Monthly Archives: December 2017

U.S Dividend Watch List: December 29, 2017

Posted on December 30, 2017 by | Leave a comment

Another year is in the book and it ended on the high note. The S&P 500 rose 20% and Dow Jones Industrial Average gained an astonishing 25% for the year. This bull market is relentless and shows no sign of slowing down going into 2018. The good news for us and most investors are that being long the market is an easy bet. The toughest part, at least for us, is to fine new investment as small amount of companies trade near the yearly low. However, utilizing the list below, we believe, will give us the best chance of succeeding in the long term.

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Insurance Watch List: December 2017

Posted on December 29, 2017 by | Leave a comment

Below is our year-end review of the insurance stocks with a market capitalization of $1 billion or more. 

Berkshire Hathaway has been given special consideration in a single post dated December 19, 2017 with our 2018 fair value, overvalued, and undervalued targets which have been achieved every year since 2012.

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Gold Stock Indicator: December 2017

Posted on December 28, 2017 by | Leave a comment

Below is the updated Gold Stock Indicator as of December 28, 2017:

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Oil and Gas Stock Index: December 2017

Posted on December 27, 2017 by | Leave a comment

On January 6, 2015, when the Oil and Gas Stock Index (XOI) was trading at 1,269.40, we said the following:

“…we expect the XOI index could easily fall to 1,015.10 and subsequently to the 812.08.  Those interested in the oil sector should start initiating positions at or below the ascending 1,015.10 level.”

The 812.08 would have represented a decline of –52.95% from the 2014 peak.  Instead of declining to 812.08, the XOI declined to 900.52, a decline of –47.83%. We were off by 5.12% in our projection of the downside.  However, our advice on the initiation of positions below the 1,015.10 has provided considerable investment gains.  Below is our update on the direction of the XOI.

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Bitcoin December 2017: Downside Targets

Posted on December 22, 2017 by | Leave a comment

“A mob’s a monster; heads enough, but no brains.” –Benjamin Franklin

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Posted in Bitcoin, crash, entropy, parabolic

Homebuilder Confidence at 18 Year High

Posted on December 21, 2017 by | Leave a comment

In an articled titled “America's homebuilders haven't felt this good since 1999” found on Yahoo!Finance dated December 18, 2017, it is noted that homebuilders confidence is “…now at a higher level than it was at any point during the housing bubble.”  Does this mean that a crash in the housing market is coming?

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To clarify whether a crash is coming, we’ve taken the data that is referenced in the article and laid bare the elements of a real estate market cycle.  In the article it is said that the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) “…hit an 18-year high of 74, topping expectations for a reading of 70 and well above last month’s reading of 69.”

As we’ve pointed out, based on the work of Roy Wenzlick, there is an approximate 18-year real estate cycle for peaks and troughs.  When we look at the HMI chart (full cycle in red), we can clearly see that major cycle lows have an 18 year period of separation.  While this is only a coincidence, it fits well with the work of Wenzlick who confidently shows this cycle (1795-1974) in his writings from 1930-1974.

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Posted in cycle analysis, real estate, Wenzlick

Berkshire Hathaway 2018 Targets

Posted on December 19, 2017 by | Leave a comment

On February 5, 2017, we said the following of Berkshire Hathaway (BRK-A) when the stock was trading at $245,646:

“The upside target to fair value is at $287,172.61, be on the lookout for this as the possible upside target for BRK-A in 2017.”

Berkshire Hathaway achieved the upside fair value target on November 30, 2017 and now trades at $297,740.  Although the gain has been only +21.20%, there is a high level of predictability in the price action of the stock.  Below we outline the overvalued, fair value and undervalued targets of BRK-A for 2018 based on the Altimeter.

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Bull Market Ranking

Posted on December 18, 2017 by | Leave a comment

Since January 2011, we have advocated against the claim that the Federal Reserve was responsible for the rise in the stock market.  Our theory has always been based on the precedent of stock market data which can be traced to periods in American history when there was no central bank.

In February 2014, we compiled enough of the necessary stock market data to show that:

“The most important concept that should be taken away from all this data is that a central bank did not exist from 1836-1914. There was no way to ascribe the gains of the market to the Federal Reserve. All iterations of a central bank with the First Bank of the United States (1791-1811) and the Second Bank of the United States (1816-1836) did not have any effect on the data sets that we have provided from the period of 1836 to 1914. In order for the claim that the current market run is based on the monetary policies of the Federal Reserve, we’d need to be able to demonstrate that the stock market would have behaved differently without the existence of a Federal Reserve (February 17, 2014).”

In that same February 2014 posting, we listed the market percentage gains that were experienced when there was no central bank in place.  We averaged the gains in the seven market cycles while having no Federal Reserve and showed that the average gain would have brought the Dow Jones Industrial Average to 17,500.  However, as time has passed and the Dow has increased, we’ve shown what the next level the Dow would need to go to in order to exceed the next highest bull market (on a percentage basis).  In November 2014, we said:

“If the Dow were to go to the extreme of rebounds with no Fed (1857-1864), then in theory the index could climb as high as 24,840 (November 2014).”

