Finding Good Stocks to Invest In and How To Find Them
January 30, 2008
The Smart Profits Issue #491
By Marc Lichtenfeld
Senior Analyst, Smart Profits Report
Everyone loves a bargain. But the question is: How do you go about creating a list of good stocks worthy of your attention? I’ve got a few tips for you - and one great number you can look at to separate the good stocks from the bad stocks.
Finding Good Stocks To Invest In with One Ratio
Wouldn’t it be wonderful if there were a simple investment formula such as, “Buy any stock with a price-to-earnings ratio under X or a price-to-book under Y?”
Alas, nothing worthwhile in life is that easy.
But there is one number you can look at that will help you find good stocks selling at discount prices. It’s called the Price-to-Cash-Flow and it’s one of my favorite ratios to examine. And there’s a simple reason I like to use it.
While companies can manipulate and massage their earnings very easily through write-offs, channel-stuffing and other means, cash flow is much more difficult to alter as it represents the cash that the company actually generates.
Let me explain how it works…
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Take A 20% Tip From “The Father”
As I said, it’s not as simple as just assigning an arbitrary value to a stock and say that it’s a good stock to buy if it trades below that number. For example, David Dreman, considered by many financial minds to be the “father of contrarian investing,” recommends looking at the lowest 20% of any ratio (Price-to-Earnings, Price-to-Book, or Price-to-Cash-Flow, etc.) that you’re considering - and expanding that into specific industries to improve your chances of success finding good stocks to invest in.
For example, let’s say you’re looking at the major pharmaceutical companies. The two with the lowest Price-to-Cash-Flow (P/CF) are GlaxoSmithKline (NYSE: GSK) and Wyeth (NYSE: WYE).
But take a look at some of the other numbers and you’ll see that their P/Es are also low compared to their peers. In addition, Glaxo pays a healthy 4.2% dividend, has the highest return-on-equity of the group and a high net profit margin. Wyeth has a low Price-to-Book compared to the others in the sector.
If you’re a long-term investor, fundamentals like this reveal that it might be a good opportunity to pick up a solid drug manufacturer at a bargain price.
Let’s take a look at another healthcare-related sector…
Of the large companies that provide healthcare plans, WellCare (NYSE: WCG) stands out from a valuation perspective as a good stock to keep an eye on. No doubt, that’s because the stock was slashed in half (and more) after the Feds raided the company’s offices!
But aside from that negative press, the company is winning new contracts and is among the lowest in its peer group in terms of P/CF, P/E and Debt-to-Equity and is one of the highest in Return-on-Equity.
That’s a good start. But you still need to perform your due diligence to see if the balance sheet is healthy, whether cash flows are rising or falling, etc. Sometimes, a stock has a low valuation for a reason. Right now, investors are clearly concerned that WellCare is going to run into more problems with the federal government, otherwise it wouldn’t be so cheap. But after digging into your research, if you conclude that the company’s woes are behind it, WellCare looks like a tremendous bargain.
One More Sector Full of Good Stocks to Invest in…
Let’s say you wanted to stare down the recession and troll around in the industrials group. You might want to pay attention to Lincoln Electric Holdings (Nasdaq: LECO), a Cleveland based manufacturer of welding and cutting products.
The company’s P/CF is low compared to its peers and its cash flow from operations grew every quarter over the past year (in fact, on an annual basis, it’s grown for the past several years). Other positives include a below average P/E, little long-term debt, and a Price-to-Book ratio that is half the sector average.
Bottom line: When times are tough (like now), cash is king. And when companies trade at a discount to their peers, based on the cash they spin off, it pays to take a closer look.
Marc Lichtenfeld
Today’s Smart Profits Action Center:
- There are a host of fundamental numbers you can use to evaluate a stock’s power. But one of the best momentum indicators is cash flow. Harder for a company to spin, cash flow numbers give a truer gauge of how much cash it’s generating and takes various factors into account, such as net income, depreciation, and amortization. As Marc mentioned above, investing in stocks that not only have a healthy cash flow, but are also attractively valued relative to that cash flow can be a valuable addition to your portfolio.
- In the February Xcelerated Profits Report issue, sent to readers on Wednesday, the team recommended a new play on one of America’s biggest, cash-rich blue chip companies. With more $20 billion in the bank and cash flow around $14 billion, it’s no wonder the company can afford to pay out a very healthy dividend, too. Plus, it’s part of a sector that is one of the most resilient during an economic downturn.
