Market Recap: Berkshire Powers On, Our 2010 Survey

Today, I want to talk about a couple of our stocks and fill you in on our 2010 Survey…

But first, a word about what’s going on with the market right now:

This week gave investors a return to heightened volatility as the VIX volatility index broke out to new highs for the month of September. But while the media focused on economic data as the driving force in the increased sway for stocks, the truth was much easier to understand…

On Monday, the S&P 500, a good proxy for the broad market as a whole, broke through a significant technical resistance level at 1130, taking stocks well above last Friday’s levels. Not surprisingly, Tuesday and Wednesday saw stocks lower as the market tested newfound support at the 1130 level.

While the Fed’s rate meeting was blamed for the tumble in equities, the market was really drooping because of technical phenomena.

Remember, the financial media likes explanations. It’s tough to say “the market’s up today, and we don’t know why…” so instead, CNN and CNBC attribute moves to whatever news story is in the headlines – even if it doesn’t really make sense. The fact is that on a day-to-day basis (barring a real piece of market-moving news) we really have little understanding over why the market moves the way it does. Despite that fact, technical analysis at least gives us a method of predicting how stocks will move in the short-term. Over the longer-term, nitty gritty fundamental analysis rules the roost.

So, what’s going on in the short-term?

Right now, it looks like more bullish days could be ahead… Following the market’s pullback earlier this week, we’re getting a bounce higher off of support today. Now that support has been set at 1130, we’ve got pretty unobstructed upside to the 1175 level.

Now onto our open positions…

Our Berkshire Play Powers On

Berkshire Hathaway (NYSE:BRK.B) is having a powerful run-up today thanks to strength in the insurance industry as a whole. As I write this, the stock is up around 3.5% intraday – making our overall gain on the stock more than 27% since we bought it in January.

That stellar performance is even more impressive compared to the rest of the market: the S&P 500 is down 0.2% over that same period. I’ll have some more interesting performance notes in next week’s quarterly letter to subscribers…

Selling Beer In China

Our long-term investment in beer is also paying off right now. Earlier this week, Molson Coors Brewing Company (NYSE:TAP) announced a deal to acquire a 51% stake in a joint venture with a Chinese beer company. The deal will help Molson Coors introduce popular American brands (like Coors Light) to Chinese consumers. With excellent beverage prospects in the People’s Republic right now, this move could provide Molson Coors with some top-line growth potential – especially now that China has vowed to let their currency appreciate for the rest of 2010.

Our 2010 Survey…

As I mentioned in last week’s market recap, I’m sending out our first quarterly letter to subscribers at the end of September (i.e. next week). In it, I’ll touch on strategies going forward, our performance, and changes coming to the Rhino Stock Report.

But I need your help too. Please fill out our Rhino Stock Report 2010 Survey. It’ll help me align this publication with your interests – and it’ll give you the chance to make suggestions and ask me questions.

I’ll answer your questions in next week’s letter. Click here to fill out the survey now – it’ll only take 5 minutes of your time.

Cheers,

Jonas Elmerraji
Editor, The Rhino Stock Report

Reviewing Our Open Positions and Taking New Stakes

With earnings season finally drawn to a close, now seems an appropriate time to review our open positions here at the Rhino Stock Report. On the whole, we’ve seen stellar performance from our Rhino plays in 2009, and there are still chances this year to make new gains… But let’s take a look at some older open picks first.

J.M. Smucker (NYSE:SJM): The J. M. Smucker company has been one of our best-performing holdings to date — currently up 58% since it was recommended in April. Smucker has been getting new analyst and investor attention lately following yet another solid quarter of earnings released on November 20. And while those new shareholders have been late to the party, with the stock currently at a 52-week high, I see this one traveling higher still.

SPX Corp. (NYSE:SPW): While SPX Corp has had some trouble delivering the numbers we’ve been looking for in its last couple of quarters, a late November dividend and current 20% gain on the stock serve as a good reminder of why this “boring” stock was worth investing in. Recently, SPX’s CFO noted that the current economy made for a “realistic merger and acquisition environment.” That’s good news for a company that’s made considerable growth through acquisitions… the latest of which was completed on December 10.

Computer Sciences Corp. (NYSE:CSC): While CSC’s latest quarter release seemed comparatively tough at first glance, a closer look revealed that one-time income from the second quarter of fiscal 2009 accounted for a lot of the “decline.” All told, it’s business as usual at CSC, with a seemingly constant stream of new contracts flowing in. At present, the company is our biggest open gain up 65.11% since March.

Molson Coors (NYSE:TAP): This beer maker has been making good on our bets since we doubled down back in March. We’re currently up an average of 21% on the double-sized stake. The brewer’s third quarter was solid, with increased cost savings from its joint venture with competitor SABMiller (OTC:SBMRY). And right now, it looks like the currency conversion issues that plagued us in the first quarter of the year could work in our benefit coming into the fourth quarter — a catalyst that could push shares higher yet in early 2010.

NRG Energy (NYSE:NRG): While NRG is currently our newest position, the stock is performing strongly, currently up more than 8% in the last month. That has been thanks in part to increased analyst interest in the stock on our coattails and strong call option interest that’s stacked in our favor. The company’s pursuit of profitable green initiatives should continue to bode well for us going forward.

Taking New Stakes in Rhino Stocks

I know that new subscribers are looking for guidance on whether it still makes sense to take positions in our open Rhino Stocks, particularly when so many of them are up so much. Right now, the only stock that is still a reasonable buy is NRG Energy. Disciplined investors never chase the market, and our other plays have already had too much time to run ahead.

That said, we’ll be taking new positions in December and January, so there will still be plenty of chances to get into stocks that remain within buying range. Watch your inbox this month and next for my next Rhino play as well as your Technical Analysis webinar.