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8 Companies to Watch on a Stock Market Decline


Consider these names for potential purchase on any decline in the equity markets.

As for the reflating Japan theme, my friends at the Riverfront Investment Group believe that while historically Japan has been very slow to change, once they decide to change the whole population gets behind the move. That's how Japan went from an agrarian society to one of the world's best steel producers in a very short period of time. Currently it looks like Japan has turned the corner, and with Abenomics and an exceptionally friendly central bank, Japan could do quite well for years to come. In addition to Riverfront's funds, there are some ETFs like the Japan Smaller Capitalization Fund (NYSE:JOF), or the Wisdom Tree SmallCap Dividend Fund (NYSEARCA:DFJ). Then there is the largest fund for Japan, the iShares MSCI Japan (NYSEARCA:EWJ).

For early cycle Europe, as well as some emerging/frontier markets exposure, I own the MFS International Diversification Fund (MUTF:MDIDX), which is managed by my friend Thomas Melendez. And while I don't really like bonds of either the muni or Treasury flavor, I have to admit bonds are one of the few asset classes that are non-correlated to stocks that should act as a downside hedge to a decline in the equity markets. For the small capitalization US bank theme, I own the Hennessy SmallCap Financial Fund (MUTF:HSFNX), managed by another friend, namely David Ellison. Speaking to "cash," I have always said that cash is an asset class because to assume the investment opportunity sets that are available today are as good or better than those that will present themselves next week, next month, or next quarter is naïve; and you need cash to take advantage of new opportunities. Last week's TW3 was punctuated by the stronger than anyone expected economic reports (GDP and jobs reports) and the surprise interest rate cut in Europe. That trifecta brought back the "buy the dippers," but they failed to recapture last week's intraday highs. From a purely technical standpoint, that potentially sets the equity markets up for a pullback, which would coincide with my timing models. This week should tell us what near-term direction the markets will take.

Because, like late last summer, I have downside timing points slated to "hit" this week, I really don't have much interest in committing more cash right here, preferring to see what happens later in the week. The following stocks from Raymond James' research universe, however, did beat earnings and revenue estimates last week, and raised forward earnings guidance. Also, all of these screened positively on my proprietary indicators, which is why I would put them on your "watch list" for the potential purchase on any decline in the equity markets. Finally, each of these stocks is rated Outperform by the covering fundamental analyst: Natus Medical (NASDAQ:BABY); DineEquity (NYSE:DIN); FleetCor Technologies (NYSE:FLT); OraSure Technologies (NASDAQ:OSUR); Cardinal Health (NYSE:CAH); LaSalle Hotel Properties (NYSE:LHO); McKesson (NYSE:MCK); and CVS (NYSE:CVS) .

The call for this week: That was the week that was, but this is the week that is! While I must admit Thursday's Tumble took the NYSE McClellan Oscillator into deeply oversold territory, none of the 10 S&P macro sectors recorded oversold readings. In fact, only two of them have fallen back to merely a neutral reading. That would be the Financials and the Utilities. As far as oversold country-specific ETFs, hereto there are only two, Columbia and Mexico. Moreover, while the Dow Jones Industrial Average (INDEXDJX:.DJI) made a new all-time high on 11/7/13, thus confirming the Dow Jones Transportation Average's (INDEXDJX:DJT) new all-time high on 11/4/13 of 7017.34, rendering yet another Dow Theory "buy signal," the US stock market's internal energy has been used up in achieving that "buy signal." Additionally, the divergences continue to mount with almost all of the other major market indices making their respective all-time highs on October 30, and declining ever since. This week should be the key to the stock market's direction into year-end.
No positions in stocks mentioned.
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