Uranium Looking Bullish Again?

Uranium soared from $10 a pound in 2000 to a stunning $136 a pound in 2007 - and then the bottom fell out. After three lean years, could another bull market be ahead?

According to the Ux Consulting Company, which tracks the price of uranium, the July 26 weekly spot price for U308 was $46 per pound. That is a 15% spike from the February lows around $40 per pound.

So does uranium at $46 per pound count as cheap, or expensive? That depends on how you look at it…

In the year 2000, uranium was well and truly dirt cheap. Thanks to a seemingly endless supply from decommissioned nuclear stockpiles, no one wanted the stuff… and the price of U308 (a standard mix of uranium oxides) fell to just $10 per pound.

Seven years on, however, uranium was at the pinnacle of a stunning bull run, riding a wave of increased demand for nuclear power plants around the globe. By the year 2007, U308 had hit an incredible $136 per pound - more than a 1,200% price increase from the bear market lows.

But then the bottom fell out for uranium prices - again - as hard assets got abandoned in the great financial meltdown. So now, in the mid-$40s, the uranium spot price is well off its year-2000 lows, but merely a third of bull market highs. Does that make it cheap?

China seems to think so…

The Dragon Inhales

"China is buying unprecedented amounts of uranium," Bloomberg reports, "signaling that prices are poised to rebound after three years of declines. The nation may purchase about 5,000 metric tons this year, more than twice as much as it consumes, building stockpiles for new reactors…"

Keep in mind, too, that China is buying at the "long-term price," which is higher than the spot price. A few weeks back, the dragon agreed to lock in uranium purchases of "more than 10,000 tons over 10 years" from blue chip miner Cameco (CCJ: 25.49 0.00 0.00%).

"China's demand is insatiable," says analyst Dave Dai in Hong Kong. "They will have to take almost whatever is available."

India is hungry too. Jagdeep Ghai, the finance director for Nuclear Power Corp., reports that India's uranium needs could grow tenfold in the coming years.

The name of the game now is locking in supply. In a world where the flow of oil is uncertain - and emerging market energy demand is certain to surge - nuclear power is a critical fallback. And that means more nuclear reactors in the works.

According to the World Nuclear Association (WNA), China alone has 24 reactors under construction - and may have 200 reactors in play by the year 2030. Russia is building another 10… South Korea six… and India four. There are also new reactors under construction in places like Finland, France, Japan, Argentina, and even the United States.

A Unique Market

Uranium is not like most other commodities. As one might expect, the "nuclear" tie-in makes it a highly regulated market. Not anyone can just buy it or sell it. (Although there is a uranium "ETF" of sorts - Uranium Participation Corp (U: 0.00 N/A N/A) - trading on the Toronto Stock Exchange.)

The supply profile for uranium is also unique. In the short run, there appears to be plenty of uranium to go around. The long run, though, is another question entirely. With all the new reactors slated for construction - and the price of oil a wildcard - forward-thinking players like China are thus happy to start stockpiling uranium more aggressively here and now, "just in case" demand gets out of hand later. Nor is China the only country to be thinking this way.

Another factor unique to the uranium market is what one might call the "Cold War effect." The reason uranium became absurdly cheap a decade or so ago was because of massive Cold War era stockpiles. For a time the world had uranium coming out of its ears as Soviet-era warheads were scrapped. Even today there is still Cold War supply to work through - but that supply will not always be there.

In fact, were all the Cold War uranium to be used up tomorrow, prices would head into the stratosphere. Current uranium demand outstrips new production by a huge margin - something on the order of 100 million pounds per year - and it's only the dwindling stockpiles (those old warheads again) that make up the shortfall.

In addition to finite Cold War supply, uranium has its own version of the "peak oil" profile. Virtually all the cheap and easy uranium deposits have been tapped. As with crude, what's left are the hard and dangerous deposits located in politically unstable parts of the world, like Kazakhstan and Niger. This is another factor that could push uranium prices higher.

The Large-Scale Alternative

When disaster unfolded in the Gulf, we wrote that the BP oil spill would be a game changer for alternative energy. That assessment still holds true. But it may prove out that the biggest "alternative" winner of all, in respect to deepwater drilling fallout, is nuclear energy.

