Jeffrey Saut – 2013

  • Short-term:
    • bullish
  • Midterm:
    • May correct in Feb.-Apr. timeframe.
  • Long-term:
    • Primary trend is a DOW theory bull market and the 4th major breakout in a century. (see June gleanings)

December

  • 20131230 “2014?”
    • the economy may  be stronger than the official figures show. He list many positive indicators.
    • Bloomberg’s U.S. Financial Conditions Index (BFCIUS) has broken out to a 23-year high in chart 3.
    • we could travel into the 1900 – 2000 zone on the SPX before succumbing to any meaningful correction.
    • This growth theme favors the Information Technology and Healthcare sectors. value stocks are largely clustered in the Financials.
    • an SPX price target of 2076 by the end of 2014 if the earnings estimates are anywhere close to the mark.
    • excessive optimism should arrive in the February – April timeframe. At that point, the equity market should become vulnerable to a more meaningful decline.
  • 20131217 Gleanings
    • I Think the Odds Favor That We are in a New Secular Bull Market Like The 1982 to 2000 Affair
    • The S&P 500 [has] a Price Target of 2014 in 2014
    • Favourite sectors in order descending: IT, Financials, Industrials, Health care, consumer discretionary.
    • Technically the S&P 500 (SPY) Could Therefore Pause/Pull Back
  • 20131216 “The One Percent”
    • the ideal trading pattern for this week would be weakness into the [FOMC] announcement, which would set the stage for a “no taper” rally that spills over into the Santa rally
    • Dixie Group (DXYN/$11.44/Strong Buy
  • 20131209 “Christmas”
    • the “sell signals” of November 19th and December 2nd remain in place. This week should tell
      the short-term tale of the equity markets.
  • 20131202 “Running Out of Time”
    • Consumer Staples, Energy, Materials, Telecom Services, and Utilities are not overbought.
    • a sign there is at least some kind of distribution going under the guise of higher major market indices.
    • time may be running out for the bears (this week should tell),
    • Recommendations:
      • Facebook (FB/$47.01/Outperform). Facebook is the backbone of the social media experience for more than one billion connected users around the world and provides the means for marketers to reach these potential customers with more efficiency and precision than has ever been possible.
      • Apple (AAPL/$556.07/Strong Buy). Apple represents the most desired digital ecosystem in the world and it trades at a discount in comparison to its peers, the market, and its intrinsic value on virtually every metric.
      • Google (GOOG/$1059.59/Outperform). Through organizing and providing access to the world’s information, GOOG has become the most powerful force in advertising and is navigating the transition to mobile and video beautifully.
      • eBay (EBAY/$50.52/Outperform). eBay has quietly put together a powerful combination of digital assets that position the company to thrive in the $10 trillion global commerce and payments markets.
      • Bank of America (BAC/$15.82/Outperform). Bank of America represents a proxy on an improving domestic economy and a company that still has vast room for operational improvement.
      • Qualcomm (QCOM/$73.58/Outperform). Qualcomm’s patented technology and innovative products are vital to the growing, global mobile device industry and management has a proven track record.

November

  • 20131125 “Sir Isaac Newton”
    • Hopefully, we can still get some kind of pullback into early December setting up the fabled “Santa Rally.”
    • the Federal Reserve still has the peddle on the metal. And that, ladies and gentlemen, has been able to trump any of the natural forces suggesting a pullback.
  • 20131119 “Who is Right on the Stock Market?”
    • One month after a 10% drop in gas prices, the five best performing macro sectors following a 10% decline in gasoline prices have historically been Consumer Discretionary, Transportation, Industrials, Financials, and Energy. Three months following such a decline in fuel prices it has been Consumer Discretionary, Financials, Technology, Energy, and Industrials.
    • Some of the best performing stocks in the Russell 1000 from Raymond James’ research universe that perform the best after a 10% decline in gasoline prices, consider:
      • Tempur Sealy International (TPX/$46.54/Strong Buy);
      • Valero Energy (VLO/$43.00/Strong Buy);
      • Lennar (LEN/$34.17/Outperform);
      • Trinity Industries (TRN/$56.65/Outperform);
      • Fleetcor Technologies (FLT/$118.20/Outperform); and
      • Micron Technology (MU/$19.46/Strong Buy).
    • If the SPX continues to trade at its current P/E ratio of 16.4x in 2014, the SPX’s target price become 1984 (16.4 x $121 = 1984) next year.
  • 20131112 Gleanings
    • Possible mild pullback in mid-Nov to early Deec,
    • Target of S&P 1960 in the new year.
  • 20131111 “That Was The Week That Was?!”
    • 2% – 3% GDP growth is a sweet spot for the equity markets.
    • QED, we are not 56 months into this move, but 25 months; and, for the record, the average duration of a bull move is 50 months.
    • Recommend:
      • Natus Medical (BABY/$19.18); DineEquity (DIN/$80.86);
      • Fleetcor Technologies (FLT/$113.60);
      • OraSure Technologies (OSUR/$6.86);
      • Cardinal Health (CAH/$62.30);
      • LaSalle Hotel Properties (LHO/$30.95);
      • McKesson (MCK/$158.56); and
      • CVS (CVS/$63.78).
  • 20131104 “Permabull?”
    • I believe the capital expenditure cycle that is about to begin will actually strengthen the GDP figures in 2014. Moreover, with a stronger economy, and continuing low interest rates [will be bullish].
    • A number of bearish divergences are shown.
    • If we don’t see a correction start next week it means that like late last summer the powers that be have again been able to prevent the normal corrective process. If so, it implies this cycle could stretch into year-end, where the markets could finally stumble

