The Week Ahead: All Eyes on Technology's Momentum

The Washington 'swamp' keeps getting murkier, but tech stocks are cutting through the gloom. Here's what to look for in coming days.

 

The Trump administration's looming health reform fiasco, draconian budget blueprint, and foreign affairs missteps are roiling the markets, but one sector appears to have seized sustainable momentum: technology.

Here's a look at the forces driving tech higher and the profitable opportunities emerging among tech companies of all sizes, regardless of the market's excessive valuations and myriad political risks.

The stock market closed on Friday with a gain of 0.2% for the week, although it didn't top its record high from the start of March. The clear outperformer was the tech-heavy Nasdaq, which closed +0.7%, rising near its early-March high to hover near another record close. The Nasdaq is now up 9.6% year to date, versus the S&P 500's (SPY) YTD gain of 6.2%.

One sector that hasn't fared well over the past week is health care. The Republican alternative to Obamacare, inevitably dubbed "Trumpcare," is a toxic stew of half-measures that no one finds palatable.

The consensus in both parties is that the Obamacare replacement bill is dead on arrival, as an increasing number of GOP senators indicate they will vote "no." The political stalemate over health care has dampened enthusiasm for health stocks, with the benchmark Health Care Select Sector SPDR Fund (XLV) falling 1.08% over the past five days.

Trump also has unnerved global investors by alienating America's key allies of Britain and Germany.

The president continues to infuriate the Brits by repeating groundless claims that Britain's intelligence services spied on him at the behest of Obama. Meanwhile, at a White House meeting on Friday, Trump's anti-EU stance was on full display as he treated German Chancellor Angela Merkel with insulting disdain to the point where he refused to shake her hand.

In case anyone has forgotten, Britain is America's most important strategic partner and Germany is the largest economy in Europe.

But through it all, technology paints a rosy investment picture. One tailwind is Trump's promise to make it easier for tech firms to repatriate cash hoards that are parked overseas. Tech companies are likely to use this cash to fund merger and acquisition activity, to fuel organic growth and innovation.

In a sign of the heightened M&A to come, Intel (INTC) announced on Monday that it was making a big bet on self-driving vehicles by acquiring Mobileye (MBLY) for $15.30 billion in cash, paying a 34% premium to Mobileye's share price from the previous session. Mobileye is a small Israeli company that creates vision systems for cars and trucks.

In the week ahead, keep an eye on Silicon Valley giants with deep pockets. They increasingly need to find new avenues of growth by gobbling up smaller, entrepreneurial firms in such hot areas as autonomous cars, the Internet of Things, and the cloud.

Indeed, largely driven by cloud growth, Oracle (ORCL) on Wednesday delivered an earnings beat that sent shares rocketing higher. The tech giant's third-quarter 2017 earnings per share of 63 cents and revenue of $9.27 billion handily exceeded the consensus estimate of 57 cents and $9.24 billion, respectively.

Another positive for technology is the expected increase this year in IT spending, as cash-rich corporations make deferred upgrades. According to research firm Gartner, worldwide IT spending is projected to total $3.5 trillion in 2017, a year-over-year increase of 2.7%. Historically, IT spending is positively correlated with stock performance. One fast-growing segment is cyber security, as hacking incidents continue to mount.

The key takeaway: ignore the dreariness of today's politics and focus on the fundamentals. And right now, several trends strongly favor technology.

Notable tech company earnings on the calendar in the week ahead: Accenture (ACN) and Upland Software (UPLD) (Thursday). Economic reports: Existing Home Sales (Wednesday); Jobless Claims, New Home Sales, and Bloomberg Consumer Comfort Index (Thursday); Durable Goods Orders and Baker-Hughes (BHI) rig count (Friday).

If you walked by this guy on the street, you would not think "millionaire"

You would probably probably think "accountant" or "average cubicle guy." Actually, he was a lawyer until he unlocked this secret that made him $5 million. How does he do it? We'll warn you... it's about as exciting as a ham sandwich. But it's turning regular readers into six-figure income machines. Click here now for all the details.

By John Persinos

Source:https://www.thestreet.com/story/14050220/1/the-week-ahead-all-eyes-on-technology-s-momentum.html

This Biotech ETF is on a Tear (BBC)

Thanks to election year politicking and posturing, the biotechnology sector was drubbed last year. Nearly as rapidly as big-name biotech stocks and exchange traded funds (ETFs) tumbled, they are rising again this year.

