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June 02, 2011
Mid Cap and Value Again for June
There were no changes to the signals from Northlake's Market Cap or Style models for June. The Market Cap model continues to recommend Mid Cap, while the Style model remains on a Value signal. As a result of the latest signals, there are no changes to the portion of Northlake client portfolios dedicated to the models and positions in the S&P 400 Mid Cap (MDY) and the Russell 1000 Value (IWD).
Underlying factors in the model had minimal movement. This is to be expected with the economy in slow but steady recovery and Federal Reserve policy on hold. Basically, the macroeconomic and interest rate drivers of the models are on hold leaving the factors underlying the models and the signals themselves unchanged.
The Style model saw no movement at all for June but the Market Cap model did see a couple of offsetting changes. The Yield Curve indicator moved in favor of small caps but was balanced by the Breadth indicator moving toward large caps. The yield curve has steepened recently which historically has been appositive for small caps as it usually is associated with accelerating economic growth. May's selloff in stocks was led by small caps which move the breadth indicator to large cap. Weak breadth is often a forerunner of market weakness when large cap stocks typically hold up better.
Last month the models saved clients a little money in a down market. MDY and IWD both held up slightly better than the market but the savings were modest. Year to date, the Market Cap continues to perform quite well gaining over 11% vs. a rise of almost 7% for the S&P 500. The Style model is up about 7.5% in 2011, producing a small incremental return compared to the market.
,b>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, an SEC registered investment advisor.
Posted by Steve Birenberg at June 2, 2011 01:45 PM in Models
1. MIICF AND VVTV HAVE HELD UP WELL DESPITE THE BAD MARKET. AT WHAT LEVEL WOULD YOU START BUYING MORE SHARES OF EACH?
2.WHAT DO YOU THINK WILL BE THE BOTTOM IN THIS CORRECTION-S/P 1250 0R 1200?
3. THE LETTERS FOR VERIFICATION ARE SOMETIMES HARD TO READ.
1. MIICF AND VVTV HAVE HELD UP WELL DESPITE THE BAD MARKET. AT WHAT LEVEL WOULD YOU START BUYING MORE SHARES OF EACH?
2.WHAT DO YOU THINK WILL BE THE BOTTOM IN THIS CORRECTION-S/P 1250 0R 1200?
3. THE LETTERS FOR VERIFICATION ARE SOMETIMES HARD TO READ.
1. will the correction most likely end at s/p of 1250 or 1200?
2millicom and vvtv have done ok so far.at what level would you start buying each of them again?
3.the letters for verification are often difficult to accurately identify.
thanks.
1. VVTV HAS HAD A STRONG SURGE THE LAST FEW DAYS. DO YOU THINK THIS IS JUST SECONDARY TO THE RISK ON TRADE OR IS SOMETHING ELSE PENDING IN THE NEAR FUTURE?
2. MIICF AND CETV ARE DOING WELL DESPITE A BAD MARKET.
DO YOU STILL THINK MIICF IS LIKELY TO MERGE?
3. WHEN DO YOU THINK CETV IS LIKELY TO GROW AGAIN?
4.WHAT ABOUT CBS AND VMED?
Not sure what is driving VVTV besides the fact that it has become a momentum stock. Someone actually asked Cramer about it on his show. That tells me there is a lot of short-term speculative money in there. I actually sold 1/6th of my stock yesterday thinking it was due for a pullback. I plan to buy that stock back on any meaningful weakness. The company has been at a couple of conferences recently and speaking positively. Also that exposure is probably helping. Lots of potential good news ahead so I don;t think it is overvalued. If the story stays on track it could be $12 within a year easily.
Nothing new on MIICF or CETV. I am glad that the Europe issues are not killing the stocks. Of course, MIICF has not business in Europe. I still see MIICF as being bought out but no way to predict timing. In the meantime, I think growth is on track. CETV still waiting on a real turn but worth waiting with the stock at $20.
VMED is subject to European worries. I like the story although I am a little nervous about upcoming earnings due to UK economic and austerity pressures. Not doing anything since we lightened it at Entermedia around $33.
CBS remains my favorite big media stock assuming the economy continues to recovery. $33ish is my next target.
Posted by: Steve at June 22, 2011 09:01 AM1.HUGE VOLATILITY IN THE MARKET REMAINS.OBAMA RELEASED OIL FROM THE SPR.DO YOU STILL THINK THE OVERALL MARKET IS HEADING HIGHER OR IS THIS SOFT PATCH MORE SIGNIFICANT AND REFLECTIVE OF A WEAKENING ECONOMY?
2. IS IT TIME TO START BUYING BEATEN DOWN STOCKS OR SHOULD ONE STILL BE CAUTIOUS AND REMAIN WITH LARGE CASH POSITIONS/
I think the oil release is part of a coordinated plan to crush the hedge fund speculators. IT is a positive.
The volatility is crazy and impossible to read. I still think we are in a soft patch and most of the market downside is done. But I see no rush on the buy side unless you are a trader. I'd rather be a buyer 5% higher with better economic data than they to luckily pick the bottom.
When the volatility gets this high I trade less and less. I do, however, think the sharp rallies show that if the economy cooperates we can go to new highs quite easily later this year.
If we are entering a new recession, we got some serious downside. I say wait to see what happens.
Posted by: at June 23, 2011 02:52 PM1.with excess volatility and repetitive large drops in market leaders,do you agree that the market action is worrisome and more suggestive of a coming new recession than a simple correction?
2.VVTV had a large sell off today. do you think that this drop may be secondary to loss of momentum traders and an increase in short action after the stock's entry int the russell index last week?
3.do you think VVTV is getting attractive again as a buy?
1.with excess volatility and repetitive large drops in market leaders,do you agree that the market action is worrisome and more suggestive of a coming new recession than a simple correction?
2.VVTV had a large sell off today. do you think that this drop may be secondary to loss of momentum traders and an increase in short action after the stock's entry int the russell index last week?
3.do you think VVTV is getting attractive again as a buy?
I disagree that a new recession is coming although that is one thing that has driven the correction in the market. I remain of the belief that the summer will be a trading range from 1250-1350 on the S&P 500. But we remain very data and event dependent so a move outside the range is very likely in news surprises.
VVTV's move up and down is likely related to index moves. I sold about 15% of my position around $8.25 and would look to buy it back closer $7.
Posted by: Steve at June 27, 2011 01:09 PM