Beat the Market

What is Sector Rotation? Sector rotation is an investment strategy. Major players in the market move money from one industry sector to another in an attempt to beat the market. In order to understand sector rotation, we need to study the market cycle and economy cycle. Market Cycle and Economy Cycle Both have 4 stages: bottom, recovery (bull market), top, recession (bear market), which is shown in the following chart. However, market (in blue) usually move ahead of the economy (in yellow) for a few months. Market will reach top when the economy still looks great. However, the interest rate and inflation would be high at that moment. In bull market, investors prefer to rotate into financials/transportation (early bull), technology/capital goods (middle bull), basic industry (late bull). Money rolls into energy and gold/silver at the market top. As the bear market starts, healthcare and non-cyclical become attractive. During the downtrend, utilities would be the only survi...

BREAKING NEWS: at least 6 killed in lower Manhattan --- possible terror attack Market finished October strongly. Customer confidence hits 17-year high, which should be good news for retailer heading into holiday season. Tech is still sucking cash from other sectors for the 3rd day. The recent rally makes me nervous. In this month, Dow Jones + 4.3%, Nasdaq +3.6%, S&P 500 + 2.2% . My portfolio performs worse than any index this month, because of the bet on GE and large holding on M & MAT. Winners Apple hits all time high, ignoring the negative news on apple watch 3. Other big names: MU + 6.4%, WDC +4.1%, Intel +2.5%. K (+6.2% ) and MDLZ (+5.4%) boost the Staples Sector by strong earnings. Casinos enjoy a nice day amid the encouraging data from both Vegas and Macau. Losers UAA/UA (-23.7% & -21.8% ) weak sale in North American, lower margin and full year guidance. More downgrades are on the way, not bottom yet. QCOM (-6.7% ) due to the news that Apple is s...

The market is taking another break after the strong Nasdaq pop last Friday. Political chaos is adding the clouds. Also investors are waiting for more big earnings later this week ( FB, QCOM, AIG, AAPL ). You can find the major earnings and events here ( https://defeatmarket.blogspot.com/2017/10/events-and-stocks-to-watch-next-week.html ) Winners MAT (+11.2% ): BMO Capital Markets analyst Gerrick Johnson said investors should start looking at the toymaker “from a sale of the company perspective.” His note, which said Mattel’s assets could be worth much more in a sale or breakup, followed a surprisingly sharp sales decline at the toy titan last quarter. Stock price now is higher than the closing price before earnings. It is so ironic. It was below $12 once in last Thursday AH. Fix-income investors were rushing out to damp MAT. It finishes @ $15.6 today. What can I say? The street always wins. AAPL (+2.3% ) jumped amid the speculated 'strong demand' of iPhone X. No numbers ...

Politics News Breaking News : Friday night CNN reported a federal grand jury as approving charges in the special counsel investigation, though they were sealed by a federal judge. That person could be taken into custody as soon as Monday. FED Nominee The president next week will likely announce Fed Governor Jerome Powell as his nominee to be the next Fed chairman, according to a source. If confirmed, Powell could be FED chairman in early February when Janet Yellen's term ends. Powell is dovish. The market has already priced this in. Earnings Monday     before: D, DO Tuesday     before: MA. PFE     after: APC, FTR, PAYC Wednesday     before: EL, SODA, WFT     after: EEP, FB, QCOM, SHAK Thursday     before: CHK, DISCA, TEVA, W     after: AAPL, AHT, AIG, CBS, DATA, GNW, LOCO, MOH, NE, RUBI, SBUX, TIVO WING Friday     before: AFRAF KLAC will have annual meeting on Wednesday, SINA, WB an...

As I said yesterday on mitbbs, the market would be boosted by big tech earnings on Friday. Nasdaq jumps 2.2%. Winners: AMZN (+13.2%), GOOG (+4.8%), INTC (+7.4%), MSFT (+6.4%) all due to great earnings Feeling the heat in tech, FB +4.3%, NFLX +2.2%, NVDA +3.2% AAPL (+3.6%) iphone X pre-order shows big demand. If you pre-order now, you will feel lucky to receive by Xmas. I am not sure if it is partially caused by wrong estimate, or OLED production bottle-neck. The impact on their next earning is also unclear. First Solar (+20.4%) due to nice earnings. However, please be cautious that solar market is expected to cool down in 2018. USO (+2.6%). As I keep saying in the past week, crude price will recover gradually. Brent crude tops $60 and WTI reaches $54. I expect WTI to ~$56. Losers: EXPE (-16%). Missed ER, disappointing guidance. Travel companies have enjoyed fast growth and fat margin in the past 5 years. Any slowing down will trigger such selloff. As I mentioned befor...

EU will reduce QE purchases from January 2018. At the post-ECB meeting press conference, Mario Draghi was sure to say rates will remain low long after QE ends. Europe markets finish strong today. It is quieter in US market except a brutal day for healthcare sector. Winner TWTR (+18.5%) ER beats, daily active usage +14% Y/Y. However, I don't think twitter can be a facebook story. BWLD (+19.6%) ER benefited from bone-less wings. Health insurer Aetna ( AET +11.5% ) spikes at the end of the trading hour on the news that CVS Health (CVS -2.9%) is in talks to buy the company. F (+1.9%) ER beats. Losers Airlines (except SKYW SAVE ) have a wild swing from green ( AAL and LUV delivered good earnings before open) to red after Southwest Airlines warns on its post-earnings conference call that unit costs will be flat or slightly higher next year as it faces pricing pressure in some markets. Celgene (-16.4%) (along with BMY -4.8% MCK -5.2% ) takes down the whole biotech se...

What a bloody morning with bullish afternoon. The market shakes off loose hands and holds the ground. I expect such volatility will continue as more ERs roll out. Winners Visa ( V +1% ), very solid ER. I prefer V over Mastercard (MA). Currently I hold AXP (lower P/E and higher dividend). In the healthcare sector: Anthem ( ANTM, +5.4% ) ER beats and raises its full-year EPS forecast to $11.90-$12.00 from ~$11.70. Escript ( ESRX +3.9% ) Q3 EPS of $1.90 beats by $0.03. Revenue of $24.5B (-3.6% Y/Y) misses by $1.14B. They lift 2017 guidance. I am still concerned about the impact of political clouds on ACA reform. Nike ( NKE +2.8% ) spikes in afternoon trading as the company lays outs long-term guidance and strategy at its investor day event, which I mentioned in my weekend post ( https://tinyurl.com/yazpw2uq ). Nike's future goal is revenue growth at a high single digit rate over the next 5 years and EPS growth in the mid-teens. Nike expects that 75% of sales will come from ou...