Take the BioShares Biotechnology Clinical Trials ETF (BBC). From its 2016 peak to trough, BBC saw its price nearly cut in half before surging in the post-Election Day healthcare sector bliss. This year, BBC is up 20.5%, more than meeting the 20% gain required for the definition of a new bull market. Two months into the year, BBC is currently 2017's best-performing healthcare ETF.

BBC differs from traditional biotech ETFs in that it focuses solely on companies that have drugs or products in clinical stage trials. As seasoned biotech investors know, clinical trial results can spark massive gains or big declines for the affected stocks. That is particularly true of smaller biotech companies and those are the type of companies found in BBC.

As BioShares acknowledges, some of the companies that reside in BBC may not have sales and are entirely focused on clinical trial success. These are smaller companies with potentially higher volatility and the impact of trial results, known as binary event risk, is a risk to be considered.

"Clinical Trials stage companies are typically younger, smaller companies which do not have a drug approved, but instead focus on testing their experimental drug candidates in human clinical trials. Successful companies prudently manage their balance sheets through financings and partnerships in order to develop their potential blockbuster drugs," according to BioShares.

Underscoring the fact that BBC is essentially a small-cap fund is the fact that 96% of the ETF's 70 holdings have market values of less than $2.7 billion and almost half of that group have market caps of $600 million or less, indicating some BBC constituents are micro-cap names.

BBC is useful for investors looking to capture some of the potential upside offered by Food and Drug Administration (FDA) trial results without the burden of having to stock pick. That makes BBC all the more alluring in the current environment. After FDA approvals slumped last year, the Trump Administration is expected to take steps to lift some of the impediments in the FDA approval process.

With that advantage, comes the requirement that investors must acknowledge BBC is not a free lunch, meaning it is usually more volatile than traditional biotech or diversified healthcare ETFs.

By Todd Shriber

Source: http://www.investopedia.com/news/biotech-etf-tear-bbc/

8 Takeaways From Warren Buffett's Annual Letter To Berkshire Shareholders

Warren Buffett released his annual letter to Berkshire Hathaway Inc. (NYSE: BRK-A)(NYSE: BRK-B) shareholders on Saturday morning.

Buffett, as usual, spent a significant portion of the letter updating shareholders on the firm's current holdings, its annualized returns and other bits of wit and wisdom.

Click here to read the full letter.

See Also: Buffett's Bucket List Buys: The Oracle Making Unexpected Plays Late In The Game

On what they accomplished:

"Berkshire’s gain in net worth during 2016 was $27.5 billion, which increased the per-share book value of both our Class A and Class B stock by 10.7%. Over the last 52 years... per-share book value has grown from $19 to $172,108, a rate of 19% compounded annually."

On what they hope to accomplish:

"Charlie and I have no magic plan to add earnings except to dream big and to be prepared mentally and financially to act fast when opportunities present themselves. Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons. And that we will do."

On American economic prosperity:

"Early Americans...were neither smarter nor more hard working than those people who toiled century after century before them. But those venturesome pioneers crafted a system that unleashed human potential, and their successors built upon it.
"This economic creation will deliver increasing wealth to our progeny far into the future. Yes, the build-up of wealth will be interrupted for short periods from time to time. It will not, however, be stopped. I’ll repeat what I’ve both said in the past and expect to say in future years: Babies born in America today are the luckiest crop in history."

On share repurchases:

"In the investment world, discussions about share repurchases often become heated. But I’d suggest that participants in this debate take a deep breath: Assessing the desirability of repurchases isn’t that complicated. From the standpoint of exiting shareholders, repurchases are always a plus. Though the day-to-day impact of these purchases is usually minuscule, it’s always better for a seller to have an additional buyer in the market... My suggestion: Before even discussing repurchases, a CEO and his or her Board should stand, join hands and in unison declare, “What is smart at one price is stupid at another."

On insurance, Berkshire's most important sector:

"[O]ur P/C (Property/casualty) companies have an excellent underwriting record. Berkshire has now operated at an underwriting profit for 14 consecutive years, our pre-tax gain for the period having totaled $28 billion. That record is no accident: Disciplined risk evaluation is the daily focus of all of our insurance managers, who know that while float is valuable, its benefits can be drowned by poor underwriting results. All insurers give that message lip service. At Berkshire it is a religion, Old Testament style."

On company management:

"Charlie and I cringe when we hear analysts talk admiringly about managements who always “make the numbers.” In truth, business is too unpredictable for the numbers always to be met. Inevitably, surprises occur. When they do, a CEO whose focus is centered on Wall Street will be tempted to make up the numbers."

