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May 02, 2011
Continued Stability as Mid Cap and Value Look Good for May
There were no changes to Northlake's Market Cap or Style model signals for May. The Market Cap model continues to favor mid caps and the Style model still prefers Value. The models have been stable for six months now leaving Northlake clients invested in the S&P 400 Mid Cap (MDY) and the Russell 1000 Value (IWD). The stability of the models reflects an economic recovery that is proceeding according to historical norms and low volatility in the major stock market averages.
As usual, there are some changes in the indicators that drive the models. Most notable, in the Style model, the value signal is stronger for May. This is the result of accelerating earnings growth for value stocks which leave them at historically cheap levels compared to growth stocks on the basis of P-E ratios. The economic recovery thus far has been kind to cyclical companies that comprise value indices thanks to big increases in basic materials prices driving commodity stocks and suppliers of products and services to commodity companies.
Last month's mid cap and value signals did not provide value added to client portfolios. However, there was no material downside either. MDY and IWD each gained 2.6% last month, almost matching the 2.8% return for the benchmark S&P 500. Year to date, the Market Cap remains a winner, producing a return of over 12% against a gain of over 8% for the S&P 500. The Style model has matched the S&P 500 so far in 2011.
Disclosure: MDY and IWD are widely held by clients of Northlake Capital Management, LLC, including in Steve Birenberg's personal accounts. Steve is sole proprietor of Northlake Capital Management, an SEC registered investment advisor.
Posted by Steve Birenberg at May 2, 2011 02:59 PM in Models
1.HOW SIGNIFICANT DO YOU THINK THIS CORRECTION WILL BE-IS THIS A TIME TO BUY OR TO LOCK IN PROFITS?
2AT WHAT PRICE WOULD YOU START BUYING MICC,VVTV AND ACOM AGAIN?
1.HOW SIGNIFICANT DO YOU THINK THIS CORRECTION WILL BE-IS THIS A TIME TO BUY OR TO LOCK IN PROFITS?
2AT WHAT PRICE WOULD YOU START BUYING MICC,VVTV AND ACOM AGAIN?
1.DO YOU THINK THE CORRECTION IS OVER THIS SOON OR IS THIS JUST A BOUNCE AND A LARGER CORRECTION IS COMING- ARE YOU SELLING INTO STRENGTH?
2. VVTV HAS BEEN GOING UP OVER LAST WEEK. DO YOU THINK EARNINGS WILL BE GOOD ENOUGH FOR ANALYSTS ETC. OR WILL THERE LIKELY BE A SELLOFF AFTER EARNINGS?DO YU THINK ITS PRUDENT TO BUY AT THESE LEVELS?
I'd say this correction is over. But something new may come along to trigger another sell off. I still feel that rising headwinds are being ignored (inflation, Europe, end of QE2, slower economic data in US, budget negotiations) and the calendar is a risk (sell in May and go away). However, our net long in the hedge fund is mostly unchanged. I would describe it as cautiously optimistic but our next move would be shorter if we were forced to make one today.
NOt sure what to expect from VVTV. HSN and QVC had mixed numbers. VVTV is a turnaround story so the peers may not matter. We decided to keep the trading portion of our position on heading into earnings so I guess that means we expect good news.
Posted by: Steve at May 10, 2011 09:50 AMVVTV NET SALES ARE UP 15% AND GROSS MARGINS ARE 37%. VVTV IS MOVING IN THE RIGHT DIRECTION.THE REPORT SEEMS GOOD IF NOT SPECTACULAR. DO YOU THINK ITS GOOD ENOUGH FOR THE ANALYSTS AND AND ARE YOU SATISFIED THAT THE COMPANY IS DOING WHAT IT NEEDS TO DO AT PRESENT?
WHAT DO YOU THINK ITS FAIR VALUE IS BASED ON THIS REPORT?
I'd like to hear the conference call later this morning but VVTV could certainly trade to $7-8 if you assume the turnaround is in place. Long-term it could go higher. If they could get to 10% EBITDA margin they could make about $70 million. Put a 10 multiple and you get $700 million in value across about 50 million shares or $14. They will need a big 4Q to prove that thesis so for now I think $7-8 is fair value (pending the CC)
Posted by: Steve at May 11, 2011 08:21 AMWHAT HAPPENED TO VV TV INNPARTICULAR AND THE MARKET IN GENERAL.EVERYTHING IS GOING DOWN TOGETHER.DESPITE AN EXCELLENT REPORT,VVTV IS DOWN MORE THAN 6% TODAY.
Posted by: MP at May 16, 2011 02:43 PMEverything moves together because the market is tied to computerized trading executed through ETFs and future. That is just the way the market works these days.
As for VVTV, I know nothing but in the hedge fund, we bought more today at prices from $6.28 to $6.05. And we will keep buying it it goes lower.
I still weakness as a correction and expect buyers to emerge around 1250-1300 on the S&P 500. I will take that risk although I have been a net seller recently at both Northlake and Entermedia
Posted by: Steve at May 16, 2011 04:22 PMVVTV IS GETTING KILLED ALTHOUGH IT HAD A SUPERIOR QUARTER.
MICC ALSO HAD A VERY GOOD QUARTER,BUT IS STILL GOING UP
DESPITE A DOWNWARD MARKET WITH BAD ACTION TODAY.
WHAT IS GOING ON AND HOW WOULD YOU DEAL WITH EACH OF THESE STOCKS AT PRESENT?
As noted in yesterday's comment, I am a buyer of VVTV. Weakness just gives me a chance to buy it cheaper. I suspect that some hangover still exists from the secondary.
MICC is also held in my hedge fund. I am not buying at current prices but I do think there is more upside over time. I think the company is aggressively buying stock in the US market because of the upcoming delisting. This positive influence could want once we get to June.
Posted by: Steve at May 17, 2011 01:24 PM