The NLO team executed the following transaction(s):
- Japan
- Market Indicator
- Price Momentum Indicators
- Richard Russell
- Silver
- Speed Resistance Lines
- U.S. Dividend Watch List
Gold Stock Indicator: June 2016
If you like a rising market then you definitely want the price of gold and gold stocks to increase above the level of $1,294 and 92.85, respectively. Otherwise, there will be a big blowoff in the gold market and sizable downside risk.
Good News, Bad News
U.S Dividend Watch List: June 3, 2016
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 May 29, 2015 and have checked the performance one year later. The top five companies on that list can be seen in the table below.
| Symbol | Name | 2013 Price | 2014 Price | % change |
| PG | Procter & Gamble | 77.43 | 82.47 | 6.5% |
| MUR | Murphy Oil Corporation | 42.30 | 30.40 | -28.1% |
| UBA | Urstadt Biddle Properties Inc | 19.65 | 21.52 | 9.5% |
| STR | Questar Corp. | 21.17 | 24.97 | 17.9% |
| WMT | Wal-Mart Stores | 73.06 | 70.87 | -3.0% |
| Average | 0.6% | |||
| DJI | Dow Jones Industrial | 17,849.46 | 17,807.06 | -0.2% |
| SPX | S&P 500 | 2,092.83 | 2,099.13 | 0.3% |
The average gain for the top 5 companies slightly exceeded the market. The best performer was Questar (STR) and the largest decline came from Murphy Oil (MUR). We started our review with Procter & Gamble (PG) which gained +6.5% excluding the dividend. It's no secret that Procter & Gamble is a blue-chip name. Our commentary stated that downside risk was limited and research should be initiated at currently level. It's too bad that we didn't heed our own advice on this one.
Last year, Murphy Oil (MUR) was trading at its yearly low with a 3.30% dividend yield. When we wrote about Murphy last year, oil was trading around $60. However, the price tanked and hit a low at $26. The recent rebound brought the price back to $48 but remains more than -20% below where we were a year ago. Our assessment that oil price were closer to the bottom at the time was extremely wrong. One key thing to note is that Murphy didn't cut their dividend payout and as such, their current dividend yield is north of 5%. Despite the fact that Murphy can sustain their dividend, shares should be view as speculative given the negative net income outlook.
Wal-Mart (WMT) was trading just north of $73 and our team believed that if shares could hold above this level AND continue to raise thier dividend, it would be worth considering. One of the two criteria came to fruition when board of director approved a dividend hike from $0.49 to $0.50. Despite that, the company reported a dismal third quarter last year and the techinicals broke down which took the shares down as low as $56.30.
U.S. Dividend Watch List: June 3, 2016
The conventional wisdom of sell in May and go away didn't quite pan out. S&P 500 rose more than +2%. At the end of the week, our watch list contains 15 companies. Continue reading
Posted in Dividend Achiever Watch List, Dividend Achievers, Dividend Watch List
Tagged members
Bitcoin Targets
On November 4, 2015 we posted a chart providing downside targets of $350.33 and $245.83 when Bitcoin was priced at $408.74. By November 11, 2015, Bitcoin had declined to $312.58 and we thought that there would be a continuation of the decline to $245.83. The reality was that Bitcoin never went below the November 11th low.
We were wrong about Bitcoin declining to the mid-range target, however, with the recent ascent in the price, we now need to focus on the conservative downside target based on the high of $538.15. Below we’ve outlined the conservative and mid-range downside targets.
As the price of Bitcoin increases we will have to adjust the target. For now, we’re looking to the $388.51 level based on the work on Edson Gould.
Nasdaq 100 Watch List: May 2016
Performance Review
Below is the one year performance of the stock on our watch list from May 8, 2015:
| symbol | Name | 2015 | 2016 | % chg |
| GRMN | Garmin Ltd. | 45.94 | 42.25 | -8.03% |
| FOSL | Fossil Group, Inc. | 79.62 | 27.83 | -65.05% |
| KLAC | KLA-Tencor Corporation | 59.8 | 72.7 | 21.57% |
| FOXA | Twenty-First Century Fox | 32.79 | 28.85 | -12.02% |
| NWSA | News Corporation | 15.14 | 11.93 | -21.20% |
| AMAT | Applied Materials, Inc. | 19.69 | 24.28 | 23.31% |
| NTAP | NetApp, Inc. | 35.65 | 25.45 | -28.61% |
| SNDK | SanDisk Corp. | 67.72 | 76.18 | 12.49% |
| MU | Micron Technology, Inc. | 27.18 | 12.63 | -53.53% |
| FAST | Fastenal Company | 42.72 | 45.99 | 7.65% |
| ALXN | Alexion Pharmaceuticals | 163.02 | 151.12 | -7.30% |
| WYNN | Wynn Resorts Ltd. | 117.84 | 96.81 | -17.85% |
| DTV | DIRECTV | 89.38 | 93.55 | 4.67% |
| DISCA | Discovery Communications | 31.33 | 27.88 | -11.01% |
The performance of the Watch List from last year averaged a loss of –11.06% which was well below the Nasdaq 100 Index change of +1.71% over the same period of time. The stock that gained the most was Applied Material (AMAT) while the stock that declined the most was Fossil Group (FOSL) with a loss of –65.05%.
