The market is attempting to test the all-time highs once again. This upward movement is dwindling the number of companies on our watch list. In fact, this is the lowest number of companies on our watch list this year. Continue reading
Posted in Dividend Achiever Watch List, Dividend Achievers, Dividend Watch List
Tagged members
Below is the inflation rate in America from the colonial period to 2012.
source:
Overview
Below are the number of indicated famines by century in both England and Ireland from 0-1845 A.D. as found in the work of Cornelius Walford’s work “The Famines of the World: Past and Present” as found in the Journal of the Statistical Society of London.
Below is a chart of Craft Brew Alliance (BREW) from 1996 to 2019 reflecting the year-over-year (YoY) percentage change.
Review
On September 1, 2016, when Craft Brew Alliance (BREW) was trading at $19.41, we said there was considerable downside risk. BREW fell nearly -40%.
On April 7, 2017, we indicated that the downside had effectively run its course after falling to $13.15. BREW increased in price from that point forward.
On December 16, 2017, we highlighted a downside pattern that seemed likely from the price of $19.20. That pattern has finally played out.
Today
Many questions remain about the direction of BREW. One element is certain, our reasoned assessment in real time on the stock. Below is the pattern that has played out and will likely not be repeated going forward. This means that it would be absurd to expect minimal downside risk and retest of the prior high from the current level at $9.69.
Speculators should be willing to lose it all and watch the stock decline to $7.11 and $5.34. However, in spite of that warning, the 1,2,3 & 4 pattern has been successfully replicated as outline in the December 16, 2017 article, suggesting a temporary low has been achieved, for now.
Posted in BREW
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 August 31, 2018 and have checked the performance one year later. The top five companies on that list can be seen in the table below.
| Symbol | Name | 2018 Price | 2019 Price | % change |
| LM | Legg Mason | 31.20 | 36.79 | 17.9% |
| IVZ | Invesco Ltd. | 24.10 | 15.70 | -34.9% |
| AMAT | Applied Materials | 43.02 | 48.02 | 11.6% |
| BEN | Franklin Resources | 31.74 | 26.28 | -17.2% |
| VMC | Vulcan Materials | 110.80 | 141.25 | 27.5% |
| Average | 1.0% | |||
| DJI | Dow Jones Industrial | 25,964.82 | 26,403.28 | 1.7% |
| SPX | S&P 500 | 2,901.52 | 2,926.46 | 0.9% |
The average gain for the top five companies was 1.0% which is comparable with S&P 500 gain of 0.9%. The best performer was Vulcan Materials (VMC) with 27.5% gain. The worse performer was Invesco (IVZ) with a loss of 34.9%.
U.S. Dividend Watch List: August 30, 2019
Our team is starting to get defensive and raised more cash. However, we will always utilize the watch list below as a starting point for investment opportunities. Continue reading
Posted in Dividend Achiever Watch List, Dividend Achievers, Dividend Watch List
Tagged members
The NLO team executed the following transaction(s): Continue reading
On August 4, 2019, we said the following of Consumer Sentiment:
A trend doesn’t define the future prospects. However, we believe that the declining trend has not completely played out. This means that we expect that the economy and stock market will languish, in the best case scenario.
Alternatively, if the Dow Jones Industrial Average can exceed the 28,750 level, the Consumer Sentiment Survey will reflect this change of direction and move above the short-term peak of May 2019.
On August 30, 2019, the University of Michigan Consumer Sentiment Survey (UMCSENT) came out with a reading of 89.8 for August 2019.
The year-over-year change in the index, along with the Dow Jones Industrial Average (DJIA), is charted below:
So far, our belief (that the trend for consumer sentiment is down) has played out. This was not a feat of economic forecasting, just an observation of the overall trend since the October 2017 and January 2018 peaks in the UMCSENT and the DJIA, respectively.
A quick resolution on the tariff front could bode especially well, pushing the DJIA higher (on a YoY basis) which will be quickly translated into the UMCSENT.
Data Review
Some discussion has been made of the fact that on a month-over-month (MoM) basis, the August 2019 UMCSENT number has declined the most in seven years. However, the -8.74% MoM decline ranks 25th among the largest declines since the inception of the UMCSENT. We’re in a wait and see mode as the economic picture evolves. We believe that the DJIA will be the real-time indication of the direction for the September 13, 2019 release of the UMCSENT.
See Also: Dow’s Theory on Consumer Sentiment
Below are the valuation targets for Costco Wholesale Corp (COST) for the next 10 years. Continue reading
On January 28, 2014, Barry Rithholtz came out with a piece about Lowry’s 90/90 Day indication. The article suggested that more downside days were likely as 90% downside days were not quickly resolved to the upside.
On January 31, 2014, we reviewed the available data on Lowry’s 90/90 Day indicator. Our concluding commentary at the time was as follows:
“The result of our narrow interpretation of the data indicates that the average decline of the market, by the time of the first 90% Downside Day, was -48% of the total expected decline.”
“What does this analysis suggest for the January 24, 2014 90% Downside Day? On the conservative side the Dow Industrials could bottom at 15,144.16. On the extreme the slide in the market could end at 14,076.66.”
Below is the illustration of where the January 24, 2014 decline stood relative to the peak at 16,576.66 and the bottom at 15,372.80 and the subsequent rise that followed.