The main trouble with wind power, solar power and the like, is the challenge of large-scale deployment. With each passing day the underlying technology improves - which moves us closer to getting the economics right - but there is still a long way to go.

Nuclear power, in contrast, is already tested and proven. It has already been deployed on a massive scale. Take modern-day France, for example, a country known for (among other things) bucolic landscapes and old-world farming techniques. Roughly 79% of France's electricity is produced by nuclear power, the highest percentage in the world.

Nuclear energy has more or less been embraced as a vital, large-scale alternative to fossil fuels. Even aggressive green advocates, who have grumbled over safety and waste disposal issues with nuclear in the past, now grudgingly admit that nuclear power has clear advantages in reducing air pollution and C02 emissions (both serious problems in China).

Combine this reality with good prospects for oil back above $100 per barrel before too long, and you have political "safe passage" for the upcoming nuclear renaissance. Put it all together, and it's not hard to accept the assessment of RBC Capital Markets that uranium could rise another 32% in price next year. That makes a number of companies in the mining and reactor space worth exploring.

Stock Market Valuation

I update market valuations on a monthly basis. I use six metrics to conclude whether the market is overvalued or undervalued.

As always, I must mention that just because the market is over or undervalued does not mean that future returns will be high or low. From the mid to late 1990s the market was extremely overvalued and equities kept increasing year after year. However, as I note at the end of the article I expect low returns over the next ten years based on current valuations.

Below are six different market valuation metrics as of August 1st, 2010:

The current P/E TTM is 18,3 , which is higher than the TTM P/E of 17.2 from last month. The P/E TTM is currently slightly overvalued.

This data comes from my colleague Doug Short of dshort.com.

Based on this data the market is moderately overvalued. However I do not think this is a fair way of valuing the market when considering the significant decrease in earnings over the past year. To get an accurate picture of whether the market is fair valued based on P/E ratio it is more accurate to take several years of earnings.

Numbers from Previous Market lows:

Mar 2009 110.37

Mar 2003 27.92

Oct 1990 14.21

Nov 1987 14.45

Aug 1982 7.97

Oct 1974 7.68

Oct 1966 13.96

Oct 1957 12.67

Jun 1949 5.82

Apr 1942 7.69

Mar 1938 10.63

Feb 1933 14.92

July 1932 10.16

Aug 1921 14.02

Dec 1917 5.31

Oct 1914 14.27

Nov 1907 9.35

Nov 1903 11.67

Historic data courtesy of [www.multpl.com]

Current P/E 10 Year Average 20.05

The 10 year P/E ratio is currently 20.05. This is higher the measurement from my previous article of 18.3. This number is based on Robert Shiller's data evaluating the average inflation-adjusted earnings from the previous 10 years. Based on my colleague, Rob Bennett's market return calculator, the returns of the market should be as follows:

My colleague Doug Short thinks this numbers are a bit inaccurate, because the number I used as it does not include the past several months of earnings, nor revisions. Doug calculates P/E 10 at.

Mean: 16.37

Median: 15.74

Min: 4.78 (Dec 1920)

Max: 44.20 (Dec 1999)

Numbers from Previous Market lows:

Mar 2009 13.32

Mar 2003 21.32

Oct 1990 14.82

Nov1987 13.59

Aug 1982 6.64

Oct 1974 8.29

Oct 1966 18.83

Oct 1957 14.15

June 1949 9.07

April 1942 8.54

Mar 1938 12.38

Feb 1933 7.83

July 1932 5.84

Aug 1921 5.16

Dec 1917 6.41

Oct 1914 10.61

Nov 1907 10.59

Nov 1903 16.04

Data and chart courtesy of [www.multpl.com]

This is moderately over valued from the average P/E as shown above.

Current P/BV 2.09

This is a very rough estimate, it is nearly impossible to get an exact number for P/B on a specific date to my knowledge.

The current P/BV is 2.09 , this is below P/B of 2.11 I measured in my previous article.

