Sector Selling, Opportunity buying??
There was a time here on CAPS were writing two blogs in one day was considered spamming. Only one would show on the list of blogs that kept track of those that rolled off the “front page” faster than you could read them. It appears now days that two blogs in one day might not be pulling an Alstry, and since I have more ideas than time, I’ll give it a go.
It appears that as dead as this place has become that new people are still finding it. My “followers” have grown rapidly in the last month since I became active again. I’m not clear what they are “following”…my rapid style trading calls for ideas, my thought provoking blogs, my witty pitches, or just trying to skim some cheap caps points….hopefully they know that my score and pitches don’t demonstrate that I actually know something. In general, it’s hard to tell why they are following me as pitch recs and blog recs are in short supply based on the old days. Not that I’m a pitch monger, it’s just good to know someone is out there. The ship left the station here on CAPS two years ago as far as rankings on those metrics. Talking with myself is generally okay, even answering myself is okay, but I need another outlet when I start arguing with myself.
Nevertheless some new folks are checking into the community, even if it feels more like Detroit to some of us who have been around awhile. I’ve also enjoyed hearing from a few old caps “friends” who are still around keeping the lights on.
In recent blogs I noted the selloffs in higher beta, higher P/E equities. I suggested, hoped, part might be sector rotation by the big guys, but it appears it wasn’t just end of quarter. Internet stocks and biopharms are taking the brunt as are some of the smaller Russell 2000 stocks. Anything with a HIGH P/E, (or no P/E), is getting focus, (except some trash stocks I have pitched and may blog about later). The debate on Bubble or NOT a Bubble, crash or boom times, will continue, but it does appear that investors are taking profits and taking a more conservative approach.
While my sentimeter has been tipping negative lately, the S&P continues to set new highs, as awallejr has been pointing out, the quality stocks with easy to measure metrics are still doing well and cash is rotating into the market. If it can’t go to low interest bonds, and doesn’t seem to be going to precious metals, it has to go somewhere. Not everyone is willing to go back into the markets after getting burned in 2008-2009, but other than the occasional healthy correction, I just don’t see a serious selloff for quite sometime.
I noted that pursuing my 401K options that some are heavy into biopharms and social media and I’m planning to rotate out of them. My real estate REIT had been missing out the last two years when compared to the rest of the markets, but I had been holding a small stake for diversification. It appears that Real Estate REIT has gone up 10% this year and other mutual funds only about 1-3%, so perhaps I should be rotating into it instead of out. Part of the ups and downs in real estate, however is tied to interest rates. Some that buy mortgage backed securities will continue to suffer if rates rise. The core, real retail that awallejr blogs about, however, continue to pay a safe dividend with good P/E's.
I also noted Energy Stocks and Utilities seem to be in favor. So overall, money is not leaving the market, but perhaps some investors are learning to take some off the table when a sector is heated compared to the rest of the market.
Of course that leaves the question of what defines heated. Large P/E’s can be perfectly valid if a company is growing 20-30% a year, has a moat, and is managing their money. I pitched BIIB, Biotech Idec earlier today. I had felt it might continue retracing, but had it charted for about $178-182 as a good entry point. Since I don’t really know what I’m doing chart wise and I wanted in, I redrew my lines, connected the dots a different way, and triggered it on CAPS at $186, a selloff of about 20% from its recent high. Understanding a biopharms pipeline, patents, and growth is key to knowing when to hold them and when to run. It’s hard to correlate unless you have a lot of time and specialized knowledge. Overall, however as ZZLangerhans, Porte and the zzporte collaborative has noted, the hot sector has some good and some bad. For a while much of it will rise or fall in conjunction, but sooner or later, the better does rise.
I don’t think the BIOPHARM and Social Media stock selloff is over. But entry points can be sought if you’re careful without too much more damage to your paper portfolio. Sometimes I do think all this “playing” around over educates me. Looking at the holdings of a mutual fund in my 401K plan can help me make decisions (good and bad) more than looking at the funds past performance and expense ratio.
It’s been a good cycle on CAPS as I had/have a habit of down thumbing the high P/E companies, perhaps out of jealousy, but certainly I’m learning that I struggle with forward pricing on growth stocks. I was glad to see some like Netflix “correct”, validate me somewhat, even if I was ahead of myself, and I was able to close it on CAPS.
There is money on the sidelines, there are some risk takers coming in. We had the January selloff and statistics indicate that 90% of the time we sell off in January, we finish lower for the year. You can make lots of things out of statistics. I can draw my lines different ways looking for the “cheese”. I can argue with myself until I change my mind. In the end, however, I need an entry plan and an exit plan, be willing to take a small lose when I’m wrong, and hold what’s working.
I still think we have some sector sell downs coming, but will consider them buying opportunities and not mattress stuffing opportunities. I’ve heard some say that the bears must be running out of ammo, but they made enough off these sector selloffs to feel vindicated. It’s not until the bears become bulls, however, that I will worry.
The SKY is Not Falling Today, but Venus has been very bright in the morning sky lately....
DISCLOSURE: IF I knew anything I wouldn't be spending my time blogging here...
A trade is a trade, until it drops like a rock, you refuse to take a loss and it's in your portfolio for the next two years until you finally offload it to offset some capital gains.....