It was a negative week for markets, as stocks pulled back across the board. The Dow Jones was down 1.06%, the S&P 500 fell 1.19% and the NASDAQ tumbled 1.92%. The MCSI Emerging Markets Index held up relatively well, dropping only 0.78%.
Big gainers in your Bull Market Alert portfolio included Drew Industries Incorporated (DW), which gained 1.94%. Avista Corporation (AVA), Allete, Inc. (ALE) and Drew Industries Incorporated (DW) hit new 52-week highs.
You were stopped out of Dycom Industries, Inc. (DY) on June 13 for a solid 15.01% gain in less than three weeks.
Your position in The TJX Companies, Inc. (TJX) moved to a HOLD.
With the U.S. stock market unable to break out to the upside, this remains a stock picker’s market.
That means that we need to continue our rifle-shot approach to picking small-cap stocks that march to the beat of their own drum.
And in 2016, utility stocks continue to emerge as favorites when this approach is used.
This week’s Bull Market Alert recommendation, Spire, Inc. (SR), is a public utility holding company that provides natural gas services.
Founded in 2001 and headquartered in St. Louis, Missouri, Spire also engages in the sale, compression, transportation and storage of liquid propane, with a bit of real estate development and merchandise sales thrown in for good measure.
Despite being a utility company, Spire is a growing business. The company currently has plans to spend up to $200 million to construct a 60-mile pipeline to deliver lower-cost shale gas to St. Louis from the Marcellus and Utica production regions. The project is part of Spire’s efforts to modernize its transportation and storage assets. Spire also recently announced it was acquiring EnergySouth Inc., the parent of Mobile Gas and Willmut Gas, for $344 million.
Spire’s financials are solid and improving. Last quarter, Spire generated revenues of $609.30 million and net earnings of $100.50 million. Earnings growth came from operating margin improvements, as well as one-time items. Gross margins widened from 24.32% to 34.73% compared to the same period last year, while operating (EBITDA) margins have expanded to 33.09% from 21.67%.
With these kind of numbers, Spire has caught the attention of many small-cap stock specialists, and is a holding in 10 value- and dividend-oriented, small-cap strategies that I track.
So buy Spire Inc. (SR) at market today and place your stop at $61.00. I am holding off on recommending any options in Spire at this time.
iShares MSCI Emerging Markets (EEM) moved just 0.78% lower. Although the bulk of emerging markets may not fall within the boundaries of countries that could be affected by the outcome of Thursday’s “Brexit” vote to decide whether Britain will exit the European Union, EEM investors could not find direction last week. With the potential to become a watershed event, the United Kingdom’s vote will certainly heighten volatility in global markets. EEM is a HOLD.
iShares MSCI Ireland Capped (EIRL) fell 2.94%. The Irish economy is closer to the center of the cross-hairs of the United Kingdom’s vote. EIRL’s trading action last week reflected this uncertainty as traders prepared for possible negative effects. EIRL is a HOLD.
The TJX Companies, Inc. (TJX) lost 1.71%. Looking at near-term options action on TJX, traders appear to be making bullish July bets for a summer rise in TJX. TJX dipped below the 50-day moving average (MA) to become a HOLD.
Avista Corporation (AVA) closed the week almost perfectly flat, dipping just 0.02%. AVA took a breather last week after three consecutive up weeks, but still managed to make a new 52-week high. Avista’s short interest fell 2.74% in June as short-shares decreased from 2.24 million to 2.18 million shares. The stock price typically moves higher as short-sellers buy back outstanding shares, and usually signals bullish action ahead. AVA is a BUY.
Allete, Inc. (ALE) gained 0.46% to hit a new 52-week high and lifetime high just days ago. ALE has been on a 30-day run higher, making higher highs during most of this period. Allete’s success has popped onto the radar of large investment firms, as reflected by their Form 13F filings. Morgan Stanley increased its ALE holdings by 220.3% in the fourth quarter to 215,574 shares, and Bank of Montreal increased its shares by 5,242.1% to 43,485 shares. Franklin Resources Inc. holds 2.04% of ALE for a total of 1,000,000 shares, and Edge Asset Management Inc. owns 473,567 shares after buying an additional 5,352 shares over the last quarter. ALE is a BUY.
Drew Industries Incorporated (DW), the latest addition to your portfolio, gained 1.94% last week. This momentum play also falls into the same category as several other recent Bull Market Alert winners, turning in a collection of recent winning weeks and new 52-week highs. When a small-cap stock like DW gets buying support in its favor, gains can be swift and strong, as demonstrated over the past month. DW is a BUY.
Nicholas A. Vardy