The average Price over book value of the S&P over the past 30 years has been 2.41. This indicates the market is slightly undervalued valued. Book value is considered a better measure of valuation than earnings by many investors including legendary investor Martin Whitman. He states that book value is harder to fudge than earnings. In addition book value is less affected by economic cycles than one year earnings are. P/BV therefore provides a longer term accurate picture of a company's value, than a TTM P/E.

Current Dividend Yield 1.99

The current dividend yield of the S&P is 1.99. This number is lower than the 2.13 yield from last month.

It is hard to determine on this basis whether the market is overpriced. The dividend yield for stocks was much higher in the begging of this century than the later half. The dividend yield on the S&P fell below the yield on Ten-Year treasuries for the first time in 1958. Many analysts at the time argued that the market was overpriced and the dividend yield should be higher than bond yields to compensate for stock market risk. For the next 50 years the dividend yield remained below the treasury yield and the market rallied significantly. In addition the dividend yield has been below 3% since the early 1990s. While I personally favor individual stocks with high dividend yields, I must admit that the current tax code makes it far favorable for companies to retain earnings than to pay out dividends. Finally, as I noted above the current economic environment has zero percent interest rates and low bond yields. During periods where yields are low it is logical for income oriented investors hungry for yield to be bid up the market, and dividend yields to decrease. I think it is hard to claim the market is overbought based on the low dividend yield.

Mean: 4.36%

Median: 4.30%

Min: 1.11% (Aug 2000)

Max: 13.84% (Jun 1932)

Numbers from Previous Market lows:

Mar 2009 3.60

Mar 2003 1.92

Oct 1990 3.88

Nov1987 3.58

Aug 1982 6.24

Oct 1974 5.17

Oct 1966 3.73

Oct 1957 4.29

Jun 1949 7.30

Apr 1942 8.67

Mar 1938 7.57

Feb 1933 7.84

July 1932 12.57

Aug 1921 7.44

Dec 1917 10.15

Oct 1914 5.60

Nov 1907 7.04

Nov 1903 5.57

Data and chart courtesy of [www.multpl.com]

Ratio = Total Market Cap / GDP	Valuatoin
Ratio< 50%	Significantly Undervalued
50%< Ratio< 75%	Modestly Undervalued
75%< Ratio< 90%	Fair Valued
90%< Ratio< 115%	Modestly Overvalued
Ratio > 115%	Significantly Overvalued
Where are we today (08/01/2010)?	Ratio = 78.7%, Fairly valued

The current level of is 78.7%, is higher than the 73.4% number from last month.

Stock Market Capitalization as a percentage of GDP is another metric albeit less commonly used than other metrics, to value the market. Between 75-90% market capitalization as percentage of GDP is considered fairly valued. Based on Guru Focus data the market should return about 6.5% per year based on the current value.

Warren Buffett has stated that market capitalization as a percentage of GNP is "probably the best single measure of where valuations stand at any given moment."

According to Barron's the ratio got as low as 40% in the late 1940s, when investors feared another depression, and in the inflationary 1970s.

Historic Data:

Min 35% in 1982

Max 148% in 2000.

Data and charts courtesy of Gurufocus.com

Current Tobin's Q 0.98

Tobins Q is 0.98 compared to 0.92 from last month.

The data comes from Doug Short. This is the most accurate data that is available. It is impossible for the data to be 100% precise because the Federal Reserve releases data related to Tobin's Q on a quarterly basis. The best that can be done is to extrapolate the data and try to provide the most accurate data possible based on the change in the Willshire 5000. This is what Doug did to get the current number. This method has proven extremely accurate for calculating Tobins Q on any given day.

The current level of 0.98 compares with the Tobins Q's average over several decades of data of approximately .72. This would show that the market is over valued.

According to Doug's estimates the market is over-valued by 39% based on Q's arithmetic mean..

In the past Tobin's Q has been a good indicator of future market movements. In 1920 the number was at a low of .30, the next nine years included phenomenal gains for the market. In 2000 Tobin's Q almost reached a record high of nearly 2, and the market declined subsequently about 50% by 2003.

