Stocks Hitting New Highs even as the Market Falls Apart
By
Timothy Lutts, Cabot Chief Investment Strategist and Editor of
Cabot Stock of the Month ReportFrom Cabot Wealth Advisory 3/3/08
Sign up for free Cabot Wealth Advisory e-newsletterOne thing I like to do when the market falls apart, as it did last Friday, is see what stocks are holding up well...even better, what stocks are hitting new highs.
A quick screen after the close Friday revealed 37 stocks hitting new highs. Only 16 were liquid enough for our taste (liquidity implies more stability of trading) and only 14 of these were trading above $10 (the higher price lowers risk).
I already know many of these, and a little study of both charts and fundamentals enabled me to familiarize myself with the remainder.
So, from the top.
Agrium (AGU), of Calgary, Canada, is in the fertilizer business, which is in excellent shape. The company has good fundamentals and the chart reveals a long-term uptrend.
Calpine (CPN) is an energy company that emerged from bankruptcy a month ago, so its chart doesn't have enough real history for interpretation. The sector is healthy and the post-bankruptcy status is attractive mainly because it gives the company a stigma that causes many investors to avoid it for a while, leading to fewer selling pressures.
Choicepoint (CPS) is being acquired by Reed Elsevier for $3.6 billion.
Concho Resources (CXO) is a Texas oil and natural gas company that came public in August. Its chart is healthy and its fundamentals attractive.
Darling International (DAR) is a Texas company that turns animal byproducts and used cooking oil into tallow, protein and yellow grease. Margins are increasing and the chart's long-term trend is up.
Echostar Corp. (SATS) was spun off from Echostar Communication in January so its chart is quite young. The firm makes the set-top boxes that process satellite TV signals.
FTI Consulting (FCN) is an old favorite, a company that does well when times are tough. It provides forensic services for companies in trouble: litigation, accounting, expert testimony, restructuring and more. The long-term chart is up and the fundamentals are good.
Kinross Gold (KGC) is a Canadian gold miner with operations in Brazil, Chile and Russia. The long-term trend is up.
Newfield Exploration (NFX) is a Houston-based oil and gas company. Growth is rather slow, but the chart has just built a long 29-month base and if this breakout works the stock could make a nice run.
Petroquest Energy (PQ) is a small Louisiana-based oil and gas explorer and producer. The main trends of revenues, earnings and the chart are all up.
Sandridge Energy (SD), based in Oklahoma City, also is finding and producing oil and gas. It just came public in November, so its chart is young, but all trends look good.
Southwestern Energy (SWN) is a big Houston-based oil and natural gas company, already owned by 250 institutions. All trends look good.
Stillwater Mining (SWC), of Montana, mines, processes and refines platinum and palladium. The long-term fundamentals are messy; the firm lost money in both 2005 and 2007. But the break above old resistance at 19 means the stock could make good progress from here.
Syngenta (SYT), of Switzerland, leaves us back where we started, in the fertilizer business. Long-term trends of revenues, earnings, and the chart are all good.
For independent-minded investors, that's the start of a decent watch list. Energy stocks are obviously leading the way today, but you should be careful where you buy (if you buy); they may be due for a rest. More important is that the recent broad market's rally has failed, a sign that you should continue to harbor lots of cash until the market's health returns. In the meantime, diligent research can pay dividends in the future.
As one of Jim Fraser's buttons says, "Proper Prior Preparation Prevents Poor Performance."
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