|Written by Rob Goldman|
I admit that stocks could go a bit higher for a couple of days. Still, many signs all point to a small swoon not later, but soon, as in Friday! (Important: We are not just referring to the Sell in May and Go Away strategy, but other key data points.) Read why this is bound to occur and what you can do about it.
Thank you all for the great feedback in last week’s survey. We are taking all of your suggestions and the survey results to heart and major changes in the Guide will be evident, beginning next week. In fact we address some of them in this week’s issue when we review the performance of 3 select stocks profiled in 1Q15, including a 30% winner in just six weeks. See what we believe is in store for these 3 stocks and how to play them.
THE LAST BIG RUN FOR A WHILE?
Sell in May and go away. Until November, that is. With Friday being May Day and the first day of the month, the old adage is likely to get a lot of play this week. This is especially the case on the heels of major NASDAQ returns last week and Apple slated to release results Monday, after the close.
Look, I would not be surprised if stocks did take a bit of a swoon beginning in early-mid May. Everyone seems to be waiting for it. Look at the NASDAQ Composite versus the NYSE. NASDAQ is up over 7% while the NYSE is up less than 2%? Something has to give here. So, I expect a short run followed by profit-taking. There I said it. Here are some practical reasons why.
I wonder how much new IRA deposit money had to do with the rise in mutual fund money inflows for the week ending April 22nd. The figure was around $3.4 billion, according to Lipper, and followed three straight weeks of redemptions, including a $30 billion whopper of a redemption period the week before. For that matter, I wonder how much money is sitting on the sidelines (and I am not referring to foreign money looking to be put to work here.) I suspect not a whole lot...which means we may be nearing a capitulation point. For that matter, margin debt as of March 2015 is at a scary all-time high. If we break down, it could get ugly, especially for big stocks.
While big caps are nearing the halfway point for 1Q15 reporting, small stocks are just starting to make their move. I suspect the numbers will be solid, fueling the continued rise in small caps and microcaps—-at least for a little while, margin or no margin.
We are pleased to announce that we had great feedback to last week’s survey both in terms of the total response and the responses to our queries. The feedback confirmed a great deal for us but some of the responses have prompted us to re-think our approach to a degree. All in all, the survey was a success and we will endeavor to initiate as many of the requests and ideas as possible going forward.
And some of these changes are around the corner. The next issue of The Goldman Guide marks our fifth anniversary and we are pulling out the stops. The Guide will retain much of its look but include specific features and topics each week in order to provide you with information and insights in a consistent format. All that you need to know for the week ahead, the overview of the week behind, and a bird’s eye view of a stock with a favorable valuation or timing, will be introduced.
One of the comments we received from the survey was related to “when to sell.” We have taken this to heart and endeavor to find the most proactive and expedient method of doing so in each issue of the Guide and other ways. To that end, there is no time like the present…
As noted on the front page of this issue, we are concerned (and we were last week too) that a short selloff is in the offing. Call it the sell in May strategy, seasonality, valuation, overheated market, etc. It doesn’t matter. The question is: What should you do?
The first step is to set sell triggers 10-12% below current prices for at least a portion of the current position in question. Some stocks may still be moving higher before the slight swoon so you would be wise to follow the trading closely and sell, in halves or thirds, into strength if possible over the next week.
The following page highlights our sentiments for some of the recently profiled stocks in The Goldman Guide during 1Q15.
Three Stock Reviews Plus One
On 1/16/15 we profiled Zix Inc. (NASDAQ—ZIXI—$4.55) at a price of $3.93. It reached $4.62 last week-a new high-following very solid financial results earlier in the week. It seems to still have some momentum and value but we would set sell triggers just a hair below $5 and around $5.30-$5.50. I suspect downside is limited to around $4.
inTEST (NASDAQ—INTT—$4.66) is slated to release 1Q15 results on 4/29/15 after the close. The stock is up 12% since our February 20th profile. Volume has tapered off during this rise but we are optimistic that another 20% is in the stock. I would target the md-$5 area as a sell trigger.
On the higher priced front, Skechers (NYSE—SKX—$89.66) has been a huge winner for us in just 6 weeks. Since March 6th, SKX has risen 30%, reaching a new year high. I would set a sell target 20% above its current price for up to half of the position as it has legs to go higher based on valuation and current business trends. Too high priced? Consider intermediate term calls just out of the money, if you are feeling lucky. Fundamentally, even at current prices SKX trades 19x FY15E EPS, far below the multiple of Nike (NYSE—NKE) and Under Armour (NYSE –UA). SKX could rise 20% or more from here but the easy money has already been made.
On a separate note, we are pleased to announce that Sportsman’s Warehouse (NASDAQ—SPWH) recently joined the 30% club, which is the third one this year (excluding SKX). As it reached our target we would sell at current prices, even though another 10% is possible.
Have a great week!
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 rare 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, daily 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 micro cap 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 is derived from Yahoo! Finance. 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.
ALL INFORMATION IN THIS 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.