Portfolios Updated

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The free monthly portfolios I track on the right hand side have been updated. Very little change this month outside of the international ETF (which still needs to be fully updated with new positions sizes and closing sales on Monday).  I will be writing commentary on each in the coming days.

The commission free 10 month SMA portfolio has been updated. I am using Yahoo Finance adjusted (split and dividend) closing prices to calculate the 10 month SMA. The signals should update daily, but, the essence of the strategy is simply to update it once per month.  More on this portfolio to come in the next few days…

I need your help – I’ve been stuck at the same number of reviews on Investimonials for too long! I’m asking 3 people to write me a review this weekend.  Help me out and be one of those three by writing a review right here!

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New Addition to Portfolios

I will begin including a link on each spreadsheet to my recent article commenting on the portfolio.  I have received some feedback that information is difficult to find on the site. I tend to agree, as the Google Search function embedded on this site is not always very good at locating information.

Thus, if you have questions on a portfolio such as why it exists, how it has performed, etc., I would first suggest checking the spreadsheets on the right hand side of the page.  If there is a link in the spreadsheet to recent commentary on the portfolio then this will be a great starting point for understanding why I track that particular portfolio/strategy.

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Mid-Week Dollar, Gold and SP500 Trend Report

Chris Vermeulen state the following in his mid-week report, to read the full, free report click here:

The dollar continues to control the equities and commodities market with its inverse relationship to them. The past couple years it seems that the dollar does what it wants and the all other investments move according to their relationship with rising or falling dollar prices. 

In short, we continue to ride the trend of higher stock and precious metal prices as the US Dollar spirals down out of control. Our SP500 positions are deep in the money and we continue to ride it for all it’s worth raising our stops as we go.

The big question is if the Sell In May, and Go Away will take shape or not… Im thinking it will as when the time is right I will be looking to short the market.

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More on this topic (What's this?)
Has Gold & Silver Finally Bottomed?
Gold Price Gravitating Lower Towards $1000
Read more on Gold, Commodities at Wikinvest

Mid-Week Market Readings

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Below are a few articles of note from this week:

Jeremy Grantham: Time to Wake Up – Days of Abundant Resources and Falling Prices Are Over Forever (summary is from Investment Postcards from Cape Town, the full article is available at GMO’s website with free registration

Physical Silver Investors Are Being Hoodwinked by the Futures Market – Dian Chu

The Mess in Europe (pdf) – John Mauldin

Managing Exposure to Extreme Markets – Geoff Considine

Monetary Policy in 3-D – John Hussman

More on this topic (What's this?)
Interoute Crosses the Pacific
Has Gold & Silver Finally Bottomed?
Read more on Silver, European Union at Wikinvest

Commission Free Portfolio

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The Commission Free Portfolio on the right hand side of the page is currently under “construction”. I am experimenting with some new data sources including having the signals update daily as opposed to just the end of the month. I should have the portfolio back to normal by the end of the weekend. Some of the signals could be unreliable until the overhaul is complete.

High Quality Stocks With Price Momentum

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I update the following portfolio/screen on a monthly basis on Scott’s Investments. March’s list of 35 stocks is here and the top 10 rated stocks returned an average of  2.23% for the top 10 stocks on the list versus -1.57% for SPY. The entire list of 35 stocks last month returned an average of 5.4%, led  by Select Comfort (SCSS) at 38.19%.

The screen looks for the following:

  • earnings growers still reasonably priced as judged by the PEG ratio 
  • low debt 
  • a history of high return on equity and investment, and 
  • price momentum as gauged by the percentage the stock is trading to its 250 day high. 
  • The stocks are then ranked based on fundamental factors as compiled by stockscreen123.

35 stocks qualified for this month’s list.  Just as in last month, this tells us individual stock momentum still exists in the market and the fundamental factors on the list are easy to find among the high momentum stocks.

Some popular names made this month’s list, inclduing Apple (AAPL) and Intel (INTC).   AAPL has struggled to breach its high set in February, even after another blowout quarter.  It is priced at a reasonable forward projected Price-to-Earnings (P/E) of 12.48 and Price-to-Earnings Growth (PEG) of .84.  However, keep in mind these are forward projections and are predicated on Apple continuing to show strong earnings growth. It also has a return on equity and return on investment in excess of 30% and no long-term debt. 

Intel is slowly transforming itself into a favorite among dividend investors. It currently yields 3.3% and has little debt.  It also has a return on equity and return on investment in excess of 20%.   Finally, it has a forward P/E of 9.1 and a PEG of .91.   The projected PEG and P/E of Intel are based on much lower earnings growth than a high growth stock like AAPL, a company which has shown significant and consistent earnings growth in recent years.  However, for investors seeking a combination of yield, price momentum, a clean balance sheet, and reasonable valuation, Intel is worth consideration.

