Tag Archives: MS

3 Ways To Make 2018 Even More Profitable Than 2017

2017 was a banner year. The stock market, as measured by the S&P 500 rallied 19.4% year-to-date, and it did so without so much as a hiccup. We’re now heading into the ninth year of this bull market, and at 3,219 days and a 300%-plus total return since the market bottomed in March 2009 this is the second-longest and strongest bull market in history. (Number one is the bull market of the 1990s, which lasted 4,494 days and returned 582%.)

Here at Maximum Profit, we booked some solid gains and are sitting on many more. And while you’ll likely hear the old saying, “A rising tide lifts all boats,” we want to be on the boats that are rising faster than the rest. That’s the purpose of the Maximum Profit system. So, yes, the large majority of stocks did rise with the overall market in 2017. However, we were able to jump on the ones that were leading the pack.

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We booked a 26% gain on Morgan Stanley (NYSE: MS) in just seven months — more than doubling the S&P’s 11% return over the same time frame. Idexx Laboratories (Nasdaq: IDXX) provided us with a nice 39% return in 11 months, versus the market’s 14% return.

Of course, we didn’t bat a thousand. Overall, however, we managed to keep our losses relatively low — averaging 9.8% on our losing positions across all of the portfolios.

Cutting losers short is key to becoming a successful long-term investor. Whatever you do, don’t rely on hope. Hope is not a strategy. Don’t hope for that loser to rebound just so you can break even. And don’t let a small loser turn into a big loser. Remember, a 50% loss requires a 100% return just to get back to even.

3 Resolutions For 2018
For many, the New Year brings an opportunity to start fresh. A clean slate.

The motivation to become healthier, get our financial houses in order and read more books really picks up steam. And while you’ll likely see plenty of articles on many of these topics from various news outlets, I want to remind you of a few that pertain mostly to your financial house and investing in general.

Realign Your Portfolio
Those big gains you’re sitting on have likely taken over a larger portion of your portfolio. As longtime readers know, I’m as much about managing risk as I am about finding big winners.

After all, it’s not how much we make, it’s how much we keep.

So it’s okay to take some profits off the table, while realigning your portfolio to it’s original (or updated) allocations. And if you’re wondering where to stash your cash while waiting for its next deployment, consider opening a savings account with a FDIC-insured virtual bank. For instance, EverBank and Synchrony Bank both have free savings accounts with rates as a high as 1.31%.

Pay Yourself First
Make it mandatory that the first “bill” you pay is to yourself. You deserve it. Plus, once you add this bill to your budget you will find a way to adjust other expenditures accordingly. Don’t tell yourself that you’ll stash a couple hundred away each month… it likely won’t happen as you’ll find some excuse to use that money elsewhere.

Instead, be sure to set up an automatic deposit — or if you haven’t already, be sure to set up an automatic deduction from your paycheck. This will help keep you accountable.

If you’re already contributing to your retirement and have automatic deposits set up into your emergency fund, then take the next step and increase your contributions. You’ll be amazed at how quickly you’ll adapt to a slightly smaller paycheck.

Keep Your Emotions And Expectations In Check
Last, but certainly not least, I want to touch on emotions and expectations. It’s been a great year in the stock market; the S&P 500 is up 19% this year. Don’t expect the market to necessarily post another double-digit gain in 2018. Remember, historically the market averages about 7% a year.

With investing — and many things in life — it’s all about managing expectations. If you expect the market to rally another 19% next year, then you’re likely setting yourself up for disappointment. Also, if you set the bar that high, you begin to take larger risks to try to hit this “goal” of 19%. Don’t let your emotions dictate your investing. If you do, it usually ends poorly.

Also, if you’ve had an exceptional year where you’ve made lots of money, don’t let it go to your head. Stay focused and disciplined. Keep your emotions out of investing.

Looking at 2018, I expect some volatility to return. But part of the beauty of the Maximum Profit system is its ability to help keep emotions at bay. Regardless of what the future might have in store for us, the Maximum Profit system will help us navigate whatever the market throws at us.

As we head into the new year and you begin thinking about how you want to attack 2018, keep these ideas in mind. Financial changes don’t need to be difficult. Keep things simple and follow some of these guidelines to help set you up for a successful new year.

Here’s to a safe and prosperous 2018.

P.S. I strongly recommend you give my premium service, Maximum Profit, a risk-free trial. That way, you’ll have a winning system that uses proven fundamental and technical indicators working for you. You’ll no longer have to worry about what to buy, when to buy — or when to sell. Simply let Maximum Profit do the work for you. To learn more, simply follow this link.

Why Citigroup Inc Stock Will Blast Through the $75 Level

Earlier this week, shares of Citigroup Inc (NYSE:C) got a boost from the increasing likelihood that the federal tax bill would pass. Now, though, C stock price is teetering on breakout status and could be signaling a buy.

