by Jon Markman | January 7, 2014 10:16 am
Stocks skidded across Wall Street Monday despite any clear-cut catalysts for the stock prices that got chopped, which I find a little spooky. A couple of days of selling at the start of a new year isn’t so bad, but it’s now three consecutive sessions that have been ugly with gains vanishing in the last hour.
This is uncool behavior, but it is not a deal-killer for bulls either. The last week of 2013 featured a huge jump, and the case can be made from technical and sentiment points of view that the last few days of selling are just blowing off some of that froth.
On Monday, the Dow Jones Industrials dropped 44 points, down 0.3%, while the S&P 500 lost 0.2%, the Nasdaq fell 0.3% and the Russell 2000 small-caps lost 0.7%. Decliners bested advancers by a three-to-one margin.
But several big-name companies hit new highs for their stock prices and closed in the black, including WellsFargo (WFC), JP Morgan (JPM), Bank of America (BAC), Citigroup (C) and Goldman Sachs (GS). I don’t know about you, but I believe I see a pattern here.
A few other names on the list were U.S. Bancorp (USB), Capital One Financial (COF), Bank of New York Mellon (BK) and BB&T Corp. (BBT). In fact, actually about 85% of the stocks that made new highs that had market caps more than $20 billion were brokers and banks. It’s difficult to have the market sell off majorly without participation from the banks, hence my lack of real concern about the red tape.
So, I remain bullish for now and I’ve got a new recommendation in that vein – one that may surprise you.
QuickLogic (QUIK), a small-cap chip maker focused on mobile communications applications, has had a pretty terrible decade in the market. It ran up as high as the mid-$40s at the apex of the tech bubble in 2000, and has spent the rest of its life crashing as low as the $1 level, and then recovering to its recent range in the $2 to $4 area.
If you just look at the raw reported numbers, there is still very little to recommend QUIK, as it is hard to distinguish it from 100 other silicon makers. Earnings and profitability are still a struggle, and that has made the stock not necessarily cheap in a conventional sense. But every dog has his day in the stock market — some longer days than others — and it looks to me as if QUIK’s stock prices have a shot at returning to the $7 to $10 area over the next 12 to 24 months, as its engineers have come up with some pretty sweet applications for ultra-low power sensors.
In my view, sensors are one of the hot new plays for communications devices as our smart phones and tablets learn about their owners’ environments and help people adapt to them in amazing new ways. This week, QUIK is showing at the CES consumer electronics show in Las Vegas a set of sensors compatible for the new Android operating system variant called KitKat that provide users with “always-on” context awareness. They can do that because they drain almost no power from the smart phone. QUIK also is showing chips that allow mobile screen makers to improve viewability in daylight while also drawing very little power.
Sensors are already helping us in ways that you just accept but that are very cool. An example of one type of sensor is when you walk into your local Starbucks (SBUX) and your phone automatically senses the café’s Wi-Fi network and connects your phone to it without prompting. Another might be that your phone could recognize that you just walked into a restaurant, and automatically display the menu on your phone…or it could sense that it’s cold outside and remind you to take a heavy coat, even if you have not actively searched for the weather that morning.
Buy QUIK at $4.50 limit, good till canceled. My initial, near-term target is $5.50 but, as I said above, I think the stock could run up to