Keeping Score of The Score

The Wall Street Journal has a weekly section, The Score, which covers “The Business Week in 7 Stocks.”

This week caught my eye since Target (TGT) was the highlighted stock two weeks in a row. Last week, ending November 24th, TGT was down 11%, “as investors focused on rising shipping and labor costs and mounting supply-chain disruptions.”

This week: “The overall strong start to the holiday shopping season pulled up shares of several big-box retailers, including Target’s 2.8%” The second week didn’t reference the first – an odd omission for the set of readers that may take action on these blurbs.

It telegraphs a possible contrarian strategy – going countertrend to the market. Buy on the open Monday stocks that were down. Short on the open stocks that were up. Here is a spreadsheet where I’m going to test this for a while.

All seven stocks reversed direction Nov 24 to Dec 1 WSJ. So did the market, however. Still, 5 of the 7 trades in this strategy outperformed.

(NB, the 2.8% rise the WSJ has today must have been calculated from the Wednesday close, 69.26, not Friday’s close of 67.35. I’m generally not going to double check the WSJ % reports…and generally there won’t be holiday breaks with unusual trading like the Friday after a Thanksgiving.)

 

Nov 24 open Monday close Friday % change reversal? Outper. S&P?
TGT, -11% 68.07 70.96 4.2 y y
GOOGL, -3.8% 1044 1109.65 6.3 y y
Nissan, -5.5% 8.65 8.87 2.5 y n
LOW, -5.7% 88.67 94.37 6.4 y y
LB, -18% 30.32 33.11 9.2 y y
WBA, -2.6% 79.11 84.67 7.0 y y
CVX – 3.4% 114.7 118.97 3.7 y n
SPY (control) 265.78 275.65 3.7

Notable Barron’s Predictions September 1

The market strategist survey was as usual effectively worthless with most of the analysts predicting a market very close to where we are today, Treasury bills at 1.75 give or take, and without decisive opinions about whether the “fiscal cliff” will be avoided.  Only Goldman Sachs stood out with an end of year S&P prediction of 1250.

Steven Auth of Federated recommended CAT at 84.47, QCOM at 61.20 and Daimler DDAIF at 48.85 (“luxury goods”).  Robert Doll of Blackrock recommended Chevron CVX @ 110.93, ConocoPhillips COP at 56.11, and UnitedHealth UNH at 54.69, Adam Parker of Morgan Stanley concurred on Chevron, Bristol Myers BMY at 32.8, AmerisourceBergen ABC at 38.1

I like the CAT call — 8 p/e also favorably ranked at Valueline — and this is on my watchlist after any market drop but low priced enough perhaps just to jump in.  Continue reading

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