Investing Wisely -- Dow 30 Industrials - Week #8
Investment Course (a freshman - year Course of Study ) Week # 8
This is week number eight and is your freshman year of learning to Invest Wisely. As you know, by now, we are using the Dow Jones 30 Industrial Companies in the pursuit of learning / applying analytics and of course - the art and science of Investing Wisely.
Note: The format for this week has been cut back on the supportive notes, information and data I included in the first two weeks. So at the beginning of my second, six week rotation of 5 Dow components per week - in (next week - week 13) I will repeat the longer version with more notes. To visit my latest 'long version' click on the following URL. It was just last week - April 22nd.
Introduction - (what to learn this week?)
For this week, I am continuing to walk you through the Dow 30 component companies for the second time. Over and over until you feel you have a grasp on how to focus your investment dollars in securities that offer the highest probability of profit with a fair (not Wall Street or Media slanted) risk ratio.
Regarding "round two" of going through the Dow 30 components 5 at a time -- I will be encouraging you to begin to hone your talents on Screening or Scanning the services for data and information.
Now that you are acquainted with the various financial (data and information) services. we move on just a little. You should have been studying each of them thoroughly and learning the basics (good and bad) for each. It is likely you will get sick of the repetition and feel like this is not necessary. I will repeat what I have shared before. I still go through the basic analytics of these companies and many more every single week. I am also profitable for every single year, and that is a lot of years. Few financial analysts whom I know go through this discipline, and I know of no investor that even comes close to "do his or her" homework - as thoroughly as I believe is necessary.
As a freshman you will likely do what most all freshmen do and that is to convince yourself that you have learned "It All" and do not need the next three years or a diploma to be successful. If you are of such a disposition or following young people or perhaps 'traders' STOP and catch up with this course of study. It is your only hope.
You will notice at the bottom I have also begun to offer you the indexes for Gold, Silver, Crude Oil and the U. S. Dollar. I hope that adds some bizzaz to this work you are doing.
I repeat and will continue to repeat: "this 'stuff' is a boring process and often believed to be an unnecessary exercise in the minds of many investors, (the mind of a human being is a very peiculiar thing!) but it is also very profitable.
General Market - Current Perspective
The following will be repeated each week: Within my work / analytics it is important to take into account the current position of the general market / sectors / industry groups and the economy as it relates to the companies that are being valuated. This is one of those - first things first situations. It is a fact that 60% of the influence of the direction of any security is that of the general market - bullish or bearish. A 20% influence is on the Sector and Industry Groups. That leaves only 20% for the Companies itself. I suggest two things: a) that you confirm my numbers and b) that when you invest that you had better - be in phase - with the bullish or bearish direction of the general market and sectors / industry groups. It is up to you to believe or dismiss this information. I urge to do your homework well and be very selective in the companies you take positions in. Many followers of my work / analytics - write to me with ridiculous remarks about the above and other important axioms of the marketplace. That my friends, is both dumb and totally ego centered. These people will ARE'T and NEVER will be consistent and profitable investors!
The general market is currently and remains over-valued, over-bought and is showing serious signs of deterioration, especially in the area of breadth. Interest rates are on the rise, and inflation is already an acute problem. These Dow 30 Industrials along with many other companies are quite vulnerable to a meaningful general market pullback. That means that you should strongly consider holding cash or perhaps taking bearish positions. I do not recommend taking short positions in any of these securities.
So - what is new to consider in the marketplace for this past week? Nothing but my boring advice that you develop patience and discipline waiting for a change of direction of this marketplace. I call that an Inflection Point.
For me that is an easy question and will be for you, if you do your homework. The rally this past week remained right on schedule and should continue to do one of two things. The first is what most investors think and that is to assault the previous highs and create what is often called a break-out. I agree that this is a possibility. However, I have been waiting for a General Market Bearish Inflection Point for three plus months. So, as of this posting, I believe that we are much closer to a meaningful pullback than going - meaningfully higher. Yes the strongest Companies and Sectors are already higher but the vast majority is Not! This is particularly true with the Dow 30.
My focus for all companies, Dow 30 or others, is - Investing Wisely. My methodology of taking advantage of the bull / bear fundamental 'rotation,' technical 'cycles,' and 'inflection points' are especially critical in this marketplace and to your annual profitability. I believe, most every investor I have ever met can profit from this course. That is if you / they do your homework well. This is a vital discipline in today's marketplace.
Companies - Current Perspective
A Ranking, using each of my three (weighted disciplines) -- Comments for each Company -- and current Numeric Ranking of the position of each Company within the Dow 30 Industrials should give you plenty hard analytics work each and every week, but soon you will be doing it like a professional.
