|Written by Rob Goldman|
Unethical companies, impotent analysts, danger zone for stocks, and a fallen angel stock profile. It doesn’t get better than this.
NO GUTS, UNDESERVED GLORY
If you think that stock gains are getting smaller, you are probably right.
I have noticed an alarming fear trend among sell-side analysts recently. Since I was one for 10 years I feel that I can address this issue head on.
As the market has reached new highs, some analysts are engaging in some dumb behavior. Or, maybe they are having difficulty finding ideas. In many cases, maybe they don’t want to stock their necks out. In any event, I am seeing a growing preponderance of ratings upgrades well after big runs, downgrades after big drops, and initiations of companies with Buy ratings that offer limited upside.
Are they now impotent? What good does it do to upgrade a stock from Hold to Buy that has gone up 300% in 3 months? Where were you for the previous 12 weeks? And, why bother downgrading a stock days after a busted quarter. For that matter, if a stock has 10% upside by your measure, how is that a new Buy recommendation?
Our ideas are supposed to help you either by introducing new ideas with reasonable upside or steering you clear of trouble. Sometimes it works, sometimes it doesn’t. We are not infallible. But, you have to at least try. For investors, be wary and get a read on these new ratings before following the herd. It will save you money and heartache later.
The Stock Market Today
Where is the driver?
All of the major indices reached new highs on the same day last week. Still, with the slight exception of the NASDAQ Composite, there was virtually no change in the weekly figure for the second consecutive week. And we are entering an historical danger zone, performance-wise. Something’s gotta give. With no more Q2 financial results due to report, all eyes will be on Yellen this week. Vice Chair Fischer ha already signaled a rate hike this year. Oy. The best she can do is keep the status quo although her comments can drive stocks higher. I am not so sure she carries that kind of moxie right now.
It is all about earnings.
On average, the Q2 earnings for the S&P 500 Index were generally ahead of the pre-announcements forecast. During the earnings release period, one-fifth of companies gave guidance for Q3. Over 70 stocks reported lower guidance, twice the number reporting higher guidance. Not too keen on that but it could definitely be worse.
Next year is going to be kick-ass.
With 6 of 10 sectors slated to grow earnings by 10% or more next year (versus zero in 2016), earnings finally catch up to valuations and beyond.
The Most Unethical Company in America
WARNING: GRAPHIC USE OF LANGUAGE AHEAD
Yes, I am talking about Uber, the shared economy wunderkind. I have no skin in this game. I am not an Uber driver, nor have I been, nor have I been a customer. I also have absolutely zero to do with their competitors. Here’s how they gave the middle finger to the people that needed them the most, which is why they need an ethics lesson.
For months and months, they promoted how much you could make as an Uber driver. After a while, drivers realized it is just bullshit as technology issues, payment changes, and internal competition made it a not so hot a way of making $. So, how does Uber reward the drivers that truly made them what they are today by drinking the Kool-Aid?
In partnership with Google (NASDAQ—GOOG) they formed the largest driverless car funding project there is. And, those cars are about to hit the streets in Pittsburgh this month. For all the schmucks that are Uber drivers, all you did was make a few bucks by building the market and customer acquisition for them only to be replaced in short order. Nice hose job, assholes.
Oh, and speaking of ethics...Uber came out and aid they wouldn’t pay $2B for rival Lyft. Never mind they did not bid, do not plan to bid, and that the $2B comment is just another way to stick it up the ass of their rival, which was valued $5.5B not long ago after an investment by GM (NYSE—GM). Real nice. I will not use Uber, and you should think twice too. Uber is defined as “supreme or outstanding”. We now know what that is.
Great info, insights, and hard-hitting stories make up this week’s Say What? feature...
The New York Post
A decent, and short read.
An important stat to sock away.
It’s all in the headline...
And no one cares!?!?
AAII Sentiment Survey (figures rounded)
Divergence illustrates the push-pull in sentiment. In the investment pros poll, after a big jump to the bullish camp, a major change has occurred —Bulls dropping, Bears and Neutrals rising. In the AAII survey, we see a sharp rise in the bulls camp. With a very modest rise in Equity Fund flows for the past week, I suspect that while big $ and institutions are not putting more money in the market, the little guy is. That is a red flag. Another red flag is the big jump in the Investors Intelligence Bull/Bear ratio and reduction in correction camp figures. It is about to go below 20 which I believe is another red flag.
