7.5.14: Weekend Readings – Blogs, Tweets and Others You Must Read

This week, Alcoa starts off q2 ’14 earnings season on Tuesday night after the closing bell. Let me get this straight: when AA was part of the Dow 30 and led off earnings season, it mattered, but now that it has been dumped from the Dow 30, was up 14% in q2 ’14 and 40% YTD as of June 30, ’14, no one cares ? Here is our earnings preview on AA’s q2 ’14. I am struggling here with Alcoa’s intrinsic value, i.e. what will the world look like in 24 – 36 months ? The first stop is the April, 2011 high of $18.47. How the stock trades around that level is critical.

Can’t resist: here is the tape on a CNBC segment I did with Oriel Morrison of CNBC Asia on Alcoa last spring. Note the cocky young anchor who injects himself at the end of the interview and refers to Alcoa as a “value trap”. The instant this kid shot his mouth off, I knew I was right to be long Alcoa, and remained that way. (long AA)

Another great piece from Josh Brown’s feed, from the Motley Fool. Couldn’t agree more.

Great tweet from Norm Conley on the Energy outperformance. We missed it, but made up for it with names like Alcoa, Intel, Microsoft, etc. for the first 6 months of 2014. Stormin’ Norman Conley notes that as of June 25th, Energy was at 729-day relative sector strength high. Cant buy it here (no way). Will remain underweight energy. (Long HAL, AA, MSFT, INTC)

From Soberlook, the Copper chart and from Bob Brinker’s Twitter feed, the chart of loan growth (loans and leases from bank credit0 from Soberlook. Hard to believe GDP fell in q1 ’14 given this chart. The Copper chart could explain the recent action in FCX. Jim Cramer gave FCX a thumbs-up this week based on one of his technical analyst’s recommending. Good call.

This Week on Wall Street’s blog talks about the employment report and shows a TNX graph. We had a blog post this week here on the 10-year Treasury yield. This Week on Wall Street features Gary Morrow’s excellent technical analysis work, as well as Doug McKay and a few other contributors. I will be Doug McKay’s guest on his Friday morning, July 11th weekly radio show. Looking forward to talking about our fundamental analysis and stocks and charts.

Jeff Miller looks to be taking the weekend off. A Dash of Insight and “Weighing the Week Ahead” hasn’t been updated as of this writing Saturday night, July 5th. Jeff has a social life. I do not.

Basic Materials is just 3% of the SP 500 by market cap. Here was our article from June 8th on our 4 favorite stocks within the sector. Alcoa (AA), US Steel (X), Freeport (FCX) and Peabody (BTU). Peabody could really be an energy stock: it depends on where you want to classify it. DuPont (DD) warned on Agriculture weakness. Wondering if it spills over into Chemicals too. Chemicals is about 70% of Basic Materials, but we are long just the industrial metals. (Long AA, FCX, X, BTU, KOL, SLX)

Anyone looked at a chart of the DJ-15 Utility Average ? If that is a rate tell, watch that 10-year yield. The only sector in the red on Thursday, post non-farm payroll.

Ute’s the best sector year-to-date, Consumer Discretionary the worst.

Muni high yield selling off the last few days too. Remember muni high yield funds and ETF’s are longer-duration vehicles. High yield muni’s are longer-dated bonds, 20 – 30 years, much longer than taxable high yield. The HYD or Market Vectors High Yield Muni ETF is already testing its 200-day moving average. Some of that could be Puerto Rico too. Moody’s downgraded PR to a Ba2 credit. The great Puerto Rican state is headed for default.

Michelle Coffey, MarketWatch Editor on the 10 Stocks that powered the Dow 30 to 17,000. The number doesn’t really matter – the valuation really does though.

Using our Weekly Earnings Update, posted yesterday, July 4th, 2014, the valuation on the SP 500 still seems reasonable from an “earnings yield” perspective, (think ERP and Fed model) and the 16(x) forward estimate p.e for what will highly likely be 8% – 10% earnings growth for the SP 500 this year. The SP 500 isn’t really all that overvalued in our opinion, although a 5% – 10% correction would be perfect, pre 4th quarter.

Love this chart from @361Capital. A return to global growth is a theme we’ve been hammering for a while, at least 2 years.

Need to jump. It is Saturday night and I need a life.

Headed for a 6 am 1/2 mile swim in Lake Michigan tomorrow morning, and a 12 – 14 mile bike ride before breakfast. Did my first Sprint Tri last weekend, the Chicago ITU Invitational. Had great splits in the swim and the bike, then totally gassed on the run. Need to improve those times. Bad knees are going to limit that run improvement.

Thanks for reading and stopping by. There are a lot of sites competing for your eyeballs. We appreciate you taking time on our blog.

Trinity Asset Management, Inc. by:

Brian Gilmartin, CFA

Portfolio manager









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