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2006-05-21 :: What to look for next week

As we approach the Memorial Day long weekend, Monday and Tuesday should be pretty quite as there are no major economic announcements scheduled.  This means there will be no economic news to guide or scare the markets and no Fed announcements exacerbate the situation.

As we move through the week, we’ll see Durable Goods, New Home Sales, Exisiting Home Sales,  and Consumer Sentiment numbers released.  Any number that shows the economy stronger than economists anticipate will cause traders to fear further Fed interest rate increases, likely sending the market indices down.  Any number that shows the economy weaker than anticipated will likely send indices up as investors move to take advantage of beaten up stocks at good values.

This week, we start the process of selling some of our lower rated (per my system) holdings and reinvesting in shares of our higher rated (per my system) holdings. 

  • Purchases will be in companies we already hold or in companies in which we took profits in late April and can now buy back in at lower prices – companies like Nabors, Nobel, Grant Prideco, Alcoa, Gardener Denver, LB Foster, Florida Rock, Cemex, General Cable.
  • Purchases will be in companies I’ve wanted to own but whose valuations were too high – like FosterWheeler, Johnson Controls, Ingersal Rand, Alcan
  • Sales will be in companies whose long-term fundamentals are good, but whose short-term fundamentals are under pressure – certain health care, early cycle energy, deep cyclicals – which we’ll repurchase later on

Market pullbacks like we’ve seen over the last two weeks can painful to experience in the short-term, but they provide opportunities.   Longer-term investors can capitalize upon  their investment strategies which will ultimately provide better long-term performance than static buy-and-hold strategies or strategies from investment managers that are not pro-active.

I’ll write more as the week progresses and we put our strategies into action!

Mark