The rational for this screen is based on backtests showing stocks with low PEG ratios, debt, and high returns on equity and price momentum have produced good historical returns. The screen has tested well historically in bullish periods and has suffered during significant market drawdowns. Strategies an investor could use to avoid major drawdowns would be to either abandon this type of strategy entirely when the SP 500 or another major index is below a long term moving average, or hedge positions using one of the methods I profiled here.

Below are the backtest results for this strategy starting in March 31st, 2001. Returns exclude commissions and taxes and assume .25% slippage.  No position accounts for more than 25% of the portfolio (relevant in cases when the screen produces less than 4 results) and it was equally rebalanced every 4 weeks.  The test was conducted using stockscreen123:

Two possible tools an investor could use to conduct this screen on his/her own are stockscreen123 or Finviz. This screen was conducted using stockscreen123. For the full list of stocks and real-time results, please see the right hand side of Scott’s Investments.

Ticker Name Trend QVG score Mkt Cap PEG LT Dbt Tot 2Eq Q ROE% 5Y Avg ROI% 5Y Avg
AIT Applied Industrial Technologi Here 99.25 1455.32 0.87 0 15.4 12.47
EZPW EZCORP, Inc. Here 98.64 1497.68 0.75 0.03 20.36 19.63
AAPL Apple Inc. Here 96.03 324307.69 0.71 0 31.92 28.48
SMCI Super Micro Computer, Inc. Here 95.36 641.47 0.96 0.08 16.68 15.12
VSEA Varian Semiconductor Here 95.16 3408.49 0.74 0 15.09 13.83
FCFS First Cash Financial Services Here 94.25 1195.43 0.89 0.01 18.99 15.95
INTC Intel Corporation Here 93.27 115565.5 0.84 0.05 16.28 14.96
DTV DIRECTV Here 91.94 37204.02 0.6 0 30.78 12.76
NSP Insperity Inc Here 91.79 786.16 0.65 0 16.52 13.25
LECO Lincoln Electric Holdings, In Here 90.44 3207.83 0.97 0.09 15.69 12.28
BIG Big Lots, Inc. Here 90.11 3120.18 0.97 0 18.49 15.7
JOSB Jos. A. Bank Clothiers, Inc. Here 89.91 1429.17 0.91 0 20.55 17.5
SHOO Steven Madden, Ltd. Here 87.11 1428.22 0.97 0 20.13 19.63
MA MasterCard Incorporated Here 85.07 33792.75 0.81 0 29.76 22.24
NTES NetEase.com, Inc. (ADR) Here 83.97 6666.89 0.79 0 32.24 30.68
AIXG Aixtron AG (ADR) Here 83.34 4269.27 0.25 0 20.23 20.05
TRCR Transcend Services, Inc. Here 80.73 242.84 0.94 0 23.39 21.83
FOSL Fossil, Inc. Here 80.51 6156.55 0.95 0.01 18.69 18
ANF Abercrombie & Fitch Co. Here 79.8 6071.98 0.78 0.04 17.92 14.06
DECK Deckers Outdoor Corporation Here 79.57 3717.31 0.74 0 24.8 24.7
NVEC NVE Corporation Here 79.01 273.87 0.83 0 23.98 23.98
TSM Taiwan Semiconductor Mfg. Co. Here 78.72 63625.59 0.78 0.06 20.19 22.56
BIDU Baidu.com, Inc. (ADR) Here 74.29 51687 0.7 0.01 43.86 43.68
SEIC SEI Investments Company Here 72.02 4270.77 0.98 0.09 27.44 30.91
GNTX Gentex Corporation Here 70.94 4335.21 0.96 0 13 12.6
GSOL Global Sources Ltd. (Bermuda) Here 67.98 542.09 0.52 0 16.57 17.17
VLTR Volterra Semiconductor Corpor Here 67.6 624.49 0.8 0 15.44 15.25
WTSLA The Wet Seal, Inc. Here 67.38 450.37 0.73 0 15.16 13.37
GA Giant Interactive Group Inc ( Here 62.55 1994.99 0.99 0 19.8 19.75
BWLD Buffalo Wild Wings Here 59.09 1101.29 0.96 0.07 15.86 13.7
NSR Neustar, Inc Here 57.67 1948.05 0.73 0.02 17.96 16.84
APEI American Public Education, In Here 55.62 805.6 0.76 0 33.59 31.22
QCOR Questcor Pharmaceuticals, Inc Here 54.61 1200.42 0.67 0 43.34 42.57
SAPE Sapient Corporation Here 43.53 1712.68 0.83 0 13.64 12.77
CKSW ClickSoftware Technologies Lt Here 42.61 297.15 0.33 0 26.52 22.28

Momentum Stocks to Watch This Week

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Each week I publish stocks to watch for the upcoming week as potential momentum trades. The stocks below all have a 50k minimum average daily share volume and traded at a 52 week high on strong volume, with a minimum of 2 times relative volume on Thursday, April 21st. In addition, stocks were required to close Thursday higher than the open price.

