Am I the only one that thinks it is remarkable that the four major indices closed on Friday at nearly the exact same figure in which they closed out 2013?  The NYSE and Russell 2000 indices are one point higher than where they ended the year while the S&P 500 Index and NASDAQ Composite are merely a handful of points higher than where they were six weeks ago. Given the volatility and fear of the first four weeks of the year, the roughly 3% gain across the board last week puts us right back to where we started. Or does it???

Let's be real. January's performance was marred by oil price declines, currency and macro economic issues, and U.S. earnings report trepidation. Last week's gains directly correlated with higher oil prices, a market coming to grips with a decent but not great U.S. economy—only to be curtailed by more global economic issues, namely out of Greece.

So, here we are, not much smarter than when we began, yet at a point some might call full circle. We, however, call it opportunity—-with a caveat.

We wrote extensively last week that we believed in a strong February and modestly higher year for stocks overall.  Brushing all the econ stuff aside for the moment, we see that all of the major indices are above their 50 week DMA for the first time in a while. Although that is likely to make chartists feel bullish, given that we are still in a rage-bound market, breaching below these averages will result in modest selloffs as there is little cushion at present.  Moreover, while valuations for these indices are not high though they are not cheap either, with the four indices ranging from 16.6 to 18.2 times 2015 expected earnings.  

America Needs Cash

Therefore, it is best to approach the market based on the opposite of short term trends—buy on down days and sell on up days unless you are engaging in day trading. In that case, until proven otherwise, stocks that are under accumulation, especially leaders in tech and health care or seasonal plays, will remain so for the interim. For those concerned about valuation or who have a longer term horizon/approach to stocks, there are plenty of companies trading at reasonable valuations.  Below are two examples of seasonal plays that everyone can latch onto and appreciate.

I recognize that it was just a week ago when Americans were waiting with baited breath to see the new, cool commercials during the Super Bowl. While they were largely a dud, it reminded me of how the popularity of television commercials or jingles have had an effect on branding success and the U.S. consumer.  I am sure that if I repeated certain phrases to friends or colleagues it would harken back to specific commercials which helped build brand awareness and success. Even the campy Sylvester Stallone movie Demolition Man referred to old TV commercial jingles as the most popular radio station in town as they bring a smile to everyone's face and prompt you to sing along. The same is true today.

Until its ad campaign last year, Americans knew H&R Block Inc. (NYSE—HRB—$35.38) as an old, stodgy company whose relevance was only in the first few months of the year when many citizens would go to their offices and have their income tax forms prepared and submitted on their behalf.  Today, we all know the ubiquitous ads exhorting the tagline: "Get Your Billions Back America."  I love it! Wall Street must love it too because the stock is at its 52-week high.

Make no mistake. HRB is no small outfit. In fact, HRB is the world's largest consumer tax services provider. More than 650 million tax returns have been prepared worldwide by and through H&R Block since 1955. In fiscal 2014, H&R Block had annual revenues over $3.0 billion with 24.2 million tax returns prepared worldwide. Tax return preparation services are provided in approximately 12,000 company-owned and franchise retail tax offices worldwide by professional tax preparers, and through H&R Block Tax Software products. H&R Block Bank also provides affordable financial services products.

At current levels, the stock trades around 19x the projected April 2015 fiscal year EPS of $1.83 and around 16.5x next year's EPS expectation of $2.11, a 15% return. The stock also offers a 2.2% dividend yield, which is pretty good given the current environment.  And it will pay its next distribution in March. HRB's shares are up around 9% in the past month which is no surprise given its seasonal business and we believe that a 15%+ return is in the offing in the next 2-3 months.  Despite its size, we view HRB as a short

term trade only at current prices, leveraging its very bullish DMA.

Speaking of ubiquitous commercials, can you find a television channel or radio station not playing the J.G. Wentworth commercials? That tagline "At  J.G. Wentworth, 877-CASH NOW!" tagline will live in infamy, or cause a chuckle. Regardless, these guys are in a clever business that just prints money.  

America Needs Cash, Part II

The J.G. Wentworth Company (NASDAQ—JGW—$10.24) went public last year. (Maybe that is where they got all this ad money and need to find new customers.)  Its performance is a lot less cheerful than its commercials, as it is down nearly 50% from its March 2014 high, but in our view represents a great value relative to its projected growth rate. For the uninitiated. this $130M in market cap microcap company purchases future structured settlement payment streams, annuity payments, lottery payments. and pre-settlement funding from its customers.

At current levels, the stock trades 7.2x Wall Street EPS forecasts of $1.42 for 2014 and 6.2x next year's projection of $1.64, a 15% increase. With just a modicum of success, we believe that these shares could reach the $12-13 level fairly quickly and reach the mid-teens later in the year.  It should be noted that while these shares trade above their 50-DMA, the 200 day DMA of $11.15 is within reach and could serve as a bullish catalyst for investors, if 4Q14 results meet expectations when reported later this month.  Additional insider buys such as the ones that occurred last month would be bullish triggers as well.