Blue Chips
A company that is well-known and that has been established over a number of years is considered a blue-chip stock. They have been through the boom times and recessions, giving investors confidence that they will remain a viable entity in the future. Blue-chips are usually less volatile than other stocks, as they have a steadier stream of predictable income and usually have extensive ownership by institutions, which can hold shares for a longer period of time than individual investors. Blue-chips are usually the market leader in their respective sectors.
Technology Sector at the Bottom of the Pack: Time to Give Up on These Stocks?
By George Leong for Investment Contrarians | Apr 17, 2013
With capital shifting into the perceived safety of blue chips and large-cap stocks, small-caps and technology stocks have been declining on the charts.
Given the advance so far this year in the equities market, it’s understandable to expect some hesitancy.
The Dow is up 13.4% as of April 12, and it’s on pace for a gain of 47% on an annualized basis.
I doubt this will happen and expect market adjustments in the equities market along the way. The same goes for the S&P 500 and the other key market indices.
Small-caps in the equities market have also fallen off since the end of the first quarter.
At the back of the pack is the technology sector; but there has been a lack of strong leadership from any sector, including the semiconductor, Internet, and technology sectors, in general.
The following chart shows the recent movement of the three sectors (semiconductor, Internet, and technology) since March and their sideways direction.
Chart courtesy of www.StockCharts.com
Without any leadership in the equities market, the NASDAQ and technology stocks will continue to drift. However, there are some opportunities for speculators searching for contrarian situations.
The Internet sector is flat and lacking a clear direction.
In the stock chart below, the First Trust Dow Jones Internet Index (NYSEArca/FDN) fund shows the sideways channel that has been in place since late January.
Extrapolating on this data, I don’t see any strong and clear signs of a breakout at the top channel line, but if you think longer-term, there are opportunities in the equities market.
Chart courtesy of www.StockCharts.com
The “Best of Breed” in the Internet sector … Read More
Fed’s Actions Making Retirement a Nightmare for Seniors
By George Leong for Investment Contrarians | Mar 25, 2013
On the surface, the Federal Reserve’s objective is to make sure America doesn’t fall into ruins. Following an aggressive strategy of monetary easing, the end result is interest rates at nearly zero percent and an endless flow of easy money. As I have already stated many times in these pages, the Federal Reserve has created an artificial economy.
Yet, if you think about it, the Federal Reserve’s push for low interest rates has helped the economic recovery—but it has also made life difficult for many Americans. The Federal Reserve’s low finance rates tend to make consumers buy more, enticed by the low carrying charges. This means more buying in homes, furniture, cars, clothes, or whatever goods and services that can be financed at cheap rates. But therein lies the problem. What happens when the Federal Reserve begins to raise interest rates? It’s going to get ugly.
There will be massive debt loads that will be subject to higher carrying charges and greater hardships for many consumers as wages for many continue to be flat.
And with the low interest rates due to the Federal Reserve, people are reluctant to save. Making less than one percent at the bank is not exactly an incentive to deposit money. In my last article, I discussed this issue of low savings. According to the Employee Benefit Research Institute (EBRI), a staggering 57% of workers surveyed said they had less than $25,000 in combined household savings and investments, excluding their homes. (Source: Greene, K. and Monga, V., “Workers Saving Too Little To Retire,” Wall Street Journal, March 19, 2013.) The problem is that the low … Read More
Be Careful of the Three-Headed Dragon on the S&P 500
By George Leong for Investment Contrarians | Jan 28, 2013
The S&P 500 is at a crux, following its recent move to 1,502 on Thursday, the first time it was above 1,500 since December 2007. The index is up nearly 12% since July 24, 2012. The fear is that the index may be testing its third top at 1,500 since 2000, something I have discussed in the past.
The overall U.S. stock market is trending higher. About 75.2% of U.S. stocks are above their respective 200-day moving averages (MAs), versus 59.3% a month earlier. On a short-term basis, 86.2% of U.S. stocks are above their respective 50-day MAs, versus 63.6% a month earlier.
Take a look at the upward move of the S&P 500 stocks to above the 200-day MA; the move represents an 86% increase as of January 24, versus the 47% level in mid-November.
Chart courtesy of www.StockCharts.com
And there could be more to come, based on the seasonal trends. The November–April period has resulted in the biggest gain for the S&P 500, according to the Stock Trader’s Almanac. In the near term, watch to see if the S&P 500 can hold at 1,500 and move toward its record of 1,565 on October 9, 2007.
The chart indicates some concerns, in my opinion. Since its first top at 1,500 in 2000, the S&P 500 made another top in 2007; now we are precariously at a possible third top. The moving average convergence/divergence (MACD), as shown on the chart, shows a downward trend. Volume has also been declining, so we are seeing a bearish divergence between a higher S&P 500 and declining volume.
Chart courtesy of www.StockCharts.com
Technology has … Read More
Why You Need to Follow the Pro Money
By George Leong for Investment Contrarians | Nov 27, 2012
I just took a look at my friend’s Samsung “Galaxy III” smartphone and must admit that it looks pretty impressive compared to my “iPhone” by Apple Inc. (NASDAQ/APPL). However, the applications available for the iPhone are what will keep me from switching, at least for the time being.
Apple was trading at $705.07 on September 21, but the stock made a steady decline down to the $505.00 level on November 16 prior to rallying back to the current price of $578.00. Based on my stock analysis, there’s profit-taking in Apple shares, which is not a surprise, given the enormous rip-up in the share price.
My stock analysis tells us that institutional ownership shows a 0.76% net sale of Apple stock over the last quarter-to-quarter, representing 4.8 million net shares sold by institutions, according to information from Thomson Financial.
In fact, my stock analysis shows that technology and growth stocks have been the focus of the market selling so far in 2012. The NASDAQ is down four percent as of Monday, versus a 0.07% advance by the S&P 500 and blue chips.
What I’m getting at is that growth stocks are being sold by institutions.
Following where the professional money is flowing helps gives us another tool to evaluate the stock markets and get a sense of what is happening.
Behind the concept of following the money of institutional investors is the belief that these experts are likely to understand the company’s situation more than anyone outside of the executive management group. My stock analysis is that, by looking at the flow of money from institutional investors and monitoring what stocks … Read More
Blue Chips Have Almost $1.5 Trillion in Cash; What Will They Do with It?
By Sasha Cekerevac for Investment Contrarians | Oct 26, 2012
One of the interesting highlights of this current quarterly earnings season for blue chips is not the lack of revenue growth that we’ve all expected, but the investment strategy of holding onto cash. Blue chips are literally banking record amounts of cash. While the economy is certainly not expanding at a fast pace, no one can question how strong the balance sheets are for many of the blue chips in the S&P 500.
At the current pace that the blue chips are storing cash, we could see a chunk of $1.5 trillion for the S&P 500 companies. (Source: CNBC, October 23, 2012.) That is truly a staggering level of liquid resources. This raises a question for investors: while companies are extremely well capitalized, what is their investment strategy for the future, and why haven’t they deployed this cash?
Many firms, including blue chips, are hesitant to deploy their cash piles before being on more solid footing. With the economy growing less than two percent, an investment strategy is that much more difficult to create for the future. Of course, with the upcoming election and fiscal cliff issues, this has led to massive levels of uncertainty.
Naturally, one’s investment strategy ahead of such a massive uncertainty would be to maintain status quo until the politicians have set some sort of roadmap for the future. People who run blue chips are extremely intelligent and understand that without the certainty of regulations and policies, it makes it extremely difficult to make a long-term investment strategy. How can one properly allocate capital if no one is sure if new regulations or taxes will be … Read More
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