Shesa's APRIL 2016 INVESTMENT BLOG
24 April 2016
APRIL 2016 Investment Blog
Shesa Nayak
U.S. Stock Market Commentary: The global stock
markets have been bouncing back nicely since mid-February and now in positive
territory for the year except NASDAQ. This is a welcome sign. We are in the middle
of earning season. Many of the corporates have declared their results and remaining
will be reporting in next couple of weeks. The earnings season will set the
tone for the market direction. We will discuss more about earnings and
potential market impacts little later. First let’s take a look to Market
Indexes.
|
U.S.
Indexes
|
4-Jan
2016
|
Friday
Close
|
Year-to-date
change
|
YTD %
Change
|
52
Week High
|
Change
from 52 Week High (%)
|
|
DOW
|
17425.03
|
18,003.75
|
578.72
|
3.32
|
18,351.40
|
-1.89
|
|
S&P
500
|
2043.94
|
2,091.58
|
47.64
|
2.33
|
2,134.72
|
-2.02
|
|
NASDAQ
|
5007.41
|
4,906.23
|
-101.18
|
-2.02
|
5,231.94
|
-1.89
|
Economic Reports
The Fed meets next week to discuss about interest
rate and announcement will be made on Wednesday, April 27. Personally, I do not
see any rate hike now. If economy keeps growing then it could happen sometime
in June. In addition, GDP growth and few more key economic reports are expected
next week. Current forecast of GDP growth is expected to be 0.7%. Let’s wait
and see..Please visit the following link for more information:
Source:
Marketwatch.com.
Why did Oil freeze deal fell and its
Impact to Stock Market? On Sunday, 4/18, OPEC nations
including non-OPEC country Russia, gathered in the Qatari, capital of Doha to
stabilize oil output at January levels. Initially all except Iran had agreed to
pen a deal. However, the deal fell apart as Saudi Arabia demanded that Iran join
the oil freeze deal despite calls on Riyadh to save the agreement and help prop
up crude oil prices. Obviously, there are political and economic reasons why
Saudi and Iran do not sail on the same boat! Moreover, not reaching a deal is
negative for the oil sector, at least temporarily. Many of these OPEC nations
do NOT realize that it’s not good for any of them because they will have to
produce more and sale more to generate same amount of revenue. Irrespective of
the failure in talk, oil and crude prices bounced back sharply. The OPEC and
non-OPEC members are expected to meet again on early June. But it can be noted
that every one has his own interest and agenda.
So I am not very optimistic that any deal will be reached! At this point
oil is trading around $43.73 per barrel. I do not expect it to have a major run
in the near future, potentially it could settle between $40-50. After the OPEC
meeting in June it could go up/down depending on the out come.
What can we anticipate from the stock
market going forward?
First,
The earnings season is under way. S&P 500 companies are expected to report
negative 9.3% profit in the current quarter, Q1 2016. This will be the fourth straight
quarter of negative earnings. The only time it really came close was during the
credit crisis of 2008. So far, the earnings seem to be mixed. Two big names companies
who missed earnings are Google and Microsoft. Let’s wait and see earnings from
Apple and Facebook next week.
Second, the
markets are bouncing up nicely due to bounce in oil price but now that deal has
fallen apart we may have to keep an eye on how it pays out. In my experience,
off late there seem to be a correlation between oil price and stock market.
Hence, if the oil prices continue to rise then market may still rise further. The
energy sector has dragged down the sales and profit for whole S&P 500.
Third, I anticipate
that the stock market could turn down as soon as the current earnings season
gets over or even before that. So what should to do? It may be advisable to
trim some positions and have some cash available to take advantage of better
buying opportunities in next few weeks.
Why Emerging Markets could be good Investment
Opportunity now?
