Shesa's NOVEMBER 2014 INVESTMENT BLOG
23 November 2014
NOVEMBER 2014
Investment Blog
Shesa
Nayak
U.S.
Stock Market Commentary
Hello and Welcome to my November investment blog. I completed one year of publishing my blog. I wish
and hope that you have enjoyed reading my blog.
The DOW Jones closed last
Friday at 17,810.06, S&P 500
closed at 2063.50 and NASDAQ closed at 4,712.97 points. The US stock market has been making new highs and inching further new
historical high as days progresses. Why is this happening? Where are we
trending for the rest of the year? Can NASDAQ go past 5000 points? I think NASDAQ could approach to 5000 points, DOW going past
18000 points and S&P 500 marching beyond 2200 points before the end of this
year. Please read below to get some insight on the above
questions and my analysis.
Before I discuss this month’s excellent Chinese ADR stock
pick, let’s first discuss other economy news that is of enormous significance.
USA
and Global Economy influencing Stock Market
Last week, an
increased reading of homebuilder confidence numbers excited investors. The weekly
jobless claims reached their most
favorable level in years, remaining below 300,000 for the first time since 2000.
We
are almost at the end of the earnings
season. According to the factset.com 487 of S&P 500 companies have
reported earnings as of last week for Q3 2014. Out of which, 77% have reported
earnings above mean estimate and 59% have reported sales above the mean
estimate. At present, forward PE ratio for S&P 500 stands at 16. This means
that US stock market is still not in a bubble and it has ample opportunity to
move to the upward direction.
Gas prices continue to fall from $100 a barrel during
summer to about $75 now. The fall is not only due to strong US dollar but also higher-than-expected
production and rising inventories. The Energy Information Administration
recently announced that U.S. crude oil production surged to about 9 million
barrels per day in November, the highest production level in decades just
little behind Russia and Saudi Arabia. As oil gets cheaper everything gets
cheaper. As a matter
of fact, there would be more consumers saving, consumer spending and corporate
profits. This has large impact on other industries such as transportation,
retail, consumer discretionary etc.. Unless OPEC countries reduce oil production,
the oil prices will continue to fall further and that would be good for overall
economy.
On international front, last Friday, China cut its benchmark interest rates for the first time in
more than two years to lower borrowing costs and lift a cooling economy that is
on track for its slackest annual growth in 24 years. Also European Central Bank (ECB) announced that it may go for full-blown
quantitative easing, to help revive the Eurozone economy. On October 31st the
Bank of Japan stunned the financial
markets by unexpectedly expanding its quantitative easing program. Now it plans
to pump around ¥80 trillion ($712 billion) each year, up from ¥60 trillion-70
trillion that was planned earlier.
Where
the Stock market trending?
Why does the market keeps making
new highs and hat can we expect going forward? There are several reasons of
stock market boom. I could attribute to the following factors:
·
Increased
corporate profit in the 3rd
quarter
·
Better
US economy in 3rd quarter, GDP
grew at 3.5% (better than expected)
· Strong
US dollar resulting in low commodity
prices, particularly low gas price gold,
silver, copper etc.
·
Interest rate cut by China, Japan's Quantitative
easing, EU plan of further stimulation
·
Better
job report and less unemployment
benefit claims
· We are in the better 6 months (Nov – Apr) of the year where equity traditionally
performs better
·
Investors
showing optimism on mid-term US election
result
· Stock
market is still not in bubble; stocks are priced with reasonable valuation. Currently S&P 500 stand
about 16 times next year earnings
In last 10 years, usually the stock
market has never gone down during the period of Thanksgiving to X-mas. Though,
past performance is not guaranteed, I am personally optimistic that same trend
to continue this year visualizing aforesaid factors. I believe that Transportation, Rail Road, Airlines
and Consumer discretionary are few sectors anticipated to do well in the next
few months.
Portfolio Update
BIDU: On 10/29, Bidu reported
earnings of $1.90 per share, up 28% from the previous year quarter, easily
beating analysts estimate of $1.59. Total revenue increased 52% to $2.2
billion, where Wall Street had projected $2.21 billion. Going forward, for Q4,
Baidu is guiding total revenue of $2.25 billion to $2.32 billion, up 43% to 48%
year-over-year. Analysts expect Baidu to post revenue of $2.29 billion, just
above the midpoint of company’s guidance.