Related Articles:
Investing In The Fear Effect: How To Buy Bargain Stocks When There’s Blood In The Streets
The Healthcare Sector: Recession-Proof Your Portfolio With This Robust Sector
Sphere: Related ContentInvestment Sectors & Portfolio Protection
January 24, 2008
The Smart Profits Report Issue #490
Thursday, January 24, 2008
Protect Your Portfolio With These Two Investment Sectors
By Karim Rahemtulla, Investment Director, Smart Profits Report
As the sun set on Monday night and the U.S. futures markets turned a nasty shade of crimson, the Federal Reserve loaded its gun and fired the bullets into the market early this morning, blasting 0.75% off the federal funds interest rate. Because of the move, the widely anticipated market meltdown today wasn’t as bad as many feared. But while the Fed’s move might have eased the problems a little, it certainly hasn’t fixed them. The question is: What does all this mean for us - the smarter investors? Is it time to go into ‘portfolio protection‘ mode? Are there investment sectors that will ease the pain of an economic downturn?
Protect Your Investment Portfolio, But Don’t Fight The Fed
There is an old Wall Street adage: “Don’t fight the Fed.”
The Fed already set the table for an interest rate cut a couple of weeks ago when Chairman Ben Bernanke proclaimed that, “…
additional policy easing may be necessary. We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks.”And with the stock market having kicked off 2008 in disastrous fashion, many expected Bernanke’s boys to act ahead of their scheduled meeting on January 30-31. They reacted to the global meltdown Tuesday morning with force.
The pump is well and truly primed - and this means you shouldn’t look to next week, but look forward a few months. There will be another liquidity-led boom.
This is not to say there won’t be any pain in the months ahead. While this morning’s cut may have saved the stock market from Armageddon today, it’s merely papering over some large cracks in the U.S. economy - ones that can’t be filled by simple monetary policy tools.
Investors are unhappy, and account values have dropped significantly. But that doesn’t mean we should just sit back and watch…Story Continues Below
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Investment Sectors Offering Some Of The Best Opportunities for Portfolio Protection
Nowhere is this truer than in the financial sector. Here, all companies are trading as if they were one. Investors are paying no heed to those that are better managed, shelling out fat dividends, buying back stock, or experiencing the most insider buying in a decade. All that goes out the window, as the masses focus on the unknown.
That sounds absurd, I know. But fear is the new King Of Wall Street. That means the companies in the strongest financial position and those that scoop up repeat business, no matter what the economy is doing, are in the best position to combat the upheaval.
For example, after the huge down move Tuesday morning, one sector rallied into the downdraft: Financials. It has since moved a little lower, but not nearly as much as would have been expected given the overall downturn.
My colleague and healthcare expert Marc Lichtenfeld has also noted that the healthcare sector offers some excellent “recession-proof” potential. Just last week he wrote about investing in the healthcare sector. In addition, while the downturn or recession plays out, it’s always worth having some strong dividend-yielding stocks in your portfolio - the cash-rich companies that will actually pay you.
Xcelerated Profits Report readers know what I’m talking about here. Our diversified portfolio consists of financials, healthcare, technology and dividend-yielders. We just put the finishing touches on the February issue, containing new recommendations on a huge, dividend-yielding healthcare firm and one of the biggest technology firms. Find out more information for yourself.
Protection From Perceived Crisis
I’m not saying it’s easy to stomach wild downward moves - we’ll probably see more of them. But one trading day - or even 10 trading days - is a mere blip on the screen in hindsight. If you judge a market’s worth based on a few hours of trading you’re making a big mistake. I’ve witnessed times like this on many occasions and the situation will look different in time.
The common theme in almost every market downturn, those who panic when they should be rational and sell on emotion when they should buy usually miss the opportunities that the market presents during overdone selloffs.
But out of perceived crisis comes opportunity - and it’s during a time of mass panic that the real money can be made. Those who stay the course - and even have the guts to buy strong assets at even cheaper prices - will come out ahead.
To profitable investing,
Karim Rahemtulla
P.S. Here at Smart Profits Report we try our best to keep you updated with different sectors, opportunities, and strategies. If you like what you read, but aren’t sure where to go with it, check out our page of resources that could help you take the next step.
Today’s Smart Profits Action Center:
- “Appreciable risks to downside growth remain.” That’s Fed-speak for, “We need to make a move - and fast.” But it wasn’t so much what the Fed said in its brief statement this morning; it was more what it did. The monetary policy board voted for the emergency 0.75% interest rate cut in an 8-1 vote, symbolically doing so before it holds its regular meeting next week. The lone objection came from St. Louis Fed President William Poole, who didn’t think the action was justified before the meeting. Tell that to investors! If the market fails to respond, the bankers may well make a further move at next week’s meeting.
