• Market Overview = The market is in a confirmed up-trend.  We are CAUTIOUS at this time, due to light market volume and uncertainties related to the economy AND the upcoming U.S. elections.  At Stock Market Companion, we remain focused on our S.I.M.P.L.E. Stock investments that offer us a clear “story” which includes expanding earnings and a catalyst for change that we can understand.  This year, the “pickings” have been pretty thin – but we have been successful identifying eBay, Mitek, Apple, 3-D Systems, Arena Pharma, Hovnanian this year – which have moved very significantly – although some for only a brief period of time. We have also made mistakes – particularly in the basic materials sector with Alcoa, and in the manufacturing sector with Ford.  Active trading without a clear understanding of catalyst and expanding earnings is a failed proposition.

•  Click here for today’s SMC S&P 500 (ETF SPY) chart.

• On July 27, 2012, the U.S. Department of Commerce’s Bureau of Economic Analysis released 2nd quarter Gross Domestic Product (GDP) estimates for the U.S. coming in at approx. 1.5%.  This is DOWN from Q1 measures of approx. +2%.  Our U.S. economy doesn’t function in a vacuum.  Weakness overseas in Europe and China impacts our economy, and there has been real weakness overseas.  We are left to now determine if further weakness is ahead.  Friday’s “Jobs Report” was good, but – overall – things are not too encouraging at this time.  We are cautious.
   

  Here is a good link to the Department of Commerce report on 2nd quarter GDP

• NEW IDEA – Last Week, former Stock Market Companion holding Silicon Image (SIMG $4.88) announced VERY STRONG earnings.  The company OWNS the HDMI (High Definition Media Interface) standard that is used – among other applications – by mobile devices to transmit video.  The company earns a small commission through the licensing of this technology to hardware manufacturers like APPLE, Inc.  SIMG is a micro-cap company whose stock has done nothing but SINK over the last 18 months, from approx. $10 to $3.80.  We entered our previous investment in SIMG while it was in an uptrend and immediately following Apple’s announcement that Apple was adopting the standard.  When the shares failed to follow-through, we sold our holdings.Now, with the shares UP approx. +20% overnight, but at near recent lows, AND the company expecting INCREASED EARNINGS AND REVENUES on strong gross margins, we are again going to be watching the stock to build a lateral consolidation from which we can gauge our risk and hopefully find a suitable entry and a possibly recovery of the shares above $7/share.  A strong advance in the shares could possibly mean a +50% move higher from here.  When companies “GUIDE HIGHER” on revenues AND earnings during a quarterly announcement, wise investors take notice.  On the other hand, we do NOT want to blindly run after the shares here. Here is the link to Silicon Image’s BLISTERING 2nd Quarter Results.Here is the link to Silicon Image’s WEBSITE.  Please use such direct references to LEARN about what a company does and the products and services a company provides.

•  NEW IDEA – AK Steel (AKS  $5.28)  On July 24, 2012, AK Steel Corp. announced positive earnings AND beat estimates by a nickel/share.  That’s good news.  The shares sell today for approx. $5.28/share – DOWN – from $72/share in June 2008!  That’s disastrous for shareholders WHO DIDN’T SELL when the going was good.  Here’s some more bad news – the company has suspended its dividend in order to preserve cash, and has discontinued giving forward guidance, due to economic uncertainty ahead.  Yikes!
  Management is doing all it can to make the best of the difficult economic environment.  Today, the company announced that it is increasing the price of all its flat-rolled carbon steel by $30/ton.  This follows other price increases announced in July, and effective immediately on all new orders.  Here is a Bizjournal link confirming this development.Under “normal” market conditions (which are a bit lacking currently) – within a confirmed UPTREND (which we DO have), price increases on the scale as those introduced by AK Steel would result in at least a +10% increase in share price and maybe initiate a new UPTREND for the shares.  We are watchful.

