The Quiet Before the Storm?
02/17/2006
Looking at the FTSE charts, I have rarely seen it so flat. It is as if the market has decided it has found perfect equilibrium and efficiency. It has not of course. What usually happens in these situations is the market after a period of low volatility explodes. But which direction? And what will be the cause?
One cause will be takeovers. And to spot takeover targets it can be the worst performers of last year. If you want to see what an explosive rise looks like, just see BAA which shot up from 650p to 800p. Other strong risers include Prudential and Barclays and Land Securities.
If you want to see what I mean about low volatility, then see Vodafone. It is trading at 1998 levels. It is at 25% of the price it hit in 2000. Marks and Spencer however has exploded to the upside and looks like the momentum remains in place. Standard Chartered too is rocketing away.
If we are looking at prospective takeover targets, then these will be potentially low performers. Cable and Wireless for one, Compass, Kingfisher, British Sky Broadcasting, Royal Dutch Shell, Rexam. And if there were a bid, what would happen, of course they would shoot up - around 25%.
The risk of playing for the next takeover target however is that it may not happen, and the weak stock continues being weak.
(As mentioned last week, each year, I pick some stocks for 12 months ahead which I like for medium risk and target 20-25% returns. I publicly disclose these so they are out in the open. In 2004 I did them for Barclays. In 2005 I did them for BBC2 Working Lunch. This year in 2006 I have done them for WorldSpreads and broadcast them on BBC2 and will also discuss them in my ShareScope Alpesh Patel Special Edition Newsletter too.
How has the portfolio done for the past two years? It is up a compounded 83% before dividends in two years. My Alpesh Patel Special Edition of ShareScope is the software used to generate the names. What were the stocks and which are the ones for the year ahead I like? Email me and I will send them to you.)
Value-Growth
Just a couple of the names from my Alpesh Patel Special Edition ShareScope trading software on my value growth criteria which are based on stocks meeting revenue and profit growth and good value based on criteria such as price earnings growth. See the software for more names. Remember they are for a 6 month outlook: John David Group (new), Wilmingon, Printing.com, Persimmon, Yell.
Rest on the software. Email me if you want to know how I generate these names based on my criteria.
Remember I am targeting about 20-25% with the value growth criteria. Last year it produced 33% return.
On my momentum value indicator (which tracks stocks with value but which in the short term also have money going into the shares) I have: Hiscox, BAE Systems, Irish Continental, XP Power, Yell Group.
Crazy Small Stock
These are high risk volatile stocks which could move sharply higher or move sharply lower in my view, but will almost certainly not stand still. Names on the radar include: XP Power, North Midland Construction, nCipher.
Also, if you would like a free multi-media CDROM on 'Investing Better', which covers spreadbetting, CFD trading and momentum indicators like the MACD, posted to you then drop me an email with your postal address to alpesh@tradermind.com.
Spreadbetters
Spreadbetters and futures traders often look at hard and soft commodities. Here's my quick take on the action for the week ahead:
- Oil: Down
- Copper: Lower to sideways
- Gold: Down
- £/$: Sideways to down
- Dow: Up
- FTSE 100: Sideways
- Soyabean Oil: Sideways to down
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