Blog Posts by Matt Nesto

If you haven't noticed, natural gas has gone from laughing stock to favorite commodity over the past year as the price of our most abundant fossil fuel has more than doubled.

While many investors look to lighten up and lock in gains at this time of year, Jeff Hirsch, editor-in-chief of Stock Trader's Almanac, says although the list may be short, there are some bullish seasonal trends in play in May.

"Two things that are really in the middle of a good season are natural gas and crude oil," Hirsch says in the attached video. "They are impacted by the heating season, but also the cooling season and the driving season. So that whole build up period between December and June/July when the usage that drives that bullish season for gas and oil."

And of the two, he says nat gas looks to be the better bet right now. Not only is new demand coming on line but the price is breaking out to a two-year high. "We also think we had a secular low last April (at $1.96 m/btu) for the nat gas market. (UNG, FCG)," he says of the crash that took prices to generational lows. "It's nice that we have a lot of gas but there's more demand coming in and the supply is being taken up."

Beyond the sluggish economy and tight job market, one of the biggest challenges graduating college students face is finding something substantial to put on their slender resumes. This experience deficit has become increasingly problematic for business school grads, given the record number of MBA degree holders being pumped into the system each year and the reduced opportunities that exist.

But there may be hope, at least for the financially minded, thanks to the first-ever All-America Student Analyst Competition --a real-world, risk-adjusted contest that measures students' stock picking and portfolio management prowess over a four-month period.

"There are a lot of stock picking competitions that go on, but generally the winner is the person that has the best luck or puts all their money into a penny stock that goes up 4000%," says John Power, CEO of Mark My Media, the Connecticut-based firm that oversaw the trading tournament in conjunction with Institutional Investor.

As Power explains in the attached video, six different performance factors where used to add an element of professionalism and sophistication that's not normally found in these types of contests. It's a component he says is critical because it shows that students are not only "able to pick stocks, but to manage portfolios in an effective way."

Had you adhered to the old adage "sell in May and go away" for the past three years, you would have not only avoided a lot pain, but you would have likely outperformed the benchmarks, as well. This as the springs of 2010, 2011 and 2012 each marked the starting point for sell-offs that would shave anywhere from 9% to 19% off of the S&P 500 (^GSPC) in just a matter of months.

In the case of Jeff Hirsch, the editor-in-chief at the Stock Trader's Almanac, it's not just about going away from the stock market, he says investors need to have a strategy that will carry them through until the fall.

"When you come around to the end of the best six months, e.g. April, and the market is up as it is, we start to get defensive," Hirsch says in the attached video. By putting what he calls "the prevent-D on the field," he implements a host of portfolio changes, such as tightening up stop-loss levels to bring them closer to the appreciated value of assets; limiting the new purchase of positions; undergoing simple profit-taking in winners and culling losers; and looking for possible short ideas and some asset shifting into bonds.

Historically, since the 1950s, Hirsch says the longer-term "sell in May" results are also compelling, but never more so than in the past three years. In 2010, for example, the high watermark set in late April did not get permanently eclipsed until December — and then, only by about 3%. In 2011, the high of the year was hit on May 2 after the S&P 500 had gained 9%. But over the next five months, stocks fell 20% and would ultimately finish the year flat, which was still 8% below where they were eight months before. And then again, in 2012, a searing hot first quarter saw a high set in April, followed by a sell-off and five unproductive months while the market got back to even.

I like to call them the disaster du jour. It's when a particular stock gets crushed after missing analyst expectations or gets slammed for perhaps sounding more cautious than optimistic in giving its purview of the future. As jarring as these double-digit dips are for existing shareholders, they can also be pure gold for investors who are quick enough to react when they think the punishment does not fit the crime.

"Whether they miss here or miss there, that's not going to change the arithmetic of how they create value for investors over the long term," says Martin Leclerc, managing partner at Barrack Yard Advisors of IBM's (IBM) recent 10% post-earnings dive.

In the attached video, Leclerc explains that while he hasn't bought IBM yet, "it's very much on our minds," pointing out that the company's strong cash flow and a share count that's fallen 40% in a decade are the real "driving force."