Last week’s list of 27 stocks returned an average of 2.09% versus 1.32% for SPY.  Purchasing the entire list of stocks may not be feasible for individual investors. However, with this list we can identify stocks with high price momentum that may be viable short to intermediate term trading candidates.
This week we have 37 stocks and ETFs qualifying for the top momentum securities. There are a variety of industries on the list, with concentrations in gold and silver related stocks and ETFs.

Complete Genomics (GNOM), which was on the previous two week’s list and returned  16.07% last week and 20.21% the previous week, remains on this week’s list. The share price of GNOM has made a parabolic move in recent weeks and remains in overbought territory, which is no guaratee a pullback is imminent. In fact, at the end of last week GNOM was overbought but had another outstanding week:

BJ’s Restaurant (BJRI) is another stock worth noting on this week’s list.  The company reported earnings on April 20th, increasing revenue by 19% and net income by 65%, compared to the same quarter last year.  The stock closed the week strongly, $.01 below its daily high, which was also its 52 week high.

Based on positive revenue and earnings growth and strong technicals heading into this week, it is a buy candidate for the short-term. Look for the stock to potentially exhibit further strength this week:

Finally, precious metals continue to show strength.  3 Exchange Traded Funds linked to Silver made this week’s list. SLV is a popular ETF and seeks to track the price of silver, which continue to show strong price momentum.  SLV has made a parabolic move in recent weeks, similiar to the previous example of GNOM. At this time momentum remains on silver’s side, but I would look for  a pullback soon, even if its to consolidate before moving higher:  Therefore, at current levels I would not be a purchaser of SLV in the short-term.

Data and Chart Source: Finviz

Ticker Company Industry Relative Volume Price Change
ACAD ACADIA Pharmaceuticals, Inc. Biotechnology 4.96 2.24 2.28%
ADS Alliance Data Systems Corporation Credit Services 2.94 90.25 3.83%
AEZS AEterna Zentaris Inc. (USA) Biotechnology 5.07 2.16 4.35%
AGQ ProShares Ultra Silver Exchange Traded Fund 2.38 340.96 6.36%
ALGN Align Technology Inc. Medical Appliances & Equipment 3.91 24.99 16.83%
BAS Basic Energy Services, Inc. Oil & Gas Equipment & Services 2.19 29.85 7.14%
BJRI BJ’s Restaurants, Inc. Restaurants 2.95 46.56 7.16%
CKSW ClickSoftware Technologies Ltd. Internet Software & Services 3.22 9.7 6.36%
COF Capital One Financial Corp. Credit Services 2.15 53.26 5.40%
CPHD Cepheid Scientific & Technical Instruments 3.54 31.46 2.44%
CPX Complete Production Services, Inc. Oil & Gas Equipment & Services 2.8 33.62 3.83%
CYOU Changyou.com Limited Multimedia & Graphics Software 3.67 39.78 5.07%
DCA DCA Total Return Fund Closed-End Fund – Equity 2.6 3.94 2.60%
DPL DPL Inc. Diversified Utilities 2.31 30.32 0.50%
DROOY DRDGOLD Ltd. Gold 2.62 5.77 4.72%
FMX Fomento Econ Beverages – Brewers 2.09 63.58 0.71%
FXA CurrencyShares Australian Dollar Trust Exchange Traded Fund 6.84 107.79 0.62%
GNOM Complete Genomics, Inc. Biotechnology 3.37 15.6 6.19%
GTU Central GoldTrust Gold 2.27 58 1.45%
HON Honeywell International Inc. Aerospace/Defense Products & Services 2.44 60.72 3.37%
IXYS IXYS Corp. Semiconductor – Specialized 7.16 14.71 19.01%
MTZ MasTec, Inc. Heavy Construction 2.99 22.59 5.56%
NEU NewMarket Corp. Specialty Chemicals 5.71 179.52 15.12%
OGE OGE Energy Corp. Electric Utilities 2.13 52.56 0.40%
PENN Penn National Gaming Inc. Resorts & Casinos 4.25 39.98 7.07%
POOL Pool Corp Sporting Goods 3.13 28.77 7.07%
RGLD Royal Gold, Inc. Gold 2.2 60.2 3.21%
RIC Richmont Mines Inc. Gold 4.41 9.01 3.09%
SCSS Select Comfort Corporation Home Furnishings & Fixtures 8.77 17.29 30.29%
SIVR ETFS Physical Silver Shares Exchange Traded Fund 2.95 46.44 3.22%
SLM SLM Corporation Credit Services 3.96 16.31 12.79%
SLV iShares Silver Trust Exchange Traded Fund 2.68 45.53 3.21%
SPPI Spectrum Pharmaceuticals, Inc. Biotechnology 2.32 9.31 2.42%
SUR CNA Surety Corp. Surety & Title Insurance 20.85 26.49 2.52%
TZOO Travelzoo Inc. Internet Information Providers 5.91 94.22 27.55%
UTEK Ultratech, Inc. Semiconductor Equipment & Materials 5.4 29.14 7.85%
WBC WABCO Holdings Inc. Auto Parts 2.94 69.16 7.83%

