Stocks End 1st Half Of 2016 On a High Note; Best/Worst Performers So Far; Where To Invest For Second Half Of 2016

Stocks End 1st Half Of 2016 On a High Note; Best/Worst Performers So Far; Where To Invest For Second Half Of 2016
 
 
     First, I want to wish everyone a great July 4th, as we celebrate America’s independence from Great Britain.  And this 4th of July has even more meaning, as Great Britain has just reclaimed its independence from the European Union (E.U.).  Speaking of Britain’s recent decision (June 23) — known as ‘Brexit,’ — the vote caught many on Wall Street by surprise; and, prompted a sharp, brief selloff of stocks around the globe.  The Intelligence Community often gets criticized for a failure of imagination, and/or, failing to foresee an event — which in hindsight, looks obvious.  Wall street institutions and firms pay their top analysts millions of dollars to forecast outcomes such as the recent Brexit vote.  How did they get this one so wrong?  I had been writing for days that I thought a majority of Brits would vote to succeed from the European Union, for a number of compelling reasons.  But, Wall Street seems to have fallen victim of believing what they viewed as the best outcome — which was a vote by Britain to remain — rather than what individual Britain’s wanted.  Not only was Wall Street wrong on the outcome of the vote; but, Wall Street also fails to understand that Britain’s decision to leave the E.U. is likely to be greatly beneficial to England in the mid-to-long-term.  Indeed, Britain did themselves and the rest of the E.U. a favor, in my opinion, if this decision leads to a major change in the E.U.’s detrimental economic regulations and interference in the domestic affairs of their member nations.  If not, then I believe this is the beginning of the end of the European Union.  Well, enough of that.
     The Brexit vote, and the following six trading days resulted in a move in the DOW of 1,705 points.  After an initial sharp global selloff in equities, investors and traders decided that this vote wasn’t the bad outcome that Wall Street had been warning about; and, markets recovered ninety percent of their Brexit losses by Friday’s close.  Indeed, the last week in June turned out to be the best week in the DOW thus far in 2016; and, June ended up being the best month in the DOW in two years.
     For the week last week, the DOW gained 549 points, or +3 percent, to 17,949; while the S&P 500 rose 66 points, or +3 percent to 2,102; and, the NASDAQ surged +3.3 percent to 4,862.  For the year, the DOW is +3 percent, the S&P 500 is +2.9 percent; and the NASDAQ is -2.9 percent.
Best & Worst Performers – 1st Half Of 2016
 
    — Newmont Minning (NEM)     +117%
    — Nvidia (NVDA)                           +42%
    — Gold                                                +25%
    — Telecom                                        +21.8%
    — Utilities                                         +21.2%
    — Energy                                          +14.2%
    — Consumer Staples                    +9%
 
    –Endo Pharma (ENDP)             -74%
    — Financials                                   -4.1%
    — Info Technology                       -1.17%
    — Health Care                                -0.45%
    — Consumer Discretionary      -0.1%
 
     As Vito Racanelli wrote in this weekend’s Barron’s, “technically the [post-Brexit] rebound looked solid, with 85 percent or more [stocks] up on volume on Tuesday and Wednesday.  However, many [traders] worry that the market’s been led by utility stocks which offer little growth, but are trading at rich price/earnings ratios of 20.”  Douglas Ramsey, Chief Investment Officer at Leuthold Group, told Barron’s “a rally led by classic defensive sectors isn’t bullish.  The market has been forming a long top,” in his view.
 
     But, central banks appear ready to begin a new phase of monetary stimulus and easing, especially the European Central Bank, the Bank of England, the Bank of Japan, and the People’s bank of China.  In essence, investors are being incentivized to buy stocks; and, that shows no sign of changing anytime soon.  There are those to be sure, who believe that this is a destructive course of action that is creating an equity bubble; and, that at some point — investors will pay a heavy price when this stock market bubble pops.  That is probably true; but, no one knows when that might occur; and, for now — stocks are likely to continue to climb higher — in my opinion.  Bubbles, can last a long time.  Indeed this is the TINA Market — there is no other alternative, for investors seeking good returns. 
 
 
Barron’s Picks To Beat The Market Over 6, 12 Months
 
     David Englander has an article in this weekend’s Barron’s with the title above.  I refer you to Barron’s for the full article.  Mr. Englander writes that “this column seeks to highlight undervalued stocks in the small-and-mid-cap arenas, specifically those whose shares could rise in the next two years or so.”  So far this year, Mr. Englander notes, he has “recommended 25 stocks, which have returned 9.2 percent, versus 5.8 percent for the respective indexes.”  And, “a basket of five industrial picks — Colfax (CFX), Raven Industries (RAVN), Franklin Electric (FELE), Clarcor (CLC), and Circor International (CIR) — returned 28.1 percent as of Wednesday’s close, compared with +7.9 percent for the Russell 2000.”  Mr. Englander’s picks are:
 
     —  Patterson-UTI Energy (PTEN)
     —  Manitowoc (MTW)
     —  Medical Properties Trust (MPW)
     —  TowneBank (TOWN)
     —  Raven Industries (RAVN)
     —  Circor Industries  (CIR)
     —  Energizer Holdings (ENR)
     —  Diamond Resorts international (DRI)
     —  Franklin Electric (FELE)
     —  Platform Specialty Products (PAH)
     —  International Gaming Technology (IGT)
 
 
Brexit Washout Creates Opportunities In Europe
 
     Another Barron’s article by Jonathan Buck highlighted what he considers undervalued companies, “after last week’s rout in European markets.”  Again, I refer you to this weekend’s Barron’s for more details/granularity.  Having said that, Mr. Buck’s picks are:
     — Albertis Infraestructures (ABE.Spain)
     —  Ryanair  (RY4C.Ireland)
     —  Rexel  (RXL.France)
     —  ARM Holdings (ARM.UK)
     —  Reckitt Benckiser (RB.UK)
     —  SAP (SAP.Germany)
     —  GlaxoSmithKline (GSK.UK)
     —  Persimmon (PSN.UK)
     —  Howden Joinery (HWDN.UK)
 
     As for my personal portfolio, I actively bought over the past two weeks, adding to GDX, and starting positions in GNCA, IMNP, PACB, and XNCR.  As with any of the companies mentioned, make sure you do your own due diligence, understand your risk tolerance, and time horizon, etc.  Otherwise, good luck.  V/R, RCP
    
 
     
 
 
 
    
 
  

 

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