Happy Monday fellow traders. Welcome back to the dance, though before I forget, this coming Friday is Good Friday, and the U.S. stock market is going to be closed. Any trading activity you were mulling this week is going to have to be done by Thursday.
Also, don't forget this is the last week of the calendar quarter, which means a bunch of mutual fund managers may be doing a little window dressing before wrapping up the month. That can be good, or bad, depending on a variety of factors. Either way, just be prepared to see a little more 'umph' than we've been seeing of late behind this week's moves.
Anyway, those are academic details at this point. What I really wanted to draw your attention to today was the six new Featured Stocks that were added at the site late last week. I'm going to start keeping tabs on these stocks for you in the newsletter (though only briefly), as we think highly of these six tickers and their foreseeable potential.
Oh, and if you just can't wait for our analysis of today's wild ride for the market, it's at the bottom.
The 3D Printing Megatrend, Redux
One of our new Featured Stocks is Cadence Pharmaceuticals (CADX), which we first mentioned way back in the March 6th newsletter. I also explained on Friday you may want to raise your safety-stop level on the stock... if you happened to step into a position based on our comments. After all, you want to protect that 14% profit we've seen so far. Honestly though, after today's round of bullishness, we're already at a point where you'll want to ratchet up that stop-level again. There wasn't any news behind the move - the market's just still falling in love with the potential of Ofirmev.
The other new name I'm really stoked about adding as a Featured Stock is 3D Systems (DDD).
Assuming you've been active in the market for at least a year, you're undoubtedly aware that 3D printing-mania captured the hearts and minds of traders last year in the same way so many homebuilding stocks drew a buying crowd back in 2006. Unfortunately, as was the case back in 2006, investors got ahead of themselves, bidding 3D printing stocks up too fast; these companies just weren't ready to support the lofty valuations we were seeing in mid-January. For example, DDD shares were trading at a P/E of 102.0 at one point a couple of months ago.
What a difference two months and a 40% dip can make.
Currently at a trailing P/E of 68.7, 3D Systems shares may still feel a little frothy, but it's at least a palatable price. Even more palatable - though completely plausible - is the forward-looking P/E of 24.10. It's still expensive, but with an annual revenue growth rate of about 50% for the past couple of years and a projected 26% increase in per-share earnings this year, DDD actually ranks as a 'bargain.'
Too good to be true? Normally we'd understand the worry - the numbers don't seem real. The 3D printing craze isn't just a fad though. These things are powerful and affordable, giving small companies on a tight budget (as well as personal consumers like me and you) the ability to fabricate any three-dimensional object imaginable.
Some of the lower-end 3D printers cost just a little over $1000, and heavier-duty ones only cost a few thousand bucks. That's not chump change, but if these printers give an organization the ability to fabricate a model, prototype, or even mass-produce a marketable product in just a few minutes, that's game-changing. These printers literally allow anybody to set up a mini-factory in their house.
Some experts think 3D printers could account for $1 trillion worth of industrial-fabrication business within a few years. That's about 10% of the world's $10 trillion in sales created each year by manufacturing companies. The 3D printer business itself, however, is expected to grow from last year's $2 billion in the United States alone to a $5.2 global market by 2018. That's strong-double digit growth. And based on what we've seen so far, it's not afar-fetched outlook. Somebody's going to pocket that money... may as well be 3D Systems.
Anyway, a couple of guys at the site have already picked up on the 3D printing mania, and even dissected some of the stocks that are making it happen. James Brumley pointed out that now was the right time to step into DDD, and John Udovich answers the yay/nay question for 3D Systems with this take from Friday. Good stuff.
What's a 'Featured Stock'?
What's a Featured Stock? Glad you asked. For lack of a shorter and simpler way of explaining it, a Featured Stock is a stock we like, and one we think has a good shot at outperforming its peers or the broad market.
Isn't that what the SmallCap Network Elite Opportunity does? Ummm..... yes and no.
Although we talk about different stocks we like here in the newsletter (and update that list as needed), this free newsletter isn't a full-blown stock-picking service. We don't really talk about entries and exits, and we just can't keep constant tabs on these companies like a shareholder would want to - there's just too much other stuff to talk about.
The SmallCap Network Elite Opportunity, however, does exactly that. These guys say exactly which stocks to get into, and when to get into them. The SCN EO also says when to get out of them. It doesn't get much easier.
And speaking of easy, here's something that'll make your decision to check out the SCN EO even easier... they're now offering a free two-week trial. That's a no-brainer, if you've been curious to see what it's all about. You can learn more about it here. Or, copy and paste the following link in your browser: http://www.smallcapnetwork.com/?vmpd_ckstr[click_track]=SCN+Newsletter&vmpd_ckstr_redirect=/pages/SCNEO/v1/
About Today
Honestly, there's really not a lot to say about today's action. Although the bears technically won the day, the bulls once again managed to push themselves up and off the mat before the closing bell rang. The bulls even managed to push the S&P 500 up to a peak of 1564.91. That's just a tad above the peak of 1563.62 hit a week and a half ago, meaning the market made a multi-year high today.
Of course, it took no time at all for things to turn south again after reaching that high, which may well be the most troubling part about the whole thing.
If the market was ready to rally, the re-entry into new-high territory today should have been exactly where it happened. Instead, all it took was just a slight brush with that line in the sand to send stocks lower again. At this point we can say with some confidence that traders have convinced themselves the market's not willing or able to keep making new highs. Ergo, traders are going to think and act accordingly, selling stocks when those key levels are hit.
That doesn't really change anything with our outlook - we were already leaning bearishly. Each day the S&P 500 doesn't break through that ceiling, though, is another day the would-be buyers lose interest. Much more of this non-progress and the bulls are all going to close their wallets and head to the sidelines, pulling the rug out from underneath the market. Again, that dip doesn't have to be a bull-market killer, but it won't be any fun either.
The next step is a break under the 1542 level, which was a key floor last week as well as where the 20-day moving average line is now. If the S&P 500 breaks under that mark, things should start to unravel a lot faster than they are now.
This is still a day-to-day matter, however, so we'll be checking in again tomorrow.