Join        Login             Stock Quote

As China Fears Lift Our Material Stocks Will Benefit

 April 23, 2012 11:02 AM

Author: Mark Holder, Stone Fox Capital

Covestor model: Opportunistic Arbitrage

The Opportunistic Arbitrage model lost a disappointing 5.8% in March versus a 3.1% gain for the benchmark S&P 500. This model typically outpaces the major indices by a large margin in up periods so the last month was a major exception.

[Related -Dick's Sporting Goods Inc. (DKS) Q3 Earnings: Opening The Door To Another Miss?]

Since the end of 2011, this model has been running on the theme that the majority of stocks would retrace the losses experienced since the July 2011 levels. In essence, our theory has been that losses since that time period were from irrational fear of a second financial collapse that the Europeans were unlikely to allow. Naturally this fluctuates on a case by case basis where any individual stock could move a lot higher or lower depending on circumstances since then.

Unfortunately this theory took a major turn in March as investors piled into dividend paying stocks sending most major indices higher while at the same time selling the higher risk, global growth stocks. In some cases, it was just a small reversal of the gains from the last couple of months, but it other cases some stocks continued to face relentless selling pressure.

[Related -Monster Beverage Corp (MNST) Q3 Earnings Preview: Sizzle Or Fizzle?]

Some major gains occurred in the positions of Liz Claiborne (LIZ) and Monster Worldwide (MWW) as both companies gained from speculations of takeover bids. In either case, this model would be happy to take a premium bid and roll the money into other cheap stocks, but neither stock was bought specifically for the takeover theme. Both stocks remain incredibly cheap, probably a contributing factor to the buyout themes.

Those gains were swamped by major losses in AerCap Holdings (AER), SodaStream (SODA), Terex (TEX), and numerous other stocks. For the most part, the selling just makes these stocks cheaper. Fluctuations will occur in some of these volatile stocks, but ultimately the expectation is that prices will eventually end up higher, making the reward worth the risk.

Next Page >>12


Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageThoughts on MetLife and AIG

In some ways, this is a boring time in insurance investing.  A lot of companies seem cheap on a book and/or read on...

article imageA 2016 Recession Would Be Different

If the US or the Eurozone entered a recession this year, a few macroeconomic variables would look very read on...

article imageWhat's Next For Chipotle?

After stumbling badly on negative publicity about foodborne illness at some of its restaurants, the fast read on...

article imageHow Fast Can These Stocks Make You A Millionaire?

These days it seems as if the market doesn't know whether it wants to break through fears of higher rates read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.