Investment Course (a freshman - year Course of Study ) Week # 4
This is week number four and is your freshman year of learning to Invest Wisely. As you know, by now, we are using the Dow Jones 30 Industrial Companies in the pursuit of learning / applying analytics and of course - the art and science of making money.
Note: The format for this week and weeks 5 & 6, I will cut back on the supportive notes, information and data I included in the first two weeks. So at the beginning of my six week rotation of 5 Dow components per week I will provide the longer version with more notes. To review my latest 'long version' click on the following URL.
http://www.safehaven.com/article/20322/investing-wisely-dow-30-industrials-week-2
Introduction
For this week, I am continuing to walk you through the Dow 30 component companies. You will notice at the bottom I have also begun to offer you the indexes for Gold, Silver, Crude Oil and the U. S. Dollar. You should be studying each of them thoroughly and learning the basics for each. It is likely you will get sick of the repetition and feel like this is not necessary. I will repeat what I have shared before. I still go through the basic analytics of these companies and many more every single week. I am also profitable for every single year, and that is a lot of years. Few financial analysts whom I know go through this discipline, and I know of no investor that even comes close to "do his or her" homework - thoroughly.
I repeat, it is a boring process for many investors, but it is also accurate and profitable.
General Market - Current Perspective
The following will be repeated each week: Within my work / analytics it is important to take into account the current position of the general market and the economy as it relates to the companies that are being valuated. This is one of those - first things first situations. It is a fact that 60% of the influence of the direction of any security is that of the general market - bullish or bearish. A 20% influence is on the Sector and Industry Groups. That leaves only 20% for the Companies itself. I suggest that when you invest that you had better - be in phase - with the bullish or bearish direction of the general market and sectors / industry groups. Then it is up to you to have done your homework well and be very selective in the companies you take positions in.
The general market is currently over-valued, over-bought and is showing serious signs of deterioration, especially in the area of breadth. Interest rates are on the rise, and inflation is already an acute problem. These Dow 30 Industrials along with many other companies are quite vulnerable to a meaningful general market pullback. That means that you should strongly consider holding cash or perhaps taking bearish positions. I do not recommend taking short positions in any of these securities.
So - what is new to consider in the marketplace for this past week?
For me that is an easy question and will be for you, if you do your homework. The rally this past week remained right on schedule and should continue to do one of two things. The first is what most investors think and that is to assault the previous highs and create what is often called a break-out. I agree that this is a possibility. However, I have been waiting for a General Market Bearish Inflection Point for three plus months. So, as of this posting, I believe that we are much closer to a meaningful pullback than going higher. Yes the strongest Companies and Sectors are already higher but the vast majority is Not! This is particularly true with the Dow 30.
My focus for all companies, Dow 30 or others, is - Investing Wisely. My methodology of taking advantage of the bull / bear fundamental 'rotation,' technical 'cycles,' and 'inflection points' are especially critical in this marketplace and to your annual profitability. I believe, most every investor I have ever met can profit from this course. That is if you / they do your homework well. This is a vital discipline in today's marketplace.
Companies - Current Perspective
A Ranking, using each of my three (weighted disciplines) -- Comments for each Company -- and current Numeric Ranking of the position of each Company within the Dow 30 Industrials should give you plenty hard analytics homework every single week, but soon you will be doing it like a professional.
Grouping Four: (see below for a list of the six groupings of five - Dow 30 Industrial Companies.)
