U.S. indices were able to shake off last week’s pressure, finding strong 50-day moving average support and
now looking to break through the highs from earlier this month. Resistance for the S&P 500 lies at 2116, while
the Nasdaq faces resistance at 5163. Leadership, though narrow in numbers, is acting very strong, leading us to
believe the major averages could test these resistance levels next week.
Author: Raj Gupta
Raj Gupta is Director, Research Analyst.
After joining the firm in 2002 as a research analyst, Raj was appointed senior equity analyst in 2006, and lead senior equity analyst in 2014—largely because of his ability to select outperforming stocks. He acts as an expert in the O’Neil Methodology and contributes to the direction of product and service line development. He recommends securities for addition to or removal from the U.S. Focus List, or USFL, and the associated alerts to clients. During his tenure, he was part of the leadership that developed the Global Focus List, which marked the firm’s successful expansion into international equity recommendations. He is also a lead on the IPO Rewind report and contributes to weekly summaries on the performance of the U.S. market. Much of his expertise is delivered as highly customized service to clients.
RAj earned his Bachelor’s degree in Economics from the University of California, Santa Barbara. He began working at the firm directly out of college, driven by his passion for investing and stocks. An avid soccer player, he built and managed an adult league in the Los Angeles area, in which he still plays. He also enjoys international travel; he and his wife commit to at least one major adventure a year.
Market View
U.S. indices ran into heavy resistance, giving back three weeks of gains due to poor earnings results from multiple major retailers. The S&P 500 and Nasdaq both broke below their respective 200-day moving averages, with each now looking to find support above their 50-day moving averages. The Russell gave back last week’s strong move and remains the lagging index.
Market View
U.S. indices moved higher for a fifth straight week, supported by a nice bounce in the Health Care sector and a further rally in large cap growth ideas. Though breadth is still isolated in large caps, a handful of good earnings reports sparked a rally in the Russell on Wednesday. A further rally in small/mid-caps would be encouraging, as outperformance is still coming from just a select group of leadership ideas.
Market View
U.S. indices continued to move higher this week, with the big move coming on Thursday. Leadership is gradually emerging, but major support for this move is still coming from lagging sectors (Energy, Basic Materials, and Transportation) and a recent surge in defensive sectors (Utilities and Consumer Staples).
Market View
U.S. indices dropped sharply early in the week, before rebounding to close slightly negative. The September
8th follow-through day, which provided no new ideas to the U.S. Focus List, quickly failed as indices re-tested
their August closing lows. The indices are now finding short-term support at their prior lows, with heavy resistance
along their respective 10-Week moving averages. We are now in the second rally attempt of this
current correction, awaiting a new follow-through day as well as new ideas. We continue to advise caution
until we see this combination occur.
Dorman Tops Aftermarket Auto Partswith Flexible, High-Quality Line
Dorman Products, Inc. , a manufacturer of “new to the aftermarket” automotive replacement parts, is extending its product
line and driving growth. In 2013, the Company introduced 873 new parts, many from brand-new product offerings, to meet demand arising from both the increasing complexity of automobile engineering and the expanding number of makes and models on the road. We see these lower-priced, formerly OEM-only parts as a unique competitive advantage for Dorman that should provide several more years of growth in revenue and earnings—and stock out performance. We rate this stock as a buy.
Fewer Uninsured May Buoy Successof Team Health Holdings
The policies of the new Affordable Care Act (ACA), widely known
as Obamacare, will be fully implemented in just under one year.
Companies that have been serving uninsured patients will now
have a strategic advantage under the new policies and will begin
to reap the benefits of this reform. A Congressional Budget Office
(CBO) study suggested that 30 million of 56 million uninsured Americans
would gain insurance under the ACA by 2016. The CBO estimates
roughly 17 million would become insured through Medicaid
and Children’s Health Insurance Program (CHIP) expansion, with
the remainder insured through newly created exchanges.1
Of several companies that could directly benefit from the changes
brought about by the ACA, particularly the large increase in
insured patients, Team Health Holdings, Inc. is the standout
among the Commercial Services-Healthcare group, according to
our research methodology. The stock is showing a rise in sponsorship
over the last four quarters, an EPS rank of 94, double-digit EPS
and revenue growth, and a chart setup in perfect technical position
for further gains. On March 20, 2013, the stock broke out from
a second-stage flat base with support off its 10-week moving average
on very heavy volume.
