another promising biotech play that could easily trend much higher — if all goes according to plan. The company's oral drug delivery platform has brought interest from a number of major large drug companies that aim to license the technology. Depomed already uses that technology in its drugs that treat diabetes and urinary tract infection, and is also testing other drugs that have large potential market sizes. The company's potential licensees are hoping to secure FDA approval in the next few quarters. Yet I repeat, this remains speculative, and investors should do lots of homework before jumping in.

Action to Take –> A strong run for a stock is not always a reason to sell. Back in the 1990s, Cisco Systems (Nasdaq: CSCO), Dell (Nasdaq: DELL) and Walmart routinely occupied the annual best-performing lists, year after year after year. But it's hard to find any stocks in this group that are on the cusp of a robust long-term rise in sales, with the possible exception of the biotechs noted above.

With the market posting a furious recent rally, a reversal may be the next move. And if that happens, these richly-priced stocks may be especially vulnerable.


– David Sterman

David Sterman started his career in equity research at Smith Barney, culminating in a position as Senior Analyst covering European banks. David has also served as Director of Research at Individual Investor and a Managing Editor at TheStreet.com. Read More…

Disclosure: Neither David Sterman nor StreetAuthority, LLC hold positions in any securities mentioned in this article.

This article originally appeared on StreetAuthority
Author: David Sterman
4 Stocks That Could Plummet in the Weeks Ahead

Read more here:
4 Stocks That Could Plummet in the Weeks Ahead

ETF, Uncategorized

4 Stocks That Could Plummet in the Weeks Ahead

October 28th, 2010

4 Stocks That Could Plummet in the Weeks Ahead

After a furious two-month rally that has pushed the major indices to yearly highs, it seems to be an appropriate time to look at stocks that have been receiving perhaps too much investor affection. When the market takes a breather, these are often the first stocks to be dumped by momentum investors.

So, I ran a screen for stocks that have risen at least +40% in the last three months and sport projected 2011 price-to-earnings (P/E) multiples above 40. There are surely some high-growth names here, but there are also low-growth stocks that, at least at first glance, don't merit such a strong move.

The logical rebounders
Some of these stocks are here simply because they were likely too undervalued earlier in the summer. Back in July, I suggested that Amazon.com (Nasdaq: AMZN), trading at $120, was due for a rally and predicted that “as investors start to once again embrace the company's robust long-term outlook, shares should eventually power past the $150 mark seen earlier this spring.” With shares now at $170, it's hard to find any appeal in this stock, as it now trades for 47 times next year's profits.

In a similar vein, health care information vendor athenahealth (Nasdaq: ATHN) also looked like the victim of too much pessimism early this summer. [Read my take here]

Now with a much loftier P/E multiple, which is nearly twice next year's sales growth forecast, it looks like too much optimism is the name of the game.

When the market gets carried away
I am among thousands of very happy Netflix (Nasdaq: NFLX) customers. The video delivery and streaming service continues to attract new subscribers at a stunning pace, and that's pushed its stock into the stratosphere, trading at more than 40 times projected 2011 profits. But I've seen this picture before. In 1999, Walmart (NYSE: WMT) sported a very rich multiple, as investors assumed that strong growth would continue forever. But growth started to decelerate and shares slowly lost that P/E premium. A decade later, shares of Walmart have gone nowhere, and still-rising sales were met with an ever-shrinking P/E. I fear a similar fate will befall Netflix.

But Netflix is also a company that cannot afford to stumble. One so-so quarter, and this stock is toast, as expectations are so high. If you own shares of Netflix, it may be time to part with a stock that has been a real winner for you.

Travelzoo's (Nasdaq: TZOO) growth spurt
This online travel site has surely posted impressive recent results. Profits for the September quarter were double the consensus forecast, as the company saw a +17% jump in revenue. Results were depressed in 2009, but demand for travel is clearly on the mend. Yet investors are clearly getting carried away, assuming that this company can grow at a very fast pace in the next few years. After all, the online travel market is largely mature, with formidable competition coming from the likes of Priceline.com (Nasdaq: PCLN) and Expedia (Nasdaq: EXPE).

Travelzoo's sales are likely to rise around +20% this year and +10% next year — logical assumptions in light of the +10% annualized growth posted in 2007, 2008 and 2009. So why do shares trade at 40 times next year's projected profits? Because investors are still reacting to recent strong results, and momentum investors smell a winning continuing trade.

