We saw an amazing performance from stocks this week, with the averages leaping to their best performance in two years on Greece’s freshly minted rescue package and some encouraging economic data. For the week, the Dow added 650 points to close at 12,583.
The big break in the Greece story came when the financially battered country finally agreed to the stiff austerity measures the EU was demanding in order to provide more financial support. That wasn’t an easy battle, because the last thing the politicians want to do is cut entitlements and lose the faith of their constituents. But with bankruptcy and default as the only other viable option, Greek leaders simply chose the lesser of two evils.
The other catalyst for the market was two encouraging pieces of economic data, with both Chicago PMI and ISM Manufacturing coming in ahead of expectations. It comes on the heels of what has been a fairly soft patch of data over the last two months that fueled concern that the economy was headed back into the doldrums. But with a temporary reprieve from the trend, the market got a very nice shot of confidence that the private sector will find a way to keep growing in spite of lingering challenges.
So when you put it all together it was enough to lift stocks to their best weekly performance in two years. It’s also an excellent example of why buy and hold is a great investment strategy, because this is a rally that pretty much snuck up on everyone. That means anyone who was selling into the recent weakness as opposed to averaging down missed out on a very rare opportunity to pick up some serious gains in a very short amount of time. It’s something for everyone to think about as we learn from the bullish but choppy market of the last two years.
Moving forward, we know there will be challenges, but for the time being, anyone who owns stocks has something to feel good about over the long holiday weekend. Let’s look for more of the same as we head into the second half of the year.
Updates:
The strong rally gave our stocks a very nice boost, let’s take a closer look.
The big winner of the week was Amerigroup Corp (AGP), jumping 12.4% for a fresh all-time high at $72.79. We saw AGP dip about 13% in June after falling from $71 to $62. But stocks that fall the most in a weak market are also the ones that usually rally the most in a bull market, and that’s exactly what we saw here. With the long-term trend in healthcare and Medicare and Medicaid well in play, AGP is looking like a serious winner.
Close on the heels of AGP was EZCORP (EZPW), surging more than 7% on Wednesday and finishing the week with an impressive 12% gain and new all-time high at $35.95. As a small capper with a market value of $1.8 billion, EZPW is in the early stages of what is looking like a very powerful growth cycle. So even though we are sitting on a nice gain, once again, the trend is working in our favor.
We also saw some awesome movement from our “economic indicator” stocks, with Kansas City Southern (KSU) gaining 9% on the week and TAL International (TAL) climbing 8%. Investors will want to own shipping stocks if they are confident the domestic and global economies will grow, and with some better than expected economic data this week supporting that notion, both of these names fell in favor.
Here is an added bonus; TAL also pays a great 5.6% dividend, so that is just extra juice on the potential for capital gains on what still looks like a very undervalued stock trading at just 10X forward earnings
On the energy front, both of our energy stocks were hot, with Baker Hughes (BHI) adding 8.5% and Cimarex Energy (XEC) gaining 8%.
Our Agriculture stocks were also in the game, with Deere and Company (DE) up 6.2% and Bunge Corp (BG) close behind with a 5% gain.
On the financial front, Blackstone Group (BX) was up 8.5% while the Intercontinental Exchange (ICE) added 7%, both getting a boost as investors rotated into higher growth segments of the market.
That’s all for this week, but until next time, here is a great article that discusses how North Dakota’s nation leading unemployment rate of 3.2% is being driven by a boom in energy and agriculture. We talk about trends a lot in this update, and the food and energy trend is one that everyone needs to be paying attention to as global population growth continues to pressure resources. Enjoy.
North Dakota, Spurred by Energy and Ag Boom, has 3.2% Unemployment
Your Investment Partner,
Mike