October

  • 20131028 “A Different Perspective”
    • I think the valuation low occurred with the “under cut” low of October 4, 2011, which was identified in these missives. Measuring from there shows we are only 24 months into this “bull.”
    • my timing models are now calling for another downside window from mid-November into early December
    • only the Financials (13.4x), Energy (13.8x), and Utilities (16.1x) are trading at a discount to the SPX.
    • Energy recommendations: Enterprise Products Partners (EPD/$64.48); Memorial Production
      Partners (MEMP/$21.11); and Valero Energy (VLO/$39.44).
    • Finaancial recommendations: Everbank Financial (EVER/$15.29); Huntington Bancshares
      (HBAN/$8.93); Lakeland Financial (LKFN/$35.19); New York Community Bancorp (NYCB/$16.08); Private Bancorp (PVTB/$24.95); Webster Financial (WBS/$28.59); and Wintrust Financial (WTFC/$44.14).
    • there is little evidence suggesting a sudden collapse is at hand.
  • 20131021 Gleanings
  • 20131021 “The Boys Are Back in Town”
    • A few of the ways to participate in this renaissance is through Rich Bernstein and either of the mutual funds he manages for Eaton Vance, Richard Bernstein Equity Strategy Fund (ERBAX/$13.62) and the Richard Bernstein All Asset Strategy Fund (EARAX/$12.24). As for a pure play (100%) on AIR, there is First Trust’s Richard Bernstein TS American Industrial Renaissance ETF (FWRVLX/$10.17).
    • A second derivative way to get at the burgeoning housing theme is via Strong Buy-rated
      Weyerhaeuser (WY/$30.11).
  • 20131014 “Huey Lewis and the News!”
    • So the upside should be favored here, although it should be favored with a cautionary tone because of the day-over-day dropoff in the Buying Pressure Index. A deal will be done.
    • Recommendations:
      • Apache (APA/$87.95/ Outperform);
      • Aflac (AFL/$64.48/Outperform);
      • National Oilwell (NOV/$79.32/Outperform);
      • NVIDIA (NVDA/$15.26/Strong Buy);
      • and Jabil Circuit (JBL/$21.99/Strong Buy).
  • 20131007 “Ashes to Ashes”
    • the Putnam Diversified Income Trust (PDINX/$7.78). I still advise you to consider PDINX for the fixed income allocation of your portfolio.
    • the equity markets’ primary trend remains “up.”
    • Consumer Discretionary (+0.21%), Healthcare (+0.94%), and Materials (+0.84) were positive for the week.
    • With no deal, we should see another pullback toward my often mentioned 1684 “pivot point;”
  • 20131001 Seeking Yield: Quantitative Screen of the S&P 500

