Académique Documents
Professionnel Documents
Culture Documents
2012 In Review
Before we discuss where we think the market is heading, let's take a look at where it's been. Here's a look back at the stock market performance for 2012:
Overall, the stock market had a strong year in 2012. There were short stretches of bearishness in the Spring and Fall, highlighted by May's 6.27% drop in the S&P 500. There was also some late-year weakness surrounding the Presidential election, and then Fiscal Cliff worries in December. When it was all said and done, the S&P 500 had a price return of 13.41% and a total return of 16.00% for the year, outpacing historical annual averages for the index. Major Index Returns for 2012: Index Price Return Total Return S&P 500 13.41% 16.00% DJIA 7.26% 10.24% NASDAQ 15.91% 17.45%
Sector Performance for 2012: The top performing sectors in the S&P 500 for 2012 were Financials, which gained 26.26%, and Consumer Discretionary, which gained 21.87%. The worst performing sectors were Utilities, which lost 2.91%, and Energy, which posted a small gain of 2.33% for the year.
www.ClarkFinancial.com
Top Stocks for 2012: Many of the top performing stocks in 2012 took advantage of the housing market rebound. Homebuilder, PulteGroup, Inc. (PHM) was at the top of the performance charts gaining more than 160% for the year. Lennar Corporation (LEN), another homebuilder, wasn't far behind.
Also benefitting from the rebound in housing were the mortgage lenders. Bank of America (BAC) gained more than 90% on the year, taking it from the worst performing bank in 2011 to the best in 2012. Moving beyond builders and lenders, there were other companies that were buoyed by housing, such as home appliance maker, Whirlpool Corporation (WHR). WHR gained nearly 120% to make it the 3rd best performer in the S&P 500. Home Depot (HD) while not on the top of the performance list, did turn in a strong gain of nearly 50% in 2012. It was also aided by housing.
The two other sectors that we expect be strong in 2013 are Information Technology and Basic Materials. Information Technology There are several reasons to be bullish on tech right now. First of all, real tech investment has been below trend for several years but growth in business investment in technology is now outpacing growth in total business investment. This coupled with the fact that banks are showing signs of easing lending requirements, could bode well for the future of the sector as spending returns to more normal levels. Additionally, tech has always grown with innovation. 2013 is setting itself up to be a remarkable year due to innovation in technology products, the cloud, social media, etc. Basic Materials We're looking at the Materials Sector as a play on what we believe will be a strengthening Chinese economy in 2012. China appears to be mounting a monetary easing campaign, which should help to support their economy, as well as the sector. We also believe that demand for materials will increase in India, and other emerging markets, as they ramp up infrastructure building again.
www.ClarkFinancial.com
Freeport-McMoRan Copper & Gold Inc. (FCX) Freeport-McMoRan's stock lost roughly 20% of its value in early December after announcing that it was buying Mcmoran Exploration (MMR), a company which had split from the larger Freeport-McMoRan organization some time ago, and Plains Exploration & Production (PXP). Both companies were bought at large premiums to their respective values at the time. We believe that the market over reacted to FCX's purchase of the oil companies, which will represent a minority of the combined companys capitalization. Freeport-McMoRan tends to be tied to the global economy. While gold prices can increase in times of economic stress, copper is one of the most macro driven commodities, and so the stock has a beta of 2.3. Revenue and earnings have been down, but with the recent stock price drop (shares fell 13% in 2012) Freeport-McMoRan trades at only 8 times forward earnings estimates. We view FCX as a good value play that is positioned to take advantage of what we see as a strengthening economy in China and global emerging markets.
www.ClarkFinancial.com
Atmel Corporation (ATML) ATML dropped 20% in 2012, finishing the year at $6.55. However, Atmel has bounced back since reaching a 52-week low of $4.37 in November. We that Atmel's touch technology is far superior to any rival product, which has earned it a place in Amazon's Kindle Fire, smartphones and tablets from Samsung, and the new Microsoft Surface tablet. This is a market that is likely to rebound as new models are introduced, and Atmel should be well positioned for an upturn in demand that would support capacity utilization and pricing. We view ATML as a strong turn around stock for 2013. We anticipate the share price returning to double digits in 2013, providing investors with healthy 50%+ returns.
PMFG, Inc. (PMFG) PFMG is the smallest of the companies on our buy list for 2013. PMFG, Inc. provides custom-engineered systems and products primarily to natural gas infrastructure, power generation, and refining and petrochemical processing markets worldwide. PFMG's stock was punished in February of 2012 following a secondary stock offering to raise capital. Additionally, it continues to face regulatory headwinds in the industry. However, we believe that the stock was over-sold by the market and is well positioned to benefit from growing market for filtration and separator products for the use in natural gas and nuclear fuel markets.
www.ClarkFinancial.com
For those with a risk profile suitable for small, speculative stocks, we feel that PFMG is worth considering.
www.ClarkFinancial.com
Under Armour, Inc. (UA) UA hit a 52-week high of $60.96 in September of 2012, and has remained in a down-trend ever since. While Under Armour has a strong brand name and image, it continues to be overpriced based on the company's financial performance relative to its peers'. This coupled with their narrowing profit margins is why we continue to recommend UA as a short.
