Latest Research

After one of the most active months ever for private equity offers, we revisit our LBO screen in “Inside the Stock Market” section. This screen has thus far outperformed the S&P 500 since we introduced it in January of 2006.

The Index of Leading Economic Indicators has a proven track record of indicating when a recession may be near. Although this index has been trending sideways for quite some time, it has not yet rolled over.

Valuations set the stage for better performance out of growth.  But it is important to note that there’s precedent for the value cycle—seemingly already overextended in time and price—to get much more extended. 

Our Attitudinal analysis—or investor sentiment—normally deteriorates badly leading into a major market top, but has held up surprisingly well in the face of the last several weeks’ almost relentless, daily upside action. 

This is the first time that combined net demand for open-end funds and ETFs has been negative since last December, and is quite interesting, even unusual, considering the stock market continued to post new highs during the most recent month.

Oil & Gas Drilling is tied for fifth in our Group Selection Scores this month and was purchased for the equity portfolio.

Expect economic expansion to pick up a bit after weak first quarter, but a 2008 recession is a possibility. 

A look at the relationship between bond and stock yields as justification for today’s expectations of a continued bull market and for the current LBO craze. No evidence that Fed-type valuation models help forecast future market returns.

Steve Leuthold discusses the rationale for using “normalized” earnings versus 12-month earnings and how it now makes little sense to sell in May and go away…..unless you need a long vacation.

The bulls remain in command as evidenced by the fact that the broad market averages continue their ascent toward new cyclical highs (or in some cases like the DJIA and Russell 2000—new all-time highs).

Initial results for Q1 earnings look disturbing. Analyst estimates of 2007 year end earnings for stocks have been declining across all market cap tiers, with biggest declines in the Energy sector.

An In Focus Special Research Study sent in late April provides a detailed look at the growth of the ETF industry and endeavors to organize the ETF universe into meaningful categories.

Clients who use our equity group work are well aware of the successful history of picking groups through the quantitative Group Selection Scores (GS Scores).

Factors driving the stock market obviously vary considerably over time. We isolated 10 factors to show what has been working so far in 2007. Best indicator in 2007 is low short interest, while the worst factors have been Low Price/Book Value and Low Beta.

While the “Sell in May” market phenomenon has become part of Wall Street lore, the sector implications of this seasonal pattern are less well-known.

We know we’re not the only ones to have noticed, but the old economic rules of thumb haven’t been working in the U.S. bond market for some time. 

We view traditional open-end funds as the primary indicator of individual investor sentiment, and consider ETF demand primarily a function of professional demand. With that said, the positive $3.5 billion going into open-end U.S. stock funds in April tells us that individual investors remain cautious.

Expect economic expansion to slow down in the second half. A 2008 recession is a possibility.

Since economic fundamentals are providing little help lately, an understanding of bond sentiment has become especially helpful.

While the current economic expansion has been below average in terms of growth, the profit expansion over this time frame has been explosive.