– Stock Market Companion – Current Holdings –

Nr.	Co.	Ticker	Action	Entry Date	Current Gain (Loss)
1	Mitek, Inc.	MITK	Holding	1/12/2012	+38%
2	ZAGG, Inc.	ZAGG	“Toe-In” Holding	2/28/2012	-3%
3	Eight by Eight	EGHT	“Toe-In” Holding	3/9/2012	-15%
4	EBAY	EBAY	HOLDING	3/14/2012	+0%
5	Ford Motor Co.	F	Holding	3/15/2012	-5%

(Please scroll down to the end of the report to see your favorite benchmarks – Dollar, Oil, Gold … closing prices and daily direction.)

– Market Trends –

*Summary of terms from Trader Vic II-Principles of Professional Speculation (pg. 140-141)
*_________* Represents a change in trend rating.

– Market Perspectives –

For your added perspective, we’ve included this chart of the broader market (Successful stock investors develop and start with a minds-eye view of the broader market and keep it clear) –

SMC SP-500 ETF Daily Chart (Please click on the chart to see a bigger, easy to read chart on a separate browser tab window).

– Today’s Highlights –

The markets are biding time and consolidating in price.  Often, markets and stocks will consolidate price increases – like the approx. +26% move HIGHER in the broader U.S. markets since October 4, 2012 by simply marking time at new price levels.

Looking back in time it is easy to see that the markets were oversold last October 3rd and 4th.  At that time, we ventured FORWARD and we sent our Special Update on October 5th to our members  saying that a reversal was quite possibly in the making – and we identified good investment candidates to invest in.  Even then, however – it was completely up in the air as to whether the European Monetary Union would survive the liquidity crisis that it was facing due to Greece’s inability to meet its bond obligations.  We took appropriate risks, made investments, put in our stops and profited strongly from our ideas.  OK.

Now however the market has made a significant recovery and as we LOOK AHEAD, things remain unclear.  A key forward indicator that we look at to measure the strength of the economy is the Purchasing Manager’s Index.  This index measures the most recent month’s activities at private sector companies (as opposed to government entities) and surveys the response of approx. 400 purchasing managers to questions about –

• Production levels
• New orders from customers
• Inventories
• Employment levels
• Speed of supplier deliveries

For this survey, the purchasing managers can answer the questions with these responses =

• Better, same, or worse conditions than the previous months.

Please click here for a good Wikipedia article on what the Purchasing Manager’s Index is and how it is measured.  We used this information to summarize our points, above.

Personally, I watch these Purchasing Manager’s Indexes, the weekly new jobless claims numbers, the Federal Reserve Beige Book, and the performance of leading stocks in terms of share price strength to get a read on what may happen next for the markets.  Other news items and indicators (auto sales, home building, home sales…) help fill in the gaps.  Another important indicator that I have come to rely upon for a good read on the forward economy is the quarterly earnings reports from excellent U.S. shipping companies like Fedex (FDX $92.38)

This week, Fedex reported excellent earnings for example, BUT also said that they are seeing weakness in Europe and overall in their priority mail services.  Companies are scaling back on their need to get things to the market quickly.  Shares of Fedex were down this week on that news.

Why do we do all this work?  Because the broader markets are always trying to price in what the economy is going to look like approximately 3 to 6 months ahead.  And the condition of the broader markets provide the climate for the stocks of individual companies that are growing their businesses and earnings to rise and fall.  Remember that individual company stocks will move anywhere from 2x to 4x the move in the background market!  That’s a lot of reward available to the investor who can read the road ahead, using the indicators that we mentioned above and combine that knowledge with an understanding of individual companies that are growing.

We mentioned above that Fedex shares were down this week, but the shares increased from approx. $65/share to $96/share since the October 4th lows.  That’s an approx. +48% increase in value in a short period of time.  Of course the investor must sell at some point to capture an excellent portion of these gains.  It doesn’t do any good to give all the gains back by not selling, when the shares re-trace their strong run – due to concerns that the overall economy is again entering a soft spot or a possible contraction.

As China has grown as a primary global provider of manufactured goods, investment companies have made progress in establishing similar indicators there for the Chinese economy.  This week the Purchasing Manager’s Index for China showed its 4th month of CONTRACTION.  Some of this contraction is due to weakness in orders out of Europe.  The current economy in Europe is recessionary.  A recession can be broadly defined as two quarters of back to back NEGATIVE economic growth in terms of Gross Domestic Product.

Concerns about China and Europe are causing our markets now to consolidate in price.  It may be that some early investors will begin taking more of their profits from strong moves in stocks like Fedex and others, if it begins to look like some softness ahead in the US economy due to weakness abroad.  Gasoline prices, hovering at approx. $4/gallon are also pinching a bit at the economy.

We’ll see more next week.  In the mean time, we are still hopeful for some further strong moves in some of our SMC holdings and look forward to more opportunities ahead with strong growth stories or sudden opportunities that appear from time to time for attentive investors.

Until we have our own glossary operational on our website, would you please consider using Forbes’ Financial Glossary to search and define terms that I have included above that are not completely clear to you.  It’s rewarding to pick out a few and track down their meanings.  Here is the link to the glossary.

– S.I.M.P.L.E. Stock Investing Method tm –

– (Where each investment begins with a Story and ends with Earnings) –

S.I.M.P.L.E. Stock Investing is built upon these core concepts –

S = Story (What is / are the key catalyst(s) behind the company of interest?)

I = Investor Interest (Is the stock chart showing investor interest = buying or share accumulation?)

M = Market (Is the background market favorable for investing at this time?  Don’t Fight the Market! We know the vast majority of stocks move in the direction of the overall market).

P = Person or Product (Is there a particular person or product that makes the story work for this investment?)

L = Leader (Is the company a leader in its industry group or is its product a leader in its market?)

E = Earnings (Are current quarterly earnings and annual earnings growing?)

Here are those video’s that we posted on Wednesday concerning ZAGG, Inc.  If the market can hold on, it may be that ZAGG can push higher from here.  This week, shares of ZAGG have shown excellent RELATIVE Strength with respect to the overall market.  Zagg shares are up nicely for the week and challenging their post earnings highs above $11/share.  A move to $14 from here would be an approx. +29% gain.

ZAGG Video #1

ZAGG Video #2

ZAGG Video #3

ZAGG Video #4

– Benchmarks “At a Glance” –

–Data Source : Financial Visualizations Inc.