A distinction that needs to be made is Rithholtz’s assertion that the 90% Downside Day was reflective of an impending decline of at least –10% in the market. However, our limited review of the data has suggested that the very first 90% Downside Day had typically come when almost half of the down move had passed.
More data is needed so drop us a line if you see any reference to the next 90% Downside Day and we’ll run the numbers again to see what the market might do.
Posted in 90%, Lowry's, Paul Desmond, Rithholtz
Review
On May 5, 2011, when the iShares Silver Trust (SLV) was trading at $34.39, we said the following:
“What remains is a high level of uncertainty for (SLV) going forward. However, in general, we should see SLV tread water for a brief period of time before falling back to the prior low which began with the current run back in November 2008. Dow Theory suggests that a reasonable buying opportunity would exist at below line B (blue line B). However, we wouldn’t jump in at the slightest move below line B. Instead, we’d like to see the price decline to the dashed blue line at $15.41 or below.”
The chart below highlights the points of interest on the iShares Silver Trust (SLV) based on the peak price, the date we gave downside targets and the first date that the price of SLV closed below our target of $15.41.
Since our May 5, 2011 posting, SLV has not exceeded the prior peak of $47.26. Additionally, SLV has reached the $15.41 level and has outlined a significant basing pattern at that price point. Using the price of silver, we will outline the upside resistance targets based on the December 2015 low. Continue reading
Below is a chart of Wells Fargo (WFC) from 1973 to 2019 reflecting the year-over-year (YoY) percentage change.
Below are the valuation targets for Wells Fargo (WFC) over the next 10 years. Continue reading
Posted in 10-year Targets, Altimeter, WFC
In James Grant’s book Minding Mr. Market, in an article titled “Hot Light On GE” that was originally published September 14, 1990, Grant highlights a curious thought experiment (emphasis ours):
“In the time saved by not visiting GE headquarters in Stamford, Connecticut, Jay Diamond, our associate publisher, compiled a fascinating historical table. The information describes the parent company’s consolidated finances in a succession of business downturns, starting with 1932, which happens to be the year in which the forerunner to GECC was started. It ends in what may or may not prove to be a recession year, pending statistical revisions, 1989. Evolution has meant more leverage, thinner coverages, lower returns on assets, and rising contributions to consolidated income by financial activity.
“Interestingly, GE’s debt rating hasn’t changed in the past fifty-eight years, even though its financial profile has. At the bottom of the Great Depression, long-term debt was negligible, interest coverage was massively redundant, and the current ratio was better than 2:1. In 1989, a non-depression year, long-term debt constituted 77 percent of equity, interest coverage was less than 2:1 (surely a remarkably low reading) and the current ration was less than 1:1. (Grant, James. Minding Mr. Market. Times Book, Random House. 1993. page 362).”
Grant goes on to explore the various rationales given by ratings agencies as to why GE could maintain a AAA rating in spite of their deteriorating financial position. What was the outcome of this erosion of financial security while holding on to a AAA rating?
GE was rewarded with a stock increase of +1,111.97% from the September 1990 close to the October 2000 peak. Somehow, GE couldn’t lose it’s AAA credit rating until after the March 9, 2009 low, after a decline in stock price of –83.96%. In fact, GE’s change in credit status was effectively a marker for the bottom in the market.
The questions for today is, after the 2009 low and recovery in the stock market while GE sinks to the lowest level in 24 years, do we think that GE has more problems that have not been revealed since September 1990? Will the recent accusation of GE committing accounting fraud be the marker for the top after the long run-up in the market since 2009?
See also: Andrew Left is Wrong About GE
Posted in accounting fraud, book, book list, General Electric, James Grant, rating agency
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 August 17, 2018 and have checked the performance one year later. The top five companies on that list can be seen in the table below.
| Symbol | Name | 2018 Price | 2019 Price | % change |
| LM | Legg Mason | 31.44 | 36.53 | 16.2% |
| IVZ | Invesco Ltd. | 24.48 | 15.64 | -36.1% |
| VMC | Vulcan Materials | 110.34 | 141.80 | 28.5% |
| AMAT | Applied Materials | 43.77 | 46.63 | 6.5% |
| PBI | Pitney Bowes Inc | 8.08 | 3.46 | -57.2% |
| Average | -8.4% | |||
| DJI | Dow Jones Industrial | 25,669.32 | 25,886.01 | 0.8% |
| SPX | S&P 500 | 2,850.13 | 2,888.68 | 1.4% |
The average loss for the top five companies was 8.4% compare to the market gain of 1.4%. The largest contributor of this loss was Pitney Bowes (PBI) whose market value fell 57%. Any company with dividend yield of 6% or more should be avoid and Pitney Bowes had a yield of nearly 10%. We thought Illinois Tool Works (ITW) is ripe for accumulation and shares gained 7.7%. At the time, we didn't think that Applied Materials (AMAT) was attractive but shares managed to gain 6.5%. However, shares of Applied Materials did fall 33% to $29 before rebounding to the current level.
U.S. Dividend Watch List: August 16, 2019
The market was on a roller coaster. After reaching an all-time high of 3,025, the fear of recession and tariff took the market down by about 5%. There is an important technical level to watch out for at 2,745 so keep an eye on it as we wait and see if the market can consolidate to move higher or lower. Continue reading
Posted in Dividend Achiever Watch List, Dividend Achievers, Dividend Watch List
Tagged members