A few months ago, I
included EEM in my blog portfolio. The ETF has been bouncing up nicely. But the
big question is “is it going to continue?” I think so.. Let’s analyze why I
think EM can provide better opportunity:
Stimulus: Many emerging countries particularly China and
India have been slashing interest rates. In addition, Chinese govt. has taken
several structural changes to make things better in China. Please refer to my
March blog for details.
Valuations: Emerging markets look attractive on both a
price-to-earnings and a price-to-book basis comparing to global valuations.
U.S. Dollar: Emerging markets are also getting a boost
from recent U.S. dollar downtrend, which are making their currencies more
competitive, which in turn helps their profit margins. This has also brought stability
in commodities prices helping the EM.
Cost Reduction: Many EM countries have started reforms of
state-owned enterprises that could reduce cost and bring better efficiencies.
Will Gold, Silver and Copper keep
shining?
Since
January 20 of this year gold has been going up at a rapid pace. There is no
major down trend so far. The question is how long will this trend continue? Currently
it’s fluctuating between $1215 and $1270. One of the reasons helping gold
prices is due to correction in U.S. Dollar. In addition, the momentum and
investors confidence is pushing price up. This year gold has been one of the
best performing asset class since decades. I believe there is a strong momentum
on its side and it may continue further. However, if U.S. Dollar takes uptrend
then there could be some correction in precious metals. But I don’t anticipate
any major correction before June when Fed is expected to raise interest rate
again. Irrespective of this uptrend I will be vigilant and put a tight trailing
stop in case it starts correcting.
JetBlue Airways Corporation is based in
Long Island City, New York and founded in 1998. It provides air transportation
services. As of December 31, 2014, the company operated 25 Airbus A321
aircrafts, 130 Airbus A320 aircrafts and few other flights. It also served 93
destinations in 28 states in the United States, the District of Columbia,
Puerto Rico, U.S. Virgin Islands, and 19 countries in the Caribbean and Latin
America. The company is known
for its customer first attitude, one of JetBlue's founding principles was to
reintroduce a sense of customer service to air travel. The company didn't
charge baggage fees, kept a bit of extra legroom and gave away soda for free.
However, with a new CEO, the company has started charging for some of these
amenities, although the company still takes first place for in-flight comfort. The
Customers do not necessarily choose airlines that are better or worse, rather Price,
Comfort, Reliability and priorities.
For more than a year the airline
industry is benefiting due to low gas prices. If we look into Jet Blue then the
company has a reasonable revenue growth, good valuation, good return on equity,
impressive record of earnings per share growth and solid institutional
holdings. It also has good cash flow from operations and largely solid
financial position with reasonable levels of debt. I believe that there is also
chance of mergers and acquisition. Now let’s see company’s fundamental:
Company Fundamentals:
Market Cap: $6.58 Billion
Revenue: $6.42 Billion. Revenue per share: $20.36
Profit: 677 Million
Earnings Per
Share (EPS): $1.98
PE Ratio: 10.35
Forward PE: 8.11, Price to Sales: 1.03
Quarterly
Revenue Growth: 10.2%
Profit Growth: 115.90%
Institutional
Holding: 92.80%
Return on
Equity (ROE): 23.59%
Total Cash: 876
Million
Debt: 1.84 Billion, Beta: 0.53
52 Week High: 27.36, Low: 16.26, 52 week change: 3.70%
Risks: Airline industry is sometime cyclical and there
would be up and down. The company has good fundamentals in the industry. We can’t expect
a great return but 23% return on equity seems to be very good. I already have
some positions and I may buy more, if it falls further. If gas prices continues
to go up then the profit for the company could be at risk. However, at this
point it provides a good buying opportunity.
