Three Types Of Stocks To Consider Now

  • September 2, 2003
  • Peter Navarro

Market Trend:
Topping
pattern

Market Outlook:
High
probability of a significant pullback

Peter’s Picks:
(
PKN |
Quote |
Chart |
News |
PowerRating),
(
WOOF |
Quote |
Chart |
News |
PowerRating) and
(
SCON |
Quote |
Chart |
News |
PowerRating)

Note: David is off this week so the technical take on the
markets is vacationing as well.

“If the market rolls over, it’ll be clear that
it was because of high valuations and unrealistic economic expectations. If it enters
a new up leg, it could be because the economy catches fire or professional money
managers make a late-year bid for performance glory. — Michael Santoli,
Barron’s

 

Last week, we projected a falling market — unless we got “some boffo reports” to
turn the market around. Well, curiously enough, we did get those boffo reports
as both the GDP numbers and the Chicago PMI sent Wall Street a very STRONG
signal that the Bush-Greenspan mega-stimulus is finally working — and we are
very likely to get blow-out ISM numbers this coming week to confirm that.

Equally curious and as a cautionary note, despite the strength of the GDP
numbers, which now suggest a next quarter growth rate that could spike as high
as 6%, the bond market remained relaxed as yields drifted down a tad — giving
the housing and financial stocks yet another little lift.

Where we stand now is exactly in the spin of the roulette wheel described in the
above quotation by Barron’s Santoli.  It could go either way.

Cautious investors will remain in cash — waiting for both a pullback and further
confirmation of the rally. More sophisticated investors with the time and
skills to manage this current rally’s high degree of risk might consider a
portfolio that is short the broad indices like
(
QQQ |
Quote |
Chart |
News |
PowerRating) or
(
SPY |
Quote |
Chart |
News |
PowerRating) but long three types
of stocks:

  1. One type is the penny stock, small cap, potential high-fliers like
    (
    OPTV |
    Quote |
    Chart |
    News |
    PowerRating)     and
    (
    CPSN |
    Quote |
    Chart |
    News |
    PowerRating)     that we’ve previously mentioned in the column that, at one or two
    bucks, trade more like options and can give you quick and massive gains. (Another which is part of the picks of the week is
    (
    SCON |
    Quote |
    Chart |
    News |
    PowerRating)    , a wireless play.)

     

  2. A second type is embodied by long term position “macroplay” stocks that focus on
    long term structural shifts in the global economy rather than cyclical swings. One such stock is
    (
    PKN |
    Quote |
    Chart |
    News |
    PowerRating)    , which is another pick of the week and a longer term play
    on the oil market.  Another would be
    (
    WOOF |
    Quote |
    Chart |
    News |
    PowerRating)    , which as a third pick of
    the week rides the pet wave the US is currently enjoying in the wake of 9/11. 

     

  3. The third type of stock is epitomized by
    (
    IFN |
    Quote |
    Chart |
    News |
    PowerRating)     or

    (
    EWJ |
    Quote |
    Chart |
    News |
    PowerRating)    , likewise previously
    mentioned in this column. These exchange-trade funds for India and Japan
    respectively move in small increments and have decent longer term prospects that
    play on the global shift to Asia of the locus of economic power and activity.


Bottom Line: If you got into the market in October or March, you are looking
like a genius. But getting in now remains problematic because of a potential
pullback and the kind of longer term macroeconomic problems I will be talking
about this coming Thursday at the Wescom event. (See https://www.wescom.org
for details.)


The Week’s Macro Data Market Movers:

The
Macroeconomic Calendar


DAY


EVENT


Tuesday

  • ISM

  • ISM

  • ISM

  • Get the point?


Wednesday

  • MBA mortgage applications

  • Auto sales

  • Construction spending

  • Fed Beige book


Thursday

  • Factory orders

  • Jobless claims

  • ISM Service

  • Productivity


Friday

  • Job report

* Potential major market movers in red

 


The first half of the week should start with a bang as the ISM numbers are
likely to confirm an accelerating economy while the last day of the week could
end with a whimper as the jobs report may not yet confirm that acceleration.  

Sandwiched in between these two key reports will be a slew of other important
information on everything from mortgage apps and factory orders to jobless
claims and productivity.

If you have a favorite macroplay or stock you would like us to consider in this
column, send an e-mail to

peter@peternavarro.com or go directly to

https://www.peternavarro.com.  We’d love to hear from you.  Â