- It’s rare to see the Fed, Treasury Department and both houses of Congress on the same page. But that appears to be the case. Last Friday, President Bush approved a $150 billion package of tax relief and incentives in order to kickstart the economy back to life. And that number could rise. Both Bush and Treasury Secretary Henry Paulson are discussing the proposal with congressional leaders in an attempt to come to a quick resolution.
Related Articles:
Investing In The Fear Effect: How To Buy Bargain Stocks When There’s Blood In The Streets
Bear Market Investing: Don’t Get Burned By Bears… Here’s Your Five Point Plan
Contrarian Investing: The Best Investment Strategy You Should Use Today
Sphere: Related ContentHealthcare Investments: 5 Steps to Investing in Healthcare During a Bad Economy
January 17, 2008
The Smart Profits Report Issue #489
Thursday, January 17, 2008
by Marc Lichtenfeld, Senior Analyst, Smart Profits Report
While the recent carnage has left many portfolios in tatters and investors nervous to pull the trigger on new trades, the fact is, it’s also created some excellent buying opportunities in the healthcare investments sector.
Not only does it offer some enormous opportunities in bull markets, it’s also a very good defensive sector during bear markets. Frankly, when it comes down to it, Healthcare is a recession-proof industry with enormous upside and its stocks deserve a prominent place in most portfolios.
I’ll give you an example: In the great bear market of 2000-2002, the S&P 500 slid more than 50%. The Nasdaq fared even worse, plunging 78%.
By contrast, the S&P Healthcare Select SPDR (AMEX: XLV) only lost 33%. In fact, some of the XLV holdings actually performed very impressively during the bear market. Johnson & Johnson (NYSE: JNJ) soared 73%, while Abbott Labs (NYSE: ABT) jumped 48%. Even Medtronic (NYSE: MDT) only fell 2% after giving up gains of 27% earlier in the bear market.
Talk about some solid bear defense. Even the Chicago Bears of 1985 would be proud. So how about in bull markets? Take a look at this…
Healthcare’s Reaction to A Massive, Bull-Driven Tailwind
Since the bear market bottomed out in 2002, the Amex Pharmaceuticals Index ($DRG) has risen 46%, the S&P Healthcare SPDR is up 76%, and the Amex Biotechnology Index has rocketed 194%. That compares with 79% for the S&P 500 and 116% for the Nasdaq.
| Bear Market (2000-2002) | Bull Market (2002-Present) | |
| S&P 500 |
-51% |
79% |
| Nasdaq |
-78% |
116% |
| Amex Pharmaceuticals Index |
-47% |
46% |
| Amex Biotechnology Index |
-66% |
194% |
| S&P Healthcare SPDR |
-33% |
76% |
Bottom line: Healthcare stocks lost less during the last bear market and, with the exception of the Amex Pharmaceuticals Index, are outperforming the broader markets during the bull.
Healthcare Investing - Five Steps
- Timing Rallies And Rumors Is Dangerous… Stick With A “Healthy” Long-Term Plan. Here’s the key during a market like this: Don’t try to time it. Buying on false rallies and rumors is a dangerous game - and not one I like to play. We’ve already seen examples of this over the past few weeks.
- Stay in the market for the long-term. Even during a bear market, I leave the bulk of my money invested in my favorite stocks and mutual funds.That doesn’t mean you shouldn’t adjust your allocation, depending on developments and where things are headed. And during a bear market or recession, I’m sure of one thing: I want to be more heavily invested in healthcare. Why? Simple…
- People will get sick, no matter what Bernanke, Bush, Cramer, or anyone else says/does. Just because Joe Six-Pack is no longer buying a big screen TV doesn’t mean he’s not going to suffer health problems.
- If you’re concerned about recession or a weak stock market: Consider repositioning your portfolio into some defensive healthcare names or ETFs. It certainly won’t prevent losses, but they should perform better than the broader averages.
- If you believe the bull market still has room to run: The biotech sector should continue to outperform. Healthcare companies are making great strides today and a host of new data is expected to hit the newswires in 2008. Some announcements have potential to propel specific names significantly higher. Even in a nasty bear market, a company with a notable scientific or regulatory breakthrough should see its shares spike.
Marc Lichtenfeld
Editor’s Note: Marc is putting his money where his mouth is. Far from running for the stock market exits along with most other investors, he’s currently preparing his next healthcare recommendation for the March issue of the Xcelerated Profits Report. Plus, with options expiration on Friday, the XPR team is set to take profits on four positions. Get the details of how you can claim some profits for yourself here.