September

  • 20130930 “Character”
    • Based on my methodology, Financials, Industrials, Consumer/NONCYC, and Consumer/CYCLIC are currently the strongest sectors.
    • I still think the near-term directional battle will be fought at my longstanding 1684 “pivot point” basis the SPX.
    • Fortunately, you should still have a decent cash reserve since I recommended only recommitting a little of our cash three weeks ago.
  • 20130923 “Thank You!”
    • we got yet another Dow Theory “buy signal” last week … All of this suggests higher prices in the months ahead.
    • Cautiously optimistic.
  • 20130916 “White Noise”
    • I continue to think the odds of a secular bull market are high and that the economy will strengthen.
    • we see five demand drivers in the U.S. They are: the return of the U.S. household formation; the American Industrial Renaissance; the second generation of biotechnology; Cloud-based information services; and the American oil shale play.
    • A number of recommendations are made.
  • 20130913 Gleanings
  • 20130909 “The Suit?”
    • The pullback is not complete. The SPX fell by 4.8% from its August 2nd intraday high into its August 28th intraday low. Since then, it has rallied 2.3% into last Friday’s intraday high. If my methodology of interpreting the equity markets continues to work, another decline should begin this week, and eventually that decline should be bought.
    • Conference call at 4:15 p.m., Tuesday 9/10/13. The call number is (866) 393-7146 with no passcode required.
  • 20130903 Seeking Yield Sept. 2013. Monthly quant recommendations.
  • 20130903 “Money and Savings?”
    • A great review of the US industrial renaissance: The playback number for that conference call number is (855) 859-2056 and the password is 29473014.

August

  • 20130826 “Random Thoughts in the Summer Doldrums”
    • the current rally attempt should peter out in the 1684 to 1696 zone, followed by a secondary decline that carries the SPX into the prescribed 1530 – 1560 zone where a trading bottom should be anticipated.
    • I am hosting a conference call (call 1-877-601-1467 and ask for the Lord Abbett conference) this Thursday at 4:15 p.m.
  • 20130819 “Temptress Time?!”
    • My belief, however, is that before this pullback is over the SPX has an appointment with somewhere between the June 24th low of ~1560, and the ~1530 level that is around the April 2013 pullback low.
    • Genesee & Wyoming (GWR/$87.33/Strong Buy): The increase in insurance cost for regional RRs will likely cause a massive consolidation for the industry with GWR probably being the beneficiary.
    • That said, the McClellan Oscillator is pretty oversold in the short-term, and there are some
      positive energy points coming in on Tuesday, so some kind of rally attempt should be in the cards. Still, I think rallies are for selling on a trading basis, but remain quite bullish on the longer-term
  • 20130812 “Dog Days!
    • And while last week was somewhat “telling,” the SPX tested, but did not close below my key pivot point of 1684. So we enter this week still thinking it is “kiss and tell” time.
    • “We are at the perfect window for the first meaningful decline of the year, but it is likely within the context of a new bull market. (reasons given
    • So even if we get the decline I have been looking for, do not get too bearish.
  • 20130805 “The One Chip Rule”
    • This weeks action gives us another Dow Theory “buy signal.”
    • I believe what is shaping up is a giant false upside breakout pattern that would be confirmed by a close below 1700 on the SPX, and reinforced by a break below 1684.
    • Accordingly this week, and next, should tell us if my cautionary call, within the context of a secular bull market, is going to play
  • 20130801 Strategy

July

  • 20130729 “Bad Trade?!”
    • Individual companies beating their estimated earnings/revenue estimates, and guiding future earnings estimates higher: Skyworks Solutions (SWKS/$23.95/Outperform); Xilinx (XLNX/$46.18/Outperform); SanDisk (SNDK/$57.00/Outperform); EastGroup Properties (EGP/$63.39/Outperform); Equifax (EFX/$61.79/Outperform); and Advanced Micro Devices (AMD/$3.87/Outperform).
    • targeting the mid-July through mid-August timeframe (with the date specific of July 19th) as the timing point for the first meaningful decline of the year?” Given the weight of the evidence, I am sticking with that “call.”
  • 20130722 “D-Day + 1”
    • I think the SPX is very susceptible to a false upside breakout that carries it into the 1700 – 1730 zone. If so, we should find out if that is correct this week. Any close below 1680 by the SPX would increase the odds that a false upside breakout has occurred. Moreover, any pullback below the 1630 level (a 50% correction of the recent rally) would confirm that the intermediate cycle has topped. This week should tell us.
    • He may have been off on his top call by 2 days.
    • Remember, however, if we get a pullback, at least in my view, it is for buying because I continue to think the odds we are in a new secular bull market remain high.
    • He gives a number of buys. He discusses many ETFs he owns.
  • 20130715 “The Philosophy of Tops”
    • Raise cash.
  • 20130709 Gleanings
    • Accordingly, by yearend we except stocks to be higher than they are currently.
    • If the envisioned summer swoon develops, I expect it to be contained to around the 10% level given the already high levels of pessimism built into the market.
  • 20130708 “Rosebud?!”
    • the timing point for the first “meaningful” decline of the year is to commence either July 11/12th (minor timing points) or July 19th being the major timing point.
    • The sectors most vulnerable to earnings misses are Materials, Technology and Industrials, even though I continue to favor Technology and the Industrials. Another sector, namely Financials, could suffer as well
  • 20130703 “Happy Birthday America”
  • 20130701 “T-i-m-b-e-r”
    • I am disinclined to play it except for the nimblest of traders. Accordingly, I am sticking with the strategy calling for a double-top followed by the first meaningful decline of the year beginning this month. That said, I think SPX will be higher than its May 22nd intraday high of 1687.18 by year-end.
    • Recommendations:
      • AutoZone (AZO/$423.69);
      • Bed Bath & Beyond (BBBY/$70.95);
      • O’Reilly Automotive (ORLY/$112.62);
      • Regions Financial (RF/$9.53);
      • UnitedHealth (UNH/$65.48); and
      • Wells Fargo (WFC/$41.27).

