I will get into yesterday’s recap in a bit as I am running short on time…
Buy Pick of the Day: Clear Channel Outdoor Holdings Inc. (CCO)
Today’s market is looking higher as we had some great news come out about non-farm productivity, jobless claims, and a
slew of positive earnings. Non-farm productivity, which measures the annualized change in the average productivity level of US workers when producing goods and services, excluding the farming sector, came in at 9.50% for October versus the 6.40% expected. The number shows that we are producing a high level of goods and services even with a smaller work force. Further, we saw that the number of those losing their jobs continues to dwindle away. Last week we dropped down to 512,000 people, which is a significant drop off from the 530,000 two weeks ago and beat estimates. We also got positive earnings from Toyota, Dr. Pepper Snapple, Time Warner, Cigna, Dollar Tree, and Sara Lee. This has all led to futures being up but not too much. The Dow’s futures are up 41 points as of 8:45 AM.
So, how did I come up with CCO? One of my favorite investment strategies is the comparable companies pick. This morning, Lamar Advertising (those guys that do all the outdoor billboards) released some pretty fantastic earnings, beating earnings estimates with an EPS of – 0.05 vs. the expected -0.16. The company beat revenue estimates, cut costs, saw profits rise despite a drop in revenue, and raised Q4 expectations past where analysts had expected. All this has transated into LMAR being up over 15% in pre-market trading.
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Clear Channel’s Outdoor sector is one of the company’s only public competitors, and the company reports earnings this Monday. Now, one could expect with LMAR showing such boldness in their ability to make money that CCO could possibly do something very similar, thus sparking some buying interest. The stock does not trade pre-market, but I am pretty confident in this theory.
Not only is there a fundmental reason why I like CCO, but the technicals are making it just ever so sexy. The stock has fell almost 25% in the past three weeks. The stock has just hit its lower band, is oversold, and undervalued on RSI. Yet, the stochastics have started to turn upwards with a lot of room to move to the top, going into earnings. The stock, literally, has 25% on top of room to grow on a 3-month chart. I think the sky is the limit on this one if it gets going.
Entry: We are looking for an entry around 6.90 – 7.00
Exit: We are looking for an exit of 2-3%.
Stop Loss: 3% on bottom.
Short Sale of the Day: Ultrashort Proshares Oil and Gas (DUG)
We will keep this one pretty short and sweet. The market is looking pretty positive today, yet at the same time oil is actually dropping in price, slightly. This has allowed DUG to not run away in pre-market levels like most of the inverse ETFs have already due to the market’s movement. The stock is down just over 1%, while SRS, SKF, and other Proshares Ultrashorts are down 2.5% – 3%.
I think we are going to go up, and DUG and oil should make turns in opposite directions with the positive news coming into the market. Further, while the chart is not as symbolic as on a regular stock, DUG hasa lot of room to drop after a steady increase of over 8% in the past two weeks. I don’t think oil is going to run away today with a stronger dollar, but as it moves up and the market moves up, DUG is going to face some heavy selling pressure.
Another thing that is keeping the ETF down in pre-market is that we saw poor earnings from Goodrich-Petroleum this morning and Petrohawk was not much better. I think these earnings will be masked by a market rally, so it should also compound on DUG as we see some squeezing on some buyers and long players, who have made money over the past couple weeks on this one.
Entry: We are looking for an entry around 13.05 – 13.15.
Exit: We are looking for 2-4%.
Stop Buy: 3% on top.
Good Luck and Good Investing,
David Ristau
