My colleague, Anna Torma, is grateful MeadWestvacohas held up reasonably well in this market. She does feel that if my thought that the S&P 500 is vulnerable to the lower 800's, then the difficult market environment might impact the stock. In a current note she has lowered estimates and there are some who are worried about the dividend. She has a buy rating on the stock and should it react negatively to a market move she would be an even more aggressive buyer with a target of $20. I hope otherwise, but the near term could be rocky. She thinks it could be vulnerable to $11-12 a share versus $15.84 Monday close.
I have long thought the oil market got ahead of itself. My experience has been that when "days in storage" rose above 55 days, prices of crude oil tended to weaken. The current storage is a touch over 62 days. I know that OPEC has been more disciplined in its production cutbacks but I think the recent strength in the price (not the last couple of days) has been due more to the thought economic recovery was close at hand. As I have been writing, I think that the recovery will come, but not today. I would be negative in the short term on the oils and there are a few ETF's that might be worth looking at. SCO is the 2x levered short, SZO is an unlevered short but apparently has poor liquidity, UCO is 2x levered long in case you think I am out of my mind, and USO is an unlevered long. My colleague Rick Rubin, COO of Soleil, did the digging to come up with the names and says the unlevered have a tracking issue due to compounding over the long term and there is no unlevered short with any liquidity.
Ford makes sense to me on the long side. Seven of Mike Ward's indicators are turning to the better and earnings at the end of July, or smaller North American losses, might surprise. Inventories are at very low levels and a few new models are scheduled for release. Mike has raised his near term target to $9.
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