|
For the last few weeks, I have
been warning you about an impending correction. This week was no
different. My data have been forecasting a correction since
early April and the overbought condition is still in play.
However, if you are very cautious, you can still be in this
market and continue to make money in all the near panic buying.
Many of the talking heads and pundits are telling us that the
next stop on the Dow is 10,000. This is not likely. When markets
are overbought, virtually anything can cause the big
institutional investors to take profits and move to cash. When
this happens, the short players will jump back in and push the
sell-off even lower. This may not be a 'Sell-in-May-and-go-away'
scenario, but it should be a time to move stops up every day
that the market moves up.
Here is what I'm doing in
this market...
* For the last couple of months, I have been about 30% invested
and 70% in cash. I sold some positions last week and am now
about 25% invested and 75% cash. What is interesting is that
even with only 25% invested, my portfolios are nearly matching
the huge run-up in the market over the past few weeks. I mention
this not to brag on my stock picking skills, but to underscore
the importance of staying in the market even if you believe a
correction is soon to occur. You just don't have to be all in or
all out. With only 25% of my money at risk, I have been able to
nearly matching 100% of the gains in the market.. At the bottom
of this week's report, I will take you through an example of how
I go about picking the right stock at the right time and getting
out at the right time.
* Every day that the market moves higher, I have been moving my
stops higher. If the market continues to move higher this coming
week, I will continue that strategy. Currently, 90% of my
holdings have stops nicely above each equity's cost basis. This
means that when the correction occurs, the vast majority of my
holdings will stop out with net cash profits. I strongly
recommend that you consider this strategy in light of the
overbought condition of this market.
Tool Time...
A few weeks ago, CEDC bubbled up in my Watch List as a good
candidate to buy (see chart, below). Central European
Distribution Corporation (CEDC) and its subsidiaries produce,
distribute, import, and export alcoholic beverages primarily in
Poland, Hungary, and the Russian Federation. It produces and
sells vodka. The company distributes approximately 700 brands of
alcoholic beverages consisting of various alcoholic products,
including spirits, wine, and beer, as well as non-alcoholic
beverages. It distributes its products directly to off-trade
establishments, such as small and medium-size retail outlets,
petrol stations, duty free stores, supermarkets, and
hypermarkets- and on-trade locations, including bars,
nightclubs, hotels, and restaurants.
As of December 31, 2008, CEDC
operated 19 distribution centers and 124 satellite branches
located throughout Poland. It imports spirits, wine, and beer of
various brands, including Corona, Budvar, Guinness, Carlo Rossi
Wines, Concha y Toro wines, Metaxa Brandy, Remy Martin Cognac,
Guinness, Sutter Home wines, GrantA's Whisky, Jagermeister, E&J
Gallo wines, Jim Beam Bourbon, Sierra Tequila, TeacherA's
Whisky, Campari, Cinzano, Skyy Vodka, and Old Smuggler. The
company was founded in 1990 and is based Bala Cynwyd,
Pennsylvania.
There was (and still is) a lot to like about this stock. I
bought it at $14.72 on April 6, 2009. It closed this Friday at
$23.94, giving me a +62% net unrealized gain. Let's review why I
picked this stock...
|
* The stock is one of my 2009
Doublers. This means I have already tagged it as a stock that
should encounter little resistance to doubling if the market
begins to move higher. Note that less than a year ago, the stock
was trading near $78.00 and as recently as a couple of months
ago, it was trading near $5.00 per share.
* In spite of the huge decline in market share price, the
fundamentals of the company remained strong. Its Fundamental
Score put it in the top 10% of all the stocks in my database.
* Technically, it gave a Buy Signal about month ago when it
moved above my trendline (10 week moving average, time shifted
forward 3 weeks) at Circle A.
* When the stock dropped to a 3-year low, Insiders started
buying (Circle B). This is a great sign that the Insiders
believe the stock is cheap. From that point, the stock's share
price dropped another 80%!
* During the time this stock was being crushed in the market,
major Institutions continued to hold the stock, with only a
slight move toward the distribution side (Circle C). I like to
see strong (but not too strong) commitment from major
institutions in holding outstanding shares of a company. My
"sweet-spot" for this ownership is between 30% and 60%. CEDC is
at the top end of my sweet-spot. This means that the big
institutions believe there is a lot of upside for this stock.
