Week In Review

Market Overview for 11/14:

Equities were little changed, with benchmark indexes hovering around record levels. Rotation, the recently very strong health-care shares sank to offset gains among energy producers. Traders and investors weighed whether the recent rally in equities may have been overdone.

The Nasdaq Biotechnology Index lost 2 percent, led by a slump of 4 percent at Biogen Idec. Energy shares trimmed a weekly decline as oil rallied from a 2010 low. Baker Hughes Inc. extended gains after confirming it is in talks with Halliburton Co. for a potential merger. Amazon Inc. added 3.5 percent after ending a dispute with Hachette Book Group. As the vastly oversold mining group attempts to correct the oversold condition Newmont climbed 5 percent as the price of gold rose.

OverviewThe asset classes above all rose on Friday (Commodities +.7%, not shown), on the week however, five advanced and three declined. Same is true if we look at the month (21 Day), except the gold miners which are down as the other three on a monthly basis.

I decided to add something a little new here today. When I update the stock database which is a mysql database for you techies out there, I use .csv file to update. Prior to exporting to the .csv file I sorted by the change over the last 5 days then eliminated anything trading under $5. Here are your top 10 stock gainers on the week.
Weekly Gainers

Take notice of the sectors.

Sector & Asset Class Watch:

For the week in review I will sort on the 5-day change, for one week.

Screen Shot 2014-11-14 at 7.19.20 PMURA leads the weekly change with a 6.65% increase for the week of which over 5% occurred on Friday. The following three are still rated as overweight on the six month relative strength.

XLU the Utilities ETF was the 3rd worst performer on the week.  If you look at the sector charts MG910 utilities or the Index Dow Utilities you see virtually the same composite chart.

910

Most people, myself included, buy utility stocks for the dividend income they provide. When I was posting these charts on Friday I noticed the break of the Chandelier on the price chart. Not a big deal if you in for the income. More importantly what I noticed was the top indicator box of the dollar weighted advancing – declining volume and more specifically the moving average as it appears to be flattening out.

I mentioned a few times for those using options on income producing stocks to buy the stock, if you can, when it is down, as in October, and to then sell the call on the next rally. Well, this chart suggests that if you did that consider writing calls now or on subsequent rallies. If the stock goes lower you can always buy back the call for a profit.  Of course if you are doing this make sure you are aware of when the next ex-dividend date is.

Watch Lists Updated: 

Both the Kirkpatrick and the “50” Watch lists have been updated.  There are four additions to the 50 list:

IBD Adds

Perhaps tomorrow I’ll look at some charts and see if we can’t plan some strategy.

The Role of Luck

You will see on occasion in the talking points section, articles by Robert Seawright, chief Investment & Information Officer for Madison Avenue Securities. The article being referred to here is: Betting on Investment Skill (link at bottom of this section).  I originally discussed this article over a year ago in these notes. Reviews are important to remind you and I.  As an aside, I know Bob personally and he appears on my Linkedin list of references. I would like to excerpt parts of this fantastic article which hopefully will give a great understanding of the role of luck along with skill and give you an incentive to click on the link and read the full article.

In 2006, the TradingMarkets/Playboy 2006 Stock Picking Contest was won by Playboy’s Miss May of 1998, Deanna Brooks. Her portfolio, which bet heavily on oil and gold stocks, gained 46.43 percent on the year and every stock in it provided double-digit returns…It wasn’t her only nugget of sterling analysis. She also liked Petrobras because “oil is making money” and IBM because computers “aren’t going away…A higher percentage of participating Playmates bested the S&P 500′s 2006 returns than active money managers. Think about that for a moment. Over the course of a full year, a bunch of Playmates outperformed a whopping majority of highly trained and experienced professionals with vast resources who spend all day every day trying to beat the market.

It’s easy to say that the Playmates got lucky, and they did. But we’d never expect a guy swimming laps at the YMCA to beat Michael Phelps across the pool, a girl off the street to beat a Grandmaster in chess, or an unschooled janitor to solve an insanely complex math problem amidst a spot of cleaning in the afternoon that the best and the brightest need years to figure out. Not even once.

It’s also important to emphasize … the paradox of skill when it comes to investing. As overall skill improves, aggregate performance improves and luck becomes more important to individual outcomes. On account of the growth and development of the investment industry, John Bogle could quite consistently write his senior thesis at Princeton on the successes of active fund management and then go on some years later to found Vanguard and become the primary developer and intellectual forefather of indexing. In other words, the ever-increasing aggregate skill (supplemented by massive computing power) of the investment world has come largely to cancel itself out….

As Morningstar’s John Rekenthaler argues, in order to be successful, active management requires (a) low costs; (b) patience; and (c) skin in the game. It also demands sectors and approaches that have been shown to work over time. These include the smart-beta flavors of small-company, value, fundamental weighting, equal-weighting, and momentum. Concentration can work too if the manager is especially skilled (like Seth Klarman). Low volatility has worked for a substantial period and seems to persist, but its current popularity makes me nervous.

Read the full article: Betting on Investment Skill.

Today’s Reports and Earnings:



Talking Points and Ethan Nadelmann: Why we need to end the War on Drugs:

Who Wins If Keystone XL Is Approved? (24/7 Wall St)
Inside Elon Musk’s $1.4 Billion Tesla Score –  (Fortune)
Fiscal Armageddon Greatly Exaggerated (Investing Caffeine)
The Outrageous Inside Story of the New Billionaire Wildcatters’ (WSJ)
We Need Stock Prices to Fall 25% (WSJ)
Doubting the Economic Data? Consider the Source (NY Times)
Portfolio envy: The other guy’s size doesn’t matter (MarketWatch)
A Plumbing Problem for the Internet (and the Stock Market) (NY Times)
Against Productivity: This Essay Took Four Years to Write (Medium)
Time for a ‘melt-up’: the coming global boom (Reuters)
Borrowers, Beware: The Robo-signers Aren’t Finished Yet (NY Times)
The War of the Words: How Did Amazon End Up as Literary Enemy No. 1? (Vanity Fair)
28 Important Philosophers List the Books That Influenced Them Most During Their College Days (Open Culture)
Housel: If Other Industries Were Like Wall Street (Motley Fool)

Ethan Nadelmann: Why we need to end the War on Drugs

Have a Great Day!