Related Articles
- The Healthcare Sector: Recession-Proof Your Portfolio With This Robust Sector
- Bear Market Investing: Don’t Get Burned By Bears… Here’s Your Five Point Plan
- Contrarian Investing: The Best Investment Strategy You Should Use Today
The Subprime Mess, Housing Market, and Consumer Debt
January 16, 2008
The Smart Profits Report: Issue #488
Wednesday, January 16, 2008
Three Monkeys on the Economy’s back
by Martin Denholm
Managing Editor, Smart Profits Report
Just two weeks into 2008, the stock market resembles an old jalopy, stumbling and bumbling its way downward. So far this year, the three major stock indexes - the Dow Industrials, Nasdaq Composite and S&P 500 - are down 5.9%, 8.8% and 5.9% respectively.
It’s not hard to see why. Even the most fearsome beast would struggle to swat away a hail of bullets. Today, I’m going to take a quick look at the subprime mess, housing market, and consumer debt issues then give you a way to protect yourself. So let’s get going…
The Subprime Mess, Housing Market, and Consumer Debt
Even before the champagne popped and 2008 rolled in, the stock market was buckling under the weight of some of the most serious issues to hit Wall Street in quite some time. For example…
The Subprime Mess: Is there any end to this fiasco? The bad news keeps on coming. Last week, Countrywide (NYSE: CFC) reported a $772.7 million fourth-quarter loss ($9.99 a share) - $723.1 million ($0.64 a share) more than in Q4 2006. Fortunately, Bank of America (NYSE: BAC) is willing to bail it out, with a $4.1 billion buyout. BoA CEO Ken Lewis says talk of Countrywide’s demise is a “malicious rumor.”
Just today, Citigroup (NYSE: C) reported a $10 billion fourth-quarter loss (the biggest in its 196-year history), slashed its dividend by 41% (from 54 cents per share to 32 cents), and slashed another 4,200 jobs, in addition to the 17,000 pink slips it dished out last spring. It will receive a further $12.5 billion in new investment, following the $7.5 billion it received in November from the Abu Dhabi Investment Authority.
Merrill Lynch (NYSE: MER) said it will receive a cash injection of $6.6 billion from three foreign funds (The Korean Investment Corp, Mizuho Corporate Bank and Kuwait Investment Authority) in order to offset some of the losses it’s racked up in the subprime market.
On a related theme…
The Housing Market: The downturn continues. Bank foreclosures soared 94% in October and in calling for a 10% drop in average house prices from their peak, Fannie Mae says the correction will last another two years and could be the “toughest housing correction in our lifetimes.”
Consumer Debt: It doesn’t help that consumers keep borrowing money like there’s no tomorrow. Total consumer credit now stands at a whopping $2.5 trillion, according to the Federal Reserve’s latest report - and that doesn’t even include mortgage debt.
That’s an enormous burden - and if consumers stop spending, the economy will be in trouble, given that two-thirds of GDP growth comes from consumer spending. This year, retail sales are forecast to rise just 3.5%, which would be the weakest since 2002.
I could go on - but you get the idea. And this news has triggered the biggest bear of them all…
Recession: The Dreaded “R” Word
According to Merrill Lynch, the U.S. economy is already in recession. They’ve vaulted past all the media pundits, who are still breathlessly debating the issue, and gone straight for the conclusion.
This includes the National Bureau of Economic Research (NBER), who said last week that a U.S. economic recession is now “more likely than not.” I know the financial world is littered with useless, attention-seeking soundbytes, but this one comes from the only group that officially confirms a recession.
Merrill’s report said that December’s pathetic job report, which showed just 18,000 new non-farm jobs created during the month and the unemployment rate edging up to 5%, was the final nail in the coffin.
The question is: What do we do about it?
The Best Hedge Against the Subprime Mess, Housing Market, and Consumer Debt
High oil prices? Check - $91.62 a barrel, to be exact.
A falling dollar? Check. The U.S. Dollar Index is now trading in the mid-70s, with the euro almost at the $1.50 mark. The dollar is likely to weaken further if (or more likely when) the Federal Reserve cuts interest rates again. Chairman Ben Bernanke all-but guaranteed this last week.
Weakening GDP growth? Check. The Organization for Economic Cooperation and Development has lowered U.S. GDP growth from 2.2% in 2007 to 2% this year. The guys at the Blue Chip Economic Indicators are a tad more positive, with a 2.4% forecast, but still down from 2.6%
A tumbling stock market? Umm… check!