Historic Tobins Q:

Market Low 1932 0.30

Market High 1929 1.06(this is not the highest number ever reached, just the number reached before the 1929 crash).

Average historic Tobins Q .72 (source: Stocks for the Long Run by Jeremy Siegel)

In the next monthly article I will have more Tobin's Q historical data.

To Recap

1. P/E(TTM)- slightly overvalued

2. P/E(10 year average)- Overvalued

3. P/BV- Slightly undervalued

4. Divdend Yield- Indeterminate/ undervalued

5. Market value relative to GDP- Fairly valued

6. Tobins Q- Overvalued

In conclusion the market is definitely not extremely over valued based on the above data. However, one can make the argument that the market is moderately overvalued. With the exception of P/BV, and market cap to GDP all the indicators point to at least a slightly overvalued market.

However the historical data fails to take into account current record low interest rates. I know not many investors take issue with my inclusion of interest rates in the equation. However, I think that most investors look at the stock/bond alternative. Right now you can get some blue chip stocks with dividend yields close to the Ten year treasury yield. I think with taking into account interest rates the market is fairly valued.

However, eventually the market will likely returns to normal valuation ratios as interest rates reach more normal levels. I believe returns over the next 10 years will be sub-par (below the 9.5% average market return). I think we will likely see returns of around that equal inflation over the coming decade.

You can read more about my predictions in the following two articles:

What Will The S&P 500 Return Over The Next 10 Years Part I

What Will The S&P 500 Return Over The Next 10 Years Part II

Disclosure: none

Note: I have received numerous suggestions on how to improve my monthly series. I tried to incorporate these ideas in my current article. Please email me or leave a comment if you would like to provide further suggestions.

Best Books on Market Valuations:

Valuing Wall Street : Protecting Wealth in Turbulent Markets by Andrew Smithers. The book explains in detail how tobin's Q is calculated.

Wall Street Revalued: Imperfect Markets and Inept Central Bankers. A more recent book by Andrew Smithers.

Irrational Exuberance By Robert Shiller. Great book by the man who calculates the P/E 10 ratio himself, Robert Shiller. The book is written in 2000, right before the tech bubble crash. Shiller correctly predicts the crash.

Hot Stock News For Monday 2 August: BP, Exxon, Lloyds, Barclays, HSBC, Prudential, RBS, British Airways, Intel, AIG, Research In Motion, Ford, SAP, Nokia

UK Banks - The Chancellor has urged banks to use revenues that would traditionally be paid in bonuses and dividends to help to fund lending to small and medium enterprises instead. Mr Osborne said that the Government "will not tolerate" banks "piling the pressure" on SMEs, and said that banks have an "economic obligation" to help the sector. (Telegraph)

 

UK

BP (BP: 38.47 0.00 0.00%) - US Justice staff said to urge subpoenas for co.'s managers. Elsewhere, Imperial, Exxon and co. (XOM: 59.68 0.00 0.00%) form a Canadian arctic joint venture, says venture includes Beaufort Sea acreage acquired in 2007, 2008. Says Imperial and Exxon to have 25% stakes each and co. to have 50%. (Sources/RTRS) - In other news, co. could start plugging its broken deepsea oil well in the Gulf of Mexico on Monday night. BP engineers were preparing to pump heavy drilling mud and cement into the well in a procedure known as "static kill", retired Coast Guard Admiral Thad Allen said on Sunday.

 

- Co. faces a forced wind-down of its Gulf of Mexico operations after American lawmakers passed a bill that could halve its production there in five years. The so-called Miller amendment proposes to freeze BP out of new drilling leases for seven years. It would also bar the co. from being granted the permits it needs to maintain current production. A final bill not expected until the autumn, when lawmakers return from their summer break. (Sunday Times) - Co dismissed speculation about selling Aral, Its German petrol station chain (ARD)

 

- The owners of co.'s 11,300 US petrol stations are actively considering whether reverting to the traditional American Amoco brand might lead to a reversal in fortunes for the tarnished oil giant. (Telegraph) - Kuwait Investment Authority (KIA), THE Kuwaiti sovereign wealth fund, is currently considering its stake in co., citing an unidentified KIAS source. (Al-Anba). Co. has no plans to sell its Poland based fuel stations. (Parkiet)