Analysts were able to accurately forecast the general direction of 71% of the watch list stocks, a fairly high level of success not normally seen.
U.S. Dividend Watch List: May 27, 2016
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 May 29, 2015 and have checked the performance one year later. The top five companies on that list can be seen in the table below.
| Symbol | Name | 2013 Price | 2014 Price | % change |
| NSC | Norfolk Southern Corporation | 92.00 | 84.00 | -8.7% |
| HOG | Harley-Davidson Inc | 53.49 | 45.53 | -14.9% |
| PG | Procter & Gamble | 78.39 | 81.43 | 3.9% |
| UBA | Urstadt Biddle Properties Inc | 20.12 | 21.00 | 4.4% |
| MGRC | McGrath RentCorp. | 30.44 | 28.41 | -6.7% |
| Average | -4.4% | |||
| DJI | Dow Jones Industrial | 18,126.12 | 17,873.22 | -1.4% |
| SPX | S&P 500 | 2,120.79 | 2,099.06 | -1.0% |
The average loss for the top five companies was -4.4%. The largest loss came from Harley-Davidson (HOG) while the biggest gain was Urstadt Biddle Properties (UBA). It is interesting to revisit our watch list and see that Harley-Davidson was part of the 10 companies added to Goldman Sachs basket of dividend paying companies. With shares down nearly -15% accompanied by a dividend hike of 13%, Goldman should really load up on Harley-Davidson. The current dividend at 3.1% with low payout ratio of 37% is rather compelling. Shares are also trading at 12x which is a deep discount to the market.
One company we touched on briefly that did relatively well was Procter & Gamble (PG). This blue-chip company managed to rise +4% excluding dividends for the year. We said that the stock is always worth considering at or near the yearly low. Not surprisingly, PG hiked its dividend to maintain its Dividend Achiever and Aristocrat rank. However, the hike of 1% isn't anything income investor would necessarily cheer for. Using this as a proxy, we believe that PG may face difficult consumer market in the months ahead.
U.S. Dividend Watch List: May 27, 2016
It was a good week for the market with the S&P 500 rising more than +2%. Year-to-date, the market is up +2.7%. By the end of the week, there are 18 companies on our dividend watch list. Continue reading
Insurance Watch List: May 2016
Performance Review
Below is the performance of the stocks listed on our watch list dated May 2015:
| symbol | Name | 2015 | 2016 | % chg |
| GLRE | Greenlight Capital Re, Ltd. | 30.24 | 20.40 | -32.54% |
| PNX | The Phoenix Companies Inc. | 33.30 | 36.93 | 10.90% |
| CRD-B | Crawford & Company | 8.25 | 8.23 | -0.24% |
| ACE | ACE Limited | 107.63 | 137.79 | 28.02% |
| RNR | RenaissanceRe Holdings Ltd. | 103.09 | 114.93 | 11.49% |
| BRO | Brown & Brown Inc. | 31.85 | 35.74 | 12.21% |
| Average | 4.97% |
Ace Limited gains are estimates based on the stock price change since the acquisition of Chubb Limited (CB). Ace Limited changed its name to Chubb and assumed the same stock symbol.
Market Outlook
On our watch list summary dated May 1, 2015, we said the following:
“Is the U.S. insurance sector running out of gas? By the looks of the chart below, all indications are that the glorious run from the 2009 low may be over. The iShares US Insurance ETF (IAK) seems to be running out of steam just as it approaches the previous high set in 2007. A breakout to the upside is possible but not before taking a break to the downside.”
Since May 2015, the iShares US Insurance ETF (IAK) has traded in a range with some downside action and very little upside movement.
