Transcript now that the mayan calendar ended

IBD MEETUP/NORTHRIDGE, SATURDAY JANUARY 12TH, 2013
AGENDA
• NOW THAT THE MAYAN CALENDAR HAS ENDED
• NOW THAT THE FISCAL CLIFF HAS…
• DEFENSIVE SECTORS TO CONSIDER
• STOCKS TO CONSIDER
• REVIEW OF WATCH LIST
• REVIEW OF FLT AND HLF STOCKS
• REVISIONS TO WATCH LIST
• MARC’S MOMENT
• LESSON 13
NOW THAT THE MAYAN CALENDAR ENDED
NOW THAT THE FISCAL CLIFF HAS…
BEEN SEMI-SOLVED WITH A
LAST MINUTE BRIDGE!
THE FISCAL CLIFF
• Remember the debt ceiling
fiasco in 2011?
– At the last second, President
Obama cut a deal with Congress
to raise the debt ceiling.
– But the price he paid was a big
set of spending cuts that would
automatically take effect unless
Congress figured out a way to do
something different.
– Congress failed, of course, which
means all those spending cuts
will happen on January 1, 2013.
– There are a few other items too,
including some new Obamacare
taxes that take effect, but this
accounts for most of it.
EFFECT ON GDP
• Which part has the worst effect: the
spending cuts or the tax increases?
• CBO estimates that the effect per
dollar is greater for spending cuts
than tax increases: roughly a dollar
of GDP for every dollar of spending
cuts versus about half a dollar of
GDP per dollar of tax increases.
• However, the absolute size of the tax
increases is much larger than the
absolute size of the spending cuts.
• Overall, CBO estimates that the
spending cuts will reduce GDP by
about 0.8 percentage points; the
end of the payroll tax holiday will
reduce GDP about 0.7 percent; and
the expiration of the Bush tax cuts
will reduce GDP by 1.4 percentage
points.
LAST MINUTE LEGISLATION
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Figures represent 10-year costs or savings compared to CBO’s March 2012 baseline, which assumed that
all tax cuts would expire as scheduled, automatic spending cuts would take effect and the expiring farm
bill would be extended.
TAXES
SUBJECT
PROVISION
10-YEAR
EFFECTS, $B
Alternative minimum tax
Income threshold permanently indexed to inflation
-1,815.6
Individual income tax rates Rates established in 2001 made permanent for income below
$400,000 for individuals, $450,000 for couples
-772.9
Estate tax
Current estate and gift tax policy revised and made permanent
-369.1
Child tax credit
Made permanent
-354.4
Rates/capital gains & div.s
Rates established in 2003 made permanent for incomes
below $400,000 for individuals, $450,000 for couples
-289.9
Stimulus tax cuts
Provisions enacted in 2009 extended through 2017
-134.2
Marriage penalties in IRS code Permanent extension of relief measures
-84.6
Tax "extenders"
One-year extension of dozens of individual, business and energy
tax provisions including the research and development credit and
the renewable electricity production credit
-76.3
Other tax provisions
One-year extension of a variety of education provisions, the
adoption credit, the dependent care credit and other provisions -30.8
LEGISLATION CONTINUED
SUBJECT
PROVISION
10-YEAR
EFFECTS, $B
HEALTHCARE:
 Medicare physician reimbursement Scheduled cut to payment rates blocked for one year
-25.2
 Other Medicare & health extensions One-year extension of health provisions including outpatient
therapy services and ambulance add-on payments
-4.1
 Community Living Assistance Services and Supports (CLASS) program
Repealed
0.0
HEALTHCARE OFFSETS:
 Medicare Severity Diagnosis Related
Groups payment system
Overpayments recouped to offset Medicare extensions
+10.5
 Medicare kidney disease treatment Changes to bundled payments for blood-cleansing dialysis services
+4.9
 Disproportionate share hospitals
Extension of health care overhaul provision reducing Medicaid pmts to DSH
+4.2
 Medicare Advantage
Coding intensity adjustment pmts to Medicare Advantage plans
+2.5
 Therapy services
Reimbursements reduced for multiple therapy procedures performed same day +1.8
 Medicare Improvement Fund
All funding eliminated
+1.7
 Other health care offsets
Offsets include payment adjustments for medical-imaging equipment and cuts to
ambulance services for non-emergency transport
+1.9
SEQUESTER DELAY:
 Delay of automatic cuts
A portion of the fiscal 2013 sequester is canceled, with March 1 set as
the implementation date for the remaining $85 billion in cuts
-24.0
 Discretionaryspending caps.
