Consumer Confidence Not Lock-n-Step with Recovery
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Wall St. started the week lower as no major economic news kept investors from taking profits. Stocks rallied Wednesday after the Federal Reserve held interest rates near historic lows and signaled the economy has finally started to stabilize. Thursday retail sales reports showed that consumers are not ready to come back to shopping as fast as expected. The Cash for Clunkers program also added to retail numbers that could have looked worse. There were 558,000 initial claims filed in the week ended Aug. 8, an increase of 4,000 from the revised 554,000 the previous week, according to the Labor Department's weekly report.
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The Dow, S&P and Nasdaq are on a tremendous recovery since March. We hope you have stayed or jumped into the market during that time and made some money, but its time to consider taking some profits. Although we acknowledge the economy is showing real signs of recovery, the Wall St. recovery seems to be far ahead and due for a pullback, even if it's a short term one. This week we are bringing you a stock that has good financials but has been beaten down by scandal. Our bear stock was easier to find than we thought, a high end consumer retailer that depends on discretionary spending to thrive and it’s up over 200%. |
 Mahindra Satyam (SAY) - If you've never heard of Satyam, it is one of the biggest outsourcing technology companies in the world. The company's stock had been declining in value at the end of 2008 along with the tech industry and stocks in general. But in January 2009, confirmation that it had cooked its books led to a real fall and management restructuring. As the markets have been recovering, Satyam has not enjoyed the same treatment from investors. If the numbers are to be believed and that’s a big if, its P/E is 3.5 which is less than 25% of its competitors. As time passes, investors should slowly keep this India based company on the rise.
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 William-Sonoma (WSM) - There are a number of reasons to be bearish on William-Sonoma, the economy may be on a recovery but consumer confidence lags and probably will continue to do so until there is a recovery in employment. For the last 10 years Americans have been artificially rich or acting like it through credit cards. That is no longer the case as an era of pay down debt and frozen credit availability is forcing consumers to buy what they have the cash for. Lastly, William-Sonoma's stock price has surged much higher than any of the averages. In December the price hovered just over $5.00 today its $15.65. If you have some WSM stock we recommend you take some profits now.
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