• On this Thursday, August 9th – after the market closes – SMC holding Nvidia (NVDA $14.01) will announce its quarterly earnings.  We are currently UP approx. +5.5% on this investment.  Last quarter NVDA posted $0.16/share in earnings and estimates this quarter are for $0.22.  At some point before Thursday mid-day, we will decide either to advance our stop, take our profits, OR hold into earnings.  Those who are holding these shares will want to consider doing similarly.

• Geo-politically, we are attentive to these kinds of developments in the Middle East.  There is a complete overload of information and opinions, but we do keep a “pulse” on developments.  Please click on this link for more insights. (Associated Press)
  
• From last week … It’s difficult to get excited about the aluminum sector – or quite frankly – any of the material sectors – BUT we remain attentive to possible changes in the aluminum industry and this significant article about Ford considering lightening the Ford F-150 significantly by introducing aluminum body panels is another piece of the puzzle.  Here’s an excellent short article about this development.
  
  
• From last week … The equities (stock) markets have moved STRONGLY higher in the U.S. and abroad over the past two days due to this comment from European Central Bank president Mario Draghi – The European Central Bank is ready to do “whatever it takes” to support the euro.  This comment put the short sellers in the market (see above) on the run and brought some short term opportunists.  We’ll have to see what next week brings before we get too excited.  Here is a good article covering Mr. Mario Draghi’s comments (BBC).

• US housing industry continues to be a bright spot with last week’s housing start data for JUNE (which measure the number of new single and multi-family dwellings initiated for construction) helping the equities (stock) market to remain somewhat stable.  At SMC, we have pointed out – since Hovnanian’s (home builder) excellent quarterly earnings report in early June – that the home building industry is improving.   Shares of Hovnanian are UP +27% since our report.  We pointed it out for risk tolerant investors, but did not initiate an SMC position at the time.  

• Please click here to send us your feedback.  Let us know how we are doing – We are here to serve you.  Support@Stockmarketcompanion.com

• Here is a video interview of a father and son using the Stock Market Companion successfully together – as a teaching and investing tool.
  

– Stock Market Companion – ADVANCED INVESTOR OPPORTUNITIES –

We are introducing this section so that at SMC, we can “get out of the way” and let you decide for yourselves and not influence members so greatly with our own risk-tolerances and objectives at the time.  We WILL point out key characteristics that we think are important to consider, or logical areas to place stops or offer realistic targets based on our over two decades of investing experience, but we will be less inclined to judge these opportunities beyond that.  What we list in this section will be cover many dimensions:

• Growth stories following our successful S.I.M.P.L.E. investing method
• Unusual opportunities arising from oversold or overbought conditions
• Opportunities presenting themselves due to key technical developments in the shares (key support and resistance line engagement, high volume clues…)
• Stocks that offer excellent dividend yields and measurable risk
• Covered Call ideas
• Higher risk but possibly quite unique investment opportunties
• Excellent mutual funds and ETF ideas (including off-shore)

At this time, we are including this section in the SMC Basic Membership.  Our advisors may determine that these insights should be offered outside of the basic membership for a modest additional fee. That decision is for sometime later.  Let’s proceed …

– Markets “At a Glance” –

• The markets were AGAIN divergent today, just as yesterday revealing further weakness in the technology sector while the broader market (S&P 500) and the DOW (DJ-30) held POSITIVE.
• Research in Motion (Ticker: RIMM $27.75) reported earnings last night that were a major disappointment.  We go through the details below.  The company received 2 broker upgrades going into earnings.  The stock then lost -21.45% from yesterday’s close into today.  We go through our steps in handling our brief investment in the stock this last week – AND WHY, below.
• Crude oil continued to descend today, reflecting a drop in value of the U.S. dollar – BUT also  concern of future demand as the global economy slows down.
• The S&P 500 is finding support at its 200 day exponential moving average.  If the broader market doesn’t find strength here and begins to sink further, the next near point of support is the low it plumbed during the recent nuclear crisis in Japan.  If it fails that point, then the intermediate term trend will be DOWN.
  
• Please click here to send us your feedback.  Let us know how we

Categories: Archives, Daily Updates
Tags:

Comments are closed.