Buy its Products? Then Buy the Stock
I have never bought a damn thing from QVC (QVC—NYSE—$21.37) and years ago I always thought the people that did were sad stories. With a ton of business in mobile, there is much more that meets the eye with QVC.
For the uninitiated, QVC Group markets and sells a range of consumer products primarily through live merchandise-focused televised shopping programs, Internet, and mobile applications. The Company’s Websites offers home, beauty, jewelry, accessories, and electronic products. It also operates as an online retailer of women’s, children’s, and men’s apparel, and children’s merchandise; and kitchen accessories and home décor products, as well as retails products through catalogs, and brick-and-mortar stores. In addition, the company distributes home and apparel lifestyle products under various brands.
I should note that the stock is not a momentum play. On the contrary, it is meant to be bought and held for a few months with a targeted 20-25% gain. Earlier this month management guided that les have experienced a sudden drop and that Q3 will be affected as well. The stock plummeted and estimates were slashed. I believe we are in an oversold situation. At present, EPS forecasts for 2016 and 2017are $1.02, and $1.30, respectively, representing 21x and 16.4 EPS estimates. Even if EPS is trimmed somewhat, the stock can easily support a 20x 12-month forward multiple, even under bad conditions. With a low RSI of 33.6, it should bounce sharply, especially if it drops 5-10%.
Our year-end target is $25.
Dropped 21% big vol..sudden sales drop
1498 Reisterstown Road, Suite 286 Baltimore Maryland 21208 Phone: 410.609.7100
Launched in May 2010, The Goldman Guide is a free weekly publication of Goldman Small Cap Research and is written by Founder Rob Goldman with contributions from the GSCR contributor team. This non-sponsored investment newsletter seeks to provide investors with market, economic, political and equity-specific insights via an action-oriented, straight to the point approach. No companies mentioned in this newsletter are current sponsored research clients of the Company or its parent, unless noted, With some exceptions, all companies or investment ideas mentioned in this publication are publicly traded stocks listed either on the NYSE or the NASDAQ. Goldman Small Cap Research members and contributors’ bios, certifications, and experience can be found on our website: www.goldmanresearch.com
This newsletter was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces non-sponsored and sponsored (paid) investment research. Goldman Small Cap Research is not affiliated in any way with Goldman Sachs & Co.
The Firm’s non-sponsored research publications category, Select Research, reflects the Firm’s internally generated stock ideas, along with economic, industry and market outlooks. In virtually all cases, stocks mentioned in Select Research offerings are listed on the NYSE or the NASDAQ. Publications in this category include the weekly newsletter The Goldman Guide, Market Monitor blogs, Special Reports, and premium products such as The 30-30 Report. Goldman Small Cap Research analysts are neither long nor short stocks mentioned in this newsletter.
Opportunity Research reports, updates and Microcap Hot Topics articles reflect sponsored (paid) research but can also include non-sponsored microcap research ideas that typically carry greater risks than those stocks covered in Select Research category. It is important to note that while we may track performance separately, we utilize many of the same coverage criteria in determining coverage of all stocks in both research formats. Please view the company’s individual disclosures for each engagement, which can be found in company-specific Opportunity Research reports, updates and articles.
Goldman Small Cap Research has not been compensated for any content in this issue.
All information contained in this newsletter and in our reports were provided by the companies mentioned via news releases, filings, and their websites or generated from our own due diligence. Economic, market data and charts are provided by a variety of sources and are cited upon publication. Stock performance data and information are derived from Yahoo! Finance and other websites or sources, as noted. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence.
The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, other firms, or other financial news outlets. Goldman Small Cap Research relied solely upon information provided by companies through filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research report, update, article, blog, note, or newsletter is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed. This newsletter does not take into account the investment objectives, financial situation, or particular needs of any particular person. This newsletter does not provide all information material to an investor’s decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with the FINRA or with any state securities regulatory authority. Statements herein may contain forward-looking statements and are subject to significant risks and uncertainties affecting results.
Separate from the factual content of our articles about the company featured in this newsletter, we may from time to time include our own opinions about the companies profiled herein, their businesses, markets and opportunities. Any opinions we may offer about the companies are solely our own, and are made in reliance upon our rights under the First Amendment to the U.S. Constitution, and are provided solely for the general opinionated discussion of our readers. Our opinions should not be considered to be complete, precise, accurate, or current investment advice. Such information and the opinions expressed are subject to change without notice.
ALL INFORMATION IN THIS REPORT IS PROVIDED “AS IS” WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION.
For more information, visit our Disclaimer: www.goldmanresearch.com.