– Stock Market Companion – Current Holdings –

Nr.	Co.	Ticker	Action	Entry Date	Current Gain (Loss)
1	Ford Motor Co.	F	Sold Today	10/5/2011	+10% (final)
2	Alcoa, Inc.	AA	Sold Today	10/24/2011	-1% (final)
3	US Steel, Inc.	X	Sold Today	10/28/2011	+5% (final)

– Story-Stock Investing –

 

After assessing new data and market conditions in the pre-market, we sent out this SMC Intra-Day Alert early this morning just after the open –

Dear Subscriber-Friend,

A week ago on Tuesday, we had the experience of the Greek Prime Minister taking unilateral action, effectively risking the future of the current European Monetary Union.

Today we have Italian bond rates exceeding 7%, which was the trigger level for the Irish, Spanish, and Portugal bailouts over the last 18 months.  The problem with Italy is that it is theoretically too big to save in the manner that
was used for the small nation states mentioned.

This early morning also, we read that German GDP for 2012 is estimated at 0.8% vs. +3.0% for 2011, DUE to the fall-out from these endless sovereign debt concerns, debates, failed plans, and political posturing.  We also note that
General Motors reported this morning DETERIORATING economic conditions ahead.

The market has again moved into the realm of complete unpredictability at this time.  It is rare.  Can this be how the euro finally dies an early death?  We do not know, and we do not want to hold anything but cash in our equities account
during this period of extreme uncertainty.  Excellent stories and investments will return and we will be ready to take prudent and opportunistic action – as we have demonstrated.

Therefore, we have increased our stops as follows –

US Steel (X) = $25.99
Ford Motor Co. (F) = $11.1
Alcoa (AA) = Closing position immediately.

We will however be out of all positions by the end of the day.  We are first working with our stops in order to allow the market to perhaps offer us higher prices in the next few hours.

We want to give the market a chance to catch its breath this morning and possibly move higher and get a better price.  Hence the use of stops instead of immediate liquidation.

Each investor is on their own.  We are simply commenting on our own actions in the market place.  Please see our disclaimer below.

Your – Stock Market Companion

GM posted earnings before the open that were decent, but their outlook was a significant disappointment.  Based on Ford Motor Co.’s chart (F $11.04), we thought it was prudent to simply take our cash.  We can get on board if the stock moves back to the $12.00 area or on extreme weakness again.  We have a long term view on Ford, BUT we also need to be realistic that new data presented this morning simply trumps the good data that we have been working from since early October.

On the positive side, we know that August and September car and truck sales were surprisingly very good compared to the low level of consumer confidence and high level of fear about the economy and jobs, and we know that the US has not slipped into a recession as many had feared.  On the negative side, we know that the US Federal Reserve has ratcheted DOWN its GDP expectations for the US to be approx. 1.0% for next year (which still identifies our economy as on a slow growth trajectory, and not a recessionary one), we know TODAY that GM is saying that conditions are deteriorating, AND we have the European situation that has now entered the “completely unpredictable” realm.   So we have to be disciplined about our investing and completely raise cash.

Today, you learned how we handle a difficult, “seismic shift” kind of day.  We were presented with a very difficult market and things do NOT look good near term.  So we –

• Made a decisive decision to head completely to the sidelines – TODAY.  We aren’t sticking around to see what tomorrow brings.
• We did NOT simply liquidate our positions in FEAR.
• We increased our STOPS to slightly below the price at the moment for the shares, giving the stocks time to recover from the shock of the opening bell and initial selling.  This allowed us to sell our shares in the course of the morning at slightly more favorable prices.  It wouldn’t be the first time that a very negative opening condition turned to a favorable one by the end of the day.  But today’s news didn’t present that outcome in our minds.  This is new data pointing to ominous, near term clouds.  We were simply looking for a bit better prices than what we were offered just after the open.

We teach investors that when emotions start charging higher,  liquid investments like stocks get sold quickly as investors raise cash.  Without buyers snapping up the shares in anticipation of better times ahead and instead more than willing to wait for the weather to clear, share prices can drop very rapidly.  We do not want to participate in such an environment on the long side.

Yesterday, Apple, Inc. shares were moving nicely higher as investors were warming to the idea that iPhone 4S sales were very strong, worldwide.  SMC subscribers know that we have been looking for another move higher in the shares, based on the idea that this Christmas season will see a tremendous boost to Apple’s sales.  Unfortunately today, new measures were out indicating that production volume on the iPad have been scaled back due to reduced sales (Rodman + Renshaw).  So the Apple shares slipped again below the $400/share line as investors re-evaluated their optimism for the shares vs. concerns for reduced sales on iPads (sales still strong, but simply reduced) and the complete “toss-up” in Europe, and European leaders losing credibility by the minute.

We mentioned yesterday that the Gentiva Health (GTIV $5.34) CFO and others had purchased approx. $400K in shares after the terrible landslide in share price.  Today the shares are UP +18.5% and still in buyable territory – except the ugly conditions overseas.  AT 2.43 million shares traded, the volume on today’s purchases of GTIV shares looks good.  We will see what tomorrow brings with the shares.

After the close today, Green Mountain Coffee Roasters (GMCR $68) came out with very good earnings, but what stood out to us was their inventory of product grew to $672.2 million from $262.5 million last year.  That is a huge increase and a big RED flag, even though the company sold +52% more in K-cup portion packs and sold over 1.3 million Keurig single cup brewers in the last quarter alone.  We aren’t the only ones concerned about the inventories … the stock is at $44.89/share, down from $68/share at the close.  That’s a -33% drop in share price over the last hour or so.

Prudent investors took their strong profits on Green Mountain Coffee Roasters some time ago.  The stock ran 1,225% (One thousand two hundred twenty five percent) from March of 2009 through the summer of this year.  The stock broke out to the NORTH in March 2009 at a split adjusted price of $8.60/share and grew to $114/share in September 2011.  This a classic growth stock story of a company introducing an innovative product (single cup coffee brewing packages with different flavors at an affordable price, combined with securing the coffee business for McDonald’s Corp., as McDonald’s entered the gourmet coffee business).

 

 

– Benchmarks “At a Glance” –

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