Grouping Two: (see below for a list of the six groupings of five - Dow 30 Industrial Companies.)
|Symbol and Current Numeric Ranking within the Dow 30 Industrials||Category||Fundamental
|(HPQ) Ranked: # 27||Bellwether||Poor||Not so Good||Good|
|Comments: Currently, at $40. a point lower than 6 weeks ago. The company does not look healthy and is carrying a very low Ranking against its Dow peers. Over the coming couple of years the earnings' growth falls back measurable! Fundamentally, HPQ is in need of very strong management and direction for its products to be competitive. I am quite bearish. It is definitely not even a hold but use your technical skills to exit. It may go a bit higher. Technically, it looks like it has topped and a bearish inflection point has already occurred. I believe the stock is coming much lower before it can begin a new up-trend. Consensus wise, in plain English - currently the "Street" does not like HPQ.|
|(AXP) Ranked: # 16||Bellwether||Good||Good||Very Good|
|Comments: Currently, at $49. 6 points higher than 6 weeks ago. The company appears to be improving and will quite likely climb up the Ranking list against its Dow peers. With the possible negative climate in mind for the future over all marketplaces, AXP is only in the middle of the list. That means, it is not likely to be a big winner or a big loser. These year earnings' are positive and will perhaps continue to grow. That is likely to be at a slower pace than the recent past. Fundamentally, it is clear that Am. Express is looking better than some of its peers - but not enough better to invest. Technically, it looks like it is topping. Should it "break out" on the upside, I believe the upper targets are not worth the risk? Consensus wise it is very good.|
|(KFT) Ranked: # 19||Bellwether||Very Good||Very Good||Good|
|Comments: Currently, at $33.7 and up 2.7 points from 6 weeks ago. The company has stayed in a 10%+ range over the past six months and carrying a lower Ranking against its Dow peers. This year, earnings' turned up quite nicely and next year and the following year they look even better. Fundamentally, KFT is making a positive move that could be sustained. However, it is a very conservative company and does not produce much growth. Food should continue to inflate, which is good for Kraft. Technically, on a more near-term basis it is looking tired at the current top. Is there more life in it for the near term? My personal work says - not much, and my asset management mind set says - it is just not a competitive investment. Consensus wise it is definitely not one of the strongest.|
|(TRV) Ranked: # 13||Bellwether||Poor||Very Good||Poor|
|Comments: Currently, at $63.1 up 4+ points in the past 6 weeks and that is very good for a company like Travelers. Especially when there is much to complain about, at least for the now and the coming years. The Insurance Industry Group is still doing well but many component companies have started to pull back. Surprising to me, TRV has remained near its recent top. The price will likely, in time, have a pullback along with some peers. Remember, these are "Bellwether" companies that are not supposed to be volatile. When doing my analytics and a company Ranks near the bottom of my list, I usually spend very little time looking deeper? Like CSCO, and others, this year earning' turned negative, but it appears that TRV next year and the following years, earnings' will not be recovering to the point of you wanting to watch it very carefully. Fundamentally, at present Travelers is just another conservative component of the Dow 30. Technically, it looks strong but be VERY careful over the near-term. Consensus wise it is not doing well.|
|(CVX) Ranked: # 2||Bellwether||Good||Very Good||Very Good|
|Comments: Currently, at $109. up only 7 points over the past 6 weeks. That is not enough for a #2 ranked company! The company looks healthy but is one of my least favorites for future price appreciation. At this time, it is Ranked very high however, I am not at all positive about the coming years, please note the following numbers. Earnings Grow appears to be declining steadily for the next few years. Current 2011: 33 2012: 3.52013: -5 and 2014: back up. The projected five year earnings' growth rate is - a not bad 12%. You should understand that there are almost always better energy companies than CVX and XOM to own and many also pay a dividend. The Energy Sector is and has been a very compelling story, in recent months but is often subject to high volatility and it too looks very toppy. Chevron is not historically a great mover, but 20% plus price appreciation since December is (or has been) a nice gift. Remember, "they" give-ith and "they" take-ith and away. Don't be greedy. Fundamentally, the near-term looks quite positive, however, the above numbers signal you do not want to remain too optimistic about the coming years. Technically, this is an excellent example of a chart picture that can turn negative without much notice. This current mini-pullback is eating up profits rather quickly. I suggest that declining tops will begin to show up rather soon. There is a very positive Consensus picture. Your job is to remember is it currently rather strong and when that starts to deteriorate it is usually too late. Note last week's Comments on XOM are very similar and that has not changed in many years!|
In my 'Longer Version I have five (rather detailed) Notes: Again, click on the above URL to visit my last 'Longer Version' of this Course of Study. That would be Course # 7.
