One of the things we talk about in the Investment Survival Workshop is developing the mindset to think ahead. When I first moved out to Park City, Utah from Atlanta, Georgia I was admittedly a bit anxious about the idea of getting up at 5:00AM every day to start researching the stock market. After all, that’s exactly what I was doing back East except it was 7:00AM and I had a full 2 ½ hours before the market opened at 9:30EST. I did this for some time until I came to the realization that if I was trying to figure out what was happening today, I was already way too late. What was going to happen today already happened early this morning in Europe or even earlier in Asia.
Maybe it was just a form of rationalization but if you are trying to figure out what is going to happen today, you are late to the game. You have to develop a mindset of thinking about something other than today. Now that will vary for everyone. I mean if you look at this as a mental exercise, much like physical exercise, are you training for a half marathon, a 5k walk & run fund raiser or just to be more fit for your family and fun? The point being is that when you have a regular exercise routine, you have goals in mind. When you are planning an investment strategy, it’s no different. What’s your time period? Are you a long-term investor or someone who is just trading week to week or even a day trader? As part of a routine, find time to anticipate what’s going to happen for some period in the future.
Everyone’s time frame will be different. For me, my crystal ball is short term in nature. With that in mind, here are a few of my ideas for the following week, beginning March 5th.
Not necessarily in alphabetical order:
Apple- APPL had their much-anticipated board meeting Wednesday, February 27th. They basically answered none of the questions swirling around their stock, including what were they going to do with the gigantic pile of cash sitting unproductively on their balance sheet, what new products were forthcoming, or how they were going to compete with the onslaught of low priced competition in smartphones and tablets. Apple, not to be dictated to by the market or anyone else in the spirit of Steve Jobs, stonewalled all of these questions. Expect a response of some kind next week or soon after especially something to blunt the impact of Samsung’s Galaxy IV launch on March 15th. I don’t know about you but I’m not on the waiting list for $1500 Google Glass or their overpriced Chromebook but we did write a number of Google puts. Google has been on a tear and the insiders can’t sell it fast enough. I am part of the pent up demand for an Apple phone with a larger screen.
Insider Trading– after a draught of insider buying a number of directors and officers have stepped up to the plate to buy their company’s stock. Notable purchases include:
Director Bryan Cressey’s purchase of 10,000 shares of Belden, Inc. BDC, at $50.04 on 2/25/13 near the 52 week high. Purchases at market tops are usually bullish signs about a company’s prospects.
Chairman of the Board, John Calamos, $1.5 million dollar purchase of his fund, Calamos Asset Management, CLMS. That was a 30.8% increase in ownership. That comes on the heels of a purchase of $651.1 thousand (?) purchase on 2/19/13. . Calamos Asset Management Inc. is a publicly owned investment manager. The firm provides investment advisory services to individuals including high net worth individuals and institutions. It also manages accounts for family offices and private foundations.
On a similar vein Arthur Penn has been lapping up his own namesake fund, Pennant Park Floating Rate Capital, PFLT. It just increased its monthly distribution to $.085 share. This is a well-diversified junk bond fund and one I own but it is leveraged two to one. What appeals to us is that it is largely insulated from a rise in rates as 80% of its fund is invested in floating rate obligations.
Large purchase by Director Frederick of the newly spun off snack business of Kraft, Mondelez, MDLZ. I think it’s a horrible name for a company but hopefully it won’t be around too long before Warren Buffett and a group of private equity investors snatch it up.
Next week financial calendar events that could move the market include Tuesday’s Euro-Zone Retail Sales numbers. They have potential to remind investors of how poor business is in the Euro Zone. They are followed Wednesday with GDP. Since U.S. multinationals are more exposed to Europe than any other market besides the U.S., this could be a lemon in the glass of water the market has been drinking. McDonald’s has been on a tear lately so this could be an excuse for profit taking.
Japanese Gross Domestic Product is announced on Thursday. Look for some of the benefit of the weak yen to begin to translate into growth for this export driven economy. There are a number of Japanese ADR’s on the market. We have small positions in Honda, HMC and Makita, MKTAY. I’d be a buyer of Toyota on any pullback. The near 20% drop in the yen is going to be a major tailwind for the Japanese auto manufacturers.
Friday, the changes in non-farm payrolls are announced in the U.S. I’ve given up forecasting when interest rates are going to rise. My guess is that this number although better will not move the needle much.
The first week of March should be smooth sailing for the stock market. I don’t expect sequestration to be an event in the near term but could offer some general weakness later on if it is left unmediated. More significant than sequestration though is April 15th, the tax man cometh. It’s not usual to develop some seasonal weakness in the markets as money is raised to pay taxes.