Despite a strong gain in the U.S Dollar the major indices were still able to post solid gains yesterday. We are not sure what exactly has changed since the lows on Feb 5th, but stocks have turned on a dime, and in deed the Russell 2000 (RUT – 624.83) has gained a whopping 7.6% in just the past seven sessions. Obama is still the President, we are still spending money we don’t have, global debt concerns are still an issue, Europe is still slowing more than anticipated, and yes, earnings continue to eclipse estimations. Hewlett (HPQ – 50.12) just reported stellar earnings that reflect exactly what we already know; that there is a P.C upgrade cycle that has been gaining momentum. HPQ has maintained a double digit growth rate since the Tech bubble burst, growing eps from $1.50 in 1999 to an estimated $5.00 in fiscal ’11. HPQ stock, like so many however, is trading below its close of ten years ago, at a 20 year low p/e multiple, and at a time when prevailing interest rates are towards historic lows, and certainly far lower than the mean of the past twenty years. This divergence has created a tremendous long term buying opportunity in the large cap traditional growth sector. The market has been very quick to afford deeper cyclical, capital intensive, debt ridden, non-R&D spending, non-intellectual property carrying stocks, higher and higher multiples; but the truly innovative, cash holding, R&D spending, brand identifying traditional growth stocks are trading at historic valuation lows. We are very confident that over the next few years, we will see large appreciation in stocks whose prices have remained stagnant over the past ten years, but whose earnings have gained dramatically. Above all else this is the theme that we want to reiterate as we move forward. On option expiration, this Friday, we will be selling our entire Ts Professional Portfolio. We will then provide a list of our own “nifty fifty” stocks that we feel are well positioned to benefit from the gradual rotation back into the more innovative large cap growth stocks. We will try to diversify the list, but the fact that Technology will carry such a large weighting is unavoidable. Over time we will provide a brief analysis of each stock. We will then buy and sell stocks only from this list in our Ts Professional portfolio. We will use index and individual options to apply defense when the Ts indicators become bearish, but we will maintain “core” positions in stocks we have a great degree of long term confidence in. Occasionally the story might change and we will update our list of 50 stocks from time to time. It is expected that we will have approximately 25-30 stocks in our portfolio at any given time. This morning we have a stock in our portfolio, Xenoport (XNPT – 19.60) which is losing 60% of its value. It is not that XNPT is down; so much as we were blissfully unaware of the fact that a FDA announcement was pending that could move the stock so much. To sell calls against a position of this nature effectively limits all upside and locks in all risk. The truth is we just don’t have the time to monitor these positions. Our portfolio is still up over 70%, but we have only been able to update positions on a part-time basis. If, however, we stick to our list of 50 large cap growth stocks we eel it will simplify things enough to work within our time constraint, and we can provide a better service.
The futures are down this morning on a jump in the PPI (Producer Price Index), higher than expected jobless claims and poor same store sales out of Walmart (WMT – 54.06). We now want to be buyers on weakness.


S&P 500 (1099.51) look for support at the 20 day at 1086, also the old critical low at 1083. 1075 is a near term line in the sand for this change of trend attempt. For now we are buyers on weakness, especially into the 1083/186 level. We are right under critical resistance at the old highs at 1005 and the 50 day at 1108. Any close above the 1105/1108 area should see a “pile on” effect as we regain this important pivot.


Nasdaq (2226.09) right into the underside of its 50 day average and old highs at 2228/2229. We would look for a natural pullback at this level, but would look to buy weakness. The 20 day is at 2183, and now represents a buy set up point. A move above 2229 would mean we would have to increasingly cover short side exposure. The market hasn’t been too accommodating lately, but a move back into the 2180/2190 would be a more timely point to start adding back long side exposure.