Caps fiscal 2013 lowered $4 B; fiscal 2014 lowered by $8 B
+10.0
OTHER:
 Retirement savings accounts
Allow funds in applicable retirement plans to be transferred to
designated Roth accounts without distribution
+12.0
 Emergency unemployment benefits Emergency unemployment benefits extended for one year
-30.1
 Commodity support programs
Extended through September 30
0.0
 Conservation Reserve program
Maximum enrollment maintained at 32 million acres
0.0
 Disaster aid
Authorization of $550 million asst. livestock, trees, honey bees, farm-raised fish 0.0
Other components of the new law are far less permanent. Most prominently, $85 billion in automatic cuts are now set to
take effect March 1.
•
•
•
•
THE MARKETS REACT
Dow Gains 308 Points as Investors Applaud Fiscal-Cliff Solution, or 2.4%
Also turning in an impressive show of strength was the S&P 500 Index (SPX) , which gained
36 points, or 2.5%.
The tech sector didn't disappoint, as the Nasdaq Composite (COMP) outperformed its
index brethren, surging almost 93 points, or 3.1%.
The CBOE Market Volatility Index (VIX) continued its sharp descent, shedding 3.3 points,
or 18.5%, to touch its lowest close since early October.
THE HEALTH OF THE CURRENT BULL MARKET
• Can current Bull Market last well into
2013?
– Investors have been hoarding cash
which will eventually flow into the
markets
– Eight other Bull Markets have lasted
longer than the current one.
– Institutional Investors still remain
ridiculously underweight to equities.
– Stocks in the S&P have risen higher in
price but have gotten cheaper
• For the past 2.5 years the P/E Ratio for
the S&P has never topped 16
• Yet during other Bull Markets since
1962, the average P/E Ratio has been
17.4
• Reason is earnings have grown faster
than stock prices.
• Stocks could rally 15.2% in 2013.
• Bull Markets typically end on a high P/E
of say 19.9 according to Bloomberg.
We have not seen a real burst of
hyper enthusiasm that typically ends
Bull Markets
• This Bull Market still has at least a
31.7% upside before it runs out of
steam.
• Insiders are 4 times more
enthusiastic about their
companies than just 2 months ago.
BEST SECTORS IN Q-1 2012
Sector
Ticker
Q1 Performance
Financials
XLF
+21.88%
Technology
XLK
+18.89%
Consumer Discretionary
XLY
+15.91%
Industrials
XLI
+11.38%
Materials
XLB
+10.78%
Health Care
XLV
+8.97%
Consumer Staples
XLP
+5.45%
Energy
XLE
+4.18%
Utilities
XLU
-1.70%
DIVIDEND PAYING STOCKS
• So what dividend stocks look good for 2013
• Stovall's picks include Chevron (CVX), Microsoft
(MSFT) and UGI (UGI), a utility. He screened for
stocks with yields of 3% or more, a track record of
increasing their earnings and dividends, and
other factors.
• Among recent IBD 50 stocks, dividend payers
include Eastman Chemical (EMN), Ingredion
(INGR), Polaris Industries (PII) and Seagate
Technology (STX).
STOCKS TO CONSIDER
•
•
•
•
Mexican fast-food chain Chipotle Mexican Grill Inc. (NYSE: CMG)
SodaStream (Nasdaq: SODA) Israeli company that makes a carbonation machine that makes custom-flavored sodas.
Petroleo Brasiliero (NYSE: PBR), the state-owned Brazilian oil and gas firm, better known as Petrobras.
