Market Monitor

Last week we commented on the old market/macroeconomic cliché about GM and the U.S.  We will keep it going with an marketing campaign slogan that reached its heights a few years back, but has been scaled back a bit to avoid being overdone.

Of course we are talking about the infamous slogan from Verizon Communications, Inc. (NYSE – VZ - $49.15), “Can you hear me now?”  In yesterday’s Goldman Guide we mentioned the buy-out of DirecTV (NASDAQ – DTV) by AT&T (NYSE – T) as maybe a bad thing, as it seems AT & T is having difficulty generating organic growth.  Even with that said, the telecom sector enjoyed a moderate bounce yesterday, including VZ.

In addition to being the largest 4G service provider in the U.S., Verizon has grown its international presence with enterprise solutions in IP and networks, and has an aggressive growth strategy in developing products and solutions outside the current realm of consumer wireless applications.  A few examples are partnerships with some automotive manufacturers in state-of-the-art communication systems in new cars, and data service infrastructure systems in healthcare.

VZ looks very attractive from a growth/earnings and growth/price perspective with a forward 12-month P/E ratio under 13 with 6.7% consensus estimate growth for 2014, and a 5-year PEG ratio of just over 2.  Additionally, operating and gross margins of 27% and 63% are comfortably above industry norms in the sector of 16% and 55% respectively.  Finally, the dividend yield of 4% indicates there is some value and security to owning VZ.

VZ is a very bullish stock when viewing the 50-day Daily Moving Average.  Additionally, the put-call ratio is bullish as well at the $55-$60 strike price in July, August, and September.  We think this stock maybe one of the few that run this summer and the $55 range is probably realistic.

Have a great day!

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.

Disclaimer:

This Market Monitor blog was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces research via two formats: Goldman Select Research, which typically highlights small cap companies, and Goldman Opportunity Research, which features micro cap companies in a sponsored research format. Thus, the Select product reflects the Firm’s internally generated stock ideas while the Opportunity product reflects sponsored research reports. 

Goldman Small Cap Research is not affiliated in any way with Goldman Sachs & Co.

It is important to note that while we may track performance separately, we utilize 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 each company-specific report. All information contained in this blog, newsletter and in our reports were provided by the Companies or generated from our own due diligence. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. Analysts are compensated on a per report basis and not on the basis of his/her recommendations. 

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, or other firms. Goldman Small Cap Research relied solely upon information provided by the Company through its 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 blog, report, 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 blog does not take into account the investment objectives, financial situation, or particular needs of any particular person. This blog 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 FINRA or with any state securities regulatory authority.

ALL INFORMATION IN THIS BLOG, REPORT OR NEWSLETTER 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

“As GM goes, so goes the nation”. Such was the famous quote uttered by GM (NYSE – GM) CEO Charles Wilson which proved to be a profound and insightful statement in the 1950’s.  Even as President Obama reiterated it while drumming up support for the GM bailout, he most likely knew it was not true in this century.  Whatever your theory is on the decline of the behemoth, we can all probably agree the quote needs a 2014 update.

As Apple (NASDAQ – AAPL) goes, so goes the nation?  Probably not true.  A large outsourced workforce and catering to early adopters are just a few reasons.

As FedEx (NYSE – FDX) goes, so goes the nation?  This is a very popular ‘insight’ into the economic activity used by many.  While this may be a great metric, it probably is not indicative of the overall state of the average American.

As Amazon.com (NASDAQ – AMZN) goes, so goes the nation?  This is another activity metric that may not speak standard of living and other daily economic concerns.

The truth is that there is probably not one singular American company that fits the mold GM did in the 1950’s.  It may be a basket of companies instead.  One of those companies would certainly be Cisco Systems, Inc. (NASDAQ – CSCO - $24.18).  Again, this is more metric than just a qualitative story and in this economy, is a great indicator of business activity.

CSCO has been the classic cyclical stock oscillating from about $15 to $30 since it peaked around $75 at the height of the dot.com boom in 2000.  On Wednesday, the stock enjoyed nearly a 7% pop after the Company reported very favorable financial results and raised future revenue expectations.  Is this the beginning of a large swing to the upside for CSCO?