June

  • 20130624 “Welcome Back, Mr.Bond”
    • this “buying stampede,” still has not ended because we have yet to see four consecutive down days for the D-J Industrial Average (INDU/14799.40), making today session 120.
    • the first part of this week – 3 sessions – should decide if we are going to spill over into a full-fledged correction. My best case scenario would be for the SPX to trade back above 1618 (its 50-DMA). If it can do that, then I think the mid-July downside timing points remain in force.
  • 20130617 “The Game of Risk”
  • 20130613 Gleanings
  • 20130610 “Thinking About Thinking?”
    • Last December I pegged the odds of a new secular bull market at 20% – 25%. Now its at 45% – 50%, yet few investors believe it. The reality is that when that “feel good” environment occurs, you are typically in the late innings of a secular bull market.
    • If we rally back toward the recent highs (~1687), and fail to make a higher high, then my mid-July point of vulnerability will regrettably move closer to now. Otherwise look for for higher highs into early July and then a July/August swoon at which to buy, because I believe stocks will be higher by year end.
    • But, there is a great rotation that is occurring out of non-U.S. equities into U.S. equities. I think that trend is going to continue, and when the rotation out of bonds into stocks arrives, it should be a double whammy for stocks.
    • mid-July where stocks should become vulnerable to a more meaningful decline.
  • 20130603 “Never On A Friday”
    • To be sure, markets typically don’t bottom on a Friday, thus giving investors the weekend to brood about their losses and then show up in ‘sell mode’ on Monday/Tuesday; aka, ‘Turning Tuesday’.
    • The stock market does not care about the absolutes of good or bad, but rather if things getting better or worse.” And manifestly, things are getting better
    • The Hindenburg Omens triggered, but to my knowledge only one of them has actually worked (The Wall Street Journal 8/23/2010 article states the accuracy is only 25%)
    • I expect the mid-June weakness to be short-lived with higher highs due into the first part of July. That said, if the timing models continue to play as well as they have been, the real point of vulnerability should come in mid-July.
    • Utilities command a price/earnings valuation 1.2 times richer than the overall stock market – the largest such margin in nearly three decades. Interestingly, of the 10 macro sectors, only Financials (+0.52%) and Information Technology (+0.58%) were positive last week.
    • the strongest demand is moving into Financials, Industrials, and InfoTech.

May

  • 20130528 “Buying Stampede”
    • He gives 6 reasons the buying stampede is still in effect.
    • I continue to believe the SPX is going to trade north of 1700 into the end of 2Q13 before becoming vulnerable to a more significant decline beginning in the July/August time-frame.
    • Reference to the 6 stages of a bull market (see April 1).
  • 20130520 “Alpha, Beta!”
    • I believe is going to happen as I expect the SPX to trade to 1700 into the end of the quarter before a polarity flip occurs sometime in the July/August timeframe, leaving stocks susceptible to a low double-digit decline.
    • I, like Rich Bernstein, think this “bull” has a lot further to run. I do, however, think the equity market will become vulnerable to a decent pullback in the July/August timeframe.
  • 20130513 “Who is Henry Singleton?”
  • 20130508 Gleanings
  • 20130506 “That Was The Week That Was”
    • ‘I think there is a decent chance that a new secular bull market is afoot’.