To most people, that’s a nasty-looking list. But to gold bugs, it’s heaven. The gold market thrives under such stress - as shown in the metal’s climb to an all-time high of $913.70 an ounce on the NYMEX today. And with the Fed set to cut rates again, gold should become even more attractive if the move triggers an inflation spike.
Gold clearly now has $1,000 an ounce in its sights - something our commodities expert Lee Lowell said in the January Xcelerated Profits Report issue: “Like the oil market, gold is prone to speculation, and with hedge funds looking for another way to score gains, it’s certainly possible that we’ll see prices surge to $1,000 per ounce.”
He also noted it in my column here on July 30, 2007. Back then, I suggested two options if you wanted exposure to the gold market: the streetTracks Gold Shares ETF (NYSE: GLD) and the Market Vectors Gold ETF (AMEX: GDX). Since then, GDX has risen 28.2%, while GLD hit a 52-week high of $90.35 today and is up 35%.
GLD isn’t the only one. Other gold companies that just hit 52-week highs include: Newmont Mining (NYSE: NEM), Barrick Gold (NYSE: ABX), AngloGold Ashanti Ltd (NYSE: AU) and Randgold Resources Ltd (Nasdaq: GOLD).
And this coming Friday, the Xcelerated Profits Report will bank a maximum 17.6% win on Goldcorp (NYSE: GG) when the call options expire. Goldcorp is one of the world’s largest gold producers and also hit a new 52-week high on Monday.
Gold is headed for $1,000. I think it will get there by the end of the first quarter, possibly sooner, depending on what the Fed does.
Best regards,
Martin Denholm
P.S. Another sector that should fare well during an economic downturn/recession is healthcare. We’ve been banging the drum here for several months, taking 99% gains on the first half of our BioMarin (Nasdaq: BMRN) position and well-placed with others. You see, even if the economy and stock market struggles, people don’t stop getting sick and they still need their medicine and drugs. My colleague Marc Lichtenfeld just returned from the JP Morgan Healthcare Conference and picked up several potential investment recommendations. He just sent me this note: “It’s a very exciting time to follow healthcare stocks. Small-cap biotechs provide ample opportunity for outperformance and there are some terrific advances being made in all kinds of maladies. I’ll have a play for the March XPR issue - one of the smartest most well-connected guys I know on the Street is heavily involved with this stock and I think it has enormous potential.”
Related Articles:
- The Gold Market: Supply-Demand Issues Set To Send Gold Prices Higher
- Investing In The Fear Effect: How To Buy Bargain Stocks When There’s Blood In The Streets
- The Weak U.S. Dollar: How To Combat The U.S. Dollar’s Demise Through Global ETFs
JP Morgan Healthcare Conference:
January 11, 2008
The Smart Profits Report: Issue #487
Friday, January 11, 2008
The JP Morgan Healthcare Conference Hosts Healthcare Heavyweights
By Marc Lichtenfeld,
Senior Analyst, Smart Profits Report
As I write, I’m 30,000 feet in the air above the JP Morgan Healthcare Conference, 30 minutes into a red-eye flight back home to Florida, and worn out from an exhausting three days in San Francisco.
I wish you could have seen the controlled chaos. Hardly surprising when you’ve got 300 companies and 6,000 of the world’s best investors descending on the Westin St. Francis hotel to listen to presentations and grill company executives in an attempt to find the next great healthcare investment.
And those numbers don’t even include the myriad of companies and investors who weren’t invited to the conference, but have taken over suites at hotels like The Hilton in order to meet conference attendees and others who couldn’t get in.
Sphere: Related ContentMarket Forecast
January 9, 2008
The Smart Profits Report: Issue #486
Wednesday, January 9, 2008
Market Forecast: What Technical Analysis Says About The Markets In 2008
By Jim Stanton,
Technical & Quantitative Analyst, Smart Profits Report
At this time of year, the financial world is chock full of predictions and market forecasts for 2008. The pundits simply can’t resist having a punt on what will happen.
Right now, you dont have to look very far to find economists and commentators ratcheting up the chances of a recession this year. In fact, Martin Feldstein, chief of the National Bureau of Economic Research (NBER), just declared that a recession is more likely than not.
If the first four trading days of 2008 are anything to go by, the bulls certainly have some work to do to arrest an alarming slump. With the bears in full control, its been anything but a Happy New Year so far.
Over those first four days, the Dow Industrials slumped 437 points; the Nasdaq 100 lost 128 points; and the broader S&P 500 had shed 52 points.
