All stock market averages fared better last week, however, the number of new lows was 5-times the number of new highs — which primarily reflects year-end tax selling. The stock market will clock-in with its fifth straight year of finishing higher than the year before. It is only natural therefore to expect profit-taking as this year’s trading activity draws to a close. The Dow gained 111 points to end the week at 13450 from 13339 the week before. In this next-to-last week of trading for the year, the Dow is almost 1000 points ahead of where it began the year, for a gain of 7.9%. The S&P 500 was up 16 points for the week to close at 1485. For the year, the S&P 500 is up 66 points, or 4.7%. Finally, the tech-laden NASDAQ was up 56 points for the week to close at 2692. NASDAQ is up 11% for the year.
A total of 8,363 stocks traded on the 3 major exchanges. Declines outnumbered advances by a 5-to-3 ratio, nevertheless, the overall market still advanced. New lows were almost twice last week’s new lows (1,693 vs. 874) the week before. The overall market averages were higher, with up-tick volume of 10.5 billion shares one-third greater than down-volume, however, these broader, positive trends mask the real damage being done to individual stocks that are currently out-of-favor. If you have losses in your portfolio, it’ll probably get worse.
AROUND the WORLD Last week we identified a few overseas companies warranting investor attention — Lufthansa (DLAKY.PK: $26.45) and Singapore Airlines (SPAAF.PK: $12.85). The Singapore Airlines web site (http://www.singaporeair.com/ ) is full of useful information —- initially, it looks like a travel reservation site, however, be sure to click on the buttons at the bottom — one of which announces “Company Information”. Here’s the Lufthansa site — http://konzern.lufthansa.com/en/index.html .
Occasionally, sites like this present some speculative opportunities. Air Terminal (SPASF/PK: $1.80) might be one. The stock was over $2.25 a share earlier this year, and once tax-selling diminishes in the stock market, this stock could be good for a quick ‘pop’. Check it out.
Elsewhere in the world, given that globalization is now a worldwide phenomenon, America’s latest export in this regard is the subprime mortgage debacle. In the UK, Northern Rock (NHRKF.PK: $1.68) was once the fifth largest mortgage banker; emphasis on “was”. It is currently the topic of discussion as to whether the British government nationalizes Northern Rock, or sells it to the private sector. Last week, the stock almost hit $2 / share on such rumors.
For the less speculative, we suggest Lloyds Bank Group (LYG: $37.59), which for being near its 52 week low, and not burned by subprime mortgages, could be a real bargain looking back a year from now. Also, just look how it has performed relative to two heretofore prominent American banks, Citigroup (C: $30.24) and Bank of America (BAC: $41.92).
Stocks listed in the Pinksheets aren’t always less than $5…neither are stocks listed on the New York Stock Exchange assured of a stock price north of $5 / share. In the last few issues, we listed two stocks that were among the most active last week. Pier 1 (PIR: $5.26) and Rite Aide (RAD: $2.98) each reported a third quarter loss. HOWEVER — Pier 1’s was less than expected, and the stock advanced a stunning 59%—whereas Rite Aide’s loss was larger than expected, and the stock lost one-third of its market value last week, dropping $1.03 to close the week at $2.98. Some short sellers are thinking “terminal short” for RAD, versus overvalued short.
In the student loan arena, we identified First Marblehead (FMD: $18.70) as a company that appeared to be doing the right things, and last week, was #4 on the NYSE’s most active list (over 26 million shares traded). Compare that with another student loan company, SLM ($19.85) – off almost $7 / share last week, or a 25% loss of market value.
Companies in similar industries, Pier 1 and Rite Aide, each reporting a loss, but with totally different stock price outcomes. The reason is a reflection of how each company communicated its expectations to the marketplace, and did so credibly. Reading about these communications online, in places like this, can make you money as an individual investor, or cost you money if you keep your head in the sand.
COMING UP NEXT WEEK —– Last week, we introduced a model portfolio of ten stocks. In the upcoming edition on Wednesday, we present a performance review of that portfolio, and any others submitted to us by our readers. We will introduce a new section next Sunday called a Walk-in-the-Pinksheets. In addition to being the USA Stock Market home to Lufthansa, Singapore Airlines and Singapore Air Terminal, there are companies such as Heineken(HKHHF: $55.25) and Kirin Brewing (KNBWY: $14.90)…though as we will illustrate next week, the Pinksheets aren’t all Airlines and Beer (see for yourself at http://www.pinksheets.com/). HELPFUL HINT— the graphs on that site are superior to those appearing in Yahoo’s finance pages (www.yahoo.com/finance).