April

  • 20130429 “Zebras?!”
    • As for last week’s stock market action, it was the best setup yet for the long awaited pullback to end the now legendary 75-session “buying stampede.”
    • I think the odds that a correction has begun remain pretty high, but there is little evidence we have seen a major “top.” Accordingly, any correction affords investors the opportunity for new buying in favorably rated stocks.
    • There are three broad arguments for this optimism: trends in globalization and technology; and large negative expectation by business and investors.
  • 20130422 “Surf’s Up!”
  • 20130222 Gleanings
  • 20130415 “Fortune’s Formula”
  • 20130410 Gleanings
  • 20130408 “The Great Secret”
    • But, then the typical pattern calls for renewed selling in the days ahead. If so, I continue to think any selling will be contained somewhere between 1490 and 1535 and consequently remain a buyer of select stocks.
  • 20130401 “A Fresh Milestone”
    • The 6 stages of a bull market
      1. pessimism: “I will never buy stocks again!”
      2. guarded optimism
      3. In Stage 3 the economy actually starts to get better with the news backdrop going from bleak to better, which leads to greater enthusiasm.
      4. As confidence builds, investors are engulfed by a feeling that nothing can go wrong.
      5. Stage 5 is the very advanced phase of exuberance.
      6. Disillusionment – this is where the Surrealistic Phase ends with the bursting of the stock market bubble.

March

February

  • 20130225 “A Permanent Investment”
    • The Buying Power, and Selling Pressure, indicators continue to suggest no major “top” is in the works. Ditto
      the Advance/Decline line traded to a new high before the mid-week pullback, also confirming the upside.
    • Still, with Friday’s rally the “buying stampede” remains in force and today is session 38. Friday’s Fling, however, felt more
      like a recoil rally rather than the beginning of a new rally leg, at least to me.
  • 20130219 “Jesse Livermore”
    • any correction is likely to be shallow and short.
    • I would peruse the Analyst Current Favorites list with an eye toward stocks with a yield (http://beacon1.rjf.com/researchpdf/acf.pdf).
  • 20130213 Gleanings
  • 20130211 “Don’t Just Do Something, Sit There”
    • Such an upside confirmation would also reinforce my sense that we are potentially in a new secular bull market.
    • I am looking for a trading top this week follow by a 5% – 7% pullback and then we’ll see how the markets handle themselves.
    • a few of the equity-centric mutual funds I own, and know and talk to the portfolio managers, are: GaveKal Knowledge Leaders (GAVAX/$12.33); Goldman Sachs Dividend Growth (GSRAX/$16.24); Hennessy Small Capitalization Financial (HSFNX/$21.53); Lord Abbett Growth Leaders (LGLAX/$16.58); MFS International Diversification (MDIDX/$14.64); and Putnam
      Capital Spectrum (PVSAX/$28.18).
  • 20130204 “The January Barometer”

January

  • 20130128 “For All the Sad Words of Tongue and Pen…”
  • 20130122 “It’s What You Learn After You Know It All That Counts”
  • 20130114 Gleanings
  • 20130114 “A Conversation with Warren Buffett”
  • 20130107 “White Noise”
  • 20130102 “Lessons Learned”. Eight from David Rosenberg and 10 from Bob Farrell.

As many investors know, the impact of dividends, and the growth of a company’s dividend over time, has a very large
impact on the total return of any investment portfolio. The numbers go something like this. Since 1926 the total
return on stocks in the aggregate has been ~10.4% per year. Roughly 5% of that return came from price appreciation
and 0.9% from price-to-earnings (P/E) multiple expansions. However, the remaining 4.5% of that total return has
come from dividends and the compounding of those dividends over time. That means ~43% of total returns have
come from dividends, which is why I always harp on them. Recently, however, the ubiquitous question has become,
‘Hasn’t the theme of buying dividend-paying stocks become a very crowded trade?’ To answer that question, I hark
back to the last era of financial repression that occurred after World War II. Indeed, post 1945 saw massive defaults
on debts leaving the populace short of income. The CEOs of corporate America realized this and began increasing
the payout of dividends on their company’s stock. This trend continued into the early 1960s, at which time the
dividend-issuers in the S&P 500 were paying out some 70% of their earnings in the form of dividends and the SPX
was trading at a P/E ratio of ~23x earnings. Now fast forward, the dividend-issuers in the SPX

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