Posts by Lawrence Lewitinn
- Lawrence Lewitinn at Talking Numbers17 hrs ago
Shares of Keurig Green Mountain were percolating on Friday thanks to a deal with Kraft Foods. But while the stock has been on fire for the last couple of years, could investors get roasted in the months ahead?
Though Keurig Green Mountain’s stock is up over 77 percent year-to-date – and has more than quintupled in the last two years – Chad Morganlander, portfolio manager at Stifel Nicolaus Washington Crossing Advisors, is not warm on the stock.
“We at Stifel have a hold recommendation on it,” Morganlander said. Stifel Nicolaus makes a market in Keurig Green Mountain’s stock.
“As a value manager, I believe that this stock is somewhat frothy,” said Morganlander, noting that the stock trades around 34 times its 2015 expected earnings.
Morganlander is also wary on the company itself. “The business model is somewhat sketchy here when it comes to pricing,” he said. “There are competitive issues that they will have in the coming years.”
Keurig Green Mountain may not be the best investment idea, according Morganlander. “You want to be somewhat more pragmatic about investing in it,” he said. “This is bubblicious to me. Stay away.”
- Lawrence Lewitinn at Talking Numbers17 hrs ago
Natural gas is a lot lower than it was during the “polar vortex” spike earlier this year and it may continue to drop.
“Talking Numbers” recently received a tweet from Jing Xiao (@collpandaca) saying:
@CNBCNUMBERS Can you guys talk about natural gas futures?
Given the way natural gas has been trading—down 40 percent in the last six months—we thought it would be worth a look.
Since 2005, natural gas supplies have been steadily increasing. And though prices have been volatile the entire way, they are much lower than they were a decade ago.
From June 2013 to May 2014, U.S. dry natural gas production was 23.7 trillion cubic feet. That’s 25 percent higher than it was 10 years ago, according to the U.S. Energy Information Administration. Meanwhile, the price of natural gas—notoriously volatile—is down 37 percent compared with this time of year in 2004.
Gina Sanchez, founder of Chantico Global, sees prices falling further. “I believe there are lower prices ahead,” she said. “Right now, we’re in sort of this trendless state which happens a lot for this time of year. So that’s totally normal.”
The dollar is near its highest levels in close to a year, and that might be a surprisingly good sign for U.S. stocks.
The U.S. Dollar Index – which measures the buck against a basket of other currencies – is near its highest levels since September 2013. The minutes from the last Federal Reserve meeting, in which the central bank debated raising rates sooner than expected, helped the dollar on Wednesday. Higher interest rates make owning the U.S. dollar more attractive compared with other currencies.
David Seaburg, head of equity sales trading at Cowen and Company, believes the dollar will continue to rise against other major currencies, especially the euro.
“We’ll continue to see it strong,” said Seaburg of the dollar. “The U.S. is essentially ending QE [quantitative easing] and the ECB [or European Central Bank] is just beginning QE, so rates are going to go higher.”
While that may make it difficult for U.S. firms to export to other countries, Seaburg doesn’t think the stock market is focused on that right now.
It’s been a hot summer for the markets, but not all indexes are basking in the sun.
While the large-cap S&P 500 index is hitting an all-time high, the small-cap Russell 2000 is down 0.5 percent for the year. Meanwhile, the Nasdaq Composite and Nasdaq - 100 indexes are also flying high, hitting levels not seen since the days of Tech Bubble 1.0. Those two indexes are up 8.5 and 12.7 percent, respectively.
The spread between big - cap stocks and small - cap stocks betrays an underlying truth about the economy, said David Seaburg, head of equity sales trading at Cowen and Company.
“The market is trying to tell us something,” he said. “There is a real comfort level around a lot of these bigger companies because of the stability.”
That stability is important, according to Seaburg, because policymakers at the Federal Reserve recently discussed raising rates due to stronger-than-expected economic data.
While everyone is staring at gold, one surprising precious metal is trouncing it: palladium.
The metal is up 22 percent this year, and earlier this week, it made 13-year highs as it broke above $900 per troy ounce. Gold, meanwhile, is only up 5 percent in 2014.
And according to David Seaburg, head of equity sales trading at Cowen & Co., the palladium run isn’t over just yet.
“Depletion of the Russian inventory has been a big issue,” said Seaburg. That country is the world’s largest palladium producer.
Meanwhile, on the demand side of the equation, increasing auto sales in China and the United States are helping the metal. Car production is a hugely important variable for palladium, given that the metal is used in catalytic converters.
