Finally, we are getting some broadening out of this rally. Up until now, the rally was marooned in the commodity sectors, a Chinese reflation trade gone parabolic. But now we’re seeing significant moves in real companies whose cash flows do not rely upon the superfluities of some Prince in Saudi Arabia.
Some of the standouts include FIT (+10%), EBIX (+9.6%), TWOU (+6.7%), AMBA (+6.6%), MU (+5.5%), ATVI (+4.2%), TWTR (+3.7%) and GRMN (+4.3%).
On the back of those stellar JPM numbers, bank stocks are up more than 3%, led by DB (+8%), SIVB (+6%) and C (+5%).
There are a slew of high profile names moving higher in a very strong manner. Breadth stands at 77%, also strong.
According to Exodus, the top short squeezes are occurring in EBIX, X, AKS, LXU and SGMS. In the momentum tracker, SID, UNXL, GGB, WETF, FTK and CLF are standouts.
Additionally, I’ve created a screen that digitizes technical analysis to find a specific “look” on a chart, one that produces stocks that are trading in a consolidation, sideways pattern, about to breakout.
Here is the first page.
In all, this is the best rally day in some time. Everything is clicking, even bonds and the dollar. Everything is up. My sole bias and short position lies in the large oil companies, whose shares are egregiously overvalued. It’s one thing to buy CHK at $3 and to see it double because it’s not going bankrupt–at least not yet. It’s another thing to buy XOM and CVX, ad nauseam, thinking earnings power warrants a soaring stock price.
It does not.
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If you had a long time horizon (10+ yrs if need be) and got a good chunk of FCX at 4.00, would you sell here or hold out for a possible monster win down the road? Thanks in advance, ma lord.
Personally, I would sell.
Here’s my opinion, in the case of industry downturns, it is fine to bottom pick. I am long an energy company, actually. However, the question you should ask is, “Can this company survive?” In this manner, you can distinguish between a negative-earings (or low earning, high PE) growth company like AMZN and a negative-earnings materals/energy play.
In the case of FCX, they have a 4+ quarters of negative earnings as evidenced by the Income Statement, which is growing worse, and no reason that this would change in the near future (12 months).
So next, look at the Balance Sheet. Net Tangible assets is positive, which means that if you coudl sell everything at Face Value, the company is worth ~$8B. This is also dropping rapidly, however. Keep in mind the negative cash earnings and the fact that you are paying $13B at current stock prices for the company.
The Balance Sheet also shows $19B in debt, which is a lot considering that almost all of the company’s assets are in Plants and Equipment ($38B), of which their is an industry surplus, (obviously) so it’s not as if they could sell a lot of assets to make short-term money.
The Income Statement also notes $645M in interest payments in 2015Q4, and a net of $0 for Q1-Q3. This is strange in itself (usually interst payments are realtively steady) and needs to be researched by a long term investor. I suspect that the loans/bond payments were backloaded, similar to many subprime housign loans, and I suspect the interst payments will only go up in the future
Lastly, looking at the qurately Cash Flow statements, it is doubtful that they will be able to continue making their debt payments, as the Operating Cash Flow ($612M in 2015Q4 and dropping), is less than thier interest payemnts. This doesn’t even account for the huge Cap Ex expenditures that they make each quarter (>$1B). Back to their Balance Sheet shows that Cash and Equivalents is $224M and dropping rapidly, so they can’t drain that to make the interst payments, so the possibility of defaultign on their debt is high, which isn’t good considering that bond holders get apid before stock owners.
I guess I shoudl add I’m not an investment professional and I have no positions in any material stocks, etfs, etc.