As of 1:00 PM today, the fifth trading day of the year, the Dow was down another 54 points, while the Nasdaq and S&P 500 were flat. So no first five days joy this year. As for January overall, well have to wait a few more weeks to see how it plays out. But that doesn’t mean I can’t give you some real guidance in the meantime…
2008 Market Forecast - Place Your Bets On Short-Term Action
Despite what the Stock Traders Almanac statistics say, or what other fancy indicators might suggest, I’ve never made my investment decisions based on things like the January Barometer, who wins the Superbowl, how often it rains on Wall Street throughout January, or how loud Jim Cramer yells at the Federal Reserve.
In my experience, trying to forecast where the stock market will end up one year from now is an exercise in futility. It’s very difficult to do in the first place, and you never know whats going to happen over 12 months.
My proprietary technical analysis, and the ESP Profit System that I use to chart the markets movements and plot profit opportunities, is more effective over the short and intermediate-term. It’s dynamic analysis, based on real factors, not just statistics. So let’s take a look at what’s in store…
Indexes Crumble To New Correction Lows
With the market carnage lately, it seems a long time ago that the large-cap indexes made their highs. But it was only as recently as October 2007. Their small-cap neighbors did the same in July 2007.
But on Monday, the Nasdaq indexes, S&P 500, Russell 2000, S&P Small Cap, and Dow Transports all made new correction lows. Quite a turnaround and fast, too. And I’ve got news for you based on the chart patterns, my ESP Profit System is calling for lower prices at least over the near-term.
Lets deal with the Nasdaq first…
Market Forecasting A 180-Degree Turn For The Nasdaq
Since late December, the Nasdaq 100 has led the way lower a 180-degree reversal from the start of the fourth quarter when it was leading the indexes higher. Having then consolidated for almost two months, though, it traded below the lows set back in November, as you can see on the chart below.
In making new correction lows, the Nasdaq 100 also closed below its 200-day moving average, a development not seen on the index since May 2006. In doing so, it projects a shorter-term downside target around the 1,920 level, according to the pattern recognition component of the ESP Profit System.
But a look at the weekly chart below tells us that if the index closes below 1,929, it may have longer-term repercussions.
As you can see, the longer-term uptrend line, drawn off the July 2006 lows, was tested in early trading on Monday and the index rallied later in the session. The Nasdaq 100 has become oversold in the short-term, so a rebound off the trendline was not surprising. The index also got very close to the shorter-term downside objective around the 1,920 level, which makes Mondays low an important level.
The indicator at the bottom of the chart is a Stochastic Oscillator. This is basically a momentum indicator and it’s turning negative. From here, it points to two possibilities:
- If the Nasdaq 100 can hold in the 1,929 area and reverse, the correction may be over.
- However, if it drops down to the 1,920 level (more than just a quick downward move), it will confirm the negative Stochastic reading and break the trendline, which will raise concerns over the longer-term health of the market.
Whenever I do market analysis, I always look at a number of indexes in order to get a broader look at whats going on. So lets move onto the broader S&P 500…
The S&P Goes Low 1,370 On Tap
While the Nasdaq 100 is still holding above its uptrend line, the S&P 500 made new correction lows on Monday. As you can see from the weekly chart, it closed below its trendline for the second day in a row.
The index is also well below its 40-week (200-day) moving average and by making new correction lows, it should lead to a test of the August 2007 low at 1,370. This is close to a Fibonacci projection at 1,362.
So is it all bad news? Not quite. Based on some alternative downside projections, there’s an outside chance that the correction has ended.
However, the S&P 500, Nasdaq Composite, Dow Industrials, Dow Transports, and all the smaller-cap indexes have closed below their weekly uptrend lines. That’s a pretty big headwind that investors are battling. It also tells me that the odds favor at least a test of the 1,362-1,370 area on the S&P 500 and 1,920 on the Nasdaq 100 before a meaningful reversal can take place.
Good investing,
Jim Stanton
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Today’s Smart Profits Action Center
- While the volatile stock market leaves many investors scratching their heads over the next move, Jim Stanton has spent 30 years charting its developments and pinpointing where its headed next, making investors, hedge funds and institutions a lot of money. Jim has devised a proprietary technical analysis model and is the lead editor of the powerful, cutting-edge ESP Profit System, which rigorously analyzes both market indexes and stocks to nail down their movement with deadly accuracy. This allows investors to see whats going to happen, how much the asset could move, and when it will occur, so they know how to take advantage. For more information, please call our VIP Trading Services Team at: 888.570.9830 or: 410.454.0498.