| Symbol and Current Numeric Ranking within the Dow 30 Industrials | Category | Fundamental (weighting 40%) | Technical (weighting 35%) | Consensus (weighting 25%) |
| (T) Ranked: # 10 | Bellwether | Good | Very Good | Good |
| Comments: Currently, at $30.6 - the theme of these five companies for this week is that the information that you read in the "sources" below is Very Inconsistent and my valuations and analytics takes issue with much of what I have read. You will note that Telephone is currently carrying only a modest Ranking against its Dow peers. ( please remember my strong emphasis on owning companies that are within the top 5% on my 'Bell Curve' -- if you compare the performance of CAT with T and other Dow 30 companies you will understand. Next year, earnings' growth falls back measurable and yet it is under heavy accumulation. (I can explain that to you privately if you ask) Fundamentally, there appears to be consolidation of the recent growth, and I am not impressed with the intermediate-term. It is a hold but I would take profits at the first sign of weakness. Technically, it looks like it is going to the moon, but that is highly unlikely. However, it definitely remains a hold. Consensus wise, it is only "good." | ||||
| (IBM) Ranked: # 7 | Bellwether | Very Good | Very Good | Very Good |
| Comments: Currently, at $164 - the company appears to be improving and should climb up (slightly) in the Ranking list against its Dow peers. This is again a company with conservative but positive 'numbers." I do see a pullback in price on the near-term horizon. Fundamentally, clearly IBM is looking much better than some of its peers - but not enough better to invest at this price level. Earnings are "steady" but I would like to see more earning "Growth." Technically, it looks like it is topping. Should it "break out" on the upside, I believe the upper targets are not worth the risk? Consensus wise it is "very good." | ||||
| (JNJ) Ranked: # 25 | Bellwether | Good | Very Good | Good |
| Comments: Currently, at $59.3 - the company has been in the 60s three times over the past five months. This year, earnings' against next years earnings' are improving as well as earnings' growth the coming few years. Remember, JNJ like KO and other Dow components are very slow movers and definitely designed for a conservative investor. Fundamentally, Earnings look rather poor in this time and is reflected in the price. However, that should change. Technically, on a more near-term basis JNJ is looking tired and not moving in the direction of a new high. Is there more life in it for the near term? My work says no. My asset management says - it is just not a competitive investment. Johnson & Johnson is one of the super conservative companies that has grown in price for the past 20 years or so without a serious pullback like so many others. The 2008 pullback was from $65 to $45. So, my strategy is to sell and if you like the company (JNJ and others) buy it back at a later time. Consensus wise it is currently not one of the strongest. You should know that Consensus Analysis is very important but often not all that accurate. The financial analysts have their favorites and are paid to say good things about - companies that are - undeserving. | ||||
| (AA) Ranked: # 4 | Bellwether | Very Good | Very Good | Good |
| Comments: Currently, at $17.5 - the bounce in earnings for this past periods will rescend sharply in the come months and years. The Metal Industry Groups are still doing well but many component companies have started to pull back. AA could well join them over the coming weeks. Fundamentally, I do not like Alcoa for the longer-term and the ride to current levels somewhere in the high teens or low twenties. Technically, it looks strong but be careful. Consensus wise the "Street" and its financial analysts are not doing an accurate job for you to follow their information and data - that is not a positive situation! | ||||
| (JPM) Ranked: # 19 | Bellwether | Very Good | Very Good | Very Good ! |
| Comments: Currently, at $46.1 - the company looks healthy for a big Banking company, but is not one of my favorites (actually I have no favorites - I dislike Banks and dislike the way they go about doing business). Longer-term price appreciation from this level is quite suspect. At this time, it is Ranked rather low by me, and I believe that is an accurate assessment. Technically, JPM looks a lot like AA, and that is a concern at this time. I would point out that the longer-term picture (20 years or so) the company had gone nowhere. In 1999 it was at $50 per share, by 2002 it had dropped to $14 per share. It recovered to $48. per share by 2006 and then fell again to $16 in 2009. Currently, JPM has only come back to $44 per share. For those who own JPM, I offer my sympathy and suggest that if you are a "Student" of the market you should know better than to participate with this historic performance. The Consensus picture offered by the "Street", and its financial analysts are not doing an accurate job for you to follow their information and data - that is not a positive situation! Sound familiar, well you will hear more about this as I guide you through these 30 companies. | ||||
In my 'Longer Version I have five Notes: Again, click on the above URL to visit my last 'Longer Version' of this Course of Study.
You can find all Dow 30 Industrial Companies and a number of other supporting Bellwether and High Profile charts amongst the 100 or so in:
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID4095527
The Prof's Six Groupings of the Dow 30 Industrials
Grouping One: BAC, CSCO, GE, BA, XOM
Grouping Two: HPQ, AXP, KFT, TRV, CVX
Grouping Three: CAT, HD, KO, DIS, DD
Grouping Four: T, IBM, JNJ, AA, JPM
Next Week -- Grouping Five: VZ, MRK, PG, MCD, MSFT
Grouping Six: PFE, , MMM, UTX, WMT, INTC
Commodities - Current Perspective
Four for focus: These four commodities are offered in order to compare their on going analytics with that of the Dow 30 Industrials.