 

Lloyds Banking Group (LYG: 4.30 0.00 0.00%) - Co. is expected to be the best performer among Britain's five biggest banks reporting their H1 results this week. It is expected to report a pre-tax profit of GBP 800mln vs. Prev. loss of GBP 4bln in H1 2009. (The Independent)

Barclays (BCS: 20.87 0.00 0.00%) - Co. is expected to report on Thursday H1 pre-tax profits of GBP 3.50bln vs. GBP 2.75bln in H1 2009. However, the GBP 3.5bln figure will be helped by a gain of between GBP 350mln and GBP 925mln on the bank's own credit which, if excluded, means H1 pre-tax profits are closer to the GBP 2.97bln mark. Co. expects overall impairment in 2010 to improve between 15-20% on 2009. Elsewhere, co.'s investment arm BarCap has already said it had experienced weaker trading conditions in May and June. In addition, Barclays Corporate is also expected to report higher impairments with provisions against falling Spanish property values. (The Independent)

 

HSBC (HBC: 51.08 0.00 0.00%) - Co. is expected to post another strong half-year performance today, with an estimated pre-tax profit of USD 8.6bln (GBP 5.5bln) vs. USD 5bln (GBP 3.5bln) in H1 2009. (The Independent)

 

Standard Chartered - Co. is expected to post H1 pre-tax profit of GBP 2.0bln vs. GBP 1.9bln in H1 2009.  (The Independent)

 

Prudential (PRU: 57.29 0.00 0.00%) - Tidjane Thiam, the chief executive, is attempting to make peace with investors by boosting the co's. Dividend by 5% when the company announces its groups results in two weeks. Thiam is also expected to say that he has no plans to sell off the group's American operations, or its UK business. (Sunday Times) In other news, co. may be interested in Pacific & Orient's insurance business. (The Edge)

 

RBS (RBS: 15.76 0.00 0.00%) - Analysts expect the co. to post a pre-tax profit of about GBP 200mln for the first six months of the year, ending a two-year run of multi-million GBP loses. Co. is expected to announce the sale of 318 branched to Santander ahead of its results; the deal is worth about GBP 1.7bln. It is also close to selling its global payments business to consortium of private equity firms in a deal worth up to GBP 2.5bln. (Sunday Times)

 

British Airways (BAY: 79.44 0.00 0.00%) - Co. merger with Iberia moves closer after regulators agreed plans for Co. to slash its pension black hole. (FT)

 

Tesco/ASDA - Co.'s are planning a major expansion of their grocery delivery operations in London to challenge newly floated Ocado on its own doorstep. This month, the supermarket giants will each open a "ghost store" in separate parts of the capital to allow them to deliver more than 10,000 orders a week. (The Mail on Sunday)

 

Hammerson - Co.'s H1 net GBP 333mln vs. Prev. GBP 791.1mln loss. Co's interim dividend GBP 7.15 pence, co. improved occupancy levels since Dec 2009. (Sources)

 

US

Despite a sell off in equity markets post weaker than expected US GDP print, stocks have staged a remarkable come back, buoyed by better than expected Chicago PMI, Michigan and NAPM reading. Also, in spite of lack of fresh news flow and low volumes, equities managed to break out of the range-bound trade and move into positive territory led by basic materials and consumer goods sectors. The NASDAQ 100 has outperformed its peers on reports that Research in Motion (RIMM: 57.53 0.00 0.00%) (+3.29%) is to launch its own version of Apple's (AAPL: 257.25 0.00 0.00%) iPad, dubbed BlackPad. Finally, at the closing bell DJIA closed down 0.01% at 10465.94, the S&P 500 closed up 0.01% at 1101.60 and NASDAQ 100 closed up 0.20% at 1864.00.