On Berkshire's ownership of $5 billion of preferred stock issued by Bank of America BAC 1.42%:

"This stock, which pays us $300 million per year, also carries with it a valuable warrant allowing Berkshire to purchase 700 million common shares of Bank of America for $5 billion at any time before September 2, 2021. At yearend, that privilege would have delivered us a profit of $10.5 billion. If it wishes, Berkshire can use its preferred shares to satisfy the $5 billion cost of exercising the warrant... Many of our investees, including Bank of America, have been repurchasing shares, some quite aggressively. We very much like this behavior because we believe the repurchased shares have in most cases been underpriced. (Undervaluation, after all, is why we own these positions.) When a company grows and outstanding shares shrink, good things happen for shareholders."

On investment advice:

"My regular recommendation has been a low-cost S&P 500 index fund. To their credit, my friends who possess only modest means have usually followed my suggestion. I believe, however, that none of the mega-rich individuals, institutions or pension funds has followed that same advice when I’ve given it to them. Instead, these investors politely thank me for my thoughts and depart to listen to the siren song of a high-fee manager or, in the case of many institutions, to seek out another breed of hyper-helper called a consultant. That professional, however, faces a problem....

"Long ago, a brother-in-law of mine, Homer Rogers, was a commission agent working in the Omaha stockyards. I asked him how he induced a farmer or rancher to hire him to handle the sale of their hogs or cattle to the buyers from the big four packers (Swift, Cudahy, Wilson and Armour). After all, hogs were hogs and the buyers were experts who knew to the penny how much any animal was worth. How then, I asked Homer, could any sales agent get a better result than any other? Homer gave me a pitying look and said: “Warren, it’s not how you sell ‘em, it’s how you tell ‘em.” What worked in the stockyards continues to work in Wall Street."

By Jason Shnubnell

Source: https://www.benzinga.com/general/movers-shakers/17/02/9096828/8-takeaways-from-warren-buffetts-annual-letter-to-berkshire-sha

Bull of the Day: Arch Coal (ARCH)

Over the past 8 years, the coal industry has been hampered by massive regulations, and a not so friendly relationship with the presidential administration.  But this is going to change, according to our new President Donald Trump.  President Trump envisions a coal resurgence under his administration.  Further, President Trump is in the process of eliminating some of the burdensome regulations imposed on the industry.  And one coal company, that is poised to take advantage of these changes, is our Zacks Bull of the Day, Arch Coal (ARCH - Free Report) .
This Zacks Ranked #1 (Strong Buy) company is engaged in the mining, processing and marketing of low-sulfur bituminous coal. The Company sells its coal primarily to electric utilities in the eastern United States. The Company also exports coal, primarily to European customers.

Recent Earnings Results
Management announced Q4 16 earnings on February 8th where they absolutely destroyed the Zacks consensus earnings estimate; expectations were for $0.03, and they came in at $1.65, a +5,400% positive surprise.  The company easily beat the Zacks consensus revenue estimate as well.  Coming out of restructuring, management was able to eliminate nearly $4.8 billion of debt obligations, and reduced annual interest expenses by $330 million.

Management’s Take

According to John W. Eaves, Arch's chief executive officer, “Arch achieved a strong financial and operational performance in the fourth quarter - our first earnings period following the completion of our successful restructuring.  These results demonstrate the positive momentum in our business and the potential we have to elevate our performance still further as the industry continues to evolve. We are confident in our ability to leverage our strong operating portfolio, commercial and logistical expertise and enhanced financial foundation to deliver long-term value for our shareholders."

Further, John T. Drexler, Arch's senior vice president and chief financial officer, stated, "Our successful financial restructuring has dramatically transformed our capital structure, enhanced our balance sheet and provided the kind of financial flexibility that will enable us to compete successfully in today's marketplace. Our fourth quarter performance illustrates the overall strength of the new Arch Coal, and our liquidity position will enable us to execute our strategy, capitalize fully on our low-cost operating portfolio, and generate long-term shareholder value."

Price and Earnings Consensus Graph  

As you can see in the price and earnings consensus graph below ARCH came storming out of restructuring plan with a huge beat, and analysts have responded by significantly increasing their expectations for 2017.

Arch Coal Inc. Price and Consensus

Arch Coal Inc. Price and Consensus | Arch Coal Inc. Quote

Increasing Estimates

Due to the extremely impressive earnings and management’s ability to adhere to their restructuring plan, earnings estimates have improved over the past 30 days for Q1 17, Q2 17, FY 17, and FY 18.  Q1 17 rose from $$2.24 to $2.85, Q2 17 improved from $1.42 to $2.24, FY 17 jumped up from $6.00 to $8.66, and FY 18 vaulted up from $3.84 to $7.08.

