Month: December 2015

Stock Screener: Take 8: ARG: Argan SA

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Remember my post on KYN, SIMO, TAICY, TYG, EWZ, XIN, GIMB? All have been doing well. GIMB has given a handsome dividend of 4% while appreciating 7%, I’m amazed how well this stock screener idea works. I’m still keeping this stock in my portfolio as it is undervalued and can continue to rise, but let’s go to another stock for our readers.

Track record 7-0.Time to move on.

If I don’t have any ideas anymore what to buy, I use the stock screener.

What you want to do is filter on 4 attributes: market cap, P/E, dividend yield and percentage change.

1) Market Cap: do not choose small companies as they are mostly fraudulent or don’t have sustainable earnings. Don’t choose big companies because these are not volatile enough to get fast profits from. I’d filter between 200 million and 4 billion.

2) P/E ratio: choose the companies with the lowest P/E ratio, these companies are dirt cheap while still having earnings. Cheap is below P/E of 5. But do not choose below P/E of 2 because those are mostly companies that are going bankrupt or have bad growth.

3) Dividend yield: always choose companies that have dividends, because these companies have real earnings and can prove they have sustainable earnings to reward investors. The higher the better of course, but don’t push it above 7% as those companies probably don’t have the money to pay out dividends on a regular basis. I’d go for companies with dividends between 3% and 7%.

4) Volatility: don’t choose companies that are so volatile. Maximum year over year change should be between the 20% range.

We use the exact same parameters as above and our next winner is: Argan SA (ARG). This time I took a stock from the Euronext Paris Stock Exchange, because I want to diversify into Europe. I wrote an article on why Europe is better than the U.S. at this moment. So I invest in France.

I always say, buy a company that has earnings and this one has it all. Very nice growing earnings around 40 million euros cashflow in a year, which means a P/E of 5-6, not too shabby but it’s ok in this world of high equity valuations. I will make an exception on the P/E ratio today (outside the range of 2-5). Market cap is at 300 million euros. Equity has risen very well in the past year. Dividend is increasing in time, it is 0.85 euro/share, which is a whopping 4% dividend. Dividend is also stable, they started to pay out already many years ago. Is trading at around book value, so valuations are normal. I’m buying it. Technically, the stock is in a very stable uptrend. This is a nice dividend generator. Let’s go for 8-0.

First reactions to gold after Yellen rate hike

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A day after the Yellen rate hike we watch what happens with the premium on gold and silver. I see a bullish rise in premiums.

Premiums on bullions from mines are getting higher, hitting 27%.

APMEX silver premiums are steady and rising at 26% for generic junk silver bags.

There is notable interest from China as premiums keep surging higher for silver, hitting 11% (without VAT tax adjustment).

China gold premiums are also rising above 0% level.

Very interesting is that premiums for gold coins at APMEX are rising to 4.3%, the highest since I monitored it.

Breadth Advance-Decline Line

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The Advance-Decline Line measures the amount of advancing stocks minus the amount of declining stocks. It is a leading indicator for the stock market.

For example:
When a lot of stocks in an index go down, while the index itself goes up, it means that the move up was the result of a select group of large companies that were going up, while most of the stocks in that index went down. This is a bearish indicator and the Advance-Decline Line will go down.

Here are some charts and it seems that the NASDAQ is the most bearish and NYSE is the most bullish.

NYSE:

Managed Money Short Gold Update

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Charts are still bullish for precious metals as large commercials are long and managed money is short.

 
 

Silver premiums are rising steadily to 30% for silver at APMEX.

 

 Silver premiums in Shanghai are rising.

 

Surprisingly high premium for gold coins at APMEX.

Europe Vs. America

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Investors are focused too much on the U.S., while they are totally ignoring what is happening in Europe. What they are missing is that Europe’s economy is actually improving.

 I believe the euro will be heading north soon due to improving current account surplus and industrial production. European stock markets will fare better due to higher GDP growth, manufacturing PMI, consumer sentiment and retail sales. An improving employment picture in Europe will boost the overall economy.
To read the analysis go here.

Corporate Loan Charge-Offs and Delinquencies Vs. Fed Funds Rate

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Corporate loan charge-offs are bad debts on the balance sheet that will be written off and will negatively affect earnings.

Delinquencies are obligations that have missed payment beyond their due date. If these delays keep on going for too long, the corporation is declared bankrupt.

What we see below is that the Fed Funds Rate is a leading indicator for these charge-offs and delinquencies. Every time the Fed Funds Rate is increased, charge-offs and delinquencies surge with a 6 month delay.

As delinquencies were already surging in 2015, it will be nearly impossible for the Federal Reserve to increase interest rates in 2016. The Federal Reserve is trapped.

Global FX reserves Vs. Global Equities

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Interesting correlation between Global FX reserves and Global equities.

When countries burn up their FX reserves, it means they are in trouble. They are defending themselves against currency outflows. In the case of China it means they are liquidating their U.S. dollar reserves, this equals to a reverse QE. A reverse QE leads to a decrease in global liquidity.