“Investing Your Green”: Recap for the week ending 12/05/08

Stocks rallied Friday during the last hour of trading erasing earlier losses triggered by the largest monthly job loss in 34 years – 533,000 jobs were lost in November. The DOW closed up 259 points on Friday, or 3.09%, to end at 8635.42, but still ended the week with a -2.19% loss and a -34.90% YTD loss. It was a volatile week for the DOW as it shed 700 points on Monday, ending its best 5-day winning streak in 75 years. The DOW rose on Tuesday and Wednesday only to fall 200 points on Thursday. The S&P lost 2.3% this week while the Nasdaq shed 1.7%. The fate of the Big 3 US auto makers still continues to hang in the balance. The CEO’s of Ford, GM and Chrysler are on Capitol Hill making their pleas for a bailout package but no plan has been agreed upon yet.

Weekly percentage performance for the major averages

Based on last Friday’s official settlement…

INDU: -2.3%
SPX: -2.3%
NDX: -0.75%
COMPQ: -1.7%

Leading sectors include: Industrial REITs +36.20%, Life & Health Insurance +20.23%, Multi-line Insurance Index +17.39%, Real Estate Services +13.14%, Retail REITs +12.93%.

Lagging sectors include: Independent Power Producers & Energy Traders -3.65%, Diversified Metals & Mining -3.27%, Oil & Gas Exploration & Production -1.62%, Electronic Equipment & Instruments -1.60%.

The following companies had sizeable moves during Friday’s trading session:

Advancers:

Amazon Co (AMZN): 48.26, +.94, +2.0% – shares rose 2% a day after the Internet seller’s shares surged on an upgrade from Barclays Capital.

Bank of America Corp (BAC): 15.24, +.90, +6.3% and Merrill Lynch (MER): 13.04, +1.13, +9.5%-

shares climbed after the companies said their shareholders approved the merger with Bank of America, a deal that will create the nation’s largest bank.

Brown-Forman Corp (BF.B): 48.10, +4.22, +9.6% – shares rallied 9.6% after the maker of Jack Daniel’s Tennessee Whisky lifted its profit target for the year.

Hartford Financial Services (HIG): 14.59, +7.38, 102.40% – shares more than doubled after the firm said its capital position is strong, its operating businesses are doing well, and it expects to earn more in 2008 than previously thought. Hartford’s outlook lifted shares in other insurers, including MetLife Inc (MET): 30.76, +5.64, +22.5%, Travelers Cos. (TRV): 43.41, +4.59, 11.8%, Prudential Financial Inc (PRU): 28.52, +7.35, 34.7% and Allstate Corp. (ALL): 27.03, +2.92, +12.1%.

Intel Corp (INTC): 13.29, +.52, +4.1% – rose 4% after Friedman, Billings, Ramsey & Co. speculated the chip giant may cut its earnings estimates and slash its workforce by as much as 10%.

Leap Wireless International Inc. (LEAP) - surged 17% after Goldman Sachs upgraded the mobile phone company to a buy. The brokerage said the weak economy could drive more customers to sign up for discount wireless services.

SanDisk Corp (SNDK): 9.23, +1.15, 14.2% - shares surged 14% on speculation that it may be acquired by Toshiba. Toshiba has denied such plans.

Decliners:

Big Lots (BIG): 16.00, -.28, -1.7% – fell after the closeout retailer reported a slump in profit and trimmed its outlook for the fourth quarter.

Chesapeake Energy Corp (CHK): 11.32, -.52, -4.4% – shares fell 4.% as natural-gas futures cratered in the wake of inventory data out Thursday and Friday’s rise in the U.S. dollar.

General Motors Corp (GM): 4.08, -.03, -.7% - shares fell, with another day of hearings under way on Capitol Hill as the Big Three automakers’ appeal for $34 billion in federal loans.

Strategies and plays for the upcoming week:

After a very turbulent week (as predicted by the author), stock indices continued their downward spiral. The jobless claims number was the back breaker and even though stocks were down for a majority of the day, the market shook off the awful data and rallied in the last hour to close in positive territory. Yes, the DOW ended the week with a loss, but some sectors showed positive gains. The DOW has rebounded more than 500 points off of its early low of 8,113 which was established during Monday’s sharp decline. Friday’s rally represented the market’s ability to shrug off nasty economic data and trudge forward. It was an ugly week, but we may be near an ultimate bottom. (Do I sound like an analyst?) LOL! I believe that the upcoming December job number will be worse than November’s, so there are some bargains in certain sectors that can be taken advantage of.

Energy – FSLR, CSIQ, LDK, JASO, etc – PLEASE DO NOT BUY. Crude oil is coming in (going lower) and $40 oil is a good thing. (better than $130 a barrel during the summer) I know a lot of us are seeing a much needed break at the pumps. Crude oil and energy stocks tend to move inversely.

Financials – MER, GS, WB, BAC, C, etc – Accumulate. Begin to start buying these stocks slowly. Start off with 100 shares. As noted in the Friday’s Advancers above, Bank of America, Merrill Lynch news is bullish for this space. These banks are laying off people but that’s being seen as bullish for those companies. Value investors love companies that are lean and profitable. Also take into account the massive and timely support for Citigroup (C), the FED’s announcement that it will buy approximately $600 billion in MBS (Mortgage Backed Securities). Tech – AAPL, IBM, INTC, MSFT, etc – Speculatively Accumulate. The Intel (INTC) news above is a major bullish signal for this space, but this space is so huge that one stock isn’t enough to move the entire sector. Choose where you want to be in tech carefully. Buy semiconductor and computer hardware stocks – INTC, AMD, TXN, HPQ.

Retail – TGT, WMT, BBY, SHLD, COST, BJS, etc – Analysts are bearish on this space, but I’m taking a bullish stand. Certain retailers are taking losses, but ultimately, like I said in my first recap, this space will give you a single digit gain (which is better than a loss). People are still buying Christmas presents and not everyone is without a job. With that being said, retailers will still flock to the variety stores, Wal-Mart, Target, BJS. As mentioned in last week’s recap, with the holidays upon us, this space is always a good play. Be conscious of where in this space you choose to be, buy the retailers associated with the holidays. Stay away from the home improvement centers like HD and LOW and high end department stores like SKS and M. Target, Wal-Mart, Sears, Costco and BJS amongst others in this space will continue to benefit from shoppers of all levels that are looking for value and convenience.

Consumer Staples – CL, PG, CLX, UN, etc – Strong buy. This space isn’t doing as well as it does traditionally, but out of a majority of the other sectors, this is the safest place to be. Consumer staples are stocks that despite a downturn in the economy, people still have to buy. Things like soap, cleaning products, toothpaste, detergent, etc. This sector is not immune to downtrends, but is somewhat “protected”. I would allocate anywhere from 25%-50% of my portfolio’s holdings in this sector.

Closing Note

Please research the companies you choose thoroughly before buying them. A lot of information can be obtained from sites like CNBC.com, Bloomberg.com and CBS Marketwatch.com. It all depends on your level of risk tolerance and time horizon. Pay attention to the various economic factors that are going on and trade accordingly. A simple plan would be to buy what the “smart money” buys. One thing we constantly remind ourselves of on our trading desk is – “This is real money we’re trading with not monopoly money. Mistakes cost.”

With that being said, have a blessed week and HAPPY TRADING!

Disclaimer – Michael Greene does not guarantee that any or all of the stocks noted in this recap will make a profit. It is an opinion of the author.

Tags: economy, Finance, Investing Your Green, market, michael greene

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“Investing Your Green”: Recap for the week ending 12/05/08

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