A Deep Post-Decline Analysis Part 2

 | Feb 25, 2013 | 8:30 AM EST  | Comments
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Retail's become a vicious conundrum of late and the list of retailers with acceptable charts is a bizarre one indeed. CVS (CVS), which hasn't pulled back a whit since preannouncing but has based well since that event, Tiffany (TIF), a tremendous conundrum given its previous hideous quarter, Kroger (KR), no doubt benefitting from the perception that the Whole Foods (WFM) dominance may be overblown (something that Safeway (SWY) confirmed in its terrific quarter earlier last week), and TJX (TJX). The latter, a new Action Alerts PLUS stock, reports this week and if the charts is right we might have a winner.

There are some stocks that defy characterization by sector, but are too notable not point out. First, two hoteliers, Wyndham Worldwide (WYN) and Starwood (HOT) have pulled back to welcome levels. WYN had still one more terrific quarter and remains a huge dividend booster and a company with tons of buyback firepower, maybe the best in the book. I was glad to see Starwood bottom as it has one of the finest growth profiles that I know, yet has been hit with a couple of wrong-headed downgrades.

Time Warner (TWX) remains totally buyable, as does Comcast (CMCSA), both of which reported tremendous quarters. A couple of oils stand out despite the decline in price of crude. EOG (EOG), with a retiring CEO, so it is heavily bet on to be acquired (for the record I don't think so and I like the earnings profile) and Diamond Offshore (DO). Offshore drilling's coming back post-Macondo, but with the BP (BP) trial beginning today I don't know if I want to get ahead of that monster.

Two others that rarely come in but can be considered retreating about as much as they have in the past before they were buyable are Gilead (GILD) and Biomarin (BMRN) (some great recent news there) are worth noting, as is my favorite biotech Monsanto (MON), except this one is a biotech company for seeds. This is the best-in-show ag stock in a very bad group, including the fertilizers and a very lagging Deere (DE).

Next up are the stocks that seem ripe for a correction, the overextended charts. There are a huge number of these that have all run too far for my tastes, perhaps because of the halo of Warren Buffett's purchase of Heinz (HNZ). Anything Buffett does is worshipped to the point where market participants will buy others in the sector hoping that lightning will strike twice.

To me this over-rotation tells me be careful and I would be a seller of almost all of these stocks, starting with General Mills (GIS), Hormel (HRL), Clorox (CLX), Campbell's (CPB), Colgate (CLP) and Conagra (CAG). Sure, Campbell's could be taken over. The others are just slow growers that, to varying degrees, seem ready to correct. I think if Chavez dies, you would get hurt on a return to higher profitability for Colgate's substantial Venezuelan business, otherwise I think group is certainly not the place to be. (Keep in mind that there are shorts running all over Hain Celestial (HAIN), on lies about its claims to be organic on many products and as much as they are rebuttable, no one seems to care right now and the stock seems headed lower still.

Johnson & Johnson (JNJ), Procter & Gamble (PG) and PepsiCo (PEP) are substantially overbought, too, but I would not be afraid to buy some on any weakness.

There's not all that much that is overextended, but two techs seem ripe for a bit of a correction in Google (GOOG) and Tech Data (TECD). The $1,000 price targets that Google got hit with last week seemed preordained to call a short-term Apple-like top. Tech Data has a huge amount of European business, so I think the rally could stall here.

It's worth noting that both Federal Express (FDX) and Action Alerts PLUS name United Parcel (UPS) seem over-extended, too, but I know that I am looking to buy more UPS not sell it, even as we did recently take profits in FedEx.

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