Bottom Line

With the new administration coal is back!  President Trump has been hailing clean coal as one of the major sources of energy during his campaign and as the new President of the United States of America.  By eliminating huge amounts of debt via their restructuring plan, Arch has positioned itself to take advantage of the resurgence of American coal.

by Brian Hamilton

Source: https://www.zacks.com/commentary/104522/bull-of-the-day-arch-coal-arch

The 10 Best Stock Charts on Wall Street Right Now

Many of the top-looking stock charts at the moment are turnaround plays

The Dow Jones Industrial Average continues to melt to incremental new highs, seemingly oblivious to the build up of overbought technical indicators, extreme bullish sentiment, and the risk of more aggressive interest rate hikes from the Federal Reserve. Stock charts are an amazing thing to watch right now, with breakouts popping up left and right.

While some of the other major averages are dithering here (ahem, Nasdaq, ahem) the Dow Jones is steadfast.

Breadth has been an ongoing concern as buying interest has been focused on areas like financials and industrials. So assuming the uptrend is going to continue, buying interest will need to widen. Nonetheless, a number of stocks look ready to roar, and they come across a number of sectors — from tech to consumer staples to even utilities.

• 7 Ultra-Cheap Value Stocks to Buy Now

The following is what I believe the 10 best stock charts on Wall Street right now — and many of them are comeback stories.

Best Stock Charts Right Now: Square (SQ)

Square Inc (NYSE:SQ) pushed to fresh post-IPO highs on Thursday, surging up and out of its upper Bollinger Band in a powerful show of force and breaking out of the uptrend channel that started back in June.

The catalyst for Square’s stock chart breakout was the reporting of better-than-expected revenues and earnings and solid forward guidance.

Analysts at Canaccord Genuity raised their price target on the payment processor, as concerns about competitive dynamics and profitability pressure have been alleviated. Their PT was upgraded from $14 to $16 — more or less just playing catch-up with recent gains.

Square will next report results on May 24 after the close. While SQ might need time to consolidate these gains, the stock looks like it’s off to the races for now.

Best Stock Charts Right Now: Verizon (VZ)

Shares of wireless telecom giant Verizon Communications Inc. (NYSE:VZ) are on the move in a big way, lifting out of a month-long consolidation range between $49 and $48 to lift up and out of its upper Bollinger Band.

Investors have been encouraged by the company’s ability to lower its acquisition price for Yahoo! Inc. (NASDAQ:YHOO) by $350 million in response to an embarrassing data breach. The next time we’ll hear anything from the company on the earnings front will be April 20 before the bell, when analysts will hope to see profits of 99 cents per share on revenues of $30.7 billion.

• The 10 Best Stocks to Buy and Hold Forever

Technically speaking, VZ has one of the more hopeful-looking stock charts right now. Verizon looks ready to challenge the 50-day and 200-day moving averages before making another attempt at its summertime high near $55, which was unsuccessfully tested in early January.

Best Stock Charts Right Now: Groupon (GRPN)

Groupon Inc (NASDAQ:GRPN) shares have blasted higher — up and out of their upper Bollinger Band and above its 200-day moving average — to fill the chart gap around $4.50 from the surge in July and the decline in October.

Shares surged in response to better-than-expected quarterly numbers, noting solid consumer activity in December as confidence bounced back after the election.

RBC Capital analysts highlighted the company’s fourth consecutive quarter of adding more than 1 million users in the North American region.

The company will next report results on April 27 after the close. Analysts are expecting a break even on revenues of nearly $730 million. Between then and there, Groupon will look to challenge the $5 area — the lower part of a range where GRPN traded from September through November before bottoming out.

Best Stock Charts Right Now: TJX (TJX)

TJX Companies Inc (NYSE:TJX) is among the best stock charts in retail right now, testing levels not seen since late November.

The stock has been flatlining since last February centered on the $78-a-share level. But renewed interest after a solid earnings report could reinvigorate interest in the discount retailer. The company reported better-than-expected earnings of $1.03 per share (3 cents ahead of estimates) on a 6% jump in revenues. Management also announced a 20% increase to its dividend.

• 7 Consumer Stocks That Will Knock Your Socks Off

Right now, TJX is breaking up and out of their upper Bollinger Band. This could be a possible attempt to challenge last summer’s highs around $83.