Elan Corporation, plc (ELN) Elan recently de-merged from Prothena Corporation plc. The company has be plagued by legal issues surround the SAC hedge fund insider trading scandal. In the last 6 months, the stock price has slid from the high 14's to the low 10's. We don't see anything on the horizon that will substantially reverse this trend.
J. C. Penney Company, Inc. (JCP) JCP is an interesting situation. The company has had lackluster performance for quite some time, is currently in a legal battle with Kmart over selling Martha Stewart products, and is a favorite of short sellers. It currently has over 1/3 of its outstanding shares being shorted. Yet, there are several billionaire hedge fund managers who are taking large positions in the stock. Essentially, you have smart money on both sides of this trade. We believe the billionaires are looking at longer-term prospects for the business and the short sellers are looking at their near-term issues. Ultimately, they both may turn out to be right. For now, we agree with the short sellers and (if you can get shares to borrow) think the stock is worth shorting in 2013.
Incyte Corporation (INCY) Incyte, like Vertex, is a one trick pony. INCY is hanging its hat on a JAK inhibitors targeting myelofibrosis, called, "Jakafi". Jakafi received FDA approval back in November of 2011. YM Biosciences (YMI) has a drug in the same space called, "CYT387", that hasn't advanced to phase 3 trials, but showed promising
results from a phase 1/2 study. Additionally, Gilead Sciences (GILD) recently announced a buyout of YMI. INCY shares fell on this news for fear that CYT387 could ultimately gain the upper hand over Jakafi, thanks to the GILD relationship. We think that's true. Also like Vertex, please remember that shorting biotech stocks can be enormously profitable, but you can get burned by rumors. Choose your entry points wisely and hedge your position.
and railway links are a key part of this integration. Guangshen Railway handles both passenger and freight transportation, and should benefit from growth in these areas, as well as Chinese government policies for infrastructure development. As of 12/31/12, GSH had EPS (ttm) of $1.50, giving it a P/E (ttm) of 13.15. It boasts a solid cash position and pays a $.69 annual dividend, which equates to a current yield of 3.50%. Summary: This isn't a flashy stock that's going to make huge runs up on news or analyst coverage, but we do think it's a stock that can break out of its 52-week high of $20.12, and move considerably higher from there. At $19.74, we feel GSH is a strong buy.
Wrap Up
In summary, while we feel that 2013 will be another strong year in the stock market, we do believe it will be a stock picker's market. In other words, we don't think taking a broad-based approach of buying and holding a large, diversified portfolio is the way to go. We believe traders who hold a concentrated portfolio of only their top names, and are willing to sell at a moment's notice, will reap the most profits in 2013. As always, trade in a fashion that you are comfortable with and do you own due diligence. Don't blindly follow our recommendations, or anybody else's. Happy trading!
www.ClarkFinancial.com
Legal Disclosures
The Clark Financial Group, LLC is neither a Registered Investment Adviser, nor a Registered Broker/Dealer. This material is intended for informational and educational purposes only. It is not intended to solicit any trading in stocks or other securities. "ClarkFinancial.com" Internet web site, in reliance upon the "publisher's exclusion" from the definition of "investment adviser", as provided under Section 202(a)(11) of the Investment Advisers Act of 1940, is designed solely to provide readers, and/or prospective subscribers, with a method to evaluate and obtain general information on current events, market analysis, trade methodology, and other related information. Recipients of the Service communications do not receive investment reporting, investment supervisory or investment management services, nor the ongoing review or monitoring of an individual investment portfolio. Your use of this educational material indicates your acceptance of these disclaimers. In addition, you agree to hold harmless the publisher, seller, and instructors personally and collectively for any losses of capital, if any, that may result from the use of this material. In other words, you must make your own decisions, be responsible for your own decisions and trade at your own risk. All investors are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance is no guarantee of future price appreciation. U.S. Government Required Disclaimer
Trading financial instruments of any kind including stocks and other securities have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the stock market. Don't trade with money you can't afford to lose. This material is neither a solicitation nor an offer to Buy/Sell options, futures or securities. No representation is being made that any information contained in this material will or is likely to achieve profits or losses similar to those discussed. The past performance of any stock is not necessarily indicative of future results. Please use common sense. This report and all contents are for educational and research purposes only. Please get the advice of a competent financial adviser before investing your money in any financial instrument. Additional Disclaimer: We strongly recommend that you consult with a licensed financial professional before using any information provided in this report. Any market data or commentary used in this report is for illustrative, educational, and creative expression purposes only. Although it may provide information relating to investment ideas and the buying or selling of securities, you should not construe anything in this material as legal, tax, investment, financial or any other type of advice. If you do, it's your own fault. Nothing contained in this material constitutes a solicitation, recommendation, promotion, endorsement, push or offer to buy or sell any security by anyone involved with this research. Use of this report and information is at your own risk.
www.ClarkFinancial.com