This level of Institutional Ownership is an excellent indicator
for owning the stock.
Special Offers
|
 |
|
Are You
Looking for a Great Dividend? Easy! Just Ask Uncle Sam . . .
Learn
More |
|
 |
|
3 Penny Stocks
Poised to Soar 300%
Learn
More |
|
|
|
|
* Although volume has fallen
off a bit (Circle D), the general trend of investor activity of
this stock has been excellent, with more green bars (increasing
volume and increasing price) than red bars over the past several
months. This gives momentum to the stock in the direction that I
want the share price to move. This is another positive for
owning the stock.
* Finally, the Industry (Beverages - Wineries and Distillers)
and the Sector (Consumer Goods) were bouncing off multi-year
lows. This is where the 'rising tide' analogy comes in to play.
If more money is pouring into an Industry and Sector than moving
out, the tendency is to see all the stocks in the Industry and
Sector moving higher.
If the stock's price is moving
higher, the insiders are buying, the major institutions are
holding a significant number of shares, volume is
increasing, the average price of all stocks in the Industry
are moving higher and the average price of all the stocks in
the Sector is moving higher... and if the stock has strong
Fundamentals... and if owning the stock does not violate my
diversification rules, this stock becomes a great candidate
to own.
That was my conclusion a few weeks ago and were it not for
the impending market correction, this would still be a great
stock to buy.
And... one more thing... The normal stop loss setting for
this stock is $12.65. This is calculated by subtracting the
Expected Move ($5.76) from last week's lowest low. In a
normal Bull market, this is the price to use to stay just
below 'normal' weekly volatility for this stock. This is a
24% stop loss. In normal markets, I am not too worried about
this low of a stop loss. But, in this market; with this much
unrealized gain and the fact that I expect a correction to
occur at any time, I do not want to lose that much profit on
a pull-back. So, I have a much more aggressive stop loss. My
stop on this stock for the upcoming week is $20.94... well
above the 'normal' stop loss. Plus, if the stock continues
to move higher, I will be moving my stop higher on a
day-to-day basis.
Have a great week in the
market!
--Mike Turner
Editor
Mike Turner's Market Report
Note from the
publisher: TopStockAnalysts Digest is excited to announce that
we will now be providing expert market analysis three times a
week on Mondays, Wednesdays and Fridays.
Additional Investing Ideas
|
 |
How to Prepare for the Market Correction "Freight Train"
Heading Your Way
Our guest contributor Mike Turner has profited
handsomely from April's market run up. But he hears a
freight train coming and he's taking the appropriate action.
Find out why he sees a possible near-term market correction
on the horizon -- and what he's doing to prepare for it. |
|
 |
Ignore The Controversy - Sin Stocks Can Make
You Rich
Tough economic conditions won't stop
drinkers from drinking or smokers from
smoking; that's what makes shares of
companies that make their living off of
other peoples vices so lucrative during
recessions. Even better, according to Jim
Nelson -- editor of Penny Sleuth --
many of these so called "sin stocks" are
currently trading near their 52-week lows
making them an excellent bargain at these
valuations. |
|
 |
What Buffett
Says About Diversification Will Shock
You
The Wall Street "experts" always
say diversification is key to having a
stable portfolio. But buying an S&P 500
Index fund would have returned -38.7% over
the last year. Doesn't sound too stable to
me. What we're seeing in today's market is a
school of thought that even Warren Buffett
has subscribed to for years -- simplifying
your portfolio and concentrating on your
best ideas -- is the best way to beat the
Street.
And as you'll see, we're putting this idea
into action... |
|
Visit this link to read additional articles from today's
leading market experts!
|
TopStockAnalysts
http://www.TopStockAnalysts.com
839-K Quince Orchard Blvd.
Gaithersburg, MD 20878-1614
P.S. -- If you're not already a subscriber to one of
StreetAuthority.com's premium investing newsletters, which include a wealth of
additional information and specific investing guidance that you
won't find anywhere else, then please visit the following
page to learn more: http://www.StreetAuthority.com/subscribe.asp
|