- Yet more problems in the real estate market put pressure on stocks again today. The National Association of Realtors said its pending home sales index slipped 2.6% in November, extending a downturn that has arguably burdened the U.S. economy more than any other development. In a research note, Lehman Brothers said the correction has caused a dramatic decline in earnings at lenders like Countrywide Financial Corp (NYSE: CFC), which is now at serious risk of bankruptcy. Major homebuilder KB Home (NYSE: KBH) is faring little better. The company reported today that its fourth-quarter loss rocketed to $772.7 million ($9.99 a share), compared with a $49.6 million loss ($0.64 a share) in Q4 2006, and projected another tough year.
- As a growing number of economists put their necks on the line and boldly call for an economic recession this year, investors are scrambling for help. That means most eyes are focused on the Federal Reserve. The monetary policy committee meets again on January 30-31, with investors hoping for another bailout. The question is: Can the Fed provide economic relief through interest rate cuts without triggering inflation? Philadelphia Fed President Charles Plosser has noted this himself. And having already cut rates three times in recent months, with little effect, its powers look limited.
Related Articles:
- First Five Days Indicator: 3 Reasons To Forget This Useless Myth & Follow The Average True Range Instead
- The Advance-Decline Line: This Technical Analysis Indicator Will Show You Where The Market Is Headed Next
- The VIX and VXO: How You Could Have Predicted The Markets Recent Meltdown
The Healthcare Sector
January 4, 2008
The Smart Profits Report: Issue #485
Friday, January 4, 2008
The Healthcare Sector: Recession-Proof Your Portfolio With This Robust Sector
By Marc Lichtenfeld
Senior Analyst, Mt. Vernon Research
We need a plan to combat the next wave of pressure on the economy and investments, as it seems to me that the upcoming “recession” is one of the most foreshadowed economic events in recent memory. Many commentators seem to think it’s inevitable.
The question is: How are you supposed to invest if there’s a recession on the horizon that everyone is predicting? The mere fact that it’s almost taken as a certainty now leads me to question whether one will even occur at all (I am a contrarian, after all!)
The thing is… nobody can tell you with any certainty whether we’ll experience a recession. But I do know one area that should perform well - no matter what the economy does - the healthcare sector…
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Forget About Pipe-Dream Drugs And Someday FDA Approvals… Here’s How A Medical Breakthrough Could Double Your Money In The Next 99 Days This one is already real… a Silicon Valley company that already has its radically new breakthrough cancer treatment on the market on a global scale. The company has no debt, $200 million cash and more than a half-billion dollars in back orders. Take a look and see if you don’t agree that this stock is one of the year’s most significantly under-valued gems. Find out more now |
The Healthcare Sector Will Always Be In Global Need
Recession or no recession, there is a simple, blunt truth: People will unfortunately still get sick and need treatment for heart ailments, cancer and a myriad of other conditions. That means the healthcare sector will remain robust - and particularly with the baby boomer generation about to retire. So where are the best bets?
Forget Big Pharma. I’m not crazy about these companies right now, as many of them have blockbuster drugs that either recently saw their patents expire, or will do so soon. This will open them up to generic competition. Pfizer’s (NYSE: PFE) anti-depressant drug Zoloft is a recent example.
However, I do like the biotech sector - especially, the smaller-cap names. As a specialist in the sector, I’ve seen many companies’ share prices quickly and easily double on positive clinical results.
And this will happen regardless of jobs data, home foreclosures, durable goods sales, or whatever other economic data is depressing the market.
Golden Healthcare Opportunities In Clinical Trials
There are so many healthcare companies that have made significant progress and are now in Phase II and Phase III clinical trials for nearly every condition you can think of. From cancer, to diabetes, to multiple sclerosis, to rare diseases, the list is extensive.
And the good news is that I’m about to get an insider’s look at the entire healthcare industry.
Starting on Monday, in San Francisco, the JPMorgan Healthcare Conference will host hundreds of companies in the biotech, pharmaceuticals, device makers and other healthcare sectors. Many more will show up just to meet investors and be part of the scene. It’s the largest and most prestigious healthcare conference of the year.
Industry heavyweights such as Merck (NYSE: MRK) and Amgen (Nasdaq: AMGN) will present in standing room only ballrooms, where powerful sound systems are needed so the people at the back can hear.
Trust me, this is as good as it gets in the healthcare sector. And I’ll be there to soak it all up, too - with one simple mission: To get the big boys’ take on the “health” of their sector and find the most profitable investments within it.
