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The Real Money column I mentioned Friday has been moved to the (free) The Street.com side: Nine Stocks for Playing the Long Side Safely

Before you yell "Capitulation!," understand that this was in response to client requests. I continue to have
concerns about a laundry list of economic problems: inflation, slowing
growth, slow job creation, rising interest rates, the drag from
housing.

What led to this research and stock selection was a repeated request from research clients, managed asset accounts, and institutional traders, who have all asked some variation of this question:

"I am afraid this market is overvalued, over-extended, and
overdue for a major correction — but I want to play from the long side
(variation: I cannot afford to fall behind my benchmark). How can I
participate in a way that is relatively safe, but still allows me
upside?"

The response we crafted was to quantitatively screen stocks for these characteristics:

1) Identify strong sectors with good money flow;

2) Screen for stocks with the best technical and fundamental potential;
3) Look for stocks within those sectors with desirable risk/reward characteristics;
4) Find stocks that are near good entry points;
5) Avoid the "runaway momentum" names;
6) Look for stop-loss protection that is a reasonable percentage downside away.

The column identifies nine firms, with entries, targets, and stop losses.

The stocks and sectors I picked, however, are more likely to outperform on a
relative (as well as on an absolute) basis, especially if the economy
slows further or slips into a recession. Our goal was to identify those stocks
that will participate in the upside, but at much lower levels of risk.

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There is a video discussion here:

Video_9_stocks

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Source:
Nine Stocks for Playing the Long Side Safely
RealMoney.com
6/8/2007 4:44 PM EDT
http://www.thestreet.com/_tscrss/markets/activetraderupdate/10361606.html

Category: Economy, Investing, Markets, Quantitative, Valuation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

16 Responses to “New TheStreet.com Column: Nine Stocks for Playing the Long Side Safely”

  1. V L says:

    I like AOC, IO, SCI, and MOS. I have some reservations about XRX.
    SGP and ABT are good defensive stocks
    I have no opinion about WCRX.

    What do you think about aerospace/defense sector and companies supplying them with carbon composites and titanium?

  2. V L says:

    Aerospace/Defense Sector: airframes, jet engines, armor…

    1. Robust and growing global air travel
    2. High demand for fuel-efficient aircrafts
    3. Rapidly growing international air travel
    4. New 787 and A380 in 2008
    5. Current global fleet is approximately 9K aircrafts; estimated additional 18K will be needed over the next 20 years; in addition to 9K of replacing old airplanes
    6. Etc…

  3. V L says:

    787 vs. 777 on composites and aluminum (by weight)

    787
    - 50 percent composites
    - 20 percent aluminum

    777
    - 12 percent composites
    - 50 percent aluminum

    Material breakout on 787

    * Composites – 50%
    * Aluminum – 20%
    * Titanium – 15%
    * Steel – 10%
    * Other – 5%

  4. michael schumacher says:

    Barry-

    What happens when the 10 year note eclipses the fed funds rate? On it’s way…..

    That’s a rhetorical question BTW…

    Ciao
    MS

  5. Tom Riedel says:

    The composite fuselages of the 787 are built by Vought which is a private company owned by the Carlyle group so not much to play on that. Just have to buy BA instead.

  6. Mike M says:

    Basically, these guys feel there is absolutely no value investing at these prices but they want to play the long side safely? I’ve got news for you, everybody thinks they are playing the long side safely. Good luck.

  7. Mike M says:

    Basically, these guys feel there is absolutely no value investing at these prices but they want to play the long side safely? I’ve got news for you, everybody thinks they are playing the long side safely. Good luck.

  8. Fred says:

    MS…the more important question is — what happens when the 90 day T bill drops to 90% of Fed Funds. W’re 1 basis point away.

    Growth is back. You all need to salute Goldilocks.

  9. michael schumacher says:

    fred-

    you are basing the goldilocks on what now???

    oh yea the gov’t statistics that are always revised upwards……

    Growth is dead in the US…..just look at the revisions to EPS in the last several weeks. And no CAPEX is not going to save us again.

    Ciao
    MS

  10. V L says:

    We are in irrational conundrum – stock market is down because of stronger than expected growth and rising yields. Everyone is freaking out about a possible assets allocation, funds moving from equities into bonds. So far, the funds are moving out of the treasuries and out of the equities (falling stock and bond prices and rising yields).

    Where are these funds going to? If the funds start moving into the treasuries (as every talking head on TV predicts it), we should see the prices rising and the yield falling (but the opposite is true)

  11. V L says:

    Everyone used to worry about the inverted yield curve and the possibility of a recession.

    Now everyone is freaking out about the normal non-inverted yield curve.

  12. Fred says:

    “So far, the funds are moving out of the treasuries and out of the equities”

    …it’s called a correction…you know, the one everyone wanted. We were going straight up (that’s unhealthy). Bears have been calling for a crash in earnings…sorry, but you’ve been dead wrong, and will be surprised (again).

    New Flash — a positively sloped yield curve suggests GROWTH IS BACK! The market (read: price) is the final arbiter. Global growth trumps housing slump.

    Inflation?? Where’s the inflation spread? Gold had been falling for ~ 60 days. CRB and Oils are following.

    More fear!

  13. V L says:

    Who has determined that the stock market needs a 10% correction? God?

    Everyone keeps talking about it as if God mandated a 10% correction: “I am not buying until we get a 10% correction”.

    No wonder we have “In God We Trust” written on our dollar bills. We should amend it to “In God & 10% Correction We Trust”.

  14. 6, 7, 9, 10% corrections, those are the days the elites shift their portfolios. I fear capitulation is at 70 trillion debt. More blood still left to suck?

    Must bankrupt country before buying it. Most of these foreign countries already bought or owned. Uraguay?

  15. JH says:

    There is a huge demand for new fuel efficient aircraft right now and the 787 should fill those shoes nicely – IF it gets delivered on time. Note that the 787 is the first major commercial airplane using composites, and with any new technology there will be birthing pains. Don’t forget the A380 was supposed to be Airbus’s 747-killer but after two significant delays it has become their millstone …

  16. JH says:

    There is a huge demand for new fuel efficient aircraft right now and the 787 should fill those shoes nicely – IF it gets delivered on time. Note that the 787 is the first major commercial airplane using composites, and with any new technology there will be birthing pains. Don’t forget the A380 was supposed to be Airbus’s 747-killer but after two significant delays it has become their millstone …