- a powerful combination of bullish market factors,
- the real bargains created by a pair of tech IPOs,
- and what China is doing to the iron and coal markets.
Confluence of Bullishness
Posted at 11:36 a.m. EDT, March 25, 2010 We've got a powerful combination of lower unemployment claims, higher retail sales from Best Buy ( BBY) and a Fed chairman who is still saying he will not pull the rug out from this economy. In the meantime the bond market, while not tamed, is certainly not enough in the way to matter. It is still not competitive to stocks, and the banks have Bernanke on their team while financial reform seems toothless at best and certainly not negative to earnings. After my worries about a more prohibitive and costly health care bill weren't realized, I'll be darned if I am going to start being worried about a pro-industry financial bill. So, let's see, retail going well, Washington not being punitive -- meaning that Bernanke's greenlighting us -- and the financial reform being well received from the market ... that's a recipe for much higher prices. Stock prices. Not bond prices, which took still one more hit on Bernanke's dovish talk. It's funny, I wanted so much to draw the conclusion yesterday when General Mills ( GIS) was down that we might be about to witness a rotation out of the soft-goods stocks. Certainly seemed possible given that General Mills beat estimates and then raised its future earnings predictions. Then the stock got hammered. I figured, here it comes, a "sell the softs, buy the hards" moment! Sure enough, in this endlessly bullish run, what happens? Pepsi ( PEP) and Coke ( KO) have two of their best days in a while and Procter & Gamble ( PG) moves up, too! Those are quintessential selloff names in any rotation. More meaningfully, GIS is down again, and yet it has no pin action whatsoever. Let's throw this in: Could there be more pin action off of Best Buy? Try Hewlett-Packard ( HPQ), Apple ( AAPL) and even IBM ( IBM). I had thought that BBY would say after the last quarter that things looked better. Now they are saying it loud and clear. Better late than never. Maybe they are just reacting to better employment reports, like the claims we got today.
Tech IPOs Create Bargains Elsewhere
Posted at 2:51 p.m. EDT, March 24, 2010 MaxLinear ( MXL) and Calix ( CALX) have created some bargains, but they aren't these two. I pegged MXL as overvalued at about $19. That gives Calix some room to run, but MXL is a register-ringer. So where are the bargains? How about in Altera ( ALTR) and Xilinx ( XLNX) and Broadcom ( BRCM) and Marvell ( MRVL)? How about Cypress Semi ( CY) and Intel ( INTC) and Skyworks ( SWKS)? It looks like the money to buy these names came right out of the other semiconductor names that have good momentum and at their current prices are now much cheaper than MaxLinear, a decent comp, and about the same price as Calix. I think it is telling that the main semis in the smartphone/fast-Internet revolution don't have enough firepower behind them to be able to hold up on new IPOs. A really solid market would have seen them all go up instead of this zero-sum nonsense.
China Demand Heats Up Iron and Coal
Posted at 9:49 a.m. EDT, March 23, 2010 China is back in the driver's seat, and China seems to be paying up for everything. This iron ore deal is incredible and a sign that anything that involves the making of steel is going to cause the Chinese to break discipline and pay up. That's why Vale ( VALE) is soaring. That's why I expect BHP Billiton ( BHP) to go up 2 or 3 more points. That's why I urge you to consider buying Walter Energy ( WLT), which has the coal that China needs to build steel. In fact, I think that Walter should go to $100 on this. China has also been low key in the last few days about fuel. It is obvious that it needs much more fuel than it will get from the Arrow deal. I think we will see some major acquisitions in the oil patch pretty soon from China, and the time frame is within the month. This iron deal is the tell that China is truly not slowing down to the point that the shorts would like, despite the sixth straight bad day for the Baltic Freight Index. You can also include Bucyrus ( BUCY), Caterpillar ( CAT), Deere ( DE), Joy Global ( JOYG) and Freeport-McMoRan ( FCX) in the mix. They are all about to see another surge in orders, judging by the Vale agreement. Even CSX ( CSX) works, as it transports coal that could go to China. Do not underestimate this trade. The shorts have not brought in their positions. Vale says they should. These stories are increasingly not about the U.S., and that means there's room to run. And Walter Energy with its best-of-breed metallurgical coal is the right way to go. Random musings: Triumph ( TGI), what a trade! So big for the aerospace bull market. ... Natural gas bottoming? Seems to be the case. ... Semiconductors looking very strong, I still think Intel ( INTC) is having a great quarter. Pay close attention to SanDisk ( SNDK), as it has been the tech leader. At the time of publication, Cramer was long INTC.