Intel (INTC: 20.60 0.00 0.00%) - Co. in advanced talks to buy Infineon's wireless chip business, seeks up to EUR 1.5bln for unit. (WSJ)

 

AIG (AIG: 38.47 0.00 0.00%) - Co. Asian Unit AIA has submitted information need for a Q4 Hong Kong IPO to the Hong Kong Exchange. (Apple Daily)

 

Research in Motion (RIMM: 57.53 0.00 0.00%) - Regulators in the United Arab Emirates said Sunday they would prohibit BlackBerry email, instant-messaging and Internet-browsing services starting in October, after what officials in the country said has been a long-running dispute with the device's maker about how it stores electronic data. (WSJ)

Ford Motor (F: 12.77 0.00 0.00%) - China's Geely will complete its USD 1.8bln purchase of co.'s Volvo unit on Monday, a source with direct knowledge of the matter said. (RTRS)

 

Europe

Siemens (SI: 97.39 0.00 0.00%) - Private equity firms are in preliminary talks to take Nokia Siemens Networks stake, though deal might not yield. Sources say deal could be for up to a third of Nokia Siemens Networks. (WSJ)

 

SAP (NYSE:SAP) - Co's Co-Chief Executive Officer Bill McDermott said the co. will have significantly more customers by 2015 and that he is very optimistic about its prospects and growth. (FT)

 

Deutsche Postbank - Co. was considering a rights issue as a potential option if it failed the European bank stress tests, sources say. (Sources)

 

Infineon - Intel in advanced talks to buy co.'s wireless chip business, co. seeks up to EUR 1.5bln. (WSJ)

 

Linde - Co.'s first half sales EUR 6.1bln vs. Exp. 5.48bln, co. reaffirms group 2010 outlook. Co.s op. profit expected to exceed year 2008. (RTRS)

 

Metro - Co. Q2 net EUR 44mln vs. Prev. 52mln. Co. raises full year capex to EUR 2.1bln from EUR 1.9bln, they confirm outlook. (Sources)

BNP - Co.'s Q2 net EUR 2.105bln vs. Exp EUR 1.61bln. Co.'s tier one ratio 10.6% June 30 vs. EUR 10.5% at March 31. Co.'s Q2 provisions fall 54% to EUR 1.08bln. Mitsubishi UFJ to buy China fund stake from co. for USD 50mln. (RTRS)

 

France Telecom - Orange is holding talks to acquire a 40% stake in Meditel. (Al-Jarida)

 

EDF - Moody's maintains review for downgrade of co. (Sources)

 

EADS - Co. Is preparing to invest EUR 1bln on acquisitions in the USA. (Le Figaro) In other news, Thai Tiger Airways plans to acquire 10 new airbus A320s in 2011 and 2012. (RTRS)

 

Air Liquide - Co.'s H1 net EUR 676mln vs. Exp. EUR 658mln. Co. confirms 2010 profit growth target. (Sources)

 

PPR - Co. is looking for acquisitions of brands with an international appeal in order to support its lifestyle division. (Les Echos)

 

ECB's Wellink in his role as chairman of the Basel Committee on Banking Supervision, said the new capital and liquidity rules for banks are still substantial, even though they were softened last week. (NRC) He added that some banks may need to sell shares to raise capital.

Nokia (NYSE:NOK) - Private equity firms are in preliminary talks to take Nokia Siemens Networks stake, though deal might not yield. Sources say deal could be for up to a third of Nokia Siemens Networks. (WSJ)

Repsol (NYSE:REP) - Co. said to seek about USD 4bln in IPO of Brazilian unit. (Sources)

 

UBS (NYSE:UBS) - Co. has agreed a GBP 600mln property deal for its European headquarters in what will be the largest building in London's financial district, citing an unnamed person close to UBS. (FT)

 

ock Buy: Chipotle Mexican Grill, Inc.

Chipotle Mexican Grill, Inc. (CMG: 147.90 0.00 0.00%) recently rebounded from a small dip lower to move back within striking distance of the all-time high after reporting better than expected Q2 results in late July. Estimates have since been on the move, with the next-year estimate now projecting 19% growth for this Zacks #2 rank stock.

Second-Quarter Results

Chipotle gave the bulls something to cheer about on July 22 with better than expected Q2 results that were driven by higher volumes and continued expansion.

