Sunday, May 15, 2016

The Long Haul Weekly Review

The market had a stronger start to the week only to find itself finish on a down note. For the week the S&P 500 lost 0.5% making this the third losing week in a row. I'm not overly concerned for the market as it climbed straight up for 10 weeks from the February lows. So a breather is warranted. Earnings season is pretty much over with as over 90% of companies reporting.

This week was a little light on economic reports. Initial claims for unemployment came in a bit higher than expected this week at 294K vs expectations of 270k. This is on top of the lackluster 160k new jobs reported the week before coupled with a few downward revisions to prior numbers. Also retail sales for April came in with a better than expected 1.3% increase from the prior month, and up 3.0% from April 2015. That's a pretty good number.  Also this time of year many people get their income tax refund checks so let's see if the strength can continue into summer.

What can I say. The job market continues an 8 year trend of absolutely sucking for many people. Although it's evident people with jobs are still looking to spend their money. I think that's proven with Amazon hitting a brand new all time high this week while plenty of other retailers are taken to the woodshed.  If your retail business does not have a special niche it appears the heat is on immensely right now as consumers increasingly buy bargains.  It seems pretty evident when you look at the charts of companies like Macy's, Nordstrom, Dick's, The Buckle, and JC Penney. They are all heading down.  Some companies dodging the Amazon train so far have been Costco Wholesale, Ross Stores,  and TJX Company.

There were a few Fed officials that gave speeches this week.  Some mentioned a June rate hike is not out of the question.  The market seems to disagree, but that does not mean they won't raise rates to everyone's surprise. If they do raise rates I think we can expect to see nothing happen until after the elections.  I still think this will be a gradual and slow shift back to normalization. Although it might be a choppy trend at times.

Here is how the major indexes performed for the week along with the YTD performance.
IndexStarted WeekEnded WeekChange% ChangeYTD %
S&P 5002057.142047.10-10.04-0.50.2
Russell 20001114.721102.30-12.42-1.1-3.0

For the week we received earnings from WhiteWave Foods, and HCP Inc.  Wabtec boosted it's dividend, and the iShares Biotechnology ETF was added to the portfolio. 

WhiteWave reported a solid Q1 and the shares responded very well.  Back in April during my last add I was a little apprehensive about the purchase. The stock had been getting hammered, and it appeared some of the wind was coming out of the organic food industry sales. Well that fear was smashed this week as WWAV reported sales that were up 14% and increased EPS guidance to $1.42-$1.45. I think my hope that 7% sales growth will be the minimum has been confirmed for now. 

HCP Inc reported numbers that were in line, but also surprised most people with it's announcement to split off the HCR ManorCare operations.  The company has been struggling with this side of the business for the last year. I think it's a great idea for the company to put some space between any of the legal issues it might have with Medicare reimbursements, and allow the company to diversify away into other more lucrative opportunities.  It was a great move and I'm sure that is why shares shot up on earnings day. Good companies always find a way to change and manage themselves well during any struggle. 

Now to the recent add of IBB.  I have to admit I'm slightly giddy about this pick.  I love the profit this industry takes in. I'm grateful to live in a time where I can buy a fund that will give me ownership slices in over 100+ companies for relatively low cost.  I'm not keen to pick any individual name here as this field is a tough one to operate in.  I'm also not savvy with medical science to be confident in choosing a specific company.  I've been looking into other areas of the science and medical industry for a buy.  This is a specialized area where expertise and know how is not easily replicated.  If I can find the right company and the right price I'll be making another new add.  In my opinion public health is another part of the economy more resilient during downturns. No matter what people spend money to keep themselves healthy and alive.  Considering the heavy weight towards tobacco and alcohol maybe some medicine is just what we need here.  

The Long Haul Investor
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