Market Monitor

In Monday’s Goldman Guide titled “What the Market is Telling Us” we said say yes to tech!  Tech was a great play in a slowly improving economy for 2013 and appears be continuing and maybe even heating up in 2014.  Look to the Google (NASDAQ – GOOG) acquisition of the smart thermostat and smoke alarm producer Nest this week for $3.2b billion.  Google is looking to expand its product line into the high end ‘smart home’ product line. This is a clear example of mega tech players looking to add and expand product portfolios, and with plenty of cash on hand, buy-outs make more sense than organic development.

As the the country recovers from the coldest temperatures in 20 years, the solar sector is heating up.  We find this ironic as this clean technology ties into the global warming debate which seems ludicrous after this past week.  Several IPO deals may be on the horizon for 2014 and a big accumulation in the space has begun.

Yesterday, Baird raised its price target for SolarCity (NASDAQ – SCTY - $67.49) to $71 and Goldman Sachs added the stock to its Conviction Buy list on Monday.  A quick glance at the options contracts definitely indicates the smart money is bullish on the stock for 2014 at this point.  The bullish sentiment should have a trickle down effect into the small cap space.

Back in mid November we highlighted Canadian Solar Inc. (NASDAQ – CSIQ - $36.91) at the $28.23 mark and the stock has not disappointed with nearly a 31% climb.  The deal flow is simply red hot for the Company.  Even with this price climb the forward P/E is under 16.  The $40 level is certainly in reach this quarter.  Keep this one if you have it.

Much of the sector has run to price levels outside of our normal small cap range.  For those who follow our Opportunity Research, a stock like SunTech Power Holdings Co. Ltd. (OTBBB – STPFQ - $0.55) may offer a unique chance to get in on the next ‘big thing’ at an inexpensive price.  The Company has operations in China and customers on several continents just like Canadian Solar.  As a caution, remember STPFQ is a highly speculative stock.

It looks like we will have unseasonably warm temperatures this weekend before another visit from old man winter next week.  Enjoy it while it lasts.

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 Monday’s Goldman Guide we discussed industrials and how they might be back in favor in 2014 as the economy expands at a greater pace than the anemic rate it has over the previous 5 years.  We highlighted Alcoa, Inc. (NYSE – AA - $10.53) back in early 2013 in an ‘outside the small cap world’ play and may have been about nine months premature.  AA has climbed over 36% since Labor Day Weekend during a huge accumulation phase.

Of course small cap industrial plays exist today. Just look at Research Frontiers Inc. (NASDAQ – REFR - $6.03 - NR).

In Monday’s Goldman Guide we discussed the remarkable January effect in markets.  We are going to try and start 2014 with a bang to really capitalize on this phenomenon.  Our 2013 will be hard to beat as our Market Monitor picks averaged a rise of over 35% in price. (More on the performance in the next issue of the Guide.)

As we mentioned Monday, a number of investors remained concerned about Obamacare.  With that said, there is money to be made in the right healthcare stocks that are innovative and diverse.  Merge Healthcare, Inc. (NASDAQ - MRGE - $2.32) was one of those stocks that had a bad 2012, but as we mentioned in the Guide Monday, we project that some of these losers are primed to turn things around.  MRGE is looking like one of those stocks. 

It figures that it would take until December 27^th to find what I call the best trade of the year. We have had some great ones and some stinkers, and this one carries a lot of risk. But, we believe that despite the risk, the reward could be a double or more in a matter of days as it provides investors with the first real public traded proxy for the growth in the use of Bitcoins.

For those who do not know the 26^th is Boxing Day, an extended Christmas Holiday celebrated in mostly English speaking nations who were formerly part of the British Empire outside of the U.S. The custom is to give money and other gifts to the poor or those in service roles who are needy. The day has nothing to do with boxing, which was surprising to discover. This spirit is truly what Christmas is all about.

As you recover from the festivities it is time to get a little selfish and put together a plan for 2014 related to your discretionary portfolio on the core side. Our first prediction in Monday’s Goldman Guide for 2014 was that the Dow Jones and S&P 500 will end the year 6% and 7% respectively, but reach 18,000 and 2,000 early in the year only to begin a decline in March in conjunction with a new budget battle.

