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July 02, 2011
Mid Cap and Value Still Reign
For the seventh consecutive month there were no changes to the signals from Northlake's Market Cap and Style models. Mid Cap and Value continue to be favored. As a result, client positions in the S&P 400 Mid Cap (MDY) and the Russell 1000 Value (IWD) will be maintained for another month.
The lack of change to the signals for this long is unusual but no unprecedented. The Market Cap model typically changes signals every four to six months and the Style model normally changes every five to seven months.
There was little movement in the underlying indicators of the Market Cap model, which remains right in the model of the range that favors Mid Cap. However, the Style model saw two indicators shift in favor of growth. Any further shifts in specific indicators in July could change the signal from value to growth for August.
The two indicators that shifted toward growth this month were insider activity and trend. The insider indicator measures net buying by insiders of stocks in growth and value industries. Over the past few months it has shifted decisively toward growth. The trend indicators measure recent relative performance of value and growth indices and are picking up the relative strength in growth stocks over the past few months. In reality, it has been weakness in value stocks that is driving the shift. Bank, industrial, and industrial stocks fared poorly in the market correction when investors lost confidence in the economic recovery and worried again about bank balance sheets in light of renewed problems in Greece.
In June, the model signals were inaccurate. Small and Mid Cap stocks led the market lower so MDY trailed the return of the benchmark S&P 500. However, year to date, the Market Cap model has added significant value with MDY gaining almost 8% versus 5% for the S&P 500.
The Style model's value signal produced a return slightly worse than both the S&P 500 and small cap Russell 2000 in June. For the year, the Style model is now slightly worse than the market and the Russell 1000 Growth. Neither gap is large, however. This lagging performance for value stocks is what the trend indicator discussed above has picked up.
Disclosure: MDY and IWD are 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 July 2, 2011 12:26 PM in Models
what are your predictions/feelings about earnings reports/stock action for the following:
vvtv
cetv
cbs
millicom
bidu
what are your predictions/feelings about earnings reports/stock action for the following:
vvtv
cetv
cbs
millicom
bidu
VVTV: I expect another good quarter on revs and margins but the stock is haead of itself so anything short of a positive surprise may be greeted by selling. I'll buy more on weakness that gets toward $7.
CETV: my expectations are low. I remain a buyer towards $15-16. I expect the report to show only limited signs of recovery and not visibility to year end.
CBS: I expect a big quarter again but the street has raised its expectations. I expect it to own it in 2012 so it will take something major for my bullish outlook on the stock to change.
MICC: I think the quarter could be good given bullish analyst commentary of late. I assume they are picking up on something.I'm a buyer at $90-95. Doing nothing at current prices.
BIDU: No opinion. I don't follow it.
Posted by: Steve at July 14, 2011 02:19 PM