On Wall Street, much is made over the difference between leading and lagging indicators, but investors of all sizes are clearly prefer the former. It's part of the reason why this morning's weaker than expected first quarter GDP report was a disappointment, but not enough to send traders rushing for the exits.

''I think what it indicates is that the economy is sort of muddling along," says Martin Leclerc, managing partner at Barrack Yard Advisors, of the 2.5% growth figure for the first three months of the year. "It (GDP data) can create a buying opportunity or a selling opportunity, but what happens with the real economy sometimes doesn't translate into what happens with asset prices."

And since this is only the first of what will likely be three very different readings of the same data point, it makes it even easier for investors to get over it, so to speak, and stay the course. That's because the general idea that the economy is slowly improving from Q4's dreadful 0.4% pace, is still intact.

For Leclerc, a value investor who shops globally, the weakness in exports confirms a well established fact that things are soft overseas. But that's not always a bad thing, he says, when you're job is to find good companies at great prices.

In the dead of winter, three long months ago, the buzz on Wall Street was about the great rotation. This budding super-trend was not only calling for a massive movement of money out of bonds and into stocks, but was also being used as a crutch to justify otherwise inexplicable gains in the market.

Today, there's another rotation underway, only this time the money flow is moving out of defensive sectors and into cyclicals and other industry groups that have been lagging. It's a sudden shift in sentiment that Miller Tabak's Jonathan Krinsky calls, "the other great rotation," and a trend that could prove to be just what's needed to drive stocks to fresh highs.

And according to Peter Kenny, managing director at Knight Capital, as much as earnings season has been "lumpy and uneven with extremes on both ends," it is also fueling the movement of money.

"Earnings and guidance are helping that rotation out of the defensives and into the more risk-oriented or growth-oriented or alpha-oriented issues, and away from the Dow 30," he says in the attached video. He notes even small and mid-cap stocks are beating the Dow Industrials now too.

For those of you looking for a reason to get excited about the first quarter GDP report due out Friday morning, perhaps nostalgia may be just the hook you need. That's because it will mark the final economic measurement done before the government's Bureau of Economic Analysis rolls out newly calculated data in July.

"People just take the GDP number and run with it, without really looking into the details," says Peter Kenny, managing director at Knight Capital in the attached video. "It is a very complex number."

Officially, Kenny and other market watchers and economists are looking for tomorrow's report to show GDP recovering to 2.8% in the first three months of the year, from what he refers to as "stole mode" in the fourth quarter amidst election and fiscal cliff worries.

"If you look at the markets and broader indexes, they're really pricing in some fairly significant earnings power and guidance," he says of the anticipated uptick in activity.

This self-described ''old school" analyst finds the whole thing a bit Orwellian and conspiratorial. Thanks to the inclusion of the value of such ''intangibles" as intellectual property, research and development, and the creativity of artists and scientists, our economy will magically be 3%, or about $450 billion larger, when the next numbers come out in July.

As we move deeper into the second quarter, the realities of summer and all the seasonal trends that go with it begin to come into focus. For many of us, warmer weather means vacation time. And even though the broader economy continues to grind along in low gear, don't be surprised to see higher prices and fewer vacancies when it comes to booking your next trip because the tourism business is heating up.

"It's really an amazing number," says Nick Colas, chief market strategist at ConvergEx Group, of the double-digit growth that vacation destinations like New York and San Francisco are experiencing. "Especially considering the still very sluggish economy and employment picture," he adds.

In fact, he says in New York alone, hotels are running at 85% capacity --a pace that he describes as "the level at which they have to start adding rooms." And they are. Colas says more than 36,000 rooms are "coming on line" in New York in the next couple years to accommodate the influx.

If you're wondering why this is happening, Colas explains in the attached video that there are a few good reasons.

"We're still seeing a lot of European inbound tourism," he says, adding that there's a lot more domestic tourism as well. "Americans are effectively staying home a little more and Europeans are coming over a little more, and the combination is driving a lot of volume."