Though the market dynamics may be shifting as we enter the New Year, technical analysis is still a strong indicator for stocks. If we do some quick math on our predictions above we are calling for a 10% rise on the Dow Jones and a 9% rise on the S&P 500 by March. It is worth reviewing what our most commonly used technical metrics indicate for these forecasts and to present a possible strategy to pursue some profit taking scenarios.

We will take a look at two ETF for these indices, the SPDR Dow Jones Industrial Average (NYSE – DIA - $163.16) and the SPDR S&P 500 (NYSE – SPY - $182.93). First, the Daily Moving Average has been a great short term metric and considering that there are 65 days until March 1, a useful one to use in this case. There are great signs for both DIA and SPY as the DMA for each is very bullish all the way out to the 50 day mark. Check one for our call here.

Let us also take a look at the put/call ratio for the March 2014 contracts. The table below summarizes some significant data.

The put call ratio is an excellent way to ‘follow the smart money’. Clearly both DIA and SPY give bullish signals as both are well below 1. Holding on to whatever you have to invest in these indices over the long haul is still a great idea, but playing some inexpensive March 2014 options could give you a nice short term profit opportunity to start 2014 off with a strong punch.

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

The American Dream is not just about social mobility—the idea that anyone can make it—it’s also about physical mobility. If economic opportunities are scarce or we don’t like living in any location, we have “the ability to vote with our feet.” We can simply move to another city or state to pursue happiness. With this in mind, we find General Finance Corporation (NASDAQ – GFN - $6.27), a holding company that helps us realize the American Dream, very attractive at current levels.

It was incorporated in 2005 and is headquartered in Pasadena, California. GFN leases and sells portable storage containers, portable container buildings, and freight containers. It does business in three industries: mobile storage, modular space and liquid containment, which it collectively refers to as the portable services industry. GFN’s two operating subsidiaries, Royal Wolf and Pac-Van, lease and sell their products through 17 customer service centers (CSCs) in Australia, seven CSCs in New Zealand and 27 branch locations across 18 states in the United States and in Alberta, Canada. The company serves various industries, such as mining, road and rail, construction, moving and storage, manufacturing, transportation, defense, retail, education, and services sectors; and small and medium-size entities.

Technically, its stock has good price momentum. The stock price appears to be near the bottom of a rising channel that has been skyrocketing since 2010. Its share price has been outperforming both its industry, Rental and Leasing Services, and the S&P 500 by a wide margin even though the Company has been issuing additional common and preferred stock during this time. Moreover, Wall Street estimates of GFN’s Target Price are 20% higher than the last close.

Growth of $10,000

Fundamentally, GFN appears to be undervalued with a price to book ratio of 1.5 versus an Industry average of 2.4 and the S&P 500 at 2.5.

While EPS estimates for the current fiscal year are only up 4.7%, estimates for next year are over 80% higher still. Similarly, while GFN’s price/earnings ratio for the trailing twelve months is over 48, its forward P/E ratio is only 16.1 versus 16.5 for the S&P 500. In other words, we believe that GFN will continue to grow and prosper.

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

So I was in line at Chipotle (NYSE – CMG) the other night at one the Company’s highest volume stores in town around 6:30, dinner time.  They were out of rice, shredded beef, and chicken.  Someone screwed up royally, and probably cost the company several thousand dollars as people were turning around and leaving.  I wonder if someone was held accountable as running out of food at dinner time is inexcusable.

A great line from the movie Scrooged, the modern update of Dickens’ A Christmas Carol, from Bill Murray as he observes his younger brother’s Christmas party is “…It looks like a beer commercial.”.  From the Clydesdales and Jack Daniels, to high end vodka there is always a huge marketing push from the liquor industry this time of year.  It’s hard not to feel like you are missing out unless you have a party.

A great article on the beer market in the U.S. appeared in MarketWatch Monday on the topic of changing consumer tastes in the industry and corresponding stocks. 

There is a lot of talk about the Santa Claus rally at this time of year as small cap stocks tend to outperform other assets during this time frame. While we typically profile stocks, here is an out-of-the-box ETF to play this recurring trend. The Direxion Daily Small Cap Bull 3X Shares (NYSE -TNA – $69.17) is a highly leveraged and speculative investment vehicle.  It’s not something to buy and hold indefinitely.