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Tech Is Still The Toast of the Town

Three techs surge on earnings despite only so-so earnings


Tech trumps all.  That seemed to be the stock market’s message last week.  We got a clutch of unsavory reports on the Thursday on the broader economy—higher first-time unemployment claims, a disappointing read by the Philly Fed on manufacturing in the Middle Atlantic states and a drop in the Conference Board’s index of leading indicators.  But investors chose to believe the tech sector will save us.  So stocks went up, with the S&P 500 index closing at its highest level since May.

I can’t really complain, since three of our tech stocks have surged since Tuesday’s blog—Intel (NASDAQ:INTC), International Business Machines (NYSE:IBM) and Oracle (NASDAQ:ORCL).  However, it’s a little puzzling that INTC and IBM have climbed as much as they have after reporting only fair-to-middling Q2 sales.

Wall Street, it appears, is buying into the idea that technology companies can be forgiven weak revenues as long as cost cutting fattens the bottom line.  A charming notion.  We’ll see how long the forbearance lasts.

In any event, if you were lucky enough to grab a few shares of INTC or IBM Wednesday morning (per my instructions the night before), you should be a happy camper about now.  Both stocks rate a hold at current prices.

Gold was all over the map Thursday — strong in the morning, swooning into the New York lunch hour and then recovering to settle in the afternoon.  I’m encouraged that the Midas metal has held comfortably above its May 16 low for more than two months now.

On the other hand, bullion’s resilience hasn’t done much (so far) for the mining shares.  Some, like Niche holding Newmont (NYSE:NEM), have kept their heads above the May lows.  But others, such as Barrick (NYSE:ABX) in the main model portfolio, have touched fresh 52-week lows within the past few sessions.

Technically, this is a touch-and-go situation.  A further breakdown, at least in the near term, can’t be ruled out.  In the end, though, I’m confident value will carry the day and our golds will rebound smartly.

NEM, for example, is trading at only 10X this year’s depressed profits and pays a generous 3.1% dividend.  You don’t need to be a gold bug to recognize the value here!  Buy NEM;  I project the stock will generate a total return of 30%-40% in the next 12 months.

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