U.S. Dividend Watch List: October 2, 2015

The market roared back this week and started the month of October strong.  However, this is after a 7% decline in 3rd quarter.  Trading this market can be difficult but long-term investors should find some value from out watch list.  Below, you will find 39 companies that may be worth exploring. Continue reading

GoPro: Extreme Downside Target Achieved

On October 8, 2014, when GoPro (GPRO) was trading at $89.93, we said the stock had a conservative downside target of $68.93 and an extreme downside target of $31.28.  On December 23, 2014, after falling to the mid-range target of $45.50, we thought that the rout in the stock was over, for the most part.  Although we thought that there was resistance at the $60 level, we figured an investment from the December 23rd level was acceptable with only a portion of the intended investable funds.  We suggested “…putting only ¾ of the intended amount into GPRO with the remaining ¼ for the ‘unlikely’ event of falling to $31.28.”

Unfortunately, GPRO was never able to sustain the initial $60 level and fell as low as $37 before making a discernable rebound.  It was from this level ($37), that GPRO did make a surge to $65.  However, the $65 level was not to last as GPRO declined to the extreme downside target that was indicated as early as October 2014.


Now that GPRO has declined to the extreme downside target, a cursory review of Value Line Investment Survey is in order.  Based on the October 2015 Value Line, GPRO is short on meaningful data.  However, the analyst for Value Line has the following thoughts:

  • Sales are surging
  • costs and expenses are declining
  • Bottom line figures are now in the positive
  • 2015 earnings have been increased

The analyst for Value Line has the closing remark that “…the recent price correction may afford risk-tolerant accounts an attractive entry point…”  At the current price, we can’t argue about attractiveness but the future risks are the only concern.

Nasdaq 100 Watch List: September 25, 2015

Dow Industrials Additions and Deletions

On September 23, 2013, the committee that makes changes to the Dow Jones Industrial Average added and dropped three companies from the index.  The three companies dropped were Alcoa Co. (AA), Hewlett-Packard (HPQ) and Bank of America (BAC).  The three companies added to the index were Nike (NKE), Goldman Sachs (GS) and Visa (V).  Below is the price performance of all six companies since those changes to the Dow Jones Industrial Average were made.


Worth noting is the fact that Alcoa Co. and Hewlett-Packard exceeded the price performance of all three additions to the index until June 2015.  Nike and Visa have recently achieved outperformance of all three stocks dropped from the index, however, if the current decline in the stock market continues, we suspect that the recent gains of Nike and Visa could be short lived, until the eventual rebound in the market.

On March 19, 2015, Apple Co. (AAPL) was added to the Dow Jones Industrial Average while AT&T (T) was dropped from the index.  The performance of the two stocks since that time shows Apple down –10.06% and AT&T down –3.10%.


The outperformance of stocks dropped from an index is not as unusual as it would seem.  Typically, index managers tend to drop stocks that appear weak in price performance and going through a transition to resolve the internal issues contributing to their weakness.  At the same time, stocks that are added to an index just coming off a period of exceptional growth and are about to experience a readjustment period resulting in a decline in their stock price.  The result is stocks being added to the index will adjust lower in price while the timing of the companies dropped from the index coincides with a resurgence in earnings surprises and increased stock price.

Real Estate: Cycle Analysis

On December 9, 2010, we wrote an article titled “Real Estate: The Verdict Is In”.  At the time, we said the following:

“As we come to the close of 2010, it appears that based on the narrow scope of sources that we’ve selected, the bottom in real estate has come and gone.”

Our call of a bottom was a bold claim at the time because of the following points against a rise in real estate:

Each of the above ideas were probably legitimate on their own and in a vacuum.  However, financial markets tend to discount all of the issues that are generally known.  Only a “black swan” event can take away the discounting mechanism of the markets.  Thankfully, it is precisely because a “black swan” can’t be predicted that makes it out of the purview of any market analysis.

Through the passage of time, we have been able to see that our guess for a bottom in the real estate cycle was fairly close, based on the indicators presented at the time.  This article will review the indicators that we cited in previous works.  Finally, we’ll review the real estate cycle as described by Roy Wenzlick, which is the basis for much of our projections on this topic.

The first indicator is the Housing Starts of New Privately Owned Housing Units.  Since our December 2010 article, the indicator has increased +124.44%, or more than double.


The next indicator is the Real Estate Loans at All Commercial Banks.  This indicator should be clear, if banks aren’t lending then homes won’t be sold.


The next indicator plots the price of real estate for the U.S.  Although there are regional differences, the general trend is the most important for assessing if a “rising tide is lifting all boats”.


Real Estate Cycle Analysis

Below we’ve included a revised and adjusted chart of Roy Wenzlick’s cycle of real estate based on the low of 2010/2011.

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