On December 18, 2017, the Dow Jones Industrial Average increased to the 24,840 level on an intraday basis. The gain from the 6,450 level is approximately +285.11%.  We think that the stock market’s ability to rise to the current level has been more about confidence in the economy and less about actions taken by the Federal Reserve.  Below we show the ranking of the current bull market to put the market action into perspective.

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Posted in bull market, Dow Jones Utility Average, Rank

2017 NLO Book List

Posted on December 17, 2017 by | Leave a comment

Below are the books that we’ve read cover-to-cover in 2017.  The accompanying links will take you to Amazon.com if you’re interested in buying the books.  Don’t forget to check out our 2016 book list.

The top three must read books from the latest list are:

See the updated book list below:

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Craft Brew Alliance: Ebb and Flow

Posted on December 16, 2017 by | Leave a comment

On September 1, 2016, Craft Brew Alliance was trading at $19.41, we said the following:

“…we have the following downside targets:

  • conservative: $12.57
  • mid-range: $10.02
  • extreme: $7.47

Although there is no assurance that the stock needs to decline to the referenced downside targets, any parabolic move must be watch closely as entropy will kick in at some point.  In this case, we believe that the ascending conservative target is a lock.”

Since September 1, 2016, BREW declined as much as –38% to the $12 level on April 18, 2017, on an intraday basis.  On April 7, 2017, we said the following:

“We don’t necessarily believe it but here we are, with BREW at a price of $13.15 and well within the range of the conservative downside target set at $12.57”"…”

Since April 7, 2017, BREW has increased by as much as +46%.  Anyone contemplating a purchase of BREW, barring a takeover by another company, should consider the exceptional increase in 8 months as a warning to protects your profits.

Below we have charted the price action for BREW and suggest that if the 2016 peak is not exceeded then the April 2017 lows will be retested and possibly violated by as much as –24% or falling to as low as $9.31.

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Posted in BREW, entropy, parabolic

Commodity Index Review: December 2017

Posted on December 15, 2017 by | Leave a comment

In February 2017, we said the following:

“For now, we have to see if the retest of the 82.10 holds while exceed[ing] the 89.93 bodes well for the commodity sector in general.”

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Posted in BCOM, Bloomberg Commodity Index, Dow Jones-UBS

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Dogs of the TSX 60

Posted on December 13, 2017 by | 1 comment

Below is our outline of the stocks that are part of the Toronto Stock Exchange TSX 60 and the rudimentary strategy of selecting the stocks based on the Dogs of the Dow investment approach.

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Dogs of the Dow: Data

Posted on December 12, 2017 by | Leave a comment

Below we summarize a point about Dogs of the Dow that is necessary for anyone who wishes to employ such a strategy.

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Transaction Alert

Posted on December 12, 2017 by | Leave a comment

On December 11, 2017, we executed the following transactions:

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U.S Dividend Watch List: December 8, 2017

Posted on December 10, 2017 by | Leave a comment

Previous Year Performance Review

In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from December 9, 2016 and have checked the performance one year later. The top five companies on that list can be seen in the table below.

Symbol Name 2015 Price 2016 Price % change
KMB Kimberly-Clark Corp. 114.61 120.11 4.8%
MDT Medtronic 73.35 81.07 10.5%
CLX Clorox 115.29 145.23 26.0%
HRL Hormel Foods Corp. 34.39 37.24 8.3%
PPL PP&L Corporation 33.51 34.50 3.0%
      Average 10.5%
         
DJI Dow Jones Industrial 19,756.85 24,329.16 23.1%
SPX S&P 500 2,259.53 2,651.50 17.3%

The top five companies gained 10.5% on average. The best performer was Clorox (CLX) which rose 26.0%. Clorox's P/E at the time of our watch list publication was 23, a high multiple for large company. One of theory we have been pondering about is the exceptional return from high P/E stocks that appear on our watch list. More assessment of this thesis is to come.

Although the average gain didn't exceed the market return of 17.3% from S&P500 or the Dow Jones Industrial gain of 23.1%, we consider return of more than 10% to be satisfactory.

The worst performer is a utility holding company,PP&L Corporation (PPL). Interestingly, PP&L is appearing on this week watch list as shares fell from $40 to $34.50. One story our team is discussing has to do with the energy usage pertaining to mining of Bitcoin or other cryptocurrency. Could this be the catalyst that propel utilities companies to higher profitability? It's certainly possible. This article on WIRED highlights important data point in that regard.

U.S Dividend Watch List: December 8, 2017

The relentless bull market marched forward. There's little sign of slowing down but a correction surely is in the future and healthy. The difficulty of seeking viable new investment in this environment is challenging but not impossible. Every now and then, the market give us the opportunity to establish a position. Many of those companies can be found by tracking our watch list for fundamental and track its technical for better timing. Below are companies on our list this week. Continue reading →

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