“Stocks Rally 2.7 Percent In A Whiplash-Inducing Week;” What To Buy After The Stock Market Selloff; Platinum Looks Set For Pop”
I hope all of you had a Great Christmas; and, I wish you the best for 2019. One certainly hopes the stock market will be more rewarding in 2019. After seeming to close lower almost every trading day these past few weeks, investors were finally able to breathe a sigh of relief last week — though it required one to fasten their seat-belt. As Ben Levishon wrote in this weekend’s (Dec. 31, 2018) Barron’s, “it’s supposed to be the most wonderful time of the year. For the market [investors], it was the most volatile time of the year.”
Mr. Levishon adds that “last week, the DOW tumbled 653 points on Christmas Eve; gained 1,086 on Boxing Day; and, turned a 611 point drop into a 260 point gain last Thursday. The good news,” he noted, was “the DOW finished the week up 617 points, or 2.7 percent, to close at 23,062; while the S&P 500 rose 2.9 percent, to 2,485 points; and, the NASDAQ added 4 percent to 6,584 points. The bad new, the DOW is still on pace for its worst December since 1931.”
For the year, the DOW is down 6.7 percent, while the S&P 500 is off by 7.03 percent; and the NASDAQ is down by 4.62 percent.
“The volatility we’er seeing is very reminiscent of some of those ugly periods like when the dot.com bubble popped in 2000, or the post  Lehman financial crisis,” said Mark Travis, Chief Executive of Intrepid Capital, which has roughly $1 billion in assets under management,” Jessica Menton wrote in this weekend’s (Dec. 30/31, 2018) Wall Street Journal (WSJ). “We don’t have the systemic problems that we had then; but, we’re seeing a global tantrum.” Mr/ Travis told the WSJ that “his firm has used this month’s downturn as an opportunity to add exposure to stocks that have more attractive valuations, including energy company Cabot Oil & Gas, and footware company Sketchers USA.” With that in mind………
What To Buy In A Down Market
The title above is from Charley Grant’s weekend article in the WSJ. “The year is ending badly for stocks; but, there are deals to be had for those who can bear to look,” he wrote. “After the 15 percent decline since September, there are plenty of ways to look for stocks that have gotten too cheap [oversold]. “One is looking for beaten-down names that will generate lots of free cash-flow, which is often a better measure of a company’s business than earnings.”
Mr. Grant notes that “there are 10 companies in the S&P 500 that are down at least 40 percent in 2018, through last Thursday; and, are trading at less than 11 times free cash-flow estimates for next year (2019), according to FactSet data. That’s a significant discount to the market’s average valuation.”
“The diverse list includes: fashion retailer L-Brands, flooring company Mohawk Industries, consumer health company Perrigo, chip maker Western Digital, food-makers Conagra Brands, and Kraft Heinz, and biotechnology company Celgene. These stocks are all down for good reasons beyond the market selloff,” Mr. Grant adds, “and probably won’t rebound quickly. Still investors should remember that a pleasant stock back-story, forms the basis for stocks to sell at high prices. Bad news can be an investor’s friend, when paired with a long-time horizon. Any investor who can wait out the weak market stands to profit handsomely in the long-term.”
A Shiny Object: Platinum Looks Set To Pop
The above is the title of Simon Constable’s article in this weekend’s Barron’s. His bottom line: “Investors should put a bar or two of platinum in their portfolio. Prices for the metal, which are used primarily in automobile catalytic converters, looks ready to bounce more than 40 percent in the next few weeks analysts say.”
“Our base-case scenario for platinum remains constructive, with a fair value of $1,000 [per troy ounce], driven by higher industrial demand, market volatility, and the South African rand,” said a recent note from Aberdeen Standard Investments. “Under a bullish scenario, platinum may rise to $1,150 [per troy ounce],” or 44 percent above recent prices.” FYI, platinum futures closed Friday at $790.20 per troy ounce. Platinum was trading at $1,512 per troy ounce in July 2014, representing about a 48 percent decline in the past four years.
“Investors looking to profit from the possible move should consider buying April-dated futures contracts on the CME,” Mr. Grant wrote. “Alternatively,” he notes, “try the Aberdeen Standard Physical Platinum Shares Exchange-Traded-Fund (ETF), (Ticker: PPLT), which holds bars of solid platinum. Platinum mining companies such as Impala Platinum Holdings (IMP.South Africa), or Anglo American Platinum (AMS.South Africa) also offer hefty upsides.”
“Mining stocks tend to benefit disproportionately more than does the metal from increased prices,” Mr. Grant wrote. “However, these stocks also bring other risks. Mines can sometimes get seized by governments, and production is more prone to interruptions from natural, or man-made incidents.”
“A major reason to consider buying platinum is that investors frequently get drawn to precious metals during periods of market stress, such as the turmoil we’ve recently seen in the markets,” Mr. Grant wrote. “Platinum prices are expected to rise over the next three months, dragged higher along with the entire precious-metals complex,” said a recent report from New York-based commodities consulting firm, CPM Group. “Put simply, falling share “
prices, could lift platinum prices.”
“Growing geopolitical tensions could also prompt a jump in price,” Mr. Grant added.
Having said all that, Mr. Grant ended with this observation/warning. “There are substantial risks in investing in platinum. The growth in the world economy will likely slow in 2019, crimping demand for catalytic converters in cars, and [thus] reducing consumption of the metal. Just as a strong rand could help platinum prices, a weak one could harm them.”
“Nevertheless, investors might see gains, if they don’t mind the risks,” Mr. Grant ended. RCP, fortunascorner.com