Direxion Daily Gold Miners
Bull 3X Shrs (NUGT)
Gold prices’ most
recent collapse is mainly attributed to strong dollar, quantitative easing,
lack of inflation, less buying initiative from China and so on. There is another
major factor, the Swiss central bank’s efforts to discourage Swiss voters from
supporting the gold initiative to be decided at referendum on November 30. If
the vote passes then it would force the Swiss National Bank to hold a fifth of
its assets in the form of gold reserves and agree never to sell them in future.
This may be a good catalyst for Gold. But if the vote fails then Gold could again
test the low that we saw a couple of weeks ago. I would like to dispose some portion
of the portfolio if the prices bounce back and hold remaining for longer term. On
another note, there may be good value of buying the junior version of NUGT
(JNUG). If any one is interested then it’s better to keep an eye. HOLD.
Apple (AAPL): As
said in my October blog I was expecting Apple to hit $115 – $120. It went to
$117.57. So the target is achieved. I still feel that Apple stock would go up
further. The reason is that, stock market is going up and there is strong
upward momentum for Apple stock. Analysts are anticipating solid iPhone 6 sales
during the holiday season. In addition, there is also anticipation built into
Apple’s forthcoming Wearable device - Apple Watch. I feel that Apple is still a
good buy and the stock can move north towards $125-130. BUY.
Facebook (FB): Facebook reported earnings
per share minus items of 43 cents, up 60% from the year-earlier quarter and 3
cents above analysts’ consensus. But it marked a deceleration from triple-digit
EPS growth the previous two quarters. Revenue was up to $3.2 billion just
edging past consensus of $3.1 billion, an increase of 59%. The company expects
year-over-year revenue growth of 40% to 47%, the midpoint missing the 45%
analyst consensus. Hence the stock has corrected after the earnings. HOLD.
QIHU 360 (QIHU): The Company will report
its third quarter 2014 financial results on Monday, November 24, 2014, after
the close of the U.S. markets. Please keep an eye on this. The buy/sell
decision could change based on its earnings.
This month I have added a
great Chinese stock to my portfolio list. This company does not only have
superior fundamental but also huge future potential. Let’s discuss:
Vipshop Holdings Limited (VIPS)
Vipshop Holdings Limited is a Chinese company. Its
Stock (ADR) is listed in New York Stock Exchange. The company operates as an
online discount retailer for various brands, such as, apparel for women, men,
and children; fashion goods; cosmetics; home goods; footwear; sportswear,
sporting goods and miscellaneous products. The company provides its branded
products through its vipshop.com and vip.com websites in China.
VIPS is fundamentally very superior
stock, probably better than Alibaba (BABA) in many respects. The company’s
sales and earnings in last one year have been phenomenal. Its stock price has
also gone up significantly in last one year. Still I believe it’s one of the
best Chinese company and lot of potential to grow further. Let us first analyze
its Q3 earning that was declared last Tuesday, 11/18/14. The company's Q3 sales and
EPS handily beat analyst expectations. It posted EPS per ADS of 8 cents
excluding items, up 167% from the previous year quarter. Revenue surged 130% to
$882.6 million, exceeding analyst estimate of $863.12 million. Going forward,
for Q4, VIPS expects revenue of $1.2 billion to $1.22 billion, up 84%
to 87%. Analysts expected $1.21 billion. Now let’s analyze overall fundamentals
of the company:
Market Cap: $12.9 Billion
Revenue: $3.07 Billion,
quarterly revenue growth of 130%
Profit: $106.8 million,
quarterly profit growth 130.3%
Earnings Per Share (EPS):
$0.19
PE Ratio: 121.72,
Forward
PE:
44.39%
PEG Ratio: 0.77, Price/Sales:
4.18
Institutional Holding: 48.8%
Return on Equity (ROE): 32.3%
Please note that VIPS is not a cheap stock, if we emphasize
the PE Ratio. But it’s a growth company and growing phenomenally well. Hence we
can’t judge with PE ratio. If we look company’s forward PE and its growth then
it’s still reasonably a cheap stock. I have already added to my portfolio and I
would keep accumulating on further dip. Currently, the stock is trading at $22.68. Please note that this stock was
trading at about $230 before splitting 10:1
on November 4th. This is a volatile stock and has high fluctuation. So
it must be kept in mind while adding to the portfolio. For long-term, I believe
this is a great Chinese stock to won which is fundamentally superior and has
tremendous future potential for better return on investment.