American insurers are making a nice recovery higher from the lows set in mid-February 2016. However, looming ahead is the double top indicated at points A and B on the chart. Failure to exceed these points could result in a decline below the February 2016 low. Alternatively, a breakout to the upside could be especially profitable for investors.
What is an investor to do under these circumstances? It is worth noting that last year we said there was considerable risk of decline in the insurance sector, however, we also bought a couple of American insurance stocks. both of those stock did exceptionally well relative to IAK, garnering gains of more that +20% each, relative to the IAK gain of +5%.
Transaction Alert
The NLO team executed the following transaction(s):
Canadian Dividend Watch List: May 2016
Performance Review
Below is the performance of the stocks found on our watch list from last year compared to what analysts projected the stocks would do.
analyst estimate in red, actual performance in blue
The first five stocks found on the watch list lost an average of –4.38% compared to the entire list which averaged a decline of –2.44%. The performance of the list is contrasted with the –7.73% change with Toronto Stock Exchange.
Herb Greenberg Review: Gems in Frothy Market
On this date in 1996, Herb Greenberg, financial writer for the San Francisco Chronicle, talked about how to find potentially undervalued small-cap stocks in an overvalued stock market. Greenberg advised investors to review 13-D filings of small-cap stocks where an investor has recently accumulated a position greater than 5%. This increase in ownership implies that the shares are undervalued. Naturally, a review of the company fundamentals is necessary before any action can be taken.
The one and only company mentioned by Greenberg in regards to a 13-D filing of 5% or more was Merit Medical Systems (MMSI). Merit, a maker of disposable products for heart catheterization procedures, has not disappointed since mid-May 1996. As seen in the chart below, MMSI has outpaced the S&P 500 by 3 times. It is no small feat to beat the S&P 500 when you consider that MMSI also exceeded Berkshire Hathaway, Intel and IBM in the same period of time.
Of course, this is an example that only confirms survivor bias & single sample data, not the most robust assessment. However, the point remains, in a market that appears overvalued there are still ways to sort small-cap stocks for those who must be in the game.
Posted in Herb Greenberg Review, MMSI
U.S. Dividend Watch List: May 13, 2016
Performance Review
In our ongoing review of the NLO Dividend Watch List, we have taken the top five stocks on our list from May 15, 2015 and have checked the performance one year later. The top five companies on that list can be seen in the table below.
| Symbol | Name | 2013 Price | 2014 Price | % change |
| NSC | Norfolk Southern Corporation | 97.56 | 85.97 | -11.9% |
| OTTR | Otter Tail Corp. | 26.97 | 29.73 | 10.2% |
| CTBI | Community Trust BanCorp. | 32.18 | 34.82 | 8.2% |
| BKH | Black Hills Corp. | 47.69 | 60.44 | 26.7% |
| GRC | Gorman-Rupp Company | 27.04 | 26.93 | -0.4% |
| Average | 6.6% | |||
| DJI | Dow Jones Industrial | 18,272.56 | 17,535.32 | -4.0% |
| SPX | S&P 500 | 2,122.73 | 2,046.61 | -3.6% |
Watch List Review
The average gain from the top five companies was satisfactory. The average gain of 6.6% far exceed the decline in the Dow Jones Industrial and S&P 500. Black Hills (BKH) was the biggest contributor to the success. The South Dakota utility company earning was virtually flat for the year. We are not quite sure what driver pushed the stock higher by more than 25%. The only thing we can think of is the search for yield. Similarly, Otter Tail (OTTR), experienced similar rise in share price. As negative yield spread and the search for income continue, utility sector will be the sector which institutions turn to. This is only our thesis but one can look at Dow Jones Utility Average for confirmation. The index rose 14% while the Industrial fell 3.6%.
The biggest drag to the top five came from Norfolk Southern (NSC) which lost nearly 12% for the year. When shares were trading at $97 last year, we pointed that Value Line estimated fair value of $90 which turned out to be a wise call. Operating in rail industry can be profitable because of the oligopoly nature in the industry. However, it is capital intensive and can be very cyclical. The slow down in the energy sector has a large affect on the rail business.
Tiffany Co. (TIF) was one name we highlighted and took position. The purchase didn't pan out as well as we'd hope for. Originally when we purchased the stock in late April of 2015, shares were trading in the mid 80s. It quickly rose to $95 at the end of July before plunging to the current level. The thesis for this purchase is the brand value and double digit return on equity. Those factors remain in tact and we are evaluating whether additional position should be taken at this level.
U.S. Dividend Watch List: May 13, 2016
It was another volatile week with the S&P rose above 2,080 but closed the week below 2,050. The index lost 0.5% for the week and is virtually flat for the year. Weakness in the market is providing long term investor with more companies to comb through. Below are 24 companies on our dividend watch list for the week. Continue reading
Posted in Dividend Achiever Watch List, Dividend Achievers, Dividend Watch List
Tagged members
Apple: Fallen and Almost There
On January 8, 2016, we posted the following chart:
That red line that says 150 was our projected downside target based on the historical average from as far back as 2004. The update to this chart is below (Altimeter levels adjusted for dividends):
Apple is on the cusp of hitting that downside target. What happens if the stock breaks through on the downside, then you’d want to consider the investment merit of the stock based on conservative fundamental data. Keep in mind that the current P/E ratio of 10 should jump before the stock marches higher.
Do you remember that article we posted on September 23, 2012, about how adding Apple (AAPL) to the Dow Industrials would be “not so great”? Yeah, well, since being included into the index on March 19, 2015, Apple has declined –28% and the company that it replaced, AT&T (T), has increased +19%. True to form, the inclusion of Apple into the Dow Jones Industrial Average coincides with decline in the stock price. The adjustment period should be coming to an end. Let’s see how this plays out.
Posted in AAPL, Altimeter, Apple Computer, Edson Gould
Gold Stock Indicator: May 2016
You want higher gold prices? You got higher gold prices. However, we have to add, be careful what you ask for. The anxiety associated with what's gonna happen next in gold and gold stocks will have investors and speculators looking over their shoulders. This will mean many sharp declines and dramatic recoveries.
In the month since our last posting, gold has increased only +6.21% while the price of the Philadelphia Gold & Silver Stock Index (XAU) has increased +26.97% in the same period of time.
In our October 3, 2014 posting, regarding the XAU Index, pointed out the following:
“In the chart above we have labeled the three potential downside targets of 75.99, 67.55 and 59.11 from the current level with the additional downside target of 41.85 as the ‘last stop’ in our downside analysis. Anything below the ascending 76.32 level is considered undervalued and underappreciated.”
Little could we have known that the index would actually decline to 38.84, a level below the end of the last bear market that ran from 1996 to 2000. The chart below points to where the current run up could meet significant resistance.
Coppock Curve: April 2016
The Dow Jones Industrial average rose +0.5% in April. After flashing a buy signal the previous month, the indicator turned negative which is a flash signal. We noted that the pattern was similar to the one that occurred in 2001. Although this may be a false signal, we're standing pat on our investments and would continue to allocate additional funds if and when the indicator flags another buy signal. Continue reading
Nasdaq 100 Watch List: April 29, 2016
Performance Review
Below is the performance of the Nasdaq 100 stocks from our April 24, 2015 watch list:
| symbol | Name | 2015 | 2016 | % chg |
| KLAC | KLA-Tencor Corp. | 58.89 | 69.94 | 18.76% |
| GRMN | Garmin Ltd. | 46.19 | 42.63 | -7.71% |
| FOSL | Fossil Group, Inc. | 83.75 | 40.5 | -51.64% |
| FAST | Fastenal Co. | 41.63 | 46.79 | 12.39% |
| WYNN | Wynn Resorts Ltd. | 130.09 | 88.3 | -32.12% |
| SNDK | SanDisk Corp. | 67.92 | 75.13 | 10.62% |
| NTAP | NetApp, Inc. | 36.12 | 23.64 | -34.55% |
| NWSA | News Corp. | 15.53 | 12.42 | -20.03% |
| QCOM | QUALCOMM Inc. | 68.24 | 50.52 | -25.97% |
The analyst estimates of one year ago are compared to the actual performance. As can be seen, 3 of 4 stocks expected to decline did while 2 of 5 stocks rose in price that were anticipated to rise.
We mentioned or discussed a few stocks of interest at the time. QCOM and FOSL bombed while SNDK and KLAC exceeded expectations. However, the one stock that stood out the most was regarding NetApp (NTAP). At the time, we said:
“Investors should remember that with analyst estimates for a +44% gain in the coming year, there is the possibility that expectations are so high that any minor earnings or revenue miss could crater the stock. In spite of the potential negatives, we think that NTAP could be a takeout target in the next year.”
While there was some talk of NTAP as an acquisition target, the reality was that it was just talk and not much else. However, the most important issue at the time was proven to be correct, excessive expectations of gains by analysts were met by the most negative divergence in performance.
Nasdaq 100 Watch List