You can find all Dow 30 Industrial Companies and a number of other supporting
Bellwether and High Profile charts amongst the 100 or so in:
The Prof's Six Groupings of the Dow 30 Industrials
Grouping One: BAC, CSCO, GE, BA, XOM
Grouping Two: HPQ, AXP, KFT, TRV, CVX
Next Week: Grouping Three: CAT, HD, KO, DIS, DD
Grouping Four: T, IBM, JNJ, AA, JPM
Grouping Five: VZ, MRK, PG, MCD, MSFT
Grouping Six: PFE, , MMM, UTX, WMT, INTC
Commodities - Current Perspective
Four for focus: These four commodities are offered in order to compare their on going analytics with that of the Dow 30 Industrials.
This presentation each week will be a simple update of the Technical picture. Fundamental and Consensus Analysis is much too complex to present in this format. However, understant in order to invest wisely in an appropriate ETF or Company the work / analytics is much the same as for any common stock.
|Symbol and Name||Category||Fundamental
|Gold ($GOLD)||Bellwether||Very Good||Excellent||Very Good|
|Comments: Currently, at $1,536., up again for the week. Gold is and has moved up strongly and has been a leader since late 2008 - that's a long time. Current Technicals: It looks like it is topping and has looked that way for a long time. It can just keep doing its thing for awhile longer. If you were worried during the January 2011 pullback you can expect yet another pullback, and quite likely - more severe! Until Gold experiences a meaningful pullback, and then clearly fails to successfully test the previous highs, it is likely a hold. That could be a longer time than an analyst like me might expect. However, looking at the near-term and not wanting to "experience a meaningful pullback" - I suggest that prudence says that if Gold starts looking like it did in November and December that it could become a sell. Students and investors alike should develop an exit strategy. Few investors ever even consider that (an exit strategy) is a most important part of their investment philosophy!|
|Silver ($Silver)||Bellwether||Very Good||Excellent||Very Good|
|Comments: Currently, at $48.4., ( Gold & Silver track each other very well historically) Silver is and has moved up strongly and has also been a leader since late 2008. Current Technicals: I suggest you re-read the above Comments on Gold.|
|Crude Oil ($WTIC)||Bellwether||Very Good||Very Good||Very Good|
|Comments: Currently, at $112.9., Crude Oil has been tracking Gold/Silver and the above is also applicable to this commodity. However, the current picture is becoming much more negative. I believe it has started to look like the topping action of December / January. This simple means caution. Six weeks ago I said: "Energy in general is not holding up nearly as well as Crude Oil. That should be a warning of some sort?" Well, warnings are always worth checking out and as a student you should - 'check this possible situation out.'|
|U. S. Dollar ($USD)||Bellwether||Very Good||Very Good||Good|
|Comments: Currently, at $73.12., at this time there is nothing to lead one to believe that the Dollar will be turning up - however!. Current Technicals: I now believe that any turn-up could well be coincident with a turn-down in the General Market. In other words - a possible rally in the U. S. Dollar and a pullback in the General Stock Market? Stay alert, this could be a very interesting study / scenario for both students and investors.|
You can also find all these Commodities and a number of other supporting
Bellwether and High Profile charts amongst the 100 or so in:
Source information and data:
The Bottom Line
Your 'bottom line' will depend on just how proactive you are about doing your homework on the above Companies and perhaps asking questions of the Prof. (that's me!)
This Week's Home Work Assignment: (Same as last week) Study at least 3 of my "Sources forScreening Securities for the collection information and data - to be compared" You must learn to Navigate through all that is offered. (the above will be your - on going homework assignment and will require many hours if not months - these sites offer much information - some good and some worthless - but can be very rewarding if you are willing to learn)
Your best source for finding the Internet sources for Screening are in Google. I want you to plow through this exercise the hard way. I has taken years to get my "screening" procedures working to near perfection.
Next read up on each of these companies and make some notes from your favorite sources of information. You may even want to make file folders for each company. Referring back to your notes can be a valuable learning experience. Remember, this is boring "stuff" to many investors, but it will provide you accuracy and profitability in your investment strategy.
More Notes about this Course of Study
Visit the 'Longer Version' URL for this information:
You may want to review my 38-week course - Investment Basics with SafeHaven.com. (see the sidebar on the SafeHaven.com home page or Authors and my name.)
Wishing you a wonderful learning experience and the continued desire to grow your knowledge. Education is an essential part of living wisely and the experiences of life, I hope you make it fun.
Learning how to consistently profit in the Stock Market, in good times and as well as in not so good times requires education, experience, time and unfortunately mistakes which are called losses. I believe if you will work ast it, you can be profitable while you are learning?
Let me know if and when I can help and tell a friend about this Course of Study.
Thanks for your interest in my work / analytics and possible my professional asset management / consulting / mentoring services.
Smile, have fun - Investing Wisely,