Value Buy: Cumberland Pharmaceticals (CPIX)

Cumberland Pharmaceticals (CPIX) has shown itself to be a very attrative equity play based of criteria of my stock screeners. CPIX from a fundamental point of view is a tremendously under valued company, for the follwing reasons.

• P/E ratio of 1
• PEG ratio of .68
• Debt to capital ratio of 9.49% which is very low conisdering the sector this company is in.

CPIX is one of the most profitable companies in the Biotechnology & Drugs industry. Its gross margin is among the strongest of any peer while the operating and net margins are above the industry medians substantially. CPIX is has very little debt, with plenty of on hand equity to pay off all outstanding liabilities if needed. From a Technical Analysis perspective CPIX is very oversold on almost all indicators.  bollinger bands suggest CPIX is hugging the lower band, which is a indicator towards a uptrend in price movement to take place after this pull back is over. Moving averages suggest the stock is unvervalued and should be trading 9-15% higher than it is now.  CCI indicates its massivly undervalued. All stochastics point towards CPIX being oversold, as well as it having a breakout upwards here shortly. When all Technical & Fundamental indicators point towards any assest being oversold/undervalued its more often than not a price correction in the positive will occur. I would say based off of my analysis CPIX is due to increase in sahre value by 8% low side 15% high side within the next 3 weeks. I rate CPIX as a BUY. CPIX is a financially healthy bio-tech company with tremendous growth opportunity, coupled with due dillegence and its recent sell off, its at a discount and will most likely rise in value quite nicely in the comming weeks.

Advanced Cell Technology: Easy 10% Pop?

In December of 2010 i made 88% off of short term trading of Advanced Cell Technology (ACTC). So out of boredom, i went back and took a look at how the speculative stem cell therapy company was trading. What i found was quite nice. Almost all of the technical inidcators suggested the stock was very oversold and was due for a turn around shortly. The day i checked, ACTC had a share price appreciation of 4%, further confirming the indicators signals.

Personally, i think the market as a whole is overvalued. But until more investors and traders, managers etc start to realize this, i see no reason not to take advantage of the irrational over-bullisness. The fundamentals of ACTC make out as well. When the Nasdaq rises in value almost always the OTC follows right behind it, so at this current point ill buy into this "rally", and realistically ACTC is one of the top stem cell companies on the market. Which means over bullish investors, or managers looking to buy some speculative investments may pick some shares of this company up for the potential of a high yield.

Every indicator above (Plus many more the free version of stockcharts wont allow me to use at once) shows that the stock is over-sold.

• All stochastic oscillators point towards ACTC to be oversold and to begin climbing into a upward trend.
• The DPO shows ACTC is due to turn north.
• What is a very good sign in my opinion is that the MFI (Money Flow Index) points to more equity in accumulation of ACTC shares to be climbing.
• More less all technical indicators suggest a buy.

What is of important notice is the Bollinger Bands have contracted very narrowly. When this happens, it almost invariably leads an equity from choppy sidesways trading to a breakout either upwards or downwards, and with all the technical indicators pointing towards ACTC being over-sold, i believe it will rise in price from its current .18 cent level to resting at .20 cents .22 cents top's in the short run.

Advanced Micro Devices: Great Short Term Momentum Trade?

Advanced Micro Devices (AMD) witnessed a 5% surge in its share price after a day of high volume trading. AMD had recently been trending and trading in bearish territory due to getting creamed by competitor chip maker Intel (INTC). AMD has seen a very generous 10.6% rise in the past 5 days, now i would typically find that fast of a rise to be a tad bit irrational, and maybe it is. However, technical indicators point towards a reverse trend from downwards, to upwards movement. Before we hit the charts, lets see some fundamental reasons why AMD share's are poised to rise in price.

• PEG ratio of 1.32% (Low)
• New and more economical chip sets taking market share from Intel.
• Investors recovering, from the behavioral reaction towards the surprise firing of AMD'S CEO in recent days.
• Net operating income increase of $67 million compared to Q3 of 1 million.

All of these factors show fundamental reasons for AMD to rise in value. Today many analyst's upgraded AMD'S future outlook from reduce/hold to buy. Now lets take a look at the charts.

Here we can see that many technical indicators have taken a entirely different direction.

• The CCI has emerged from oversold territory trending now upwards, indicating a bullish trend is now in play.
• The Slow Stochastic Oscillator has crossed the sell signal, now giving off a buy signal.
• The Parabolic SAR indicator is suggesting a new trend upwards is beginning.
• The bollinger bands also indicate this a rebound of the current down trend.

