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In
This Edition... |
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On
tap for this mid-week edition of the Micro Cap Press newsletter....
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Before Taking
the Gridlock Plunge - Don't believe the numbers just because they're
in print.
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Trading Ideas
- Four small and micro cap ideas
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From the Blog
- Recent highlights not featured in the newsletter
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Before
Taking the Political Gridlock Plunge.... |
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It's common
knowledge that if the country is mired in political gridlock, then stocks
just do better, right? After all, with neither party really able
to accomplish anything that might disrupt ongoing business, then Corporate
America is essentially left alone... and allowed to continue business
as usual (i.e. making lots of money).
Conversely,
if at least one government house - preferably both - are dominated
by the U.S. President's party, that sweeping change/reform can really throw
a wrench in businesses' practices, crimping profits as a result.
 There's
only one problem with the idea though..... it's just not true.
The media, never
letting the facts get in the way of a good story, rarely back up assumptions
with research. Had the press done so, it would have found that
a split house/senate tandem produces the weakest annual results for stocks,
while a split President/congress tandem produces a market return that's
only slightly better.
And the most
fruitful political scenario for stocks? One political party in control
of both houses as well as the Presidency.
 But
isn't one party better for the market than another? Again, that's a
myth.... one propagated by each political party to support their own agenda.
Indeed, the
Democrat 'math' suggests stocks do better under Democratic regimes,
while Republican
'math' seems to hint that stocks do better under Republican leadership.
Reality:
The only thing history says about the market under a certain party's leadership
is that each party is able to massage and spin the numbers in an advantageous
- and disingenuous - way.
As we've said
repeatedly here at the Micro Cap Press (and will continue to do so),
respond to what the market IS doing, and respond to what stocks ARE worth.
Most of the 'common-knowledge' theories that are expected to drive stocks
higher or lower actually break down when put to the test.
As we've also
said recently, the market is fairly valued at current levels, and as earnings
are improving, we anticipate tepid growth through 2011. No less, no more.
That will not prevent the emotion-driven ebbs and flows however, nor would
we want them to. Each ebb and flow is an entry or exit opportunity.
It just so happens
that stocks are at the top of a short-term bullish 'flow'; we're expecting
a modest correction despite the nice rally on Tuesday. Don't confuse the
short-term swings for long-term trends though, bullish or bearish. And
don't count on Tuesday's election outcome to have any real predictive effect
for the market.
Last week, the
'From the Editor' portion of
the newsletter added a new name to the portfolio, but subtracted two.
The addition came from a list of compelling buy
candidates listed the week before.
While we intend
to continue to share the ongoing thoughts and management of the editor's
'sandbox portfolio', the following stocks are not being officially added
to the portfolio's watchlist. They are simply small cap and micro cap ideas
for you to consider, and use as you wish, if you wish. There may
or may not be any follow-up on them.
In no particular
order:
Kulicke &
Soffa Indus. (KLIC): The semiconductor industry got dunked in Q2 and
Q3 over worries that the economy was headed for another recession. Not
only did the contraction never materialize, the semi industry never even
saw a blip. If anything, tech sales actually got better. Now, many of these
stocks - including Kulicke & Soffa - are parked (read 'undervalued')
at low-single-digit P/E ratios. Investors aren't got to let then sit there
at these low levels forever though.
If KLIC can
just climb back above the $6.40 line, that should spark the rally.
 Universal
Travel Group (UTA): It's the same story as Kulicke & Soffa, but
for a different reason..... worries of an economic contraction in Q2 and
Q3 pulled UTA shares to multi-year lows, but the company continued to earn
money all the same. Investors seem to be coming back to this one with a
little more confidence though; the stock punched through a key resistance
line in mid-October, and hasn't looked back since. The value was there
the whole time.
American
Equity Life (AEL): Yes, it's the same American Equity Life that was
purchased in the editor's sandbox portfolio last week. It's on this buy
list for a different treason though. (It's not unusual for the best of
the best stocks to show up as buy candidates for a variety of reasons.)
While AEL really
needs to hurdle the $11.25 mark to recognize its full potential, like UTA
was, this is a stock that has the right underlying results to justify such
a move eventually.
 United
Online Corp. (UNTD): Like Universal Travel Group, UNTD shares have
broken out of their slump and made a move above a major long-term ceiling.
And since it happened last week, buyers have yet to look back.
And why would
they? There's still another 25% rally ahead before the prior highs
are even retested. With a projected (2011) P/E of 6.45 though, why would
they worry about looking back? United Online could actually justify a price
in the $10-ish area with little effort.
With all that
being said, whether you're following the sandbox portfolio, the newsletter's
trading ideas, or both, you should know you're still not getting
the absolute best picks, market overview, and follow-up. If you
want that, you must subscribe to the Rhino
Report.
Some of the
Rhino Report's recent winners include a closed-out 42% win on O'Reilly
Automotive (ORLY), an open-trade gain of 25% on McDonald's (MCD), and an
8.9% gain so far on Biogen Idec (BIIB) after purchasing it in mid-September
[the portfolio caught last week's big jump from BIIB.]
You can try
the Rhino Report risk-free by clicking here. Empower yourself by becoming
a Rhino today.
While we try
and make the newsletters as potent and meaningful as possible, there's
just not enough room to get all of our commentary packed into it. Here
are some of the harder-hitting blog entries from the past few days.
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Updated: 8:15 pm PDT (03:15 GMT), November 2, 2010
