Weekly Notes from Paul Resnik, CFA: Dec 28, 2015

Paul Resnik operates Resnik Asset Management Co. (RAMCO), a registered investment advisor.

Dec. 28, 2015 | RedChip Companies


Stocks rallied strongly in the holiday-shortened week with the Dow Jones Industrial Average rising 423.62 points (2.47%), the S&P 500 Index gaining 55.44 points (2.76%), and the Nasdaq Composite advancing 125.41 points (2.55%). Interestingly, the rally was particularly strong for previously-depressed issues. Data from Bespoke Investment Group showed that those Russell 1000 stocks in the bottom 10% of performance for 2015 jumped an average of 7% last week, as of Wednesday. The worst 20 stocks for the year were up 10% last week. It would appear that professional investors were taking profits by covering short positions before year end. While the Dow Jones Industrial Average remains down for the year (-1.52%), the S&P 500 inched into positive territory (+0.10%). Oil prices also bounced back from recent weakness with the light crude price rising from $34.73/barrel to $38.10. Online orders surged putting pressure on delivery services in advance of Christmas. However, it was reported that year-over-year sales in physical stores fell 6.7% over the last weekend before Christmas, while traffic fell 10.4%. In other news, private space-flight company, SpaceX, successfully launched its Falcon 9 rockets Monday at Cape Canaveral. It entered orbit, released 11 satellites, then landed vertically on a designated landing site, the first time such a feat had been accomplished. I found the video account of this feat on the SpaceX website absolutely inspiring. Not so inspiring was news from China that a massive mudslide in Shenzen, that buried dozens of buildings and likely killed scores of people, consisted of construction rubble accumulated over many years and that by midweek the smog that had enveloped Bejing for four days had only began to lift. The government called off the smog alert in Beijing but imposed new alerts in 10 other cities in China’s northeast.

In the News

Oneok Partners (OKE-24.12) Piping Hot

On Monday, ONEOK Partners announced that it expects 2016 earnings to be driven by continued natural gas and natural gas liquids volume growth across its integrated pipeline system, with strong year-end performance providing it momentum into 2016, and that its substantial backlog of well connects, flared gas inventory in the Williston Basin and uncompleted wells provides considerable visibility into our 2016 volumes. While the Company stated that the commodity price outlook remains cautious for 2016, it expects the partnership's 2016 earnings to increase compared with 2015 guidance, primarily from volume and fee-based margin increases, resulting in increased distributable cash flow. While the stock rallied 27% last week in response to the favorable outlook, the shares still provide a current yield of 10.6% and remain down 51.5% year-to-date.

ORBCOMM Inc. (ORBC-7.44) In Orbit

ORBCOMM, a global provider of Machine-to-Machine (M2M) and Internet of Things (IoT) solutions, announced on Monday that it has successfully launched eleven next generation OG2 satellites from Cape Canaveral Air Force Station. The eleven OG2 satellites were successfully separated from the SpaceX Falcon 9 launch vehicle into the proper orbit. The satellites are expected to be providing full commercial M2M messaging and Automatic Identification System services within the next 60 days. ORBCOMM’s OG2 satellites are far more advanced than its current OG1 satellites, designed to provide subscribers with faster message delivery, larger message sizes and better coverage at higher latitudes, while significantly increasing network capacity. The stock was up 10% last week to finish near the top of a tight 52-week range.

The Week Ahead

This holiday-shortened week will have a paucity of economic data releases and scheduled earnings reports. President Obama will be on vacation in Hawaii all week. Congress is on recess until it reconvenes the first week in January. In the meantime, market analysts are wondering whether last week's rally for depressed stocks will continue into January. The Treasury auctions scheduled for this week are on: Monday: $28 billion three-month bills, $26 billion six-month bills, and $26 billion two-year notes; Tuesday: $35 billion five-year notes; and Wednesday: $29 billion seven-year notes. The when-issued yields as of Friday afternoon were higher than the last auctions for all the note maturities. I wish all my readers a happy, healthy and prosperous new year.

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