Strength in Small Cap Core
Commentary – It might seem odd based on the recent drop in commodities that Veritas DGC Inc. (VTS), an oil and gas equipment company, is still a highly rated stock within our analytics. If you look at its Y-T-D chart, you’ll see a very well established trend basically starting at the beginning of the year. You’ll also notice that from August 28th through September 5th VTS was up over 28%; this is a great example of portable alpha generation!
The underlying stimulus for the recent drop in commodities is up for debate. I tend to believe that geopolitical issues were the primary catalyst for the price increase over the last few months, and unless I missed some significant headlines, those issues are largely unresolved. Basically I wouldn’t be surprised if oil reverses direction again and goes back up, although I don’t know by how much. If that happens, VTS will likely be a solid alpha-generating stock again. Until then, I’m probably going to stay away from energy companies and focus more on tech and real estate.
Short-Term Technical Indicators – All eight improved overnight in response to yesterday’s broad-based rally. The DJIA MACD crossed back over its 9-Day Moving Average, a bullish indication. Only three indicators are higher than last week’s levels, but all eight are again higher than last month’s reading.
Long-Term Market Model – Bullish since August 23rd.
Investor Sentiment – Both the VIX and VXN declined overnight, as did two Put / Call ratios (the Equity Put / Call Ratio was unchanged). The Investors Intelligence Advisor Sentiment survey indicates an increase in the percentage of Bullish advisors compared to Bearish advisors.
Asset Allocation – 75% to 85% invested within the actively-managed portion of the overall investment portfolio. 15% to 25% in cash or bonds.
Top Rated Major Market Derivative – Fidelity NASDAQ Composite Index (ONEQ)
Top Rated Style-Box Derivative – Morningstar Small Cap Core (JKJ)
Top Rated Sector Derivative – iShares Goldman Sachs Semiconductor (IGW)
The underlying stimulus for the recent drop in commodities is up for debate. I tend to believe that geopolitical issues were the primary catalyst for the price increase over the last few months, and unless I missed some significant headlines, those issues are largely unresolved. Basically I wouldn’t be surprised if oil reverses direction again and goes back up, although I don’t know by how much. If that happens, VTS will likely be a solid alpha-generating stock again. Until then, I’m probably going to stay away from energy companies and focus more on tech and real estate.
Short-Term Technical Indicators – All eight improved overnight in response to yesterday’s broad-based rally. The DJIA MACD crossed back over its 9-Day Moving Average, a bullish indication. Only three indicators are higher than last week’s levels, but all eight are again higher than last month’s reading.
Long-Term Market Model – Bullish since August 23rd.
Investor Sentiment – Both the VIX and VXN declined overnight, as did two Put / Call ratios (the Equity Put / Call Ratio was unchanged). The Investors Intelligence Advisor Sentiment survey indicates an increase in the percentage of Bullish advisors compared to Bearish advisors.
Asset Allocation – 75% to 85% invested within the actively-managed portion of the overall investment portfolio. 15% to 25% in cash or bonds.
Beta Exposure and Portable Alpha Generation
Top Rated Major Market Derivative – Fidelity NASDAQ Composite Index (ONEQ)
Top Rated Style-Box Derivative – Morningstar Small Cap Core (JKJ)
Top Rated Sector Derivative – iShares Goldman Sachs Semiconductor (IGW)
Today’s Top “Buy” Recommended Stocks
- Piper Jaffray Companies (PJC)
- Veritas DGC Inc. (VTS)
- Sequa Corp. (SQA-A)
- OM Group Inc. (OMG)
- SanDisk Corp. (SNDK)
Today’s Top “Buy” Recommended Exchange Traded Funds (ETF)
posted by Justin at
9:42 AM
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