Author: Bill Peattie, Peattie Capital
Covestor model: Reasonable Price
Disclosures: PCM, MIC, KVHI, AAPL
The markets continue to focus on macro events including Bernanke's Jackson Hole speech, the ongoing summits in Europe, the election, fiscal cliff, and the subpar economic expansion.
Market expectations are very low, fear is very high, and valuations are attractive, especially compared to bonds. Any surprisingly good news from the likes of China or Europe could trigger another leg up in U.S. stocks.
That said, a couple noteworthy indicators have crossed my radar. For example, volumes on the NASDAQ (^IXIC) have been trending higher than volume in the more conservative S&P 500 (^GSPC), and have reached levels that have coincided with at least a pause in the market in the past.
In addition, insider selling has been much higher than insider buying, the Dow Transportation Index (^DJT) has not performed as well as the Dow Industrial Index (^DJI), consumer confidence is falling, and the VIX (^VIX) hit a low of 13.45 on August 17, which is about where it was back in the spring.
More than compensating for these however, are monetary conditions which remain very supportive, and the aforementioned valuations. So while I wouldn't be surprised by a little sideways action or minor pullback, I believe that the overall picture is still a good one.
Furthermore, given the vast underperformance by most hedge funds again this year, I would think that any selling would be met with buying.
Regardless, PCM Fund (PCM) owns shares of companies that I believe in. Macquarie Infrastructure Company (MIC) still has a 6% yield. KVH Industries’ (KVHI) marine satellite communications system has become the market leader and I expect more exciting announcements from KVHI over the next few quarters. Apple (AAPL) shares trade at barely 12x forward estimates and the dividend yield, which I expect to rise from here, is higher than the yield of the US 10-year note.
As I've said many times, I believe in owning the right stocks at the right prices. And I am comfortable owning current positions right now.