Revenue for the period was up 20% from last year to $467 million, with comparable store sales showing a solid 8.7% gain. Earnings also came in strong at $1.46, 5% ahead of the Zacks Consensus Estimate. Chipotle now has an average earnings surprise of 19% over the last four quarters.

The strong top-line results were accompanied by tight cost and expense management, with operating margin up 90 basis points from last year to 26.9%. The company also opened 25 new stores during the quarter for a grand total of 1,001, including its first presence in London.

Estimates Climb

The analysts were encouraged by the results, pushing the current-year estimate 9 cents higher to $5.08. The next-year estimate is up 16 cents on the good quarter to $6.05, a 19% growth projection.

Valuation

In light of the recent gains, CMG does look a bit pricey, trading with a forward P/E of 31X against its peer's 19X.

2-Year Chart

CMG has spent most of the last 15 months trending higher before spiking on the news to move back within striking distance of the all-time high just above $155. The MACD below the chart recently turned bullish too, take a look below.

Read the May 19 CMG article here

Last Week's Momentum Zacks Rank Buy Stocks

UAL Corp. (UAUA: 23.74 0.00 0.00%) just hit a new multi-year high after reporting its first quarterly profit since 2007 that included an 11% earnings surprise. Estimates have since turned higher, providing some nice upward momentum for this Zacks #1 rank stock. Read Full Article.

Complete Production Services, Inc. (CPX: 19.25 0.00 0.00%) is fresh off the heels of an awesome 567% earnings surprise that sent shares blasting past a key level of resistance to a new multi-year high. Estimates jumped higher on the news, with the next year now projecting bullish 81% growth. Read Full Article.

Alaska Air Group, Inc. (ALK: 51.59 0.00 0.00%) is once again pressuring its all-time high after reporting excellent Q2 results on July 22 that saw income double from last year. With the current-year estimate pegged at $6.59, a 168% growth projection from last year, analysts are looking for a strong finish to the year. Read Full Article.

Avago Technologies Limited (AVGO: 21.76 0.00 0.00%) continues to trade near its 52-week high after reporting better than expected Q2 results in late May that included a 7% earnings surprise. With an attractive valuation and bullish next-year estimate, this stock has some nice upward momentum. Read Full Article

Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the new Zacks Momentum Trader Service.

Major Moves July: More Interest In Active ETFs, But Asset Growth Tepid

The S&P500 rose by 6.87% in July, as markets digested a slew of earnings reports from corporate in the US and also internationally. Uncertainty though continued to remain in the market, with concerns continuing to hover around in Europe. The results of the European bank stress tests did little to alleviate those concerns because of how "un-stressful" market participants saw those tests being.

In Active ETF land though, the action continued as more players from the mutual fund space, such as Alliance Bernstein made moves to join the Active ETF space. We also finally saw more actual products hitting the market and begin trading on their exchanges, after a lengthy assessment period on the part of the SEC. Grail Advisors also announced its partnership with DoubleLine, lead by renowned fixed-income manager, Jeffery Gundlach. The CEO of Grail Advisors, Bill Thomas, spoke to us and indicated how big of a win that was for the company. AdvisorShares also made lots of progress during the month, with two new fund launches that had been in the works for a while and also filing for additional actively-managed ETFs.

Fund Flows:

 

 

(Click each table to enlarge)

US Active ETFs saw their assets reduced by nearly $300million to $1.8billion, despite the addition of two new products from AdvisorShares which together garnered about $40million in assets, bringing the total number of US Active ETFs to 28. The Mars Hill Global Relative Value (GRV: 24.95 0.00%) in particular picked up steam very quickly, bringing in $38million in assets in about 3 weeks since its launch. At the same time, PIMCO's Enhanced Short Maturity ETF (MINT: 100.552 0.00%) continued to see more outflows, as investors moved their money in search of greater risk and return. MINT's assets dropped from roughly $650million to around $330million. And as in previous months, the fate of PIMCO's MINT also largely determined the fate of the entire Active ETF space as a whole.