This presentation each week will be a simple update of the Technical picture. Fundamental and Consensus Analysis is much too complex to present in this format. However, understant in order to invest wisely in an appropriate ETF or Company the work / analytics is much the same as for any common stock.
| Symbol and Name | Category | Fundamental (weighting 40%) | Technical (weighting 35%) | Consensus (weighting 25%) |
| Gold ($GOLD) | Bellwether | Very Good | Excellent | Very Good |
| Comments: Currently, at $1,432., Gold is and has moved up strongly and has been a leader since late 2008. Current Technicals: It looks like it is topping but may just keep doing its ting. If you were worried during the January 2011 pullback you can expect yet another, but a likely and perhaps more severe pullback in the coming weeks. Until Gold experiences a meaningful pullback, and then clearly fails to successfully test the previous highs, it is likely a hold. However, looking at the near-term and not wanting to "experience a meaningful pullback" - I suggest that prudence says that if Gold will not break-out strongly that it is a sell. | ||||
| Silver ($Silver) | Bellwether | Very Good | Excellent | Very Good |
| Comments: Currently, at $37.6., ( Gold & Silver track each other very well historically) Silver is and has moved up strongly and has been a leader since late 2008. Current Technicals: It looks like it is topping but may just keep doing its ting. Until Silver experiences a meaningful pullback, and then clearly fails to successfully test the previous highs, it is likely a hold. However, looking at the near-term and not wanting to "experience a meaningful pullback" - I suggest that prudence says that even though Silver has broken out on the upside while Gold has yet to do so that the longer-term performance for Silver will continue to track Gold both in a bullish manner as well as a bearish manner.. You might want to consider that while Silver has out performed Gold on the more recent upside that - Silver may just do the same on the downside. | ||||
| Crude Oil ($WTIC) | Bellwether | Very Good | Very Good | Very Good |
| Comments: Currently, at $106.8., Crude Oil is tracking Silver and the above is also applicable to this commodity. | ||||
| U. S. Dollar ($USD) | Bellwether | Very Good | Very Good | Good |
| Comments: Currently, at $43., at this time there is nothing to lead one to believe that the Dollar will be turning up - however. Current Technicals: it is still in the range of the November lows and there is a possible technical scenario that would say that a turn-up is in the making. That turn-up could well be coincident with a turn-down in the General Market, in other words - a rally in the U. S. Dollar and a pullback in the General Stock Market? | ||||
You can also find all these Commodities and a number of other supporting Bellwether and High Profile charts amongst the 100 or so in:
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID4095527
Source information and data:
Yahoo Finance
MSN Money
MorningStar
BarCharts
StockCharts
Nasdaq.com
The Bottom Line
Your 'bottom line' will depend on just how proactive you are about doing your homework on the above Companies and perhaps asking questions of the Prof. (that's me!)
This Week's Home Work Assignment: (Same as last week) Study at least 3 of my "Source information and data" (see above) and learn to Navigate through all that is offered. (the above will be your - on going homework assignment and will require many hours if not months - these sites offer much information - some good and some worthless - but can be very rewarding if you are willing to learn)
Next read up on each of these companies and make some notes from your favorite sources of information. You may even want to make file folders for each company. Referring back to your notes can be a valuable learning experience. Remember, this is boring "stuff" to many investors, but it will provide you accuracy and profitability in your investment strategy.
More Notes about this Course of Study
Visit the 'Longer Version' URL for this information:
You may want to review my 38-week course - Investment Basics with SafeHaven.com. (see the sidebar on the SafeHaven.com home page or Authors and my name.)
Wishing you a wonderful learning experience and the continued desire to grow your knowledge. Education is an essential part of living wisely and the experiences of life, I hope you make it fun.
Learning how to consistently profit in the Stock Market, in good times and as well as in not so good times requires education, experience, time and unfortunately mistakes which are called losses. I believe if you will work ast it, you can be profitable while you are learning?
Let me know if and when I can help and tell a friend about this Course of Study.
Thanks for your interest in my work / analytics and possible my professional asset management / consulting / mentoring services.
Smile, have fun - Investing Wisely,
