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Good Things Come In Threes


As Central banks the world over flood us with money it remains prudent to play both sides of the table.

Before I hop on the 1:00 p.m. train from Washington DC to MVHQ, I'll leave you with three new names about to get some affection from me: Nordstrom (JWN), Children's Place (PLCE), and, depending on what the quarter looks like this morning, Analogic (ALOG).

Here is my basic thinking...

n Nordstrom and Children's Place:

  • First and foremost, the charts; I use a charting package called Telechart Gold, which has the most reliable proprietary "money flow" indicators I know of. In the case of PLCE the divergence between "money flow" and price is as wide as one might expect. The same cannot be said for JWN, as money flow is still weak, but it is turning. From a pure pattern standpoint, both stocks are coming off decent bases and offer nearby support.

  • Second, the fundies: They are hardly good, but are they as bad as feared? If you have kids you know PLCE offers some decent stuff at really inexpensive prices, an approach that may attract relatively more demand. As for JWN, it has a reasonable valuation and November same-store-sales could have been worse.

  • Third, the BoE cut rates about 45 minutes ago. I will be shocked if next week the Fed does not act as aggressively as the equity markets hope. Minyans know I believe that the notion that wealth/growth can be created by printing money is a failed policy. But it does not mean that it won't inflate nominal prices in the near term. And in the context of a portfolio which would greatly benefit from nasty downside volatility, I am comfortable owning some stuff that may do well if we are not plunging into the abyss (yet).

On Analogic:

  • It is a natural fit to the "health-tech" theme I like, and in which I am already participating through Hologic (HOLX), SectraAB (SECTB SS), and ElektaAB (EKTAB SS), and Varian (VAR).

  • The same positive pattern/money flow attributes described above apply here.

  • If the company embraces current FY estimates, after the shelling the stock has suffered (from $80 to $50), the valuation is stomachable.

  • As I type this earnings are out: EPS are in line and revenues are a quite a bit higher. The stock is indicated up $4-5; I am not inclined to chase it, especially with strong resistence at $60, but if the conference call is a "happy" event, ALOG goes on the -buy-on-weakness list.
With that, Minyans, I wish you a great day and look forward to seeing many of you tomorrow night at Festivus!
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Positions in HOLX, SECTB, EKTAB, VAR
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