I'd hate to be around when the momentum investors take profits. We may already be there. Shares surged strongly last week and on Monday, but are starting to drift back Tuesday.

Room to run?
Not all of these strong gainers look ripe for profit-taking. For example, micro-cap Cleveland BioLabs (Nasdaq: CBLI), which has doubled in the last three months, could rise much higher if it sees strong demand for its anti-radiation treatment. The U.S. government may eventually look to stockpile the company's drug in order to treat to the effects of a potential nuclear attack, such as with a dirty bomb. As with any small biotech, this stock remains speculative, and investors should do lots of homework before jumping in.

In a similar vein, Depomed (Nasdaq: DEPO) is another promising biotech play that could easily trend much higher — if all goes according to plan. The company's oral drug delivery platform has brought interest from a number of major large drug companies that aim to license the technology. Depomed already uses that technology in its drugs that treat diabetes and urinary tract infection, and is also testing other drugs that have large potential market sizes. The company's potential licensees are hoping to secure FDA approval in the next few quarters. Yet I repeat, this remains speculative, and investors should do lots of homework before jumping in.

Action to Take –> A strong run for a stock is not always a reason to sell. Back in the 1990s, Cisco Systems (Nasdaq: CSCO), Dell (Nasdaq: DELL) and Walmart routinely occupied the annual best-performing lists, year after year after year. But it's hard to find any stocks in this group that are on the cusp of a robust long-term rise in sales, with the possible exception of the biotechs noted above.

With the market posting a furious recent rally, a reversal may be the next move. And if that happens, these richly-priced stocks may be especially vulnerable.


– David Sterman

David Sterman started his career in equity research at Smith Barney, culminating in a position as Senior Analyst covering European banks. David has also served as Director of Research at Individual Investor and a Managing Editor at TheStreet.com. Read More…

Disclosure: Neither David Sterman nor StreetAuthority, LLC hold positions in any securities mentioned in this article.

This article originally appeared on StreetAuthority
Author: David Sterman
4 Stocks That Could Plummet in the Weeks Ahead

Read more here:
4 Stocks That Could Plummet in the Weeks Ahead

ETF, Uncategorized

Forget Apple and RIMM: Buy This Smartphone Stock Instead

October 28th, 2010

Forget Apple and RIMM: Buy This Smartphone Stock Instead

It's time to write the obituary for traditional cell phones. Apple (Nasdaq: AAPL) has changed the game with its iPhone, and there are now a raft of other smartphones on the market as well.

My favorite play on this theme is Synaptics (Nasdaq: SYNA), which was a pioneer in touch-screen technology. The company is not without its detractors (as I'll detail in a moment), but it is a proven play on the touch-screen revolution.

Until recently, Synaptics was a clear-cut growth story. Sales rose from $185 million in fiscal (June) 2006, to $267 million in fiscal 2007, to $473 million by fiscal 2009. But the global slowdown, coupled with increasing competition, led to a sharp slowdown in sales growth this past year to just +9%. The market for touch-screen technology should rebound nicely in 2011 as new devices hit the market, but Synaptics is now dealing with a host of new competitors, including Atmel (Nasdaq: ATML) and Cypress Semi (NYSE: CY). So the company has had to deal with a smaller slice of a much larger pie. That means sales are only expected to rise +10% to +15% this year and next.

Yet investors may be underestimating the changing nature of computing. Notebook sales are slumping because consumers have already started (or will soon be) buying tablet computers to replace them. The key difference between notebooks and these tablets: touch-screens. Who needs a keyboard when you can simply tap on what you want?

Apple may have kick-started the tablet computer industry, but a much broader onslaught is about to arrive. The likes of Hewlett-Packard (NYSE: HPQ), Dell (Nasdaq: DELL), Samsung, Research In Motion (Nasdaq: RIMM) and others are all rolling out tablet computers. And as they're much larger than smartphones, touch-screen makers like Synaptics can charge a lot more for touch-sensitive glass.