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In fact, it’s not just Citigroup stock that is moving up, it’s the whole sector. Bank of America Corp (NYSE:BAC), Morgan Stanley (NYSE:MS), Goldman Sachs Group Inc (NYSE:GS) and others are pressing higher. Financials as a whole remain attractive. One of my favorites remains BAC stock, which just hit new highs earlier this week.

But C stock has plenty of upside too. Let’s talk about why.

Compelling Fundamentals for C Stock

Citigroup stock trades with a price-to-earnings (P/E) ratio of 14.5 and with a forward P/E ratio of 12.7. Those are pretty low metrics, particularly considering earnings are forecast to grow 12.7% in 2017 and another 11.3% in 2018. Analysts expect revenue to grow 2.5% and 3.6% in 2017 and 2018, respectively. Citigroup’s sales growth is decent and its double-digit earnings growth is very respectable.

Additionally, Citigroup has beat earnings estimates for 11 straight quarters. Who’s to say the 11.3% estimate for 2018 is enough, particularly in an environment where the U.S. economy is seemingly getting stronger by the week? More banking, spending, mortgaging and jobs growth should lead to a growing bottom line for Citigroup.

Further, Citigroup’s price-to-book ratio make the case that C stock is undervalued.

The book value of a company is its total assets minus intangible assets and liabilities, and the P/B ratio is a great way to relate this to the corporation’s current stock price. In essence, a P/B ratio of 1 means the share price is equal to the company’s book value. A sub-1 ratio means it’s worth less than book value and a ratio greater than 1 means shares are worth more than book value.

With a P/B value of 0.96, C stock has a lower valuation than BAC, GS, MS, Wells Fargo & Co (NYSE:WFC) and JPMorgan Chase & Co. (NYSE:JPM). In fact, the closest peer to Citi stock is BAC, with a P/B value of 1.17. Using some back-of-the-envelope calculations, C stock would have to trade at around $92 in order to have the same P/B ratio as BAC. That’s roughly 22% above current levels!

Trading C Stock

That’s not necessarily saying that Citigroup stock has 22% upside from where it sits now. But when looking at the whole picture, it’s easy to argue that at least some upside exists. How much? Well, let’s look at the chart.

There have already been three solid breakouts since summer. Is breakout No. 4 on the horizon? Last Thursday, it looked like that was the case. But then C stock couldn’t hold its intraday move and went lower. On Friday, it couldn’t break through either.

Maybe this will be the week or C stock will gear up for another move to eventually do so.

But here’s the good news: trendline support has been strong all year. Should C stock fail to break out, it could pull back to this level. So, in essence, there are two trades for investors. Either wait for a close over $76 and buy the breakout or buy on a pullback toward the trendline.

Will it go to $92? It might over time, but I wouldn’t bank on that as a short-term target. (Sometime in 2018 is realistic, though, presuming the market holds up and the economy continues to gain momentum.)

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The Bottom Line on Citigroup Stock

We have a company that’s operating in an industry facing lower regulation, with a backdrop that is perfectly geared toward its success. With an improving economy, consumers and businesses alike will be helping (knowingly or not) their banking partners.

Throw in the potential for tax reform and the banks become even more attractive.

C stock, with its low valuation and compelling earnings growth, is an attractive target. For those who don’t like single-stock exposure, but want more alpha than a fund, consider owning several, high-quality bank stocks. This could include BAC and JPM in addition to Citigroup.

Add in Citi’s 1.7% dividend yield and C stock becomes even more attractive.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell did not hold a position in any of the aforementioned securities.

Session Starts to the Upside; Watch for Economic Data, Earnings Reports

(Tuesday Market Open) The three major benchmarks were heading to the upside in the early going today as Wall Street seems like it might want to shake off the doldrums of the last two weeks.

Yesterday, volume was low—as is typical during a shortened holiday week with an early closing on Friday—but the Dow Jones Industrials ($DJI), the S&P 500 (SPX), the Nasdaq Composite (COMP) and the Russell 2000 (RUT) all found higher ground on which to settle. It was the third straight day of gains for the RUT.

The RUT comeback, coupled with the declines seen in the Volatility Index (VIX) ahead of Thanksgiving might typically signal a strong market. But there’s still plenty of day ahead and low volume could lead to high volatility, so watch trading patterns.

If COMP stays on the track it’s treading in the early going it might post another record peak at the close. As of Monday’s close, the three major benchmarks were pacing annual gains of 15% to 26%.

Earnings are still in the spotlight this week. Shares of Campbell Soup Company (NYSE: CPB) tumbled nearly 8% in pre-market trading after missing expectations, citing higher costs for carrots and other produce. Lowe's Companies, Inc. (NYSE: LOW) shares moved higher after beating Wall Street’s forecasts, helped somewhat by post-hurricane sales, the home-improvement retailer said. Farm-equipment maker Deere & Company (NYSE: DE) is scheduled to report earnings after the bell today and might be an interesting story to watch.

