Nonetheless, nothing can seem to stop these equity markets from pushing higher. The S&P 500 capped it's 6th winning week in a row and has yet to see a down week so far this year. Just about everyone is waiting for some type of pull back which has yet to happen. This may indicate the higher the rise, the harder the fall.
The broader based Russell 2000 index which includes many smaller market cap companies, continues to lead the way as far as performance is concerned this year. Out of the four major indices that we track, the Russell is leading the pack with a return of 7.6%.
The TAMMA Fund had a difficult week due to the continued out performance of Netflix. This is one stock that has quite a bit of momentum behind it. We are still standing behind our call that the company is severely overvalued and will eventually come back down to earth.
Apple showed signs of strength this week despite being in the limelight as famed hedge fund manager David Einhorn of Greenlight Capital, suggested that the company needs to do more with it's cash position. Einhorn reportedly owns between 1.3M and 1.5M shares of Apple. We particularly liked a discussion we heard on Bloomberg Friday morning with The Big Picture's Barry Ritholtz.
Ritholtz's point was who knows more about what to do with Apple's cash than Apple. He went on to suggest that just because the company has retreated in price the past two quarters does not make it a damaged company. People weren't telling Apple what to do on the way up so why are people trying to tell them what to do now given a lower stock price? We completely agree with Ritholtz while we also continue to stand behind out current long Apple positions.
Moving on from Apple, a sector that continues to perform well this year and is part of our long-term strategy are the agriculture companies. Currently we own Mosaic, Monsanto, Terra Nitrogen, and Lindsay. We are also following equipment maker Agrium, but are hesitant to take a position given the run in the stock over the past 12 months. However, any signs of a pullback we would be buyers of this company.
There was a mixed bag of economic data released this week. The big stunner was the drop in productivity which showed a decline of 2%. This drop supports the lower GDP number for Q4 reported last week. Some of this could be attributed to the uncertainty caused by the fiscal cliff as companies pulled back not knowing what to expect. Initial jobless claims continued to slow and steady march lower which has to be seen as a positive.
The Week Ahead
Another light schedule of economic data lies ahead of us this week. Again, look for individual company earnings report to drive stocks. We will be specifically watching Buffalo Wild Wings, Kinross Gold, and Archer-Daniels Midland.
- Mon - N/A
- Tue - NFIB Small Business Optimism Index
- Wed - Retail Sales, Import and Export Prices, Business Inventories
- Thu - Jobless Claims
- Fri - Empire State Mfg Survey, Industrial Production, Consumer Sentiment
Have a great week!
TAMMA CapitalI wanted to thank everyone who attended our business book club review of “The Power of Habit: Why We Do What We Do in Life and Business” by Charles Duhigg at The Community House in Birmingham this past week. We had a great turnout of approximately 35 people. For those of you who could not attend or are interested in learning more about the book, please email us for a "Guide to Changing Habits" by the author as well as an outline of our discussion.
During the past few weeks, you may have noticed that we have not been writing as many posts as we typically do. Our focus over the past few weeks has been working on the redesigned website that we hope to launch within the next week. We appreciate everyone's understanding and we look forward to bringing you continued great content once this project is complete.
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