Kennouth Investments

Times to Buy All-Time Highs: Dow Jones, S&P 500, Starbucks (SBUX), Celgene (CELG), KIE

            2013 has proven to be a very profitable year.  Year-to-date, the Dow Jones has soared 19%, the S&P is half a percent higher, and since the lows of 2009, more than doubled at 121% and 133%, respectively.  But three sectors have significantly outperformed those returns; consumer staples, technology and biotechnology, and financials.  From the same time of early 2009, the XLV rose 135%, well-known biotech company Celgene exploded by 284% and the sister SPDR ETF, XLF, earned a little less at plus 265%.  Along with being well led and having plenty of room for expansion, the symbols mentioned in the title can also attribute their success to achieving all-time or multi-year highs.  When this happens multiple times over several years, it’s a good indicator that your investment won’t be facing much risk, and better, should ring in high profits. 

            The last four years have been filled with volatility fodder, moving markets and gridlocking the political arena.  Looking at the indices, however, the market seems to be unaffected, maybe even better off, with political inaction.  Some regulation has been put in place, but really it’s the Federal Reserve’s monetary policies that have allowed the stock market to recover.  And the wall of fear that surrounded sequestration was sapped when quarterly earnings and jobs reports kept beating estimates this year.  This year’s bull run could also mean the stimulus programs and bailouts we all hated have actually worked.  We won’t see the full effects of Obamacare for another year now, but green energy investment, tax incentives for small businesses, and the housing recovery are just a few steps taken by the government to allow certain sectors to make more money than others.  Politics aside, returns from the past four years should bring more certainty to stock market investing, sending indices even higher.

Starbucks (SBUX)

            Starbucks is quite an American success story.  It’s the product of a commodity increasingly demanded by a country that wakes up earlier and stays up later every day, combined with an iconic image of the great American city of Seattle.  The coffee shop has successfully placed itself at the top of the consumer staples/fast-food list in terms of growth.  The stock has grown 820% in four and a half years.  Compared with its competitors, like McDonald’s and the Yum! Brands restaurants, Starbucks has a much lower presence in overseas markets, like Europe, China and India.  They have more than 700 stores in China, but about 12,000 in the United States, despite a population a third the size of China.  And the very first Indian Starbucks shop opened last year in New Delhi.  Stores should also expect more food sales, as they were a large factor in its outperforming earnings statement last quarter.  It has fallen below its 50 – day moving average only on two occasions in the past nine months.  SBUX closed at an all-time high today of $73.48, and I wouldn’t be surprised if it hit $95 or even $100 by years end.

Celgene (CELG)

            It’s taken me a while to take notice of biotech stocks, but when I did, I knew why Jim Cramer is always talking about them.  Featured stocks in this category of his include Celldex Therapeutics (CLDX), Gilead Sciences (GILD), and Tearlab Corporation (TEAR), all of which have doubled from twelve months ago.  Another biotech stock not talked about much is Neurocrine Biosciences (NBIX).  It too has doubled from a year ago, but since January 2010, it’s grown 428%.   Catching the attention of a lot of investors, however, is Celgene.  From this time two years ago, it’s risen 148%, two-thirds of that being since November.  Second quarter earnings reported a 17% increase in revenues from last year.  In chart technicalities, the 9-day moving average came close to crossing over and going back below the 13-day MA.  But a bullish sign of strength came six sessions ago, July 25^th (earnings), when the price had a two-day move from $135.99 to $143.94, almost six percent; this was followed by a down day that closed higher than its open, and a session threepeat sent CELG up almost five more points (3.6%) to all-time high of $148.79.  This stock doesn’t show many, if any, signs of slowing down.

Insurance

            Not many people enjoy thinking about their insurance.  It’s something no one really wants, but when it comes down to it, it’s something we all really need.  Most companies are fearful of how Obamacare will affect their balance sheets.  But in my opinion, the possible negative effects of Obamacare pale in comparison to the money to be made in life insurance over the next fifteen years.  For two years now, one group of Americans has jumpstarted the life insurance, back to life.  Those born in 1946 through 1964, the Baby Boomers, started turning 65 in droves, like ten thousand a day.  It’s been claimed by executives of Assurant Solutions (AIZ), that this generation will pass on $22 trillion of wealth to their survivors.  Companies in life insurance, annuities, and financial services, like Assurant Solutions, are determined they get the largest slice of that pie as possible.  Still not convinced life insurance is positioned for outperformance?  Of the sixteen SPDR ETFs that Kennouth Investments monitors on a daily basis, only one outperformed the insurance ETF year-to-date, KIE, and that was biotech, XBI.  In addition to being at an all-time high of $57.75, it beat XLF (financial) by five percent, which is still nearly twelve points away from its all-time high of $32.35.

            So when is it safe, or safer, to buy stocks at all-time highs?  These stocks all outperformed estimates.  They all have good business models and have a lot of market space to fill.  They all came close to or achieved double-digit rates in earnings statements and outperformed the major indices by about an additional 25% year-to-date.  Lastly, SBUX, CELG, and KIE have soared more than 250% since 2009.

Charts courtesy of TDAmeritrade’s thinkorswim software

Disclaimer: Trading stocks has extremely high risks, and should not be taken to lightly without a thorough understanding. This is written from a purely commentary point of view and is not meant to suggest buying, selling, or holding a stock. All traders must do their own research prior to investing. We (Kennouth Investments, Learning and Research) are unaffiliated with all of the companies that are mentioned on this blog, and can't be held responsible for any losses that may occur. Invest at your own risk.