Berkshire Hathaway (NYSE: BRK-B) growing by 20% annually will likely go down as the longest and most impressive
strings of wealth creation in history. BRK-B holdings include:
–
–
–
–
–
1. An increased stake in banking giant Wells Fargo (NYSE: WFC
2. A huge commitment to DirectTV (NYSE: DTV)
3. A new stake in Liberty Media (Nasdaq: LMCA
4. Another notable wide-moat purchase in DaVita (NYSE: DVA), which runs dialysis centers across the United States.
5. Other notable moves
•
•
•
•
•
–
•
Buffett also acquired additional shares in International Business Machines (NYSE: IBM)
in Intel (Nasdaq: INTC)
Visa (NYSE: V)
CVS Caremark (NYSE: CVS)
General Dynamics (NYSE: GD).
6. Notable sales include the complete liquidation of Exxon Mobil (NYSE: XOM) and lower stakes in Kraft (NYSE: KFT) and
Johnson & Johnson (NYSE: JNJ).
Three candidates for potential takeovers.
•
•
•
1. Avery Dennison (NYSE: AVY) Business: Labels and packaging materials - A likely acquirer could be label and adhesives giant
3M (NYSE: MMM), which, with a robust market cap of $63 billion, would have no problem digesting Avery's $3.3 billion market
value. It would easily be able to swoop in and cut overhead to boost efficiencies, as it has a reputation of doing.
2. Office Depot (NYSE: ODP) or OfficeMax (NYSE: OMX) Business: Office supplies retailing - a possible bid by office supply giant
Staples (Nasdaq: SPLS
3. RadioShack (NYSE: RSH) Business: Electronics retailing - A potential buyout of struggling electronics retailer RadioShack has
become less likely in the near term, given that the founder of industry titan Best Buy (NYSE: BBY), Richard Schulze, is trying to
use his 20% stake to take the rest of Best Buy private. But Best Buy is struggling to compete against online rivals that include
Amazon.com (Nasdaq: AMZN) Part of its explicit strategy has been to roll out smaller stores that specialize in selling mobile
phones. And this is where Radioshack comes in. The retailer operates more than 5,000 smaller domestic stores and has settled
on hawking cell phones. Acquiring RadioShack would help leverage the company's fixed costs and market share presence.
WATCH LIST
ADDITIONS/DELETIONS
FLT
HLF
MARC’S MOMENT
LESSON 13
Lessons 1 – 12 showed how the CAN SLIM® Investing System
helps you find the best stocks – and spot the right time to buy
and sell.
This lesson provides checklists and routines to help put the
CAN SLIM® rules to work for you.
Quick Investing Routine
Approximately 20 – 30 Minutes
• Step 1: Check overall market direction with The Big
Picture
• Step 2: Scan stock lists & features in IBD for new stock
ideas
• Step 3: Evaluate your stock ideas
• Step 4: Take action – Buy or Add to your watch list
• Make it a habit – The more you do your routine, the
faster & easier it gets.
• Short on time? – Do steps 1 & 2, then come back to
steps 3 & 4 on the weekend; or when you have more
time
Did you know..? Most big winners will show
up in one or more of these 3 lists in the
early stages of their big price moves.
So check them regularly!
Superior Returns start with a superior watch
list
If you want to get in early on the market’s next
big winners, you need to regularly review
refresh your watch list.
IBD’s stock lists and tools help you do that
quickly.
Tips on Maintaining – and Using – Your Watch List
• √Don’t add too many stocks. Keep it manageable. Focus
on the strongest stocks so you can actively track each one
and be ready to act on a breakout or pullback to 10-week
moving average after a breakout.
• √Regularly ‘weed out’ your lists. If something changes
negatively with a stock on your list, remove it. Your watch
list should be actionable.
• √Create a watch list routine – and stick to it! Find a daily
time that works for you and stick to it.
• √Note potential buy points and make a plan of action. For
stocks on your ‘Ready” list, write down the ideal buy point.
Then make your plan of action before the market opens.
– Determine how many shares you’ll buy when it breaks
out.
– Set alerts on your quote service or use buy-stops if you’ll
be away during trading hours.