Posted October 28, 2013 9:23
After the debt ceiling debacle, the market recovered its losses and is now setting at fresh all-time highs. There are many reasons to why there should be an end-of-year rally. First, hedge funds have massively underperformed the broader market indices such as the S&P 500, and the only way to boost their returns going into year-end is to buy the market. These hedge funds are going to go after names that can deliver substantial returns in a short period of time. These stocks are the high-beta names; such as Facebook, Netflix, Amazon, LinkedIn, Yelp, Zillow, etc. All of these names have had substantial returns throughout the whole year but are also volatile, which means that an investor can make a large amount of money with a very short period of time.
I think that the time to buy is now, however, I wouldn’t be surprised with a 1-2% fall in the market before continuing to go higher. There are also some fundamental reasons for the market to go higher. Earnings haven’t been as dire as people have expected and there have been many tech sector earnings beats such as Google, Netflix, and Amazon. The economic indicators have been quite poor: the jobs report and consumer sentiment report have been awful. One may think that these are signs for the market to fall, but to the contrary, this just means that the Federal Reserve is going to continue pumping money for a prolonged period of time.
The stocks that I recommended a couple of months ago I still believe are going to do very well in the future. I would add CELG, AMGN, and NFLX to the list of stocks I think are going to continue to go higher. Specifically the AAPL calls that I recommended in august are currently trading for $41, compare that with the cost of $8.40 and that’s almost a 400% profit in just 2 months. I think Apple can report solid numbers when it reports but it would be prudent to take some of those gains off the table, in case Apple drops the ball.
My Year-End Targets
S&P 500: 1820