Shesa’s Blog
Portfolio
|
Equity
|
Suggested Price (USD)
|
Current Price (USD)
|
Suggested Date
|
% Changes
|
My Opinion (see disclaimer)
|
|
STOCK
|
|||||
|
54.09
|
105.68
|
1/25/13
|
95%
|
HOLD
|
|
|
86.43
|
190.76
|
4/18/13
|
121%
|
HOLD
|
|
|
21.8
|
18.39
|
10/1/13
|
-16%
|
BUY
|
|
|
47
|
110.56
|
11/13/13
|
135%
|
HOLD
|
|
|
135
|
253.75
|
11/13/13
|
88%
|
HOLD
|
|
|
78.06
|
97.45
|
12/12/13
|
25%
|
HOLD
|
|
|
311.73
|
620.5
|
4/12/14
|
99%
|
HOLD
|
|
|
22.68
|
13.3
|
11/23/14
|
-41%
|
HOLD
|
|
|
100.92
|
101.93
|
1/11/15
|
1%
|
HOLD
|
|
|
89.1
|
71.86
|
2/6/15
|
-19%
|
HOLD
|
|
|
9.57
|
5.84
|
6/14/15
|
-39%
|
HOLD
|
|
|
52.03
|
60.52
|
9/13/15
|
16%
|
BUY
|
|
|
171.15
|
145.39
|
1/15/16
|
-15%
|
BUY
|
|
|
31.88
|
32.73
|
2/21/16
|
3%
|
BUY
|
|
|
67.28
|
79.89
|
2/21/16
|
19%
|
BUY
|
|
|
20.44
|
20.44
|
4/24/16
|
0%
|
NEW BUY
|
|
|
ETF
|
|||||
|
26.88
|
22.59
|
4/1/13
|
-16%
|
BUY
|
|
|
31.94
|
27.2
|
3/15/15
|
-15%
|
BUY
|
|
|
ASHR*
|
28.46
|
23.98
|
3/15/15
|
-16%
|
HOLD
|
|
INCO
|
34.46
|
31.68
|
5/15/15
|
-8%
|
BUY
|
|
139.1
|
128.17
|
8/16/15
|
-8%
|
HOLD
|
|
|
77.76
|
79.46
|
8/16/15
|
2%
|
BUY
|
|
|
69.43
|
65.65
|
10/18/15
|
-5%
|
HOLD
|
|
|
32.5
|
34.54
|
11/15/15
|
6%
|
BUY
|
|
|
MUTUAL FUND
|
|||||
|
117.73
|
183.69
|
3/1/13
|
56%
|
HOLD
|
|
|
55.17
|
63.72
|
2/2/14
|
15%
|
HOLD
|
|
|
135.91
|
139.37
|
4/12/14
|
3%
|
BUY
|
|
|
27.3
|
28.14
|
10/25/14
|
3%
|
HOLD
|
|
|
28.31
|
26.92
|
12/20/14
|
-5%
|
HOLD
|
|
|
63.38
|
70.23
|
12/20/14
|
11%
|
Accumulate
|
|
|
MINDX
|
26.94
|
26.2
|
6/14/15
|
-3%
|
BUY
|
|
MCDFX
|
14.11
|
13.67
|
12/9/15
|
-3%
|
BUY
|
|
95.46
|
104.5
|
1/15/16
|
9%
|
BUY
|
|
|
38.78
|
40.5
|
3/20/16
|
4%
|
BUY
|
|
|
* Indicates dividend
adjusted
|
|||||
Positions closed in after my last blog: NONE.
Company Updates:
ILMN: Gene-sequencing giant Illumina (ILMN) reported preliminary revenue of $572
million, falling well below analyst expectation of $596 on lower-than-expected
sales of some models of its HiSeq instruments. Now the company is projecting
12% revenue growth of for fiscal 2016 against projected 16% growth. Per the
company, Europe is their main concern. The company will announce full Q1
results on May 3. After the news the stock plummeted after the news. I have
added little more to my position
That’s all
for today. Wish you good investing! Stay tuned for my MAY 2016 blog. Thanks for
your time. If you want to get alert on my action then please subscribe to shesagroup_invest@googlegroups.com. Also, 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 opinions and some of the information provided may not be correct. 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.
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