Updated from 9:14 a.m. EDT
Things are brutal out there. No question about that.
Here I am all day, stuck being a bull, trying to defend equity prices to the various bears that I talk to all day, only to have equity prices slide horribly against me.
As the stock market hits multiyear lows, there are a few credit indicators that I quickly want to look at, which suggest the worst for the stock market might be over:
TED Spreads, which reflect the difference in yield (and therefore risk) between InterBank and U.S government loans, are trading at record lows of 1.00 (or 100 bps). TED spreads right after the Bear collapse were over 2.00 (or 100% higher). Historically, a rising TED spread often foretells a downturn in the U.S. stock market as liquidity is being withdrawn. Thus, a massive drop in spreads should be followed with increased liquidity and potentially some upward movement in stocks.
Two- and 10-year swap spreads, which reflect the riskless rate of treasury securities, plus the credit risk associated with the financial sector, are near their lows for the year.
Recent Federal Reserve term securities lending facility loans have had extremely low bid/cover ratios. Last week, the Federal Reserve made availed $25 billion in T-notes; however, the money-center banks "only" took $15.4 billion from this latest action. This suggests that money-center banks might not be as dreadful at this point as the media pundits would like us to believe.
With that said, here is this week's
of stocks that might be driven higher by near-term catalysts.
But first, before I highlight a few names, let's see how
- 3Com (COMS) : Down 11.5% on the week, although at one point it was up 5%.
- Huntsman (HUN) - Get Report: Down 16.7% on the week, although at one point it was up 5%, after UBS upgraded the stock with a $15 price target.
- KeyCorp (KEY) - Get Report: This snapback play worked fairly well; shares of KeyCorp where up as much as 6% during the week
- Fifth Third Bancortp (FITB) - Get Report: Was up as much as 10% during the week, but finished about flat.
- Deere (DE) - Get Report: Down 7.5% on the week, as the whole agricultural sector got crushed.
- AIG (AIG) - Get Report: Down 13.3% on the week.
- North American Energy (NOA) - Get Report: Reported earnings per share for the quarter of 63 cents compared with 4 cents per share in the prior year, but ended the week down 14.5%.
- Research In Motion (RIMM) : Down 17.4% for the week after missing earnings by a penny, citing higher marketing costs.
- Kodak Oil & Gas (KOG) : Was up over 10% during the week, but ended the week down 11.3%.
- Monsanto (MON) : Down 9.1% on the week.
First up this week is
, which was totally crushed as
cited "a slowing economy and weakness in the nonresidential construction market in North America and Europe."
First off, Terex, which makes various mining equipment, cranes and other platforms, boasts that most of its products are sold out for 2008 to 2009, even though Terex is not leveraged to the U.S. economy at all; 70% of revenue comes from abroad.
Terex is extremely cheap, with operating margins well north of 10% and a forward P/E of 6.5. The last two times Terex hit this level, it had a hard snapback, rallying more than 10% to 15% days after its decline. My bet is that this is no different.
You also want to keep a serious eye on shares of phone carrier
, which was actually up during last week's 350 point market selloff.
Right now, there is some serious rumbling that
is sniffing around at various Sprint assets.
Shares of Sprint are down about 60% for the year, and despite recent investor disappointments, there is some intrinsic value to having 75 million clients. Also possible is that Sprint would be a natural acquisition by T-Mobile parent company
. Add in the weak dollar, and shares of Sprint are down more like 70% to 80%.
For more ideas, including
Family Dollar Stores
, please check out this week's
To find snapbacks and potential breakouts on a regular basis, check out these Stockpickr portfolios, which I use in my own research each week:
Always check the Biggest Percentage Losers, a list of stocks that lost big the day before, because they can snap back hard.When you check this list on Stockpickr, you can see which stocks are owned by the quality hedge funds and mutual funds. Pay attention to those. The funds will be buying at the lower prices and likely supporting the stock.
Ditto for the 52-week-low list. You must check the above two lists every day if you hope to find volatile stocks that can snap back.
Biotech Short Squeezes: Dendreon and others can often be found in this category.
Stocks Rising on Unusual Volume: These are potential breakout plays.
Stockpickr's System Trades of the Day: These are trades triggering that day in various back-tested trading systems we've developed.
Stocks With Unusual Options Activity: Perhaps someone knows something?
Latest Activist Situations: These are stocks that hedge funds are accumulating shares of and demanding change in. Believe me, these hedge funds piggyback each other. And once they start rocking the boat, things happen quickly. This should be on the must-view list.
One final place to frequent is the
section on Stockpickr, where ideas such as those presented in this article are thrown around daily. And you can further discuss your ideas and share opinions in Stockpickr's
At the time of publication, Altucher and/or his fund was long Nvidia, although positions may change at any time.
James Altucher is president of
LLC, a wholly owned subsidiary of TheStreet.com and part of its network of Web properties, and a managing partner at Formula Capital, an alternative asset management firm that runs a fund of hedge funds. He is also a weekly columnist for the
and the author of
Trade Like a Hedge Fund
Trade Like Warren Buffett
. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback;
to send him an email.
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