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November 02, 2010
Style Model Finally Favors Growth
For the first time since the summer of 2009, Northlake's Style model is recommending Growth over Value. In last month's commentary, I mentioned this shift was possible as there had been a steady drift in the underlying model factors toward growth. The signal for November changed to growth but is just over the borderline. It is a weak signal as the indicators are actually split pretty evenly, just leaning slightly toward growth. As a result of the new growth signal, all Northlake client positions in the Russell 1000 Value (IWD) were swapped into the Russell 1000 Growth (IWF).
The new growth signal is based on a combination of sluggish U.S. economic growth, the weakening dollar, and recent strength in technology stocks that has shifted stock market technical indicators toward growth.
There was no change in the Market Cap model this month, which continues to favor small caps. The signal is stronger than it was for October.
The long running value signal produced mixed results. For the entire 16 month period it was active, IWD produced a return of 27.8%, trailing the return on IWF by about 3.5%. However, for 2010 and the entire signal period, IWD produced a return that matched the S&P 500 benchmark for Northlake's investment strategy.
The new small cap signal is off to a good start. In October, it's first month, the Russell 2000 Small Cap (IWM) earned 4.2%, ahead of the S&P 500 at 3.8% and the previously owned S&P 400 Mid Cap (MDY) at 3.5%.
Disclosure: IWF is widely held by clients of Northlake Capital Management, LLC, including in Steve Birenberg's personal accounts. Steve Birenberg is sole proprietor of Northlake, an SEC-registered investment advisor.
Posted by Steve Birenberg at November 2, 2010 10:20 AM in Models
1 WHAT DOD YOU THINK OF THE OVERALL MARKET-ARE WE NEAR ALIKELY TOP?
2. WHAT DO YOU THINK OF APPLE,CTC MEDIA,LIBERTY GLOBAL AND NETFLIX AT PRESENT LEVELS?
I think the market is OK but overbought. Economic data has definitely gotten stronger so I think the gains are justified. This also provides support. I'd add to stocks on any meaningful pullback.
Apple looks fine. I think it heads to $375-400. No worries at all.
Liberty Global is enjoying an acceleration in growth but the stock reflects the good news. A pause that refreshes before higher prices seems about right.
I do not follow CTCM or NFLX close enough to have an opinion on their stocks. CTCM seems in good shape fundamentally. NFLX is booming but if the slightest thing goes wrong, look out below.
Posted by: Steve at November 5, 2010 01:17 PMPS ANY THOUGHTS ABOUT VMED AND/OR CETV
Posted by: MP at November 5, 2010 02:26 PM1.ARE THE SELLOFFS IN CETV AND MICC THE LAST FEW DAYS JUST RELATED TO THE DOLLAR
2WHAT DO YOU THINK OF VMED AND ACOM AT THESE LEVELS
1.ARE THE SELLOFFS IN CETV AND MICC THE LAST FEW DAYS JUST SECONDARY TO THE DOLLAR
2.WHAT DO YOU THINK OF VMED AND ACOM AT THESE LEVELS.
CETV had weak earnings and there is no reason to be a buyer. Thus, it drifts lower. Weaker news out of Europe also a negative.
MICC just lacking a catalyst. Goldman initiated today with a neutral and $120 price target. I am a buy if it slips back to the $80s.
Don't know ACOM. Never heard of it.
VMED just pulling back after a big run. I think it eventually moves to the low $30s.
Posted by: Steve at November 8, 2010 01:03 PM