Equity Portfolio:
Equity
|
Suggested Price (USD)
|
Current Price (USD)
|
Suggested Date
|
% Changes
|
My Opinion (see disclaimer)
|
STOCK
|
|||||
AAPL
|
58
|
116.35
|
1/25/13
|
101%
|
BUY **
|
BIDU
|
86.43
|
245.21
|
4/18/13
|
184%
|
Buy on Dip
|
GOGO
|
14
|
16.27
|
9/1/13
|
16%
|
HOLD
|
SLW
|
22
|
21.31
|
10/1/13
|
-3%
|
HOLD
|
FB
|
47
|
73.71
|
11/13/13
|
57%
|
BUY
|
TSLA
|
135
|
242.78
|
11/13/13
|
80%
|
HOLD
|
AGNC
|
20.02
|
23.17
|
12/14/13
|
16%
|
BUY
|
MA
|
78.7
|
84.72
|
12/12/13
|
8%
|
BUY
|
NLY
|
10.77
|
11.5
|
2/2/14
|
7%
|
BUY
|
KO
|
38.55
|
44.5
|
3/9/14
|
15%
|
HOLD
|
KNDI
|
19.4
|
14.04
|
3/9/14
|
-27.6%
|
BUY
|
AMZN
|
311.73
|
332.57
|
4/12/14
|
7%
|
BUY
|
BAC
|
14.74
|
17.12
|
5/11/14
|
16%
|
BUY
|
QIHU
|
85
|
69.36
|
6/22/14
|
-18%
|
BUY
|
BX
|
32.42
|
33.12
|
8/24/14
|
2%
|
BUY
|
VIPS
|
22.68
|
22.68
|
11/23/14
|
NEW -
BUY
|
|
ETF
|
|||||
GDX
|
27
|
19.88
|
4/1/13
|
-26%
|
HOLD ** (Note: we may sell if it
goes further down).
|
DUST
|
15.33
|
25.03
|
7/20/14
|
63%
|
HOLD
|
NUGT
|
27.38
|
15.52
|
9/21/14
|
-43%
|
HOLD **
|
MUTUAL
FUND
|
|||||
FBIOX
|
128
|
231.73
|
3/1/13
|
81%
|
Accumulate
|
PRHSX
|
60
|
74.12
|
2/2/14
|
24%
|
Accumulate
|
FSCHX
|
142.24
|
154.87
|
4/12/14
|
9%
|
BUY
|
OBCHX
|
16.14
|
17.27
|
6/22/14
|
7%
|
BUY
|
FSCRX
|
29.34
|
30.94
|
10/25/14
|
5%
|
BUY
|
Note: Better Earnings from QIHU on 11/24. Upgraded to BUY.
|
|||||
Economy News to watch next week (week
11/24/14)
Tuesday:
GDP
revision
Wednesday:
Weekly
jobless claims, Consumer Spending, Personal Income, Chicago PMI, Pending Home
Sale, New Home sale.
Thursday:
US Stock Market is CLOSED
Friday:
US Stock Market is opened till1 P.M EST.
Also you can go to the following URL:
Source: Marketwatch.com
Folks, that’s all for today. Wish you good
investing! Stay tuned for my next month’s year-end blog for 2014. Thanks for
your time. If you want to get alert on my action then please subscribe to shesagroup_invest@googlegroups.com. Please feel free to send
me your comments and suggestions or alert request to shesa.nayak@gmail.com
Disclaimer: This blog is meant to provide my personal
opinion rather than professional recommendation to buy/sell any stock, ETF,
mutual fund or any other security(s). As an investor, it’s your hard earned
money and you decide what is best for you. The above are merely my own suggestions.
Please contact a professional money manager to buy/sell any security. I do not
earn any commission by writing the blog. I have position(s) on whatever
security I write on my blog and avoid recommending any security that I do not own
or follow.
Note: Click on Blog archives to read all my Blogs and updates.
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