Weekly Update-October 27, 2012

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Weekly Update-October 27, 2012

By: Michael Vodicka

“Overall, the market is actually holding pretty strong near the recent high in spite of the disappointing earnings season.”

Stocks spent most of the week trending lower as the list of companies reporting weak earnings and guidance continues to grow. For the week, the Dow Jones fell 1.8%, the S&P 500 was off 1.5% while the Nasdaq led with a .6% decline.

Earnings definitely remain the name of the game, and on that front, we saw some more dissapointing results this week. That list includes Apple, Inc. (AAPL), fellow tech titan Amazon, Inc. (AMZN) and blue chip McDonald’s Corp. (MCD).

That fresh round of earnings misses and lower than expected guidance weighed on the averages, with the S&P 500 spending most of the week trending lower before a rally into the weekend on better than expected Q3 GDP.

But overall, even though the market has felt quite weak lately on some bearish earnings news, the S&P 500 is still only 3.5% below its multi-year high from mid September. Considering how weak the data has been and some of the uncertainty about growth, that’s not much of a contraction at all. Take a look below.

 

 

 

 

Some of that has to do with Europe just going absolutely dead silent ahead of the US presidential election. I’m convinced the European Union is under directive to stay quiet to not “disrupt” the results, but either way this has been a serious lull in the story that will undoubtedly pick up again as we head into the end of the year.

But overall, the market is actually holding pretty strong near the recent high in spite of the disappointing earnings season.

Looking forward, we’ve got a jobs report next Friday that is always huge and then after that we’ve got the presidential election on tap. Investors are staying cautious right now and choosing to wait for more data to get either more bearish or bullish. Stocks have made it through a terrible earnings season without any major downside, so that is actually a positive signal. Buying the dip has been a great move for the last three years, but with stocks only down 3.5% from the recent high I am still looking to stay patient with further or any big deployments.

Updates:

Apple, Inc. (AAPL) continued falling this week after reporting disappointing Q3 results that fell short of expectations. Apple shares are now down about 15% from the recent high above $700. Looking ahea, Q4 is the company’s strongest quarter and Apple will be selling tons of gadgets over the holidays, so I look at the recent dip as a chance to buy. Take a look at the recent pullback below.

 

 

 

 

McDonald’s Corp (MCD) reported results that missed expectations as the company continues to struggle with weakness in the global economy and higher input costs. Bigger picture, I still think this is a great blue chip, but right now is time to stay patient and focus on the big picture. McDonald’s is having a pretty bad year, with shares now down 12% after a sharp decline this week. Take a look below.

 

 

 

 

Check Point Software (CHKP) fell 12% in one day last week after the company provided weaker than expected Q4 guidance. As you can see, the hits just keep on coming this earnings season, and Check Point is no exception. Even though the company disappointed the Street with lower than expected guidance, the full-year 2013 estimate only fell 4 cents to $3.27, a solid 10% growth projection from this year. Enterprise and Internet security are and will continue to be huge areas of growth, and Check Point is a leader in the space.

And finally, to end on a positive note, Kansas City Southern (KSU) jumped 4% on the week in spite of reporting a small earnings miss. This stock has seen huge gains in the last few years as companies increasingly look to cut shipping expenses, but looking forward, analysts are looking for 25$ earnings growth in 2013, so there should be plenty more to come. Take a look at the strong weekly performance this week

 

 

 

 

That’s all for this week, but until next time, here is an interesting article discussing how presidential elections effect the stock market and different sectors. Enjoy!

Presidential Elections, Stocks and Sectors

Your Investment Partner,

Mike

Michael Vodicka is the president and founder of the Vodicka Group, Inc., a Registered Investment  Advisor  (RIA). He specialized in trading fixed-income derivatives at the Chicago Board of  Trade before  spending five years managing equity portfolios for a private investment research company.

Michael graduated from the University of Kansas with a degree in business communications and is registered with the State of Illinois and the SEC (Securities and Exchange Commission) as a Licensed Investment Advisor (Series 65).

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