The Stochastic Relative Strength Index shows its soared into the overbought territory. However looking at historical data of this indicator, its hows these overbought conditions typically continue for a duration of 3-4days. This mean's to me we can expect more gains for AMDS stock in the following trading sessions.

From a behavioral point of view, 87% of fellow investors/traders predict AMD shares will make gain's tomorrow and over the following 3 days. So it seems that sentiment towards AMD's stock is favorable as well.

Conclusion? It appears that all Technical and Fundamental indicator's point towards this stock being a short term buy. I would predict that we should see a upward moving trend for another three to four, maybe five trading sessions. I predict AMD will rise 9-13% before pulling back. As for long term share appreciation, well that's a different story. With so much market share being taken away by Intel, it may be a long time until AMD witnesses any significant share price appreciation, but for the short term i think its good for a solid 10 point pop.

S&P 500: Over-valued?

Warren Buffet has always said, "Be fearful when others are greedy, and be greedy when others are fearful." That statement could not have been better applied to anything but the overall market and the S&P 500 today. The S&P 500 has skyrocketed 14.42% YTD, and bullish sentiment does not seem to be weakening. This appears to be very worrisome. The 50+ year average return of the S&P 500 anually is 11%. The S&P 500 has blown past that average in 24 days, not even a month!

Anytime you see a excessive bull run, the state of euphoric buying inevitably begins to fade, and the rally typically begins to turn south, and fast. I can see no real logical reason for the market to be behaving this way. There are simply still too many macro-economic issues that have not been solved (dollar falling in value, housing market falling still, unemployment still un-changed, etc.) for investors to have any rational reason to be so optimistic toward the equity markets.

Above is the S&P 500 charted. There are so many technical-analysis indicators pointing toward the index being very over-bought and due for a pullback, that I cannot fit them all on the chart. It suggests a bearish correction and soon. Here are some of the signs.

• The RSI indicator is about to break 70, which is a very over-bought signal.
• The Bollinger bands have contracted significantly, which means a major market trend is about to occur. Since the Index's candlesticks have been hugging the upper band, that points toward it being ready for a trend reversal from bullish to bearish.
• The MFI shows that a much more than usual amount of capital has been dumped into the equities markets, which is a over-bought signal.
• The final nail in the coffin is the fact the MACD has fallen below the signal line, giving off a bearish signal.

So what does this all mean? All major technical indicators point toward a bearish trend reversal in the S&P 500. This recent bear market rally is due to bust. This recent bull run in the S&P is simply a behavioral reaction due to the herd mentality, affecting Wall Street traders/managers and investors right now. I expect that a correction will occur in two to three weeks.

Ways to hedge against a correction?

• Purchase Ultra-Short ETFS.
• Purchase energy/commodity ETFS, or contracts.
• Purchase put options on the major index funds.
• Move capital to a money market mutual fund, and wait to see where to re-allocate funds.

Gains of this speed historically lead to one conclusion. A painful forced awareness, in a price correction of over-bought assets. All the technical, fundamental, and macro indicators point toward this being an irrational false rally. Hopefully, the correction won't lead to a blood-in-the-streets sell-off on Wall Street. It's always possible that I could be wrong, but evidence and due-diligence suggests otherwise.

Goldman Sachs: Good Short Term Trade?

Goldman Sach's common stock had a signifigant pull back today, falling 4.69%, and to 4.98% afterhours. That is about 9 dollars per share. What are the reasons for this pullback? Here are some strong possibilities.

• GS Reported today, that earnings fell 53% in the fourth quarter, due to decrease of demand in its investment-banking and trading businesses.
• The whole facebook drama. Goldman decided to block U.S investors from investing in its FaceBook IPO (reason is still unkown), this has lead to a utter PR disaster for Goldman.
• Many top traders, and portfolio manager's, claim many technical indicators (VIX & trading algorithms) are giving off the first bearish signals since 2007 pointing towards a 10-15% trend downwards in equities (especially financials) starting at the end of the month.

Although these factors may represent a long term bearish outlook for goldman, im more interested in the short term. For a stock like Goldman, which has a large Market Cap 85 billion, as well as a large amount of shares, a moderate pullback like this may end up being seen as a buying oppotunity to many traders and investors. Goldman is expected to make a boat-load of cash on the FaceBook IPO, ive seen many traders on messege boards showing bullish sentiment towards Goldman as well.

From a Technical Analysis standpoint, heres what we got.

