Article by Investment U
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In focus this week: the return of mega-cap stocks, indicators say gold prices are set to rally again and the fattest slap-in-the-face award (SITFA) ever.
While the market has been taking its lumps this year, one sector of the stock market that has been out of favor for years has been lighting it up; ultra-large caps, $50 billion and bigger.
CNBC reported this past week that despite the EU, China and the fiscal cliff hanging over the U.S., the largest of the large, the Russell Top 50 Index, climbed 14% since last year. The darlings of the market since the early 90s, the small caps have gained only 1%.
When you add dividends, these behemoths returned a total of 18%.
In July alone they are up 2% and some analysts are saying this is a sign of a gradual shift back to the more stable U.S. big caps, even away from international stocks.
Jack Albin, CIO of Harris Private Bank, said in the CNBC piece that one of the factors driving the increased attraction of these monsters is stability, and of course dividends. The flight from the EU has also added to the big uptick as investors look for less troubled waters.
The 50 mega caps have a yield of about 2.2%, which blows away anything small caps have.
“One of the big surprises in this sector,” said Keith Trauner of the GoodHaven Fund (GOODX), “is that big companies have been much more adept at cutting expenses, adjusting their cost structure and adapting since the collapse in ’08, more than anyone thought they could.”
And, mega-caps currently have a PE of about 13 compared to small-caps at 20.
Mega-caps may finally be having their day in the sun…
A little over a week ago it was up 2.2%, which got gold bugs just a little excited.
The Hulbert Gold Newsletter Indicator (HGNI) gained 12.5 points last Friday, and Le Metropole Café reported that the HGNI has been under 20% for the last 100 days, a record for the index. The last time it did this was in 2002, which was followed by a 10.9% run-up over two months.
The bullion dealer Standard Bank reported that there is a large short position in Comex gold and there have only been five times since 2004 that Comex short positions have stood out like this.
Three of these spikes were followed by 25%, 23% and 36% run-ups.
HSBC said this past week that based on short positions gold has room to rally from here.
Last year the U.S. debt ceiling crisis was blamed for a 12.3% run-up in gold prices. This year we have our pick: Iran/Israel, the EU saga and the U.S. QE possibilities and looming fiscal cliff.
While it’s never a sure thing, right now there are lots of reasons to watch gold, and that’s coming from a committed non-gold bug…
Donuts are going big time! Tres Leche, Foie Gras, chili mango, apricot cardamom are some of the new flavors for donuts that cost as much as $11, for one donut.
I’m not kidding!
This saturated fat craziness is popping up everywhere. San Francisco has a shop that features a strip of bacon on a maple long john, yuck!
According to a Smart Money article, you used to be able to count on two things from donuts: they were cheap and guaranteed to kill you. Now you can only count on the later.
It seems when times are tough folks look for comfort food and what is more comforting than a donut? But 11 bucks? That’s a lot of comfort.
You can now get donuts made from locally grown ingredients, trans fat free… what’s the point of a trans-fat free donut, gluten free and organic? As the article said, you’re not pigging out on these, you’re doing the world a favor.
The amazing part, Megan Brown of Glazed and Confused, a super donut shop, said even at $3 a donut the margins are lower than the $6 a dozen at Dunkin Donuts (Nasdaq: DNKN).
A chocolate covered $.79 donut is fine with me.
Foie Gras on a donut, how awful!
See you all next week.
Article by Investment U