Barchart.com's Chart of the Day - Power Solutions International (PSIX) for Nov 12, 20

[Thierry Martin]

Markets were heading higher on Friday after the job market unexpectedly rose last month. The Labor Department announced that there was an addition of 204,000 new jobs in October, however the unemployment rate still crept up to 7.3% from September?s 7.2%. The new job data blew past the 125,000 job increase that economist were expecting. They also expected the unemployment rate to increase, but only by a tenth of a percentage point. The announcement this morning also showed there was an additional 60,000 jobs added in September than originally thought. The higher than expected data was further evidence that the 16-day partial government shutdown did not have a strong affect on the job market. Russell Price, a senior economist at Ameriprise Financial Services, said, ?Clearly what transpired was businesses viewed the shutdown as a temporary phenomenon and the economy was still growing and would continue to grow going forward.?

In a separate report released on Friday morning, the Commerce Department announced that U.S. consumer spending was up slightly. The also reported that household savings were on the rise. Spending was up 0.2% in September after a 0.3% climb in August. This was on point with the 0.2% increase that economists were expecting. There was a decrease of 1.3% in consumers purchasing of long-lasting manufactured goods. In the same report it showed that there was an increase of 0.5% in American?s income. This was the highest increase since February. The rise in September was partially attributed to the end of the government furloughs. Household savings were up to 4.9% of Americans after-tax income. This was up from 4.7% in August.

Shares of McDonald?s (MCD) were down slightly after the company missed sales expectations for October. The company announced that global sales at stores open at least a year were up 0.5%, however this was below the 0.6% analysts were expecting. Comparable store sales ales were up 0.2% in the U.S. This also fell short of the 0.7% analysts had expected. Sales took a 2.8% dive in their Asia Pacific, Middle East and Africa regions.

That?s all for the day. Have a great weekend, loyal readers!
All the best,
Jack Aubrey, Oakshire Financial

[Thierry Martin]

The Chart of the Day is Mastech Holdings (MHH). I found the stock by using Barchart to sort the New High List for Weighted Alpha and this stock has a WA of 265.90+. Since the Trend Spotter gave a buy signal on 9/24 the stock has gained 60.01%.

It provides Information Technology services in the disciplines which drive today's business operations. Clients turn to Mastech for comprehensive I.T. services including: I.T. Consulting; OneSource Co-Managed projects and supplemental I.T. resources. Mastech's niche focus includes Business Intelligence/Data Warehousing; Enterprise Resource Planning; Service Oriented Architecture; Web Development and I.T. Project Management. Mastech also provides Recruitment Process Outsourcing services and Brokerage Operations Staffing services through its RPOworldwide and Global Financial Services subsidiaries. Mastech is a certified minority-owned business enterprise.

[Thierry Martin]

When I was a kid, I went to a Catholic grade school. And because our school was affiliated with a church, I volunteered to be an altar boy.

On the surface, it was a great way to make myself look good. I knew my parents would be happy. But in reality, it was just a good excuse to get out of class. I knew that every week, whether it was sunny, rainy, warm or cold, there were going to be a couple of funeral processions that would need altar boys to help celebrate Mass.

Even though being an altar boy at a funeral doesn't sound like much fun, it was an early lesson about the nature of demand -- mortality wasn't just predictable, it was undeniable.

But looking forward, that undeniable trend is accelerating. With more than 10,000 baby boomers retiring every day, the National Funeral Directors Association projects the U.S. death rate will increase from 8 deaths per 10,000 people to 10 by 2045.

That is setting the stage for a wave of demand for "death care" products and services. And there is one company ready to cash in.

This little-known market leader is one of the largest death care service providers in North America. It owns more than 1,400 funeral homes and 375 cemeteries in 43 states and eight Canadian provinces. It just announced a major acquisition of its largest competitor that is expected to produce $3 billion in annual revenue. That has driven a 72% gain in just the past two years. Take a look below.

[Thierry Martin]

The former boiler room king, Jordan Belfort, is ready for his closeup as The Wolf of Wall Street heads into theaters this December.

I loved his book and I had met most of the old Stratton Oakmont guys fifteen years ago during my early days in the Long Island brokerage scene. I've always said that if Jordan had used his powers and charisma for good rather than evil, he'd have been a billionaire. Guys I knew who had worked with him and gotten into trouble because of him still worshipped at the altar of Jordan years after the fact. To this day there are still thousands of brokers using the scripts and selling methods he had devised, albeit not to sling garbage house stocks (let's hope).
In a new profile at BusinessWeek, Jordan Belfort lets us in on where he is now...

Jordan Belfort, aka the Wolf of Wall Street, hates it when people describe him as a criminal. ??Convicted stock swindler??it?s like it hurts my heart,? he says, practically shuddering. ?I know it was true, but it?s not who I am. I say to my son, I say it to everybody who I try to mentor: We are not the mistakes of our past. We?re the resources and capabilities that we glean from our past. And it?s so true.?

Keep Reading:
Jordan Belfort, the Real Wolf of Wall Street (BusinessWeek)

[Thierry Martin]

This is an early (and incomplete) edition of the daily linkfest. We will catch back up tomorrow.

Daniel Gross, ?We should think about IPOs like draft picks in sports.? (The Daily Beast)

Market breadth has been deteriorating. (The Reformed Broker)

How are hedge funds doing this year? (FT Alphaville)

Two headlines: one story. (A Dash of Insight)

Changing dynamics in the US buyout market. (Sober Look)

There are always some investors who think ?it is different for me.? (Rick Ferri)

Did Twitter ($TWTR) really leave money on the table? (Ivanhoff Capital)

Wall Street won the Twitter IPO. (Quartz)

Small caps: active or passive? (IndexUniverse)

Investors are paying a lot for future growth. (Jack Altman)

A solid employment report. (Calculated Risk)

Rail traffic is accelerating. (Pragmatic Capitalism)

What you may have missed in our Thursday linkfest. (Abnormal Returns)

Thanks for checking in with Abnormal Returns. You can follow us on StockTwits and Twitter.



The post Friday links: IPOs as draft picks appeared first on Abnormal Returns.

[Thierry Martin]

We've all accidently cut ourselves and stuck a bandage on it to stop the bleeding, then gone about our business. Usually the wound heals after a couple of days, and all is good.

On occasion, though, a simple cut can turn complicated.

Say I've cut my finger and it begins to fester. I go to a doctor's office and have a blood sample drawn and shipped to a lab for analysis. The doctor makes an educated guess as to which antibiotic might clear the infection and prescribes a 10-day supply.

By the time your blood has gone through the routine tests to identify the infection and determine the correct antibiotic, five days have passed.

But after a few days -- and pills -- you feel better. This time the doctor guessed right, averting a possible crisis. However, more than 250,000 people die from sepsis -- the spread of bacteria from a point of infection -- every year. A simple infection from a cut, or pneumonia, or any number of sources can quickly turn to sepsis -- which can be deadly without prompt and proper treatment.

Until recently, doctors had to rely on antiquated tests that took days to deliver results and accurate treatment. Without a quick way to differentiate between bacteria and viruses, prescribing the right antibiotic is little more than a crapshoot.

Last year saw the emergence of a new breed of molecular diagnostics -- known as in-vitro or IVD -- that involves tests that identify a patient's nucleic acids or proteins (blood or urine) or foreign objects outside the body.

These devices can diagnose sepsis and identify the proper antibiotic -- right in the doctor's office. The process takes just 2 1/2 hours after a positive blood culture and requires only five minutes of a technician's time, with greater than 95% accuracy.

This technology truly has life-saving potential -- and it's a potential moneymaker for investors.

The global in-vitro diagnostic market was valued at $49.2 billion in 2012 and is expected to reach $69.1 billion by 2017. It is forecast to be the highest-earning segment in the $455 billion medical technology industry throughout those five years.

Right now, two companies are battling it out in this arena: One is a good investment for today, Cephid (Nasdaq: CPHD), the other possibly for tomorrow, Nanosphere (Nasdaq: NSPH).

[Thierry Martin]

This is so cool! Probably the only time I'll ever appear on a list with Banksy and the President of Cinnabon...
From Business Insider:
We're constantly amazed by revolutionary new companies, products, and ideas ? especially when they're launched by young people.
We found the most inspiring innovators and entrepreneurs under the age of 40.
Whether they're in finance, tech, sports, entertainment, media, science, food, or retail, these people are introducing amazing new products and ideas and shaking up their industries forever.

[Thierry Martin]

Random Thoughts

You can't argue with a market making new highs but you also can't take them at face value.

As you know, lately I have been concerned about the action in sectors like Biotech that could be rolling over. I've been concern about the alarming amount of debacle de jours-stocks that have been getting whacked. And, I've also been concerned about the lack of forward progress the indices (sans the Dow).

Even though Thursday's action didn't surprise me in the least, it still caused quite a few F bombs to be dropped in my office.

Let's look at what happened on Thursday.

The Ps peeped up to nearly all-time highs but unfortunately, they found their high and began to sell off hard-losing 1 1/3% for the day.

The Quack was hit even harder. It lost nearly 2% for the day. This action has it breaking down out of its shorter-term sideways trading range.

Keep an eye on 1725 in the Ps and 3800 in the Quack. Those are the previous breakout levels.