Best Stock Charts Right Now: Walmart (WMT)

Wal-Mart Stores Inc (NYSE:WMT) shares are gapping higher, lifting up and out of a downtrend channel that started last summer.

The move comes after the reporting of solid quarterly results: Walmart earnings of $1.30 per share beat estimates by a penny on a 1.8% jump in U.S. comp-store sales (vs. 1.0%-1.5% guidance). The increase was driven more by customer traffic rather than average ticket, which is a positive sign suggesting a shift in behavior that could be long lasting.

The company’s next report isn’t until May 18, when analysts will want to see 96 cents per share on revenues of $117.1 billion.

Currently, WMT stock is challenging its December highs. The next big price level after that is above $74.50, which Walmart touched this August.

Best Stock Charts Right Now: Johnson & Johnson (JNJ)

Johnson & Johnson (NYSE:JNJ) shares are continuing their powerful march higher, returning to levels not seen in August after crossing above both its 50-day and 200-day moving averages, exiting a five-month basing range with support near $112-$110.

The rally stands in contrast to the slippage in late January after Johnson & Johnson reported disappointing fourth-quarter sales and issued weak forward guidance.

The rally is being fueled, it seems, by a search for value among large-cap investors.

• 9 Top Pharmaceutical Stocks to Buy for the Dividends

JNJ will next report results on April 18 before the bell. Analysts are looking for earnings of $1.76 per share on revenues of $17.98 billion. Edge Pro subscribers recently closed a position in the March $115 JNJ calls for a gain of nearly 170%.

Best Stock Charts Right Now: Colgate-Palmolive (CL)

Colgate-Palmolive Company (NYSE:CL) shares are going vertical, pushing past their summertime highs to hit new records — up a whopping 17%-plus from late January.

The catalyst has been intense M&A activity in the consumer staples space, with a $150 billion-plus bid for Unilever N.A. (ADR) (NYSE:UN) from Kraft Heinz Co (NASDAQ:KHC) making headlines. Although the bid was rejected, it’s raising valuations across the sector. This was great news for shareholders after the company missed sales estimates in its latest quarterly report.

Colgate will next report results on April 28 before the bell. Analysts are looking for earnings of 66 cents per share on revenues of $3.9 billion.

Right now, the ceiling on CL shares has been removed.

Best Stock Charts Right Now: Unilever (UN)

Unilever N.V. (ADR) (NYSE:UN) shares — the ADRs traded here in New York — are consolidating their post-M&A announcement surge near last September’s highs which in turn capped a multi-month consolidation range.

While Unilever rejected the offer from Kraft Heinz as too low, resulting in the bid being pulled (as mentioned above), this was quickly followed up with an announcement of a comprehensive review of options to boost shareholder value.

KHC may well continue to circle the company, especially if shareholders lose patience with management.

• The 7 Most Popular Vanguard Funds for 401k Plans

For now, let speculation be your friend as UN pushes new heights.

Best Stock Charts Right Now: Duke Energy (DUK)

Duke Energy Corp (NYSE:DUK) looks like one of the best stock charts in the utility sector, with DUK rising up and out of an inverse head-and-shoulders reversal pattern that started in October. Shares are above their 200-day moving average as they extend above the upper Bollinger Band.

Although the company reported weaker-than-expected earnings on Feb. 16, shares are being propelled by a surge of buying interest in the entire utilities space. Thus, Duke’s next report isn’t for a while — May 2, before the bell, when analysts will look for a bottom line of $1.08 per share on a top line of $6.1 billion.

In the meanwhile, watch for a run at the July high near $84.50.

Best Stock Charts Right Now: Southern Co (SO)

Speaking of utilities, Southern Co (NYSE:SO) shares are blazing up and out of a four-month basing pattern while also rising up and over their 200-day moving average and upper Bollinger Band.

The impressive demonstration of upside strength on Southern’s stock charts breaks a downtrend pattern that started last summer and follows the reporting of mixed quarterly results: Earnings of 24 cents per share missed estimates by 6 cents, but revenues rose 45% from the prior year to $5.18 billion vs. the $4.4 billion expected.

• The 10 Best Stocks for 2017

The company, which next reports on May 24 before the bell, is benefiting from renewed interest in yield-sensitive utility stocks as long-term interest rates stall out.

Anthony Mirhaydari

Source:http://investorplace.com/2017/02/the-10-best-stock-charts-on-wall-street-right-now/view-all/#.WK-U2_krI2w