While Seaburg sees palladium prices “stalling out” in the short term, “in the long term it’s going to go higher.”
The technicals are also bullish, according to Steven Pytlar, chief equity strategist at Prime Executions.
Looking at a multiyear chart of palladium, Pytlar sees a long-term base that formed in late 2011.
“Given the range of that prior base, there is actually a technical case to be made that it could go higher,” Pytlar said.
It turns out that following the smartest of the "smart money" can improve your investing decisions, according to a recent study. And that may give you a good reason to buy the shares of certain apparel companies today.
A new study by Erin Gibbs, equity chief investment officer at Standard & Poor’s Investment Advisory Services, begins by taking a look at the type of institutional investors out there, and how the stocks they buy performed. (A pdf of the study can be found by clicking here.)
Institutions have gained an overall larger stake in stocks over the past decade. About 82 percent of all S&P 500 shares are now owned by institutions, up from 73 percent a decade ago. (However, note that shares owned by ETFs are included in this percentage.)
Out of the 11 types of institutions Gibbs analyzed – including private equity firms, charities, pension plans, insurance companies, and sovereign wealth funds – one type of investor stood above the others.
Oil may have gained a little bit on Wednesday, but that doesn’t necessarily mean that crude’s long downtrend is over.
The price of West Texas Intermediate crude oil for September delivery settled at $96.07 per barrel on Wednesday, a day after bouncing from its seven-month low of $94.26.
However, Erin Gibbs, equity chief investment officer at S&P Capital IQ, believes the price of oil is headed lower still.
For Gibbs, the key is that the world is using less oil than usual while supplies are at record highs. Demand has fallen to its lowest levels in two years, with a relatively cool summer in the U.S. and a slowdown in Chinese imports likely to gain.
“We don’t see that changing any time soon,” Gibbs said. “Seasonally, we expect oil to drop as we head into fall. So we set our target at $92 , and I still see that as a potential for oil going down further.”
The technicals agree with Gibbs, said Richard Ross, global technical strategist at Auerbach Grayson.
Could one of the hottest companies in the Internet sector be … America Online?
It’s a serious question.
Since early May, shares of the company synonymous with yesteryear’s dial-up Internet are 25 percent higher. And while AOL’s stock is still down 6 percent on the year, it has more than tripled over the last three years.
So is this a “dead cat bounce,” or is AOL the Internet’s best comeback story yet?
James Cakmak, senior research analyst at Telsey Advisory Group, says the company is reinventing itself and transitioning from a value story to a growth story. He considers AOL one of his top picks, and gives it a price target of $70 per share. That’s 60 percent above where the stock was trading on Wednesday afternoon.
“This is not your grandmother’s AOL,” Cakmak said. “That’s the bottom line.”
While AOL still made $155 million in the last quarter off of subscriber revenue, he doesn’t see this legacy component as the future of the company.
Investors have been flocking to gold, but that doesn't mean everyone is taking a shine to the precious metal.
Gold ETFs saw almost 16 tons worth of inflows in July on geopolitical concerns. That’s the highest amount since November 2012.
That all sounds good for gold until one reads the World Gold Council’s recent report on gold in the second quarter of 2014. Its data show that total demand for gold—physical, jewelry and ETFs, too—was down nearly 185 tons compared to the same time last year.
The lack of demand for physical gold has offset added demand for gold in the ETFs, according to Gina Sanchez, founder of Chantico Global.
“I haven’t really changed my mind on gold,” she said. “It’s been overvalued for years.”
However, Sanchez said investor positioning remains bullish. Data from the Commodities Futures Trading Commission show that gross short positions are at their lowest levels since December 2012.
- Lawrence Lewitinn at Talking Numbers3 days ago
Banks reported near-record profits this past quarter. So why are they down over the past 30 days?
For the second quarter, the banking sector reported $40.24 billion in net income. That’s the secondhighest it’s been for any quarter in more than two decades.
Yet curiously, the KBW Bank Index is down 1.2 percent over the past 30 days while the S&P 500 index is green. What’s more, the financial sector as a whole is trading at 14.3 times its earnings, making it the cheapest of all ten sectors in the S&P 500.
For Gina Sanchez, founder of Chantico Global, the answer to this riddle is simple: It comes down to government scrutiny.
“Going forward, we’re looking at regulation that, while it’s designed to de-risk banks, is also probably going to impair their profitability,” said Sanchez, a CNBC contributor. “All of the banks are actually going to be suffering from that.”
Ari Wald, head of technical analysis at Oppenheimer & Co., is no fan of the banks either.
(See: CNBC's Bank coverage)