– Stock Market Companion – Current Holdings –

Nr.	Co.	Ticker	Action	Entry Date	Current Gain (Loss)

(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 stock market is all about forward earnings.  Period.  A stock’s price is nothing more than the current value of future estimated earnings…   Stocks fluctuate – often considerably – as estimates of future earnings change.

Why do estimates of future earnings vary or change?

• Leadership changes at companies.
• Product life cycle realities.  Products mature and customer demand stabilizes or wanes (earnings flatten or begin to decline).
• Competition heats up and demand for a company’s product is siphoned-off by competitors (think early Apple days and Microsoft).
• Company’s miss the next generational development for their products (think Kodak or Nokia).
• Products become obsolete.
• Technology becomes obsolete.
• Government regulation impacts market (sometimes positively; mostly negatively)
• Business cycle enters recessionary period (demand drops as customers stop spending)
• Fear of future recession or shocks to financial system cause customers to stop spending and take on a “wait and see” attitude.
• Monetary policy encourages or discourages investment.
• The market gets all “abuzz” about some new technology or development that has people making bold estimates on earnings that may never materialize, but that drive stocks up to some crazy heights.
• etc…
  

As stock market investors who time our entries in individual stocks and the market in general, these variations in expectations for future earnings is our “bread-and-butter”.  When you get a new story “right” an investment can grow very significantly.    What we teach at Stock Market Companion is that people need to have the correct “distance” to the market.  In other words – you don’t want to be –

1. so close to the market that each and every twitch in the stock price makes you wonder whether to buy or sell.  This has you miss out on intermediate and long term trends in earnings expansion stories at companies.  It’s also an uncomfortable place to “dwell”.   You do not want to be thinking about stock prices all the time.
2. so detached from the market that you come to believe that you cannot engage it successfully and that it’s either better to ignore the market altogether or let some one else manage your money entirely – who is not as concerned about the growth and protection of your gains – as you are.  (We encourage participation with mutual funds and with money managers.  Just make sure that you stay abreast of the market and know what is going on.)

You want to be –

1. Close enough to the market to see new trends forming and early changes taking place in the economy and at individual companies that allow you to participate in NEW GROWTH,  TURN-AROUND, or other interesting stories unfolding in the marketplace.
2. Far enough away from the market that you don’t get overly focused on the  daily gyrations of the marketplace.

Last week we exited the market entirely.  Why?  Because –

1. The political developments in Europe involving Greece being able or unable to remain in the European Monetary Union (EMU) and the immediate uncertainty and disappointment surrounding France’s new socialist president has everyone questioning what is going to happen next.
2. The “U.S. Jobs Report” (Non-Farm Payroll Report from the Department of Labor) for April has us a bit on edge as to what is going to happen near term with the U.S. economy.
3. Stock prices of leading stocks were beginning to fade; Some quite strongly (Fossil (FOSL) lost almost 40% in one day, following disappointing earnings related to – you guessed it – earnings from Europe.)

Today the market continued its downward trajectory as –

1. Germany’s Chancellor Merkel’s party lost an important election in Germany’s most populous region.  The big question = How will France’s shift toward left-leaning policy impact the economic development in Europe and will policy change toward Greece and other rim European nations in financial trouble precipitate a restructuring in the euro, thereby causing short term instability in the financial markets?
2. Greece has been unable to put together a government that honors commitments established this past October to the institutions that are lending it money.  The Greek government is basically shut-out of the bond market and may soon no longer qualify for the lines of credit that it is receiving from institutional lenders.

Into the markets close today, Greece’s government was saying that outflows of capital may destabilize the country’s banks.  Market participants began selling strongly into the close.

– 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 = Institutional 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?)

We like how Arena Pharmaceuticals held onto its mid $6 range after Friday’s gap HIGHER on FDA panel approval and therefore possible FDA full approval of its Lorcaserin “weight-loss” drug.  (Appetite suppressor).  (ARNA $6.61)

Shares in Nokia continue to probe NEW LOWS.  Nokia CEO Mr. Stephen Elop is fighting for his life and may yet come up with a winning formula for Nokia?  He’s been at the helm of the company now for approx. 1.5 years. (NOK $3.05)

We reported last week that Asian markets are paying a premium for aluminum contracts …”Aluminum buyers in Japan, Asia’s largest importer, may pay a record fee to producers after China boosted purchases and global smelters cut output.

Premiums for the three months starting in July may climb more than $30 from fees this quarter between $115 and $127 a metric ton over the London Metal Exchange cash price, four executives, representing smelters and buyers, said before pricing talks this month. The highest fee since Japanese buyers began purchasing most requirements through long-term contracts in 1996 was $125 to $130 for the first quarter of 2010, they said, declining to be identified as negotiations are private.

Premiums are poised to surge as demand is expanding in Japan, led by the auto and construction industries, because of rebuilding from last year’s earthquake and tsunami. Buyers inChina, the biggest consumer, boosted imports as they took advantage of international prices that were below domestic levels. Alcoa Inc. (AA), the largest U.S. producer, cut 12 percent of capacity in January and Chief Executive Officer said last month the reductions “may not be the end. (Bloomberg)” ”  We are watchful about the share price of Alcoa as it dropped again below $9/share.  (AA $8.92)

Groupon (GRPN  $13.79) shot higher tonight after the markets closed when the company announced an unexpected profit.  In the late fall, at Stock Market Companion we shared frequently about the then upcoming GRPN initial public offering and the importance of price discovery and the difficulties associated with Groupon’s business model.  The shares soared above $30 on the first day of trading and then proceeded to sink over the last 6.5 months to approx. $10/share this last week.

– Benchmarks “At a Glance” –

–Data Source : Financial Visualizations Inc.