Tuesday, April 13, 2010

Taking a Step Back

The market is taking a breather this morning, and it is definitely due.  We crossed 11k on the Dow, and that was about as far as it went.  While we're definitely due for some type of pullback, but I wouldn't be surprised if it isn't that significant.  The economy continues to improve, and you can just feel the confidence come back to the market as things move gradually higher.  To me, its still a market for picking stocks though.  I look at the large-cap stocks that most talk about and I really don't see a catalyst for them to make a sizable move.  Yes, the economy is improving, but that has been priced into many stocks.  I continue to like smaller cap names, and some other non-traditional companies.

I still would point to a company like Loews Corp (L) if you're looking to find value out there.  The market continues to undervalue the total group of their assets.  CNA financial, which Loews owns a 90% stake is a classic case of a stock beaten down badly during 2008-2009, but is primed to perform well very soon.  I also think commodities will be hot again very soon.  Loews has great assets there, with a 50% stake in offshore driller Diamond Offshore, and natural gas exploration and pipeline assets as well.  The stock still trades below book value, and I think there is a pretty good chance some of this value gets realized when Q1 earnings come out of these various companies.  I took advantage when the stock pulled back into the 35 range in January, but haven't added to the position yet.  I'll definitely look to add before earnings on May 3, and maybe a correction will play right into our hands on this one and help us buy Loews shares for cheaper.

Etrade (ETFC) is another company I may look to add as well.  Their operations are improving in the loan portfolio, and the brokerage business is a good one.  Although lower volatility has brought trading revenues down a bit, more funds and new accounts continue to help them grow.  Someone might swoop in and buy them if the stock stays this low, and if they don't, I still see shares appreciating as they move back into profitability.  Here's a good story I found at thestreet.com about a potential deal for Etrade.

If the market reacts like it has been (buying any dip), we'll probably have moved higher again by the time you read this. : )

Disclosure: Long L, ETFC

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