Easter Readings

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Below are a few recent articles of note:
A 3 Part Series from Satyajit Das on Voodoo Economics: 

Gold and Stocks Rally

Chris Vermeulen gives us a an update on the equity and gold rally since Monday. The full, free article is here, below is his conclusion:

In short, it looks as though stocks and commodities are in favor again. Monday’s panic sell off looks to have shaken the masses out of the market and the big money players were buying up all the shares they could. Members and myself are sitting nicely in our long positions and this could be the start of something exciting.

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More on this topic (What's this?)
Has Gold & Silver Finally Bottomed?
Gold Price Gravitating Lower Towards $1000
Read more on Gold, Commodities at Wikinvest

10 Value Microcap Stocks with High Price Momentum

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On a monthly basis I conduct a close replication of AAII’s (American Association of Individual Investors) Shadow Stock screen. The goal is to find small, undervalued stocks with high price momentum over the past 52 weeks.

The screen and date below is courtesy of Stockscreen123. I use the following screen criteria to identify high momentum value stocks:

  • No over-the-counter stocks
  • No financial stocks
  • Market cap > $20 Million and < $200 million
  • Previous EBITDA quarter and trailing twelve months are positive
  • Share price > $1
  • Price/book < .80
  • Price/sales < 1.2
  • Top 10 stocks are selected based on highest 52 week returns
  • Minimum average daily volume > 5k shares

The results for this month are below:

Ticker Name Trend Rank Mkt Cap Pr2SalesTTM Pr2 Book Q EBITDATTM EBITDA Q Pr52W % Chg
ABL American Biltrite Inc. Here 99.25 36.13 0.18 0.72 7.51 1.01 229.15
GFN General Finance Corporation Here 96.96 69.34 0.41 0.62 25.67 9.2 122.63
FFHL Fuwei Films (Holdings) Co., L Here 94.07 27.95 0.36 0.33 14.83 7.12 86.09
SVLF Silverleaf Resorts, Inc. Here 91.96 93.05 0.41 0.45 51.6 9.87 70.63
COBR Cobra Electronics Corporation Here 84.92 24.92 0.23 0.71 5.74 2.84 45.98
JAX J. Alexander’s Corporation Here 83.04 35.91 0.24 0.74 8.23 2.59 41.84
ESCA Escalade, Inc. Here 75.08 67.24 0.56 0.77 12.52 1.86 30.27
WCAA WCA Waste Corporation Here 71.32 141.96 0.62 0.76 53.13 12.74 25.52
GRRF China GrenTech Corporation Li Here 63.83 71.51 0.27 0.3 23.84 20.28 17.9
BLD Baldwin Technology Co. Here 62.11 27.05 0.17 0.49 2.39 0.27 16.11

March’s list returned an average of 2.23% (excluding dividends, commissions, and taxes).

Looking at this month’s list Fuwei Films (FFHL) is worthy of further attention. While its 52 week momentum is high, it recently received a delisting notice from Nasdaq.  FFHL’s intermediate momentum is a stark contrast to the 52 week momentum: Quarterly returns are -52.04% and 1 month returns -48.14%.  For those looking at price momentum and stability, this information should give investors pause.

Silverleaf Resorts (SVLF) also has high price momentum and solid fundamentals. However, in February SVLF’s board agreed to sell SVLF to Cerberus Capital Management for $2.50/share. Thus, any position in SVLF at this point will only serve to place you in the middle of an acquisition with little upside (unless shareholders are successful in fighting the sale of the company).

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Market Outlook
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