Tiny Rooms, Red-Hot Blackberrys, And Expensive Scotch
When I’m not stuffed into the jam-packed main rooms like a commuter on a rush hour subway train, I’ll likely be stashed away in one of the tiny rooms - you know, ones that probably double as the janitor’s closet when a big conference isn’t in town. Here, no microphone is needed. This space is for the handful of folks who want to go off the beaten path and listen to presentations from small and microcap companies as we search for the next “10-bagger.”
I’ll get the inside scoop for you, as I already have one-on-one meetings set up with several CEOs. Additionally, many of the best healthcare investors on the planet will be there, so I’ll have the chance to sit down with some of them and compare notes.
It’s an incredibly hectic conference, complete with frantic analysts bashing away on their Blackberrys and lavish cocktail parties, where one can talk stocks with hedge fund managers who are sufficiently loosened up by Dalwhinnie single malt.
I’ll report back to you on what I hear, who I spoke to, and the developments to look for in 2008. The only thing you won’t get is the free top-shelf cocktails. Yeah, I know… it’s a tough job, but someone has to do it.
Marc Lichtenfeld
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Today’s Smart Profits Action Center
- Having started as an analyst and trader, we plucked Marc from TheStreet.com in the middle of 2007. And it didn’t take him long to pick a winner. In fact, with his very first recommendation, he bagged 99% on the first half of the position - and is riding high with a 104% gain on the remainder. He’s got plenty more lined up for 2008, so don’t miss out. Here’s how to profit.
- Find out how Marc grabbed that 99% profit for investors in mid December - and learn just how this simple yet powerful investment strategy eliminated fear and greed from the sell decision, reduced risk, and allowed for continued upside at the same time.
- Biotechnology is a highly specialized field that requires extensive knowledge of the players, products and investing climate in order not to get burned. That’s Marc’s business - and is why he’s able to dish big winners to readers who act on his recommendations. But if you’re just looking to gain exposure to the broader biotech sector through just one investment, there are several ETFs and mutual funds available. You won’t grab a huge win like Marc did, but one of the most popular is the iShares Nasdaq Biotechnology ETF (AMEX: IBB). It edged up 4.4% in 2007 and the company Marc recommended is one of its holdings.
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Capture 13% Dividend Yields in this Ultra-Safe Foreign Country
January 1, 2008
| With the U.S. headed toward a possible recession, and with yields abroad simply beating the pants off of those in the U.S., it’s a mistake not to look internationally for a solid income stream. In fact, if you want truly high yields, then you need to look overseas. For example, while U.S. shares pay less than 2%, the average stock in many foreign nations is now yielding 2X or 3X that amount!
In today’s issue, I’m going to introduce you to one of my This large, English-speaking nation is Sound a Australia:¼br> A Gold Mine for Yield-Hungry Investors
Now is a particularly auspicious time for Australian stocks. The economy is growing robustly — GDP is expected to rise +3.8% in 2008, according to the And as mentioned,
plus dividend yield) of +10% would actually have delivered an effective total return of +20.9% thanks to the currency boost. I think the Australian dollar will continue to perform well vs. the U.S. dollar, partly because our own greenback is being pushed lower by forces that are unlikely to let up in 2008: a continuing trade imbalance,
Australian companies. I spent weeks poring over financial statements, digging through news articles, and talking to some of my high-level contacts — mutual fund managers and other experts who specialize in the region. In the process, I discovered one of my absolute favorite high-yielders on the planet — an Australian natural gas distributor that serves nearly 1 million customers. Like many operators here in the U.S. and Canada, this company enjoys monopoly control over its extensive pipeline network. And it’s involved in one of the most stable businesses known to man — it charges government-regulated fees in exchange for pumping gas through its network. Thanks in large part to these steady fees, this firm brings in copious cash flows, helping it deliver a 13.0% dividend yield. I also found one of the world’s biggest zinc and lead producers — a great play on the global boom in commodities. Paying a juicy 11.3% yield, this aggressive company is one of the world’s most intriguing mining firms. And thanks to booming commodity prices, its share price should continue to move strongly higher in the coming years.If you’d like to learn the name of these companies — plus receive a steady stream of foreign stocks, funds and other investing ideas with abnormally high dividend yields each and every month — then I’d like to extend you a personal invitation to try my premium international investing newsletter . . . High-Yield International. Visit this link to learn more.
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~Dexter L., Jonesboro, GA
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What Others Have To Say...
Just wish that I would have put more $$$ on it oh well.
Thanks"
~Paul K.