Warranting individual mention, the iShares Diversified Alternatives Trust (ALT: 49.96 0.00%) continued to gather assets slowly but surely, picking up another $10million in assets in July. WisdomTree's Chinese Yuan Fund (CYB: 24.95 0.00%) saw more than a $100million coming out of the fund.

In Canada though, the month of July saw some long-awaited action within the actively-managed ETF space as AlphaPro broadened its selection of ETFs by bring 3 new products to market, including the first fixed-income active ETF for the Canadian market. Where most of AlphaPro's active equity ETFs have continued to languish around the seed capital mark, its newly launched Corporate Bond ETF (HAB) really caught the attention of investors as they piled into the fund, sending the fund soaring to a market cap of $222million in a mere 15 days since its launch. This effectively meant more than tripling AlphaPro's total asset base within Active ETFs to $330million.

Head to our Active ETFs Database for a more dynamic listing of all Active ETFs.

New Entrants and Filings:

1. RiverPark expanded its initial ETF line-up – direct link

2. ALPS Advisor filed for an Active Global Fixed-Income ETF – direct link

3. Alliance Bernstein joins Active ETF race – direct link

4. AdvisorShares files for Short-Only ETF – direct link

5. WisdomTree files plans for Commodity Currency and Emerging Market Debt Active ETF – direct link

6. AdvisorShares files for Cambria Global Tactical ETF – direct link

 

 

 

 

 

No Double Dip In The UK?

 

The Pound has risen to a five month high against the Dollar, our derided ONS has published fantastic growth figures. All seems to be improving in the UK economy once again. Even the Prime Minister has remembered to go on a trip with business executives to try and help UK business.

This is all good news, in fact, good enough to say there will be no double dip this year. Now of course, I have been saying this all along, but with a caveat. I thought more QE would be needed to help the economy through, now it looks like this will not be needed again this year. Next year may be different as the cuts hit. but if the cuts continue to hit totally unproductive parts of the economy, like speed camera's, then maybe not.

Better news then for share prices. I resisted the urge to sell off in the July panic. Now it is quite likely that the FTSE below 5000 was the low for the year. In fact, it is quite possible the FTSE will re-test the high's of 5800 or even touch 6000 at some point this year. The death cross (where the green line cross the red line below) of July looks to have been negotiated and the uptrend can be resumed.

There are plenty of things to fret about and some events that could knock this newly germinated recovery off the rails; but confidence breeds confidence, so now is a time to be hopeful.

PS If you have never watched that Seinfeld 'Double-Dip' episode then you should, its very funny.

Will Thursday’s Unemployment Report Trigger A Stock Market Selloff?

 

An uneventful day of consolidation was the main theme for Tuesday.  We had a quick morning move up before selling took place and we moved sideways the rest of the day.  The good news is we managed to stay above the 200-day moving average for a second straight day but we made no ground towards the 100-day moving average, which will be a tougher resistance to break.

If we were to break the 100-day moving average, this market would no longer be in a downtrend.  Many consider this just a correction in a downtrending market and I am leaning towards that belief at the moment but won't discount the recent strength.  Those who were predicting a top in 2009 were wrong the majority of the year.

Technology, which has been a leader in the markets, did not fair too well even with strong earnings reported.  Gold, oil, basic materials, and retail lead the negative sectors today.  Even with the negative action, we should still consider this just healthy consolidation after a strong run-up.  However, Thursday has unemployment claims and I'm not too optimistic about those figures.  With the main earnings reports out of the way, we have little to focus on but macroeconomic issues now.  As Bernanke stated ,we have an "unusually" uncertain economy and those words should ring loudly over the next few weeks.  Will that be enough fuel for the bears though?

While I'm leaning bearish now, I can not discount the V-shaped bounce we saw so often in 2009.  For that reason, I am hoping for some bullish action tomorrow but will look to reduce/exit my positions before Thursday's unemployment figures.  If figures are better than expected, I can always aggressively jump back in.  As I always state, protecting capital in a bear market is most important.  The downside risk is too great, especially as the VIX moves higher.

As always, do your own homework to see if you agree.