Article by Investment U
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This week: corporate insiders are selling, a lot, but Jeremy Siegel says look for 17,000 on the Dow, Hitachi is glowing in red-hot Japan, and the SITFA.
This year alone, Hitachi (NYSE: HIT) raised its full year profit forecast by 40%, and its shares are up 31%. But will Hitachi’s success continue?According to the Thompson Reuters, a dollar-based ratio of insider corporate sales, was at 40 this past week and 35 the week before. Twenty is considered a negative market indicator.
It has been above 20 for six of the last 10 weeks.
Insider selling isn’t a perfect indicator of the market, but the last time it was this high was last May just before the summer sell-off.
The Journal also reported a steady flow of money out of stock mutual funds and into yield-oriented investments, bonds and dividend-paying stocks.
But, on the other side of the coin, Barron’s reported that professional traders have bought into the stock rally at a 77% bullish reading by the Consensus Index.
This April is looking very much like the last two with professional traders bullish, volatility low and prices for most big caps not looking too stretched at the moment.
So the picture is ambiguous at best.
But not for Jeremy Siegel.
Jeremy Siegel is one of the most respected minds in the money business and an economics professor at the University of Pennsylvania. When he talks, the money world listens.
He sees this market as cheap compared to bond yields. In fact, one of the cheapest he’s ever seen, and that goes back quite a ways.
He also thinks it cheap based on historical data and returns five and 10 years after really bad markets.
He’s optimistic for a lot of reasons.
The ECB has put off its crisis and that has eased a lot of fears in the market.
Earnings are good and we have low interest rates.
He believes rates have to move up and that will drive more investors out of bonds and into stocks.
And, he’s not at all worried about inflation and stated that history tells us the bulls will run for one to five years even after the Fed tightens.
So, two very different market perspectives, but I’ll tell you, for my money, Siegel is the man.
Historically, insider selling isn’t as good a predictor as insider buying. I think the bulls still have room.
Hitachi is Hot!
Hitachi was on the ropes after a huge $9.5-billion loss in 2009, but the picture is changing rapidly.
The Journal is reporting they have under gone big cost cutting measures, refocused to infrastructure for energy, transportation and telecommunications, and are leaving their competitors in the dust.
This year alone they raised their full year profit forecast by 40%, and their shares are up 31%.
Further cost cutting in the next four years should shave another $5.4 billion, which should help them double their operating margin to the stated 10%.
Their competitor Toshiba only shows a 6% margin for the next two years.
Hitachi’s goal, according to the Journal is to go after profit margins two to four times higher than present; on par with GE and Siemens. That’s considered tough for Japanese conglomerates, but not out of Hitachi’s reach.
Its 200-day chart is on the screen now.
It’s looking pricey now, about $10 above its 200-day, but if the projections are right, this could be very big. Buy on the dips and keep this one on your screen. The market loves companies like this one, and with profit margins soaring, there isn’t much not to like.
Finally, the SITFA.
This week it has to go to BAC top dog Brian Moynihan. It seems he is the only Executive Officer at BAC that didn’t get a cash bonus this year.
Not only that, three of his underlings earned more than he did.
In news releases, the bank’s board said each of the officers who received bonuses met and exceeded expectations, but those words were not in Mr. Moynihan’s description.
Even a new executive hired in 2011 earned as much as this week’s winner.
In fact, last year Mr. Moynihan was described as a strong leader, this year the word strong was omitted from comments about him by the board.
Boy, that’s a tough week. I have some as tough but they weren’t published in the WSJ for all to see.
But fear not, Brian should make up for it in next year’s bonus; BAC’s stock is up 75% this year so far. Let’s hope for his sake and sanity it holds up until 2013.
Article by Investment U