Yet the company's detractors question whether Synaptics can replicate its success in the tablet market. The company has not formally announced any major design wins, but you need to know how the tech industry works to see why that hasn't happened yet. Tech vendors unveil technologies that must go through a six to 12-month testing phase with clients. Synaptics unveiled its new ClearPad tablet touch screen in late July, and it is simply too soon for customers to announce that Synaptics' technology will be used. But if history is any guide, Synaptics' heavy R&D means that the ClearPad has features that many rivals lack, such as precise inputting, the ability to read the movements of 10 fingers, and very fast response time. As design wins eventually roll in, the company's languishing stock, which is off -20% since early August, should rebound nicely.

Solid cash flow
Whether the company grows at a +10% clip or a +25% clip, you can be sure that cash flow will be prodigious. Free cash flow has risen every single year since fiscal 2007 and now exceeds $100 million annually. That has pushed the company's cash balance up to more than $7 a share, which has enabled it to announce ever larger stock buybacks.

Action to Take –> Synaptics' shares are a good growth story, trading at around 10 times projected fiscal 2012 profits. As the company is increasingly seen as a play on tablet computers, that multiple should expand. An expansion in the price-to-earnings (P/E) ratio up to 15 implies +50% upside, which could be reached once new tablet computer design wins are announced.


– David Sterman

P.S. –

Uncategorized

Forget Apple and RIMM: Buy This Smartphone Stock Instead

October 28th, 2010

Forget Apple and RIMM: Buy This Smartphone Stock Instead

It's time to write the obituary for traditional cell phones. Apple (Nasdaq: AAPL) has changed the game with its iPhone, and there are now a raft of other smartphones on the market as well.

My favorite play on this theme is Synaptics (Nasdaq: SYNA), which was a pioneer in touch-screen technology. The company is not without its detractors (as I'll detail in a moment), but it is a proven play on the touch-screen revolution.

Until recently, Synaptics was a clear-cut growth story. Sales rose from $185 million in fiscal (June) 2006, to $267 million in fiscal 2007, to $473 million by fiscal 2009. But the global slowdown, coupled with increasing competition, led to a sharp slowdown in sales growth this past year to just +9%. The market for touch-screen technology should rebound nicely in 2011 as new devices hit the market, but Synaptics is now dealing with a host of new competitors, including Atmel (Nasdaq: ATML) and Cypress Semi (NYSE: CY). So the company has had to deal with a smaller slice of a much larger pie. That means sales are only expected to rise +10% to +15% this year and next.

Yet investors may be underestimating the changing nature of computing. Notebook sales are slumping because consumers have already started (or will soon be) buying tablet computers to replace them. The key difference between notebooks and these tablets: touch-screens. Who needs a keyboard when you can simply tap on what you want?

Apple may have kick-started the tablet computer industry, but a much broader onslaught is about to arrive. The likes of Hewlett-Packard (NYSE: HPQ), Dell (Nasdaq: DELL), Samsung, Research In Motion (Nasdaq: RIMM) and others are all rolling out tablet computers. And as they're much larger than smartphones, touch-screen makers like Synaptics can charge a lot more for touch-sensitive glass.

Yet the company's detractors question whether Synaptics can replicate its success in the tablet market. The company has not formally announced any major design wins, but you need to know how the tech industry works to see why that hasn't happened yet. Tech vendors unveil technologies that must go through a six to 12-month testing phase with clients. Synaptics unveiled its new ClearPad tablet touch screen in late July, and it is simply too soon for customers to announce that Synaptics' technology will be used. But if history is any guide, Synaptics' heavy R&D means that the ClearPad has features that many rivals lack, such as precise inputting, the ability to read the movements of 10 fingers, and very fast response time. As design wins eventually roll in, the company's languishing stock, which is off -20% since early August, should rebound nicely.

Solid cash flow
Whether the company grows at a +10% clip or a +25% clip, you can be sure that cash flow will be prodigious. Free cash flow has risen every single year since fiscal 2007 and now exceeds $100 million annually. That has pushed the company's cash balance up to more than $7 a share, which has enabled it to announce ever larger stock buybacks.

Action to Take –> Synaptics' shares are a good growth story, trading at around 10 times projected fiscal 2012 profits. As the company is increasingly seen as a play on tablet computers, that multiple should expand. An expansion in the price-to-earnings (P/E) ratio up to 15 implies +50% upside, which could be reached once new tablet computer design wins are announced.


– David Sterman

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