|Written by Rob Goldman|
As we enter a new month, I think I speak for all of us when I say good riddance to January! The good news is that since 2010, the S&P 500 Index has risen each February and with a kick-ass average return. We expect much of the same this go-around as well.
With a busy earnings and economic calendar, this week could be a Groundhog Day for stocks…and I don’t think the market will see its shadow…but there are a lot of negatives out there that will need time to shake out. In fact, there wasn’t a single IPO in the month of January! Go figure, and see some of the hurdles that remain ahead.
Feeling lucky? These oil stocks are worth a watch and maybe even an investment or two…
Check out how our big cap and small cap picks in January performed...you will be surprised…
THE MARKET’S GROUNDHOG DAY
On Tuesday, February 2nd, we will “celebrate” Groundhog Day. As the legend tells us, if the groundhog sees its shadow it means 6 more weeks of winter. If not, then spring comes early. We believe that this week is also a “Groundhog Day” of sorts for stocks, where we find out if the current stock market malaise continues or whether there is near term daylight ahead. (Hint: We are optimistic.)
“Stocks’ Groundhog Day”
A similar return could be determined this week, much like the Groundhog’s forecast, given this week’s key economic calendar highlights such as personal spending, crude oil inventories, construction spending, auto sales, and factory orders.
Throw in the expectation of favorable earnings for a ton of small cap, midcap and key large cap companies and this is an important week. In the first two days alone, the market will eagerly watch stocks like Alphabet (NASDAQ—GOOG), Aetna (NYSE—AET), Chipotle (NYSE—CMG), UPS (NYSE—UPS), and Yahoo! (NASDAQ—YHOO), among others.
In addition to the stocks listed above, this week we will be profiling key small cap names as before and after reporting this week as we believe that many bargains exist our there. We expect that in the near term, this group could enjoy the greatest bounce as compared with large cap and midcap companies—as long as they derive the bulk of their revenue from domestic sources.
It is difficult to ignore the impact the drop in oil has had on the markets as well. Have we reached a bottom? Everyone from T. Boone Pickens to Jed Clampett has an opinion on the matter. One thing is certain, whether it is two weeks, two months, or two years, oil WILL rebound eventually. Right now there are some bargain basement oil plays in the small cap space that would be ideal to add as a trade or investment, especially if you have not taken any loses in the space to date.
Going back to the relatively way back machine, we featured offshore driller Hercules Offshore, Inc. (NASDAQ - HERO - $0.98) in the Market Monitor in July of 2013 at $7.55. The Company filed for bankruptcy last August, but reorganized and is still viable. HEROQ is also trading at $0.06 on the OTC markets as part of the melee. We cannot say that any of the standard metrics look decent, but this one might be worth watching for a while as a cheap oil play in the small cap space.
On the services side we featured both Cypress Energy Partners, LP (NYSE – CELP - $9.08) and CSI Compressco, LP (NASDAQ – CCLP - $6.15) about a year ago. Both had a great run for a few months going up a little over 50% in price on average, but have been clobbered since. Stocks like these will probably be the last ones to benefit from any recovery so options at much lower strike prices than the current stock prices is a good idea.
Finally, a new cheap pick that is primarily an exploration firm, but does offer services also is Parker Drilling, Company (PKD – NYSE - $1.37). The stock was up around the $9.00 mark two years ago and has plummeted since. The Company has over $100 million in cash on hand and $500 million in debt. Not ideal figures, but not nearly as horrific as similar companies in the same space and market cap. Additionally, the short float technical indicator is under 4%, which is fantastic considering how awful it has been for oil recently. Look for PKD to double this year if oil prices move to the upside as an overall trend.
The Stock Market Today
AAII Sentiment Survey (figures rounded)
It is no surprise that a jump at week-end made investors feel a little better, and aided in ending the month on a somewhat of a high note, all things considered. The Ticker Sense poll is also indicating a light rise in the Bullish category, but the majority of respondents are still Bearish, which is understandable.
Profiled Stocks Performance
How did our early 2016 picks do? The answer is mixed due mainly to two stinkers but we are overall pleased, given the disaster it could have been. Of course it is a marathon and not a sprint. Our big cap picks soundly beat the S&P 500 but the small cap picks were clearly worse than the Russell 2000.
FIT, IMMR, and MBLY may be lost causes but the others have great potential, especially ROVI and VCRA.
As for the big ass group, I confess I am surprised that CVX outperformed CAT. Still, DOD and VZ seem to offer the greatest potential at this time.
Great info, insights, and hard-hitting stories make up this week’s Say What? feature...
Investor’s Business Daily
The answer to this question will tell us how stocks will perform.
The Smoking Gun
Something tells me there will be more of these...and that’s both funny and sad.
The New York Post
Those were the days…
A frightening proposition.
A true warning sign.
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