As you can see the 10 SMA is above the 30 EMA so GS is trending up. This indicates that the GS is still giving off bullish signals. The GS Jan 20 candle stick fell from the trend of hugging the upper bollinger band to touching the lower bollinger band. This leads me to believe that today's sell off is a behavioral reaction to the news today, and tomarrow traders and investors will see this as a opportunity to buy GS at a short-run discount. So i expect we will see a rise in GS share price by 2.5% to 4%. So for the short term trade, lets take advantage of purchasing GS at a discount and make money off the spread, when the stock recovers from the sell off earlier today.

Macro-Economic Outlook Analysis: Danger of Rising Oil & Commodity Prices.

The macro-economic environment right now is performing exactly as I described it would in October, when I questioned Andrew Sorkin at a Chapel lecture at a Pitt U campus. This is what I predicted on October 19:

• A devaluation of the USD currency before 2011
• The creation of a commodity drive, possibly a bubble, as speculators, fund managers, and hedge funds hedge their portfolios, increase their positions in commodities across they board in every sector to fight against falling equity prices, as well as inflation. (When our money depreciates in value, it takes more dollars to purchase the same amount of commodity.) So, in essence, when they purchase commodities during a time of inflation or fiat currency devaluation, they not only protect their clients' capital investment, they turn a profit for them as well.
• The resulting raise of direct fixed and variable input costs for manufatuers & services due to commodities increasing in price.
• Unemployment to stay at near same levels in the short-run, then increase substantially in the long-run.

Well now, lets see what happened.
  

(I use crude oil since it is typically the most important commodity to the infastructure of our economy, as well as a represenative hard asset purchased by those who wish to hedge against inflation. Most traders, fund managers and analysts use crude oil as the benchmark for the investor sentiment of commodities.)

Shortly after I made my predictions, warning signs of those predicions appeared. Early Novemeber, QE2 (Quantitative Easing Two) was implemented, which whether or not anyone in the FED or financial firms will admit,  is a devaluation in the governments ability to fix the economy, as well as the stimulus's failing to spur economic growth, and will most likely lead to a devaluation of our dollar.
So what is the purpose of this QE2?

• Force capital out of the bond & money markets, so investors will purchase equities.
• Lower T-bill & Treasury bond rates, mortage rates, etc.
• Make the equity markets rise in value.

Reason it has been implemented? Simple. The FED, as well as the politicians in Washington, want to artificially prop the equity markets up, so they can make the economy look like it's recovering. Shortly after commodities across the board began trending quickly upward. D.C and Bernanke & Co, may have created a POSSIBLE (nothing is for certain) future econmic crisis. Because of QE2 it has made the already terrible macro-economic conditions worse. Funds, managers, traders everywhere re-allocating funds and weight portoflios heavier towards commodities, especially crude oil. This is very worrisome and dangeous to the U.S and below is why.

The American consumer's purchasing power is still weak. We have an unemployment rate of nearly 10%, as well as the U.S economy and spending power of the U.S consumer still being very low. There is a very strong possibility that oil will pass $110 a barrel and push towards $120 a barrel. This rise in oil prices will put an even greater pressure on a already weak U.S economy. When oil & commodities rise in price, it takes more dollars to purchase the same amount of commodity, therefore acting as a tax on the U.S producers & consumers, destroying potential consumer purchasing power. Those same dollars could be used to purchase goods and services, but now instead will be spent on buying the gasoline.

What's even more striking is that gas is now past $3 dollars per gallon.Winter is usually the weakest time for gas prices. The recent surge in crude oil has raised the possibility that gasoline could hit $4 a gallon by summer, which is the peak driving season, as well as the highest demand season for gasoline. Gas prices that high would almost certainly destroy an already weak recovering market, as well as damage many services due to lack of consumers traveling and having less money to spend on products & services.

We are also seeing a rise of all manufacturing & services fixed and variable industrial input costs, which simply means that many business will have to in turn raise prices on the consumer. Businesses will react to this by cutting hours, labor, and laying off workers. Some businesses may have to close down, all leading to unemployment and less money being spent in the economy. Equities will fall in response to the loss in corporate earnings due to this rise of input costs and destruction of consumer spending on their goods.

What is just as worrisome is the direct upward movement of food price indices since QE2 was implemented.


All of these rises in commodities (oil, food, copper, precious medals) leads to one thing - long term bearish sentiment of the U.S macro-economy. Their rise in price will restrain the U.S economy from recovering, as well as possibly create another large drop in the equities markets. Based on these macro-economic factors as of now, I would be inclined to purchase commodity futures or commodity based ETF's profit in the short run, as well as hedge against a crash in equities induced by this upward trend of commodities. Hopefully, things will turn around, and commodities will fall, markets change direction quickly. However, current macro-economic analysis says otherwise.