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Monday started with crushing news from the auto sector. Sales for both General Motors and Ford hit levels not seen since 1945, as consumers fearful for the future, drastically pull back on new vehicle purchases. Despite the gloomy news, the stock market closed pretty much flat on the day.
The Presidential election triggered a substantial rally resulting in the largest Election Day gain in 6 Presidential cycles. The euphoria was so great, stocks overlooked dire news in the Factory Order figures closing up impressively on the day.
However, Wednesday saw a steep sell off with stocks giving up their patriotic gains earned on Tuesday, as the euphoria quickly faded. The selling continued on Thursday with negative news continuing to rock stocks. This sell-off led to the S&P 500 suffering its worst 2 day decline since 1987. Negative news from the employment front and weak earnings only added to the desperation.
Non Farm Payrolls fell to 240k on Friday and unemployment hit a 14 year low, however stocks are showing great resilience with the major indexes strongly in positive territory as this is being written. I believe stocks are setting up for a once in a lifetime buying opportunity during these difficult times. The question is, what stocks have the best chance of holding up and advancing over the long term?
Our Long Term PowerRatings can assist you in answering this crucial question. They are one highly effective tool to help you locate stocks that are most likely to be top performers in the future. Our studies indicate that stocks earning a 10 Long Term PowerRating have an 81% chance of being higher one year later. Those with a 9 rating possess a 79.1% chance of trading higher one year later. Conversely, stocks that are awarded low ratings of 1, 2, or 3 have proven to simply be too volatile and risky for prudent, conservative long term investors. You can clearly see the statistical advantage in building a long term portfolio consisting of 9 and 10 rated stocks, while avoiding the lower ratings. Let's take a closer look at several of the Long Term PowerRated stocks profiled this week:
Psychiatric Solutions(PSYS | Quote | Chart | News | PowerRating) - An interesting company that specializes in outpatient behavioral services. It seems to be a good economy for the counseling business! It makes sense that economic stress would booster this type of operation. Income increased over 37% for the third quarter and revenue was up 13%. Technically, the stock has been climbing sharply since October 27th. Price is right below both the 50 and 200-day simple moving average that are in the $34-35.00/share area. The company has just been upgraded from a 4 to a 5 Long Term PowerRating and it deserves careful consideration for your portfolio.
Xerox (XRX | Quote | Chart | News | PowerRating) - Here is a classic name in the printing and document management space. The company was just awarded an upgrade from 4 to a 5 Long Term PowerRating. Their business model is built on a recurring revenue stream and not simply the sale of equipment. Revenues were up 2% and the third quarter is reported as stable despite the shrinking economy. Technically, shares bottomed around the 27th of October and have been bouncing slightly since this time. Price is still well below technically critical 50 and 200-day simple moving averages at 10 and 13 dollars per share. This is a good company with solid business that should be closely watched here.
McDonalds (MCD | Quote | Chart | News | PowerRating) - This king of burger chains has earned a 5 Long Term PowerRating. The company had a strong third quarter driven by 7.1% global comparable sales growth and a 20% increase in operating income. The price chart shows price hovering right below the 200-day simple moving average and well off its mid October lows.
Johnson & Johnson (JNJ | Quote | Chart | News | PowerRating) - The pharmaceutical power house has the highest rating in the DJIA with a 6. Sales have increased 6.4% and EPS climbed 10.4% in the third quarter over last year. Technically, price seems to be stabilizing in the mid $60.00's range.
Stocks In The News
Here is a brief overview of stocks that caught my eye from the newswires this week:
Burger King (BKC | Quote | Chart | News | PowerRating) - The burger giant climbed after Wachovia increased its outlook to outperform from market perform.
DryShips (DRYS | Quote | Chart | News | PowerRating) - The Greek shipping giant soared after announcing an incredible 71% profit increase due to higher shipping rates and a larger fleet.
Polo Ralph Lauren (RL | Quote | Chart | News | PowerRating) - Goldman downgraded this popular American clothier.
Papa John's (PZZA | Quote | Chart | News | PowerRating) - Missed analysts estimates by a whopping 22%.
Google (GOOG | Quote | Chart | News | PowerRating) - Fell after dropping its deal with Yahoo, forcing Yahoo back to the table with Microsoft. Yahoo was up on the news.
This Week's Top Performers
Cephalon (CEPH | Quote | Chart | News | PowerRating)
iShares iboxx (LQD | Quote | Chart | News | PowerRating)
Proshares Short QQQ (PSQ | Quote | Chart | News | PowerRating)
This Week's Worst Performers
Citizens Republic Bancorp (CRBC | Quote | Chart | News | PowerRating)
Las Vegas Sands (LVS | Quote | Chart | News | PowerRating)
Brinks (BCO | Quote | Chart | News | PowerRating)
What to Watch For Next Week:
Thursday - Initial Claims, Trade Balance
Friday - Retail Sales, Michigan Sentiment, Import Prices
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