There are good signs for the stock in terms of simple price-earnings and price-growth metrics.  First, the forward P/E is 11, 4 points under the trailing P/E of 15.  Additionally, the 5-year PEG is a reasonable 1.51.  Both the profit and operating margins look to have hit an inflection point back in the 3Q13 with improved performance to north of 20% for both.  Additionally, the Company has $47 billion of cash and short-term securities on hand. Not too shabby.

The big picture is the economy here.  GDP growth under 3% for the foreseeable future is definitely not a bright outlook for cyclical stocks like CSCO.  Additionally, the competition has become fierce, and formidable from firms of all sizes including even ‘Big Blue’ IBM (NYSE – IBM). 

We say take the conservative approach here and either buy lightly or look for some inexpensive calls.  The key is to remember sell discipline if the stock breaks through the $30 level and makes a big run.

Have a great weekend!

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.

Disclaimer:

This Market Monitor blog was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces research via two formats: Goldman Select Research, which typically highlights small cap companies, and Goldman Opportunity Research, which features micro cap companies in a sponsored research format. Thus, the Select product reflects the Firm’s internally generated stock ideas while the Opportunity product reflects sponsored research reports. 

Goldman Small Cap Research is not affiliated in any way with Goldman Sachs & Co.

It is important to note that while we may track performance separately, we utilize 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 each company-specific report. All information contained in this blog, newsletter and in our reports were provided by the Companies or generated from our own due diligence. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. Analysts are compensated on a per report basis and not on the basis of his/her recommendations. 

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, or other firms. Goldman Small Cap Research relied solely upon information provided by the Company through its 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 blog, report, 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 blog does not take into account the investment objectives, financial situation, or particular needs of any particular person. This blog 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 FINRA or with any state securities regulatory authority.

ALL INFORMATION IN THIS BLOG, REPORT OR NEWSLETTER 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

In yesterday’s Goldman Guide we opined on industrial stocks and how their cyclical nature is usually an indication of an inflection point to the upside in a market correction.  The question is, has this already happened?

There is one Dow Jones component that may offer insight into this potential phenomenon.  Caterpillar, Inc. (NYSE – CAT - $106.20), the MNC heavy equipment and engine manufacturer, has been on a tear up nearly 11% over the past three months and nearly 17% this year.  At a quick glance, the technical Daily Moving Average looks very bullish for the next 50 days for CAT also.  Is the ride over or still worth jumping on?

As far as the valuation and growth are concerned CAT, the wave still looks smooth.  The forward 12-month P/E of 14 versus the trailing 12-month P/E is one great sign.  Additionally, the 5-year PEG ratio of 1.31 still makes CAT an attractive proposition from a growth/price perspective.  The gross margin of 26% and operating margin of 11% are in line and well above the industry averages of 26% and 6% respectively. 

Last week Argus raised its price level to $120 for CAT, which we think is about right.  Options are an alternative to a straight buy here and there are some deals on some contracts at that level starting in July.  Coincidentally, we believe late summer should be about the time the market starts to get out of this corrective phase, and CAT will have led the way.

Have a great day!

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.

Disclaimer:

This Market Monitor blog was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces research via two formats: Goldman Select Research, which typically highlights small cap companies, and Goldman Opportunity Research, which features micro cap companies in a sponsored research format. Thus, the Select product reflects the Firm’s internally generated stock ideas while the Opportunity product reflects sponsored research reports. 

Goldman Small Cap Research is not affiliated in any way with Goldman Sachs & Co.

It is important to note that while we may track performance separately, we utilize 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 each company-specific report. All information contained in this blog, newsletter and in our reports were provided by the Companies or generated from our own due diligence. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. Analysts are compensated on a per report basis and not on the basis of his/her recommendations. 

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, or other firms. Goldman Small Cap Research relied solely upon information provided by the Company through its 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 blog, report, 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 blog does not take into account the investment objectives, financial situation, or particular needs of any particular person. This blog 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 FINRA or with any state securities regulatory authority.

ALL INFORMATION IN THIS BLOG, REPORT OR NEWSLETTER 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

Yesterday the POTUS decided to make another one of his annual appeals to fight global warming, climate change, extreme weather events. 

In yesterday’s Goldman Guide we delved into the current market dynamics of the “Haves”, which included the DOW 30, and the “Have Nots”, which include Twitter (NASDAQ – TWTR) and LinkedIn (NASDAQ – LNKD).  We have occasionally commented on Tesla Motors, Inc. (NASDAQ – TSLA - $216.61) on Twitter and the Market Monitor over the past year or so as sort of a ‘tweener” stock that is more about potential then actual sales and market penetration.  The question is where does TSLA go from here?

The figure below is the one year price history for TSLA.  The stock skyrocketed over 350% from about this time last year to 52-week highs over $250 in early March.  Since then the stock is down 14% to the current price level.

Tesla Motors, Inc. (NASDAQ – TSLA) 1-Year Price Chart

(Source – Yahoo Finance)

Remember our 12 New Tactics for Investment Success from last Monday’s Goldman Guide?  The first part of our assessment had to do with valuation.  TSLA forward 12-month P/E is estimated at 56, versus 19 for the Russell 2000 and 16 for the S&P 500. The 5-year PEG ratio of 3.45 is also not that stellar.  Strike One.  Tesla Motors also has large debt positions with almost $90 of debt per every $1 of equity, another bad sign.  Strike two.  Finally, Tesla Motors’s negative operating and profit margins are also not in favor in current market conditions.  Strike three.

While we think the 0.1% growth in GDP in 1Q14 is more due to the miserable winter, and a blip on the radar, but we also would not expect the economy to grow any more than 2.5% per quarter the rest of the year.  And the bottom line is Tesla still makes a luxury item.  Orders could drop off if the economy does not pick up.  We say take some profits here and/or set a bottom of $175 for TSLA.

Have a great day!

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.

Disclaimer:

This Market Monitor blog was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces research via two formats: Goldman Select Research, which typically highlights small cap companies, and Goldman Opportunity Research, which features micro cap companies in a sponsored research format. Thus, the Select product reflects the Firm’s internally generated stock ideas while the Opportunity product reflects sponsored research reports. 

Goldman Small Cap Research is not affiliated in any way with Goldman Sachs & Co.

It is important to note that while we may track performance separately, we utilize 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 each company-specific report. All information contained in this blog, newsletter and in our reports were provided by the Companies or generated from our own due diligence. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. Analysts are compensated on a per report basis and not on the basis of his/her recommendations. 

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, or other firms. Goldman Small Cap Research relied solely upon information provided by the Company through its 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 blog, report, 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 blog does not take into account the investment objectives, financial situation, or particular needs of any particular person. This blog 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 FINRA or with any state securities regulatory authority.

ALL INFORMATION IN THIS BLOG, REPORT OR NEWSLETTER 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

Happy May Day! Today is a celebration that traces roots back to the Romans as a way to mark that spring finally appears to be here.  And indeed this year is a real cause for merriment after the brutal winter.  Here in the U.S., Cinco De Mayo has in effect become this celebration over the last 20 years or so.  The Kentucky Derby also concludes what is arguably the greatest five weeks in sports the entire year.  We say enjoy the times, but keep focused on what appears to be a transitioning market. 

Do we outright sell big winners, take profit, or just hold on thus turning picks from trades to investments.  We took a look at our three biggest Market Monitor winners from three big small-cap sectors; biotechnology (LCI), technology (RMBS), and Consumer Goods (RAD), to illustrate the possibilities.  The chart below summarizes the price level increases.  Initial Price is stock price at the previous day’s close before featured in the Market Monitor.

In doing some research for today’s Market Monitor article related to finding a creative title we discovered what the saying “…Until the cows come home”, actually means. 

In yesterday’s Guide we highlighted some biotech ETF and offered some important commentary on the all important sector that is critical to small cap portfolios. 

2014 has not been a kind year to the small cap biotech sector, a staple of the space.  Figure 1 below says it all illustrating a sample of ETF from different fund companies.  What was hot in 2013 is cold in 2014.