It is not a line in the sand but it would be a level(s) where you certainly should consider pulling in your horns.

Speaking of previous breakout levels, the Rusty (IWM) was also disappointing. It lost nearly 1 ?%. This action puts it back below its prior breakout levels-circa 108 in the IWM.

With the Rusty down big it is no big surprise that internally it was ugly. Weaker areas like Biotech continue their slide. Areas that have been trading sideways at best like the Semis came in hard. Areas like Shipping that were just breaking out came right back in. I can go on and on. As you would expect, there were also quite a few debacle de jours.

So, tell me something good Big Dave. Well, I did just save a lot of money on my car insurance. Something good? Reminds of Viking ship joke when the captain says "Good news, we finally get to change our underwear. Okay, you change with him, and you change with him, and you....." Seriously, if, and that's a big if, the market rallies and takes out Thursday's high, I think it would be off to the races. It would suggest that Thursday's action was just a shakeout/fakeout. In fact, I'm seeing buy setups in the inverse Q shares. They have a Double Top Knockout look to them (email me if you need the pattern).

So what do we do? Honor your stops on your longs. If this thing gets ugly, you'll be taken out of your longs and all you'll be left with is shorts. This is part of the portfolio ebb & flow I often discuss (see webcasts). I hope, and I hate to use the word hope, this does not happen. I'd much rather be stopped out of my shorts for a loss but have my longs more than make up for it. I'm still not seeing a lot of new meaningful setups. Again, this actually might be a good thing. It could be the database, (continuing to ) tell me to let things shake out a bit.

[Thierry Martin]

Legendary activist investor Carl Icahn has had a tremendous run. In recent years, he's made a quick fortune on many of his investments, thanks to a combination of savvy stock-picking and occasional cage-rattling.

But even Icahn has an off day.

Earlier this year, he bought 6 million shares of oil refiner CVR Refining (NYSE: CVRR) just as the entire refinery industry was at a multi-year peak. Shares were trading above $30 when Icahn bough CVR, though as I cautioned in this mid-summer article, refinery stocks subsequently took it on the chin as pricing spreads narrowed between Brent crude and West Texas Intermediate (WTI) crude.

Although other refiners such as Valero (NYSE: VLO), HollyFrontier (NYSE: HFC) and Marathon Petroleum (NYSE: MPC) have stabilized or risen since I wrote that piece, Icahn's pick has really fallen out of bed. The fund manager is now sitting on a 28% loss on CVRR.

[Thierry Martin]

From January through May I had wholesalers from all the big ETF and mutual fund shops in my office pitching us bank loan funds as a diversifier and an interest rate hedge for our income-focused models. State Street rolled one out as an ETF with Blackstone / GSE doing the portfolio management. iShares had one too, then DoubleLine launched one, etc.

Bank loans, in securitized form, tend to offset rising rates because they roll over frequently at ever-higher interest rates to the borrowers. Thus, if you own the interest stream on a portfolio of loans, as rates rise, theoretically, so should the income you're pulling in. The loans in the portfolio mature and new loans are struck with borrowers at ever-higher rates. And, as Christine Benz at Morningstar explains, they do a really good job at diversifying you as well, with a very negative correlation to long-term treasurys.

But there's a catch (when is there not?) - bank loans are highly correlated, for a bond asset class anyway, to US stocks. This is a risk-on asset class, after all, and will trade lower based on the threat of defaults picking up across the economy, just like junk bond ETFs will. Eventually.

Here's Christine:

Bank-loan funds' correlation with high-quality bond funds is also pretty low. That's perhaps not surprising when you consider that bank loans are typically beneficiaries when rates rise (their yields tick up to keep pace with LIBOR), whereas high-quality bond funds get hurt. During the past decade, bank-loan funds have exhibited a slightly negative correlation with the Barclays Aggregate Index and an even lower correlation (-0.35) with long-term Treasuries. The 10-year correlation with short-term bonds is higher (0.57) and higher still for equities (0.61) and high-yield bonds (0.87).

Thus, even though bank-loan investments may help mitigate the pain in a rising-rate environment, investors expecting these funds to provide ballast in an equity market shock might not get it here. In 2008, the typical bank-loan fund lost 30% of its value, though higher-quality offerings such asFidelity Floating Rate High Income (FFRHX) held up substantially better.

Like all products, strategies or asset classes, bank loans can work if used appropriately and with the right understanding of their idiosyncrasies and risks. But to just toss them into a portfolio as part of the bond category would be a mistake. There's nothing bond-like about them in a recessionary environment or during an equity market sell-off. They will not be your safe assets in an economic crisis.

Understand that while you're mitigating one risk (interest rates), you're taking on another one.