Yesterday’s session ended higher, possibly helped by economic data. The Conference Board’s Leading Economic Index (LEI) surged 1.2% in October, soundly outpacing the 0.1% gain it posted after hurricane-battered September. The LEI is considered a leading indicator of business peaks and valleys. All 10 components of the indicator rose yesterday, which could be an indication that the economy is in growth mode.

This morning, more economic news is on the docket from the Chicago Federal Reserve Bank’s national activity index and the October numbers for existing-home sales.

Shares of AT&T Inc. (NYSE: T) were moderately lower while shares of Time Warner Inc (NYSE: TWX) headed to the upside in early trading today. Late yesterday, the Department of Justice (DoJ) surprised market observers by filing an antitrust lawsuit to block T’s $85.4 billion takeover of TWX. In the complaint, DoJ said the merger would harm competition, stifle innovation and drive up prices.

DoJ said it believes that a combination of T’s AT&T and DirectTV division—one of the largest providers of Internet and subscription TV in the U.S.—with TWX’s Turner Broadcasting unit, which includes CNN, TBS, TNT, Cartoon Network, HBO and Cinemax, “would have the incentive and ability to charge more for Time Warner’s popular networks and take other actions to discourage future competitors from entering the marketplace altogether,” according to the government’s press release.

As a condition for approving the merger, the government has been pressuring for a sale of Turner Broadcasting, according to published reports last week. At a press conference later yesterday, T Chief Executive Randall Stephenson said the suit “defies logic and is unprecedented,” noting that the two companies “do not even compete with each other.” He reiterated his earlier stance that he has no intention of selling CNN. The merger is considered a vertical one, in which two companies produce different products or services within the same industry, or in this case content and distribution.

Elsewhere yesterday, the SPX telecom sector was the strongest, climbing 1%. Shares of Verizon Communications Inc. (NYSE: VZ), for example, climbed higher by 1.8% after a Wells Fargo & Co (NYSE: WFC) analyst upped VZ stock to “outperform” from “market perform,” noting the impending rollout of its next-generation 5G network.

Health care stocks were mostly depressed. Shares of Cardinal Health Inc (NYSE: CAH) fell 4.4%, for instance, after a Morgan Stanley (NYSE: MS) analyst cut the stock to “underweight” from “equal weight”

Crude oil prices stumbled Monday ahead of next week’s oil ministers meeting and were moving slightly higher early today. Though the Organization of Petroleum Exporting Countries is largely expected to extend its caps on production, analysts told MarketWatch they expected oil trading to be mostly muted ahead of the Nov. 30 meeting. West Texas Intermediate crude closed off by $0.46 to finish at $56.09 a barrel.

FIGURE 1: TELECOM INDEX CLIMBS. The S&P Telecom Index (SPSITE) finished the sector higher as it tries to rebound from the 52-week low it hit earlier this month. Data source: CME Chart source: The thinkorswim® platform from TD Ameritrade. For illustrative purposes only. Past performance does not guarantee future results.
Good Bye Janet: Federal Reserve Chair Janet Yellen turned in her letter of resignation to the White House yesterday, despite having six more years on her term as a member of the board of governors. Yellen, who was the first woman to lead the Fed since its inception in 1913, has been the chair since 2014, replacing Ben Bernanke.

Her four-year term as chair expires Feb. 3, when her successor Jerome Powell will take the reins. She also heads the Federal Open Market Committee, the Fed’s principal monetary policy-making body. Yellen was first appointed to the Fed board by President Clinton in August 1994 and served until February 1997, when she was named the chair of the President’s Council of Economic Advisers. Her 14-year term as a Fed board member began in 2010.

Lessons Learned from GE Dividend Cut: Never trust a dividend from a company that is paying out nearly 120% of its earnings to support its 5%-plus yield, according to Sam Stovall, CFRA chief investment strategist. That was the position that General Electric Company (NYSE: GE) was in last week when it had to cut its dividend in half amid a widespread restructuring.

“Investors can use the payout ratio to see if the company is living beyond its means by paying out in dividends more than it is earning,” Stovall said. A payout ratio is determined by dividing the annual dividend by the company’s annual net income. If the payout is over 100%, then the company is returning more money to shareholders than it is making. If it does that over a long period of time, it is not likely that the company will be able to support that payout, he said.

Happy New Year: We have not yet ended 2017 and already economists are talking about 2018. Goldman Sachs Group Inc (NYSE: GS) Research economists Jan Hatzius and Jari Stehn said yesterday that the global economy is outperforming most predictions for the first time since 2010 and they see that “amplifying” next year.

Their forecast for global gross domestic product is at 4%, “a forecast notably above consensus expectations and supported by still-easy financial conditions and fiscal policy,” Goldman Sachs said. It’s still far too early to tell how close that projection might be.

Information from TDA is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade.