It was yet another negative week for U.S. markets as the Dow Jones fell 1.77% and the S&P 500 dropped 1.48%. Global markets fared slightly better with the Emerging Markets Index down only 0.70%.
U.S. stock and options markets will be closed on Monday and possibly Tuesday, as Hurricane Sandy bears down on the New York area. It will be the first time the market has closed for a weather-related event since Hurricane Gloria on September 27, 1985.
As a result, I won’t be making a new Bull Market Alert recommendation this week, and I will look to make up for this by offering an extra recommendation in the coming weeks.
The big news in your Bull Market Alert portfolio was Stratasys (SSYS) rocketing over 10% last week, on the back of huge earnings from rival — and former Bull Market Alert holding — 3D Systems (DDD). Stratasys itself is reporting earnings on Nov. 2, and the market is clearly expecting good news on the back of DDD’s results. With your January $70 call options up 66.67%, I am recommending that you sell half of your options to lock in your gains. Hold on to your remaining options and the stock for bigger gains ahead.
As a result of the pullback in the market, several of your positions moved to a HOLD, including Bank of Ireland (IRE), Seadrill Limited (SDRL) and Medivation Inc. (MDVN).
Otherwise, financial markets continue to be oversold as the current correction continues. There are a couple of important implications for this in terms of your Bull Market Alert portfolio. First, the bigger the bust, the bigger the bounce. On the one hand, the market has not bounced as quickly as I had expected. On the other, when it does, it will do so even more strongly. I remain convinced that we will see a solid rebound in the market between now and the year-end — one that will be turbocharged on the prospect of a more business-friendly administration in Washington, D.C.
Second, a poorly performing stock market does not bode well for President Obama’s re-election prospects. The correlation between the performance of the U.S. stock market and the U.S. president’s popularity has been very strong. And based on Friday’s close, the market is trading where it was on Aug. 16 — which, again, tracks Obama’s waning popularity. The stock market is a potent indicator, not because most voters own stocks, but because it reflects the public mood and the overall direction of the economy. A poorly performing stock market makes consumers and business feel negative, pessimistic and uneasy. That feeling of pessimism ultimately reflects on the nation’s political leader, whether deservedly or not.
Finally, on a personal note, I attended the NFL football game yesterday between the St. Louis Rams and the New England Patriots in front of a sell-out crowd of 84,004. Although it was a one-sided 45-7 victory by the Patriots, the more unusual thing was that the game was here in London, where the NFL has been looking to expand for several years. Next year, the NFL plans to play two regular season games in London, including one with my hometown team, the Pittsburgh Steelers. It is amazing how small the world has become.
Bank of Ireland (IRE) fell 4.11% last week. IRE managed to grow earnings 65% over the past year — a rate much better than the average 48% industry growth rate reported by its rival banks. Slipping below its 50-day moving average (MA), IRE is now a HOLD.
National Bank of Greece SA (NBG) continued to link winning weeks, adding another 1.97%. NBG hit a new 52-week high last Monday and then spent the remainder of the week holding steady. News broke last week surrounding a labor reform deal between the Greek governing factions and the troika. The deal included several austerity measures, such as an increase of the retirement age from 65 to 67. However, Greek markets dipped later in the week as the deal soured over the following days. NBG is a BUY.
Novo Nordisk A/S (NVO) gave back most, but not all, of last week’s gain, falling 3.99%. NVO took a punch last Thursday as news broke that the Food and Drug Administration (FDA) would be meeting to discuss “the cardiovascular safety” of NVO’ s two new flagship drugs, insulin degludec and insulin degludec/insulin aspart. These are the same drugs recently approved for wide use in both Japan and Europe. NVO is scheduled to report earnings on Oct. 31. NVO is a BUY.
Seadrill Limited (SDRL) also gave back a portion of last week’s strong gain, losing 3.23%. SDRL acquired just over 12 million shares, at a cost of $5 a share, of Asia Offshore Drilling Limited as of Oct. 25. This brings the total SDRL ownership to 25.6 million shares — roughly a 64% ownership stake. SDRL fell slightly below the 50-day moving average and is now a HOLD.
Michael Kors Holdings Ltd. (KORS) dipped 1.02%. KORS continued its sideways trading pattern for yet another week as the 50-day moving average finally reached this line-in-the-sand to create a solid support level. KORS competitor Coach (COH) reported strong earnings last Tuesday, showing higher profits and stronger sales, especially in China. This could spell good news for KORS’ upcoming earnings report on Nov. 13. KORS is a BUY.
CVR Partners LP (UAN) lost 1.50% last week. UAN declared a $0.496 a share cash distribution last Friday, to be paid on Nov. 14, to unit holders of record as of Nov. 7. Barclays also maintained its “equal weight” rating on UAN last week and raised its price target to $29. UAN will report earnings on Nov. 5. UAN is a BUY.
Medivation Inc. (MDVN) dipped 1.40% over the past five trading days, making a second test of the 50-day MA support level. MDVN continues to move forward with its blockbuster new drug, Xtandi. a new treatment for prostate cancer, which reportedly reduces prostate-specific antigen serum levels by 89% just one month after treatment begins. MDVN is scheduled to report earnings on Nov. 8. MDVN is a HOLD.
Stratasys, Inc. (SSYS) jumped 10.09% last week as competitor 3D Systems (DDD) reported a blowout quarter. Investors bought shares of SSYS last week on positive expectations that Stratasys will report similar numbers. DDD’s numbers were as close to a “home run” as it gets — with revenue, net income, net margin, operating margin, sales, and cash balance figures all rising. SSYS will report earnings on Nov. 2. SSYS is now a BUY.
United States Natural Gas Fund LP (UNG) gave back 5.20% as natural gas inventories were reported to be greater-than-expected. With Hurricane Sandy bearing down on the U.S. East Coast, expect natural gas supply to come under pressure over the following weeks. And, as millions of Americans start their furnaces for the first time since last winter, natural gas consumption will begin to rise, putting additional upward pressure on prices. UNG is a BUY.