Raymond James’ Jeff Saut remains bullish:
The call for this week: Last Friday CNBC’s Maria Bartiromo asked me what was going to happen with this week’s Super Committee decision? After jokingly responding that if past is prelude if the Super Committee doesn’t arrive at a decision they will appoint a SuperDuper Committee, I then stated, “I don’t think the Super Committee will reach a consensus.” I also opined, “I believe there is a wink and a nod between President Obama and Speaker John Boehner to not implement the mandatory ‘cuts’ and let the 2012 Presidential election resolve the debate between increased taxes and spending cuts.” Quite frankly, I don’t know of any member of Congress that will stand for major military base closings in his (or her) state. Meanwhile, earnings continue to surprise with S&P 500 earnings up ~22% y/y, while revenues improved ~11.7% y/y. Such reports make it increasingly uncomfortable for the underinvested crowd; and the world remains profoundly underinvested in U.S. equities. Accordingly, I think stocks will continue to grind higher, provided we don’t talk ourselves into a recession. The reasons for that view are: 1) underinvested portfolio managers playing “catch up” (read: performance anxiety); 2) the upside seasonal bias; 3) low stock valuations; 4) improving economic trends; 5) still depressed sentiment readings; and 6) the knowledge that we have now entered the best performing six months of the year for stocks.
As for his specific advice…
Consistent with this view, I think the buying of inexpensive beta makes sense. To parse that theme, I screened our Analysts’ Current favourites List, excluding the banks, looking for companies with less than an 18x P/E multiple (based on forward earnings estimates) and with more than a 1.20 Beta. Then I overlaid my proprietary technical algorithms and came away with the following names, all of which are rated Strong Buy by our fundamental analysts: Energy XII (EXXI/$30.25); National Oilwell Varco (NOV/$67.50); VeriFone (PAY/$42.97); and ValueClick (VCLK/$16.07), which I offer for your consideration. Regrettably, the SPX has violated my long-standing pivot point of 1217, bringing into view 1206 and then 1191; and while it was not “decisive” as of last week, it looks like it is going to be decisive this morning. The approximate cause for this morning’s futures fade is our dysfunctional government punctuated by the Super Committee’s failure to reach a decision. On the positive side, there is a “ton” of internal energy that has been rebuilt over the past few weeks following our near-term overbought “cautionary call” of 10/29/11 in a report titled “Crescendo.” Additionally, if the equity markets open where the futures are indicating, the McClellan Oscillator should be in oversold territory, as can be seen in the chart on page 3.
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