New 52 Week Highs – Notice a Pattern?

Courtesy of MarketMontage. View original post here.

As I scan my traditional watch lists most of the stocks in them are doing “meh” – they take 3 steps forward and 2 steps back.  Or vice versa.  They are really doing very little other than churning.  Most of the leadership of the past 2-3 years has died – broken charts everywhere.   See Mr. Amazon.com (AMZN) for but one example.

Lately, it has been a market whose leadership is in safety and yield.  Not typically what you associate with a bull move.  Many of these stocks are very overbought (in some cases extremely so) but each day the buyers come in and buy more…. one wonders if Mr. Bernanke with his multi year (and perhaps decade long) low interest rate policy has begun fomenting the next bubble: yield.  No longer able to get yield in traditional havens, investors are pushed into equities that provide it.  Seemingly, en masse.When stock price appreciation expands in excess of earnings or cash flow – that means multiples are expanding.   Multiples are a judgement call – but generally fall within very long term historical ranges.  We are now seeing excess in the ranges but like good lemmings the crowd is being herded…

Ironically these are considered ‘safe’ stocks – but we all have seen this game before and know how the crowded trade ends.  But we never know when.

I think as you scan the 52 week high list a very obvious pattern should be apparent.

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Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog