2 Shorts & a Buy
08/18/2006 12:00 am EST
Jon Markman’s diligent research efforts not only provide comprehensive analysis and forecasts of current market trends, but also help investors pinpoint stocks with well-timed trading potential—short or long. Here, he finds three such opportunities…
“When judging the strength of the market, it is important to see which stocks are leading. When defensive stocks are leading, investors are rewarding companies that have low risk, like utilities. There were 72 new 52-week highs on the NYSE recently, which is strong, but a closer look at the leaders may surprise you: 26 were closed-end bond funds and the rest were a mix of high-yielding stocks, including energy limited partnerships and tobacco. When high yielding stocks lead, investors are betting that bonds will be going up and yields will be falling—exactly what is happening now.
“My research suggests that the market will have trouble going higher without proper industrial and technology stock leadership, and I will not recommend chasing any high yielding stocks.
“St. Joe (JOE NYSE), a real estate development company primarily in the northwest panhandle of Florida, builds home and resort projects, usually at the high-end of the price spectrum on the Gulf of Mexico. JOE reported earnings of 25 cents per share in the most recent quarter, down 50% from a year ago, and also lowered guidance to $0.70-$1.05 for the year, which still represents a huge P/E of at least 50. The stock rallied after earnings backed to its downtrend line and now is at an attractive entry point on the short side. Short JOE at current prices. Target is $40. Set a stop on a close over $51.
“Anderson's Inc. (ANDE NASDAQ) is a diversified agriculture business operating in the rail, turf, and retail segments. The company was a huge winner over the past 18 months. Anderson's stock rocketed from $15 to $60 in just seven months on hopes that ethanol companies were going to hit gold. Now, as the mania has died down, so have shares of Anderson's, and the stock continues to move lower. Short ANDE at current prices. Cover on a close over $40. Target is $30.
“AMN Healthcare Services (AHS NYSE) recruits and places physicians, traveling nurses, and other healthcare professionals on a temporary or permanent basis. The company's quarterly revenues increased 63% over the prior year, mainly due to an acquisition. AHS has been benefiting from the shortage of healthcare professionals, especially nurses. Shares have hit a multi-year high, eclipsing important resistance levels. Buy AHS at current prices. Target is $26. Set a stop on a close under $20.50.”