The value of street consensus:

I notice that on BNN’s popular Market Call shows there is a growing tendency for the callers to ask the host for the “street consensus” in addition to the guest opinion on a particular company. The problem is the street consensus is usually a “buy”, a “hold” and rarely a “sell”.

In the new investing book - Market Masters (ECW Press, by Robin Speziale, I state on page 388 “the problem with fundamentals is that the fundamental analyst isn’t going to know anything about jewellery stores by going to the annual meeting. He needs to have actually worked in a jewellery store to understand the real story. Take a stock like Auto Canada, which everybody loved for a while. When I was in Ryerson, to pay my tuition I worked at a GM dealer selling cars. Also, I worked as an apprentice mechanic. So I

was at the back end of a dealer and at the front of it. I knew how complicated a dealership is: you’ve got new cars coming in, you’re dealing with trade-ins, you’re dealing with mechanics, you’re dealing with the union, you’re dealing with sales and marketing, you’re dealing with the workers’ compensation. You’ve got so much going on, so the only people who can run a dealership is the owner who is an entrepreneur.

And why would a dealership ever go up for sale? It’s because the owner can’t take it anymore and wants to get out. So he’s going to unload it to AutoCanada. Well, good luck with that..”

A recent tweet by BNN’s Frances Horodelski was refreshing – “In April 2014, 80% of the analysts that followed $BTU rated it a #Buy.  Today, company files for Chapter 11

$BTU refers to NYSE listed Peabody Energy (BTU) which is displayed in our weekly bar chart – spanning about three years. Note circled April 2014 period that Horodelski refers to at the $250 price level and the subsequent decline to the $2 level. I wonder how many analysts rated Valeant a “buy” or “hold” a year ago?

 

The new 52-week high / low rule:

In my last post – I observed that most of the technical analysts I know have their own style or skill sets they apply to the study of the capital markets. Technical analysis is an art form and differs from the fundamental analysis of profit and loss statements and balance sheets which is a mathematical study of past history      

The technical analyst will also scan the new 52-week high / low list because we know the 52-weekk high / low rule – the first new 52-week high will not be the last and, the first new 52-week low will be the last.

At the close on the TSX April 11, 2016 there were about 32 new 52-week highs (I ignore non common issuers) and of the total population 28 were commodity related. Names like Asanko Gold Inc, Yamana Gold Inc, Kinross Gold Corporation, Barrick Gold Corporation, First Majestic Silver Corp, NovaGold Resources Inc., Detour Gold Corporation and Agnico Eagle Mines Limited were listed.

Most of these names are components of the TSX listed iShares Materials ETF (XMA) and so to avoid stock picking why not just own the XMA?

Ignore the noise - listen to the market:

Most of the technical analysts I know have their own style or skill sets they apply to the study of the capital markets. Technical analysis is an art form and differs from the fundamental analysis of profit and loss statements and balance sheets which is a mathematical study of past history      

We technicians tend to tune out the opinions of the fundamental side and conversely listen to what the markets are telling us. Basically the technical analyst will follow the money – because the smart money will lead the lagging financial statements.

The new 52-week high list will often deliver a profound message – like if the bears are predicting doom and gloom, how come the SPDR Technology ETF (XLK) closed last Friday at a new 52-week and multi year high?