Weekly Market OverviewThe market continues to experience volatility as earnings continue to pour in this week with 452 announcements expected. Many investors are complacent as the market continues to make gains, but professionals caution that a market retracement is overdue. Meanwhile, continued merger and acquisition activity by private equity and competing companies continues to drive shares higher. Overall, this week promises to be choppy with lots of earnings, economic data, and the Federal Reserve meeting. Any of these can end up moving the market, but direction remains unclear until investors get a better picture of the economy.
Top 10 Stocks to Watch this WeekFundamental AnalysisOur top five stocks to watch for fundamental investors are:
- Cost-U-Less, Inc. (CULS) - There are two hedge funds currently involved with this stock, both calling for the company to put itself up for sale. One of the hedge funds has even said it would make an offer. If the two hedge funds are successful in lobbying management, the company should sell for at least $12 per share - a 40% gain. (More CULS articles...)
- Temple Inland Inc. (TIN) - Carl Icahn said that this company is being held back due to its conglomorate structure. Consequently, he recommended that the company be broken up and its different division spun off into new companies. This presents a great spin off opportunity led by one of the best activist investors of our time. (More TIN articles...)
- Ceridian Corporation (CEN) - Bill Ackman propposed that Ceridian spin off its Comdata division since the two share almost no synergies. Moreover, he said that the segment was being held back by the parent company. This is another great spin off opportunity that would help both the parent company and the child company... and Bill Ackman definitely knows what he is doing! (More CEN articles...)
- Applebees International Inc. (APPB) - The Breeden Partners recently filed a series of Schedule 13Ds suggesting that the company improve several defficiencies, including its excessive executive compensation. If these issues are appropriately addressed, it could help the company save millions and increase their share price significantly. (More APPB articles...)
- Electro Scientific Industries (ESIO) - Nierenberg Investment Management first lobbied this company to take several actions to return shareholder value. Since then, they have been joined by another hedge fund. Combined, these two should have enough leverage to at least warrant a response by management. If they are successful, it could mean special dividends or other measures aimed at unlocking value. (More ESIO articles...)
Technical AnalysisOur top five stocks to watch for technical analysts are:
- Texas Instruments, Inc. (TXN) - Chart indicates an intermediate term breakout from a 67-day downward channel.
- Ultashort QQQ Proshares ETF (QID) - Chart indicates another intermediate term breakout from a 56-day downward channel.
- International Rectifier Corporation IRF - Chart shows a long term breakout from a 167-day horizontal channel.
- Evergreen Energy, Inc. (EEE) - Chart shows an intermediate term breakout from a downward channel and a drive through resistance from a prior high.
- Abaxis Inc. (ABAX) - Chart illustrates a reversal and breakout from an intermediate term downward channel.
Stock of the Week : Cost-U-Less Inc. (CULS)We believe
that this company presents great opportunities for investors to profit
over the next year. Two hedge funds are actively engaged in forcing the
company up for sale with one of them expressing interest in making a
bid of their own. CULS currently trades at roughly 3.5x EBITDA with its
peers trading at around 16x EBITDA, which values CULS at roughly $12
per share at the low end of the spectrum. With the company’s annual
meeting coming up soon, look for these hedge funds to take a more
active stance in their investment and unlock value for shareholders.
Specifically, watch for future
Schedule 13D or
14A Proxy
filings made by hedge funds, which may contain letters to management,
additional demands, or proxy materials in the event of a proxy battle.
Read More on SECInvestor.com…Filing of the Week : Schedule 13DAfter acquiring a 5% or greater stake in a company, investors have two options: they can either file a Schedule 13D or a Schedule 13G. A Schedule 13D is the activist version of this filing made by those who may contact management from time to time (as opposed to those who simply hold the stock passively). Many Schedule 13D filings contain letters to management, demands made by hedge funds, and other interesting reading material for special opportunity investors - like us at
SECInvestor.com! However, the filing also contains information of interest including:
- The name of the investor/fund
- How many shares they own
- When they made their purchases
- What prices they bought at
- Why they purchased shares
You can easily track these SEC filings with e-mail and RSS alerts using
SECFilings.com!
Tip of the Week : Track Your Favorite Investors
What if you could look over the shoulders of some of the greatest investors of our time? Well, it turns out that you can do just that through the use of SEC filings! How? Simply visit
SECFilings.com and instead of typing a company name, type in the name of the investor you'd like to follow. Since all investors that acquire more than 5% of a company are required to report their holdings, you can easily track them! The key filings to look for are Form 3/4/5 (when they buy or sell), Schedule 13D/G (what they are holding), and 13F (annual list of holdings). Here are a few examples to get you started:
Final WordsThis week promises to be an interesting one as the market decides which direction it would like to move. Be cautious when investing in this market, as it has moved up a lot without a significant retracement. It is likely that many investors will take profits off the table on any major sign of weakness, which could move the market down even further. Good luck trading!