What the Market Wants: Sell-offs and VIX’s Rise Deserve Caution

Repeating Friday’s market performance, today, the S&P 500 sold off in the last 30 to 40 minutes, giving up its entire daily gain for a loss of 0.27%.  Nevertheless, it did gain 0.1% last week for its eighth consecutive weekly gain. 

The Small-cap Growth style/cap was the leader last week, gaining 1.58% and raising its leading one-year gains to 43.67%.  The growth style continued to dominate value in all three major market cap ranges. Value delivered a negative performance for the week in both large- and mid-caps.  (See market stats.)

Market Stats

Interestingly, all economic releases last week, and again today, beat estimates with only one exception, Consumer Confidence, which had been expected to be flat at 72.4, actually dropped to 70.4.  Those indicators beating estimates included Building Permits, Jobless Claims, Durable Goods, Chicago PMI, Michigan Sentiment and Leading Economic Indicators.  A few were actually down a bit but still beat estimates. Today, both the Manufacturing ISM index and Construction Spending for October were up and above estimates.

Two disquieting notes are the sharp drops in major indices during the last 30 minutes of trading and the sharp rise in the VIX fear index, up 5.9% on Friday and another 3.87% today, closing at $14.23.  Volume was quite weak last week as expected, but it was also below normal levels today.  Clearly, there was disappointment in brick and mortar holiday and Black Friday sales, down approximately 3% from last year. However, online sales were up a similar amount percentage wise.  Accordingly, brick-and-mortar chains were down sharply today, while eBay Inc. (EBAY) and other online retailers were up.  Amazon.com Inc. (AMZN) was off 0.41%.

What should we take from all of this? 

Well, the rise in the VIX, while much closer to historic lows than highs, dictates caution. As do the late sell-offs. We feel valuations, while higher than the past few years, are still historically reasonable, and true bargains can be found as our weekly searches have demonstrated throughout the year.  Good news from congressional dysfunction or the ObamaCare fiasco would certainly help.

3 Stock Ideas for this Market

I selected the following stocks from a custom search looking for undervalued growth stocks with recent upward analyst revisions in MyStockFinder (*all data below from Yahoo! Finance):

Marvell Technology Group Ltd. (MRVL) –Technology

Trading 27x current earnings estimates and 13x forward earnings estimates

Analysts have revised earnings estimates up for next quarter in last 30 days

108% projected EPS growth for current quarter, 16% this year, 10% over the next 5 years

Nu Skin Enterprises Inc. (NUS)—Healthcare

Trading for 25x current earnings estimates and 16x forward earnings estimates

Analysts have revised EPS estimates up in last 30 days

97% projected EPS growth for the current quarter, 28% next year, 28% over the next 5 years

NXPI Semiconductors Inc. (NXPI)—Technology

Trading for 79x current earnings estimates and 10x forward earnings estimates

Analysts revised EPS estimates up in last 30 days

90% projected EPS growth for the current quarter, 26% next year, 35% over the next 5 years

What the Market Wants
david / Tag: VIX, AMZN, EBAY, MRVL, NUS, NXPI /