Tag - Hurn

Stocks are rebounding today after Monday's 2% sell-off. As of press-time, 2:00 P.M. eastern, the Dow is trading up 86 points at 9,222; the Nasdaq is up 24 points at 1,955; and the S&P 500 is up 9 points at 989.

Stocks in the Russell 2000 are up 1.56% and with the index trading at 556.

Leading small-cap gains halfway through today's session is American Axle (NYSE:AXL). The beleaguered auto parts manufacturer's stock is up 95% today on news that it will receive up to $210 million in ad from former parent company General Motors. The firm will receive $110 million in payments from GM to recover costs from GM's bankruptcy this spring. Another $100 million will also come from GM in the form of a loan against which American Axle will have the right to make draws. Other parties in the loan terms include JPMorgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC).

Other small-cap leaders include Rentech (Amex:RTK) up 74%; Huron Consulting Group (Nasdaq:HURN) up 35%; and Popular (Nasdaq:BPOP) up 28%.

*****Lowe's (NYSE:LOW) reported weak earnings yesterday. Plus, the company's guidance for current quarter earnings was weaker than expected. Needless to say, worrisome headlines about consumer spending sprang up, and stock prices went down.

At SCI Daily, we've been discussing how high unemployment necessarily means that consumer spending will be weak. And that with little chance of any improvement in unemployment in the foreseeable future, there's not likely to be more money spent. This is a major condition of my "Managed America" economic scenario.

Too bad Lowe's CEO Robert A. Niblock isn't a reader. He said "Wavering consumer confidence, unseasonable weather in core markets, and restrained customer spending compared to last year's fiscal stimulus-aided results led to lower than expected sales in the second quarter…"

Yeah. It's the weather. That's it.

And Lowe's COO Larry Stone ran with it, saying that the mild summer has led to declines in air conditioner sales. But Stone said the heat wave in August has air conditioners selling at a "…pretty good clip."

Apparently better air conditioner sales couldn't keep Lowe's from lowering future guidance and scaling back its expansion plans.

*****The Fed is phasing out several economic rescue programs. Treasury bond purchases and a money market lending program will expire, while a program for loans to commercial banks is being scaled back. 

One program that isn't in danger of getting cancelled is the Term Asset-Backed Securities Loan Facility, or TALF. That's because TALF was expanded to allow commercial real estate assets to qualify under the program. And with $165 billion in commercial real estate loans due this year, and values down 35%, TALF could come in handy.

Again, despite the fact that it's essentially taxpayers at risk, this is a good thing for the economy. And we expected the Fed would do something to help commercial real estate. 

*****Jason Cimpl, the technical analyst for TradeMaster Daily Stock Alerts
just nailed down another winner. This time, his readers were treated to a 29% gain on PPG Industries (NYSE:PPG) in just under two months.

Never heard of PPG Industries? Well, me neither, until Jason uncovered an extremely bullish trading pattern on the stock chart and recommended it to his readers. Jason is extremely skilled at finding profitable trading patterns on stocks, both well-known and unknown.

Now, Jason has his readers positioned to profit from a downward move in financials stocks. For more, click HERE.

*****We have a winner! I'm pleased to announce that we have a winner in The Small-Cap Investor t-shirt contest.
 
We received hundreds of submissions from our readers around the world. And 470 of your fellow readers voted for their favorite t-shirt slogan. The winning t-shirt slogan received 41% of the audience's vote. And the slogan is…"Don't sweat the big stuff. Trade the small stuff. The Small-Cap Investor: Secrets to Winning Big with Small-Cap Stocks."
 
The slogan was submitted by Monika Schmidt. Monika will receive a one-year membership to all of my advisory services, a $2,680 value. Plus, she'll get a personalized, autographed copy of my The Small-Cap Investor and three t-shirts with her winning slogan. Congrats Monika, and thanks for contributing a great slogan to our contest! We hope you enjoy your complimentary membership to our investing newsletter services, including SmallCapInvestor.com PRO.
 
Monika's winning idea was one of many great submissions we received from our audience.  The runners up were as follows:
 
#2: "For profits to peak, small-cap stocks are what we seek." Contributed by Keith Timm, received 91 votes or 19%

#3: "Profit Like the Big Dogs by Investing in the Little Dogs. Learn the Secrets to Winning Big with The Small-Cap Investor." Contributed by Bryan Alvarez, received 74 votes or 16%

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#5: "Got Profits? The Small-Cap Investor. It does a portfolio good!" Contributed by Jannica Beam Johnson, 48 votes or 10%

Everyone who submitted their slogan has received a complimentary one-month subscription to SmallCapInvestor.com PRO. If for some reason you haven't already heard from Claire in my office, please call her at 202-420-7800 and she can setup your complimentary one-month membership. I hope you enjoy your trial, and consider purchasing a copy of The Small-Cap Investor: Secrets to Winning Big with Small-Cap Stocks. You can pre-purchase your copies today by clicking here now.

Thanks again for your support and interest. Once the t-shirts are available, I'll share the design with you. 

Best Regards,

Ian Wyatt
Editor
Small Cap Investor Daily

P.S. My book The Small-Cap Investor: Secrets to Winning Big with Small-Cap Stocks is coming out on September 14 - visit www.smallcapbook.com to learn more. You can also follow me on http://twitter.com/ianwyatt 

Ian Wyatt is the Chief Investment Strategist of SmallCapInvestor.com and author of The Small-Cap Investor: Secrets to Winning Big with Small-Cap Stocks. You can learn more about his book and receive small-cap stock picks at www.smallcapbook.com.

Stocks closed higher today, thus extending July's rally into the new month. Both the Nasdaq composite and the S&P 500 Index broke through psychological barriers.

The Dow closed up 114.95 points to end the day at 9,286.56; the Nasdaq finished over 2,000 at 2,008.60; and the S&P 500 broke through the thousand barrier to close at 1,002.62.

Stocks on the Russell 2000 moved up with the broader markets to help that bellwether of small-cap stocks end the first trading session of August at 564.19, representing a gain of 1.34% for the day.

Small-cap price leaders for today include Patriot Capital Funding (Nasdaq:PCAP) up 92% on news that Prospect Capital (Nasdaq:PSEC) will buy Patriot for $197 million; Commercial Vehicle Group (Nasdaq:CVGI) up 60%; Transcept Pharmaceuticals (Nasdaq:TSPT) up 40%; and Oncothyreon (Nasdaq:ONTY) up 41%.

Small-cap price decliners were lead by Huron Consulting Group (Nasdaq:HURN) down 69% breaking news of an ongoing accounting scandal. In a twist of irony the firm that helps clients avoid accounting pitfalls and remain on the right side of the law found itself showing the door to the entire management team as well as announcing it will it would restate financial results for the past three years. The firm is also fighting claims of employee payments viewed as "kickbacks". Huron was promptly downgraded by five research firms.

Other small-cap price decliners include Repros Therapeutics (Nasdaq:RPRX) down 49% on news that development of its uterine fibroids drug, Proellex, had been put on hold due to an increase in liver enzymes in patients; and Savient Pharmaceuticals (Nasdaq:SVNT) down 18%.

******Stocks closed higher today. Our leading indicator for investor expectations, oil prices, is up over $70 a barrel.

Despite the still-compelling argument that the economy is staging a tepid recovery that will take years to gather steam, and even though many feel that housing prices and unemployment have not yet bottomed, stock prices are clearly showing that investors believe that the financial crisis is past.

Of course, that's the exact opposite of what Deutsche Bank CEO Josef Ackerman told us Friday. But why fight the trend?

*****I've been looking for a quote from George Soros to share with you, but so far our great search engines Google and Bing have let me down. I'll have to paraphrase, and I'll try not to misrepresent his thoughts. On getting rich in the stock market Soros once said the key is to ride the trend based on false assumptions, and then get out before everyone else realizes it's false.

At first, it sounds silly. How could every trend be based on false assumptions? Surely there must be a solid reason for stock prices move higher, right?

Sure, there's always a good reason for stock prices to move higher when they do. The Internet increased productivity and opened the door for many new and innovative business models.

And the emergence of commodity demand from China coupled with robust consumer demand from Americans drove many assets to all-time highs.

*****But in each case, even though the rallies started on firm footing, they were eventually proved false. The Internet led to a massive misallocation of capital as even the most absurd business model scribbled on a cocktail napkin received start-up money and an IPO. And analysts perpetuated the cycle with fraudulent numbers based on unrealistic assumptions. You'll even recall so many of the "new economy" entrepreneurs claiming that the old rules no longer applied. They did, and in a big way.   

The American consumer demand that supported China's commodity demand was based on unsustainable rising housing values and refinance cash. And of course, Wall Street fraud again made the situation worse.

Investors, from individuals to Wall Street bankers, seem to always take things too far. And while it may not be possible to see in advance the exact moment when investors realize they've been duped, it's a good idea to understand the assumptions that may eventually be proved false.

Of course, it can take a long time. Greenspan's now famous "irrational exuberance" warning came two years before the Internet bubble popped. And the warnings that housing was a bubble likewise went unheeded for years.

*****It seems there's a fair amount of potentially false assumptions driving stocks higher. But we can't know in advance when, and from what level, stock prices may reverse.

We can, however, say confidently that government stimulus is supporting stock prices. And given the essentially endless supply of money that can be thrown into the economy, fighting this uptrend is an uphill battle.

*****Bloomberg reports that Lone Star is in the process of raising $20 billion for a distressed real estate fund. They see value out there in both actual real estate and mortgage backed securities.

This exactly the type of news that the bulls want to see. Asset prices have dropped, but the only way to know if they've dropped far enough is when buyers step in.

Of course, Lone Star could be wrong…just sayin'. 

*****Last week, it was reported that Warren Buffett has a $1 billion paper profit on his investment in Chinese electric car battery company BYD (BYDDF.PK).

At SmallCapInvestor Pro, we've bought into a Chinese battery company too. This one makes batteries for cell phones, not cars. But it fits our thesis of buying Chinese stocks that have ridiculously low valuations.

You'll find this stock in the latest SmallCapInvestor Pro Special Report called Going for Growth: 3 Top Chinese Stocks to Buy NOW. Click here to get your copy.

*****The Managed America web video conference is coming up next Monday, August 10 at 6:00 P.M. It's free to attend and you can register right now. Click here to register for this free online event.

*****Finally, let's have a look ahead at the economic data for this week:

08/04/2009: Pending Homes Sales numbers
08/05/2009: Challenger Jobs Report
08/05/2009: Factory Orders
08/05/2009: ISM Non-manufacturing Index
08/05/2009: weekly oil inventory report
08/06/2009: Chain Store Sales
08/06/2009: New Jobless Claims.

Best Regards,

Ian Wyatt
Editor
SCI Daily

Huron Consulting Group Inc. (Nasdaq:HURN), Savient Pharmaceuticals Inc. (Nasdaq:SVNT) and Synaptics Inc. (Nasdaq:SYNA) are among the most actively traded companies in Monday's trading among companies with market capitalizations under $1 billion.

Also included among the results: Sequenom Inc. (Nasdaq:SQNM), Verigy Ltd. (Nasdaq:VRGY), James River Coal Co. (Nasdaq:JRCC), Spectrum Pharmaceuticals Inc. (Nasdaq:SPPI), ImmunoGen Inc. (Nasdaq:IMGN) and Century Aluminum Co. (Nasdaq:CENX).