Weekly Market Assessment
Drum roll please...last week we received the jobs report for November and it was a huge surprise! 321,000 jobs were created compared to the 220,000 that analysts had predicted. Wow! This is huge as it's the biggest monthly improvement since January 2012! It looks like the economy may finally be catching some momentum as the average monthly job numbers are now well above 200,000 per month. As it pertains to the market, we have seen a slow and steady improvement. Just as shown in the jobs reports, the market has mirrored it's same incline. The DOW and S&P 500 are once again having a year where double digit returns are being made (hard to believe after a year like last year). A secular bull market can run for many years and if the economy continues to improve at this rate, every correction the market offers should be bought like all previous corrections in the past. It seems impossible to pull the trigger when a market looks to be in free fall however, buying equities requires a stomach for risk and taking that risk comes reward."Bull markets do not die from old age, they die from excesses and recessions!" - Leon Cooperman. Quantitative easing ended (almost forgot about that program) and the fear of inflation entering the market so far hasn't panned out. The dollar is at 4 year highs and crude oil is falling to lows not seen since 2009. Could it be possible that the Federal Reserve had the mechanics of the market really under control and was ahead of its time with its unconventional approach to monetary policy? As of right now, the answer is yes! I cannot argue with the facts. However, what was suppose to happen with their approach was going to create the exact opposite of what is currently happening in the market as we speak. Although we could guess the affects in the future, anything is possible. However, as mentioned earlier; a secular bull market can last many years. For now, its onto new highs and attempting to buy on any market dips!
The Rant: Going Off on a Tangent with My 2 Cents
Nothing this week
Making the Watchlist: Below are the stocks that I will be looking at over the coming months. I will provide the the current stock price and why I am watching them. I will comment on them as I continue to keep an eye on them. You will be able to see and follow their growth and/or decline. Chart links may be attached.
SeaDrill (SDRL) $11.06 - The company announced that they would suspend their dividend and use this extra cash to buy back 10% of its shares outstanding and also use this extra cash to reduce debt and when prudent reinstate its dividend in the future. I look at this as a positive in terms of management taking an active approach to fundamentally protect its balance sheet as it pertains to current crude oil environment. Large investment funds most likely had to exit their SDRL position due to the fact that some firms can only hold shares in companies that do have a dividend and this is where the massive selling I believe has come from.
From the Trading Floor to the Option Pit: A quick look at whats on the trading desk:
S&P 500 (SPX) -No Trades
SPDR S&P 500 EFT (SPY)- Follows the S&P 500. Took a 35% loss on this option position. I have again gone to next week and bought another out of the money "PUT" at 203.5 to continue to protect my net long positions.
Lululemon (LULU) - I have sold out of this position for myself and clients and captured a 9% and 11.5% return. This position was held in most account for at least 6 months. After their recent earnings report on Wednesday I was able to finally exit this position.
Continental Resources (CLR)- I have previous held this company before and since a continued sell off in crude oil it has dragged CLR down with it. Current cost basis is ~$34.
Seadrill Limited (SDRL)- After suspending its dividend due to low crude prices SDRL last almost half it value, dropping over 10 billion dollars in little over 2 weeks! I have bought shares here at 11.25. It looks to have found support at ~11. Its worth holding on any crude bounce and the fact that it is one of the largest off shore drillers in the world whose valuation has been cut my more than half!
FireEye (FEYE) - I have purchased more shares of FEYE as a recent sell off after the Sony hack exposed tens of thousands of employees identities didn't seemed justified, even when Sony has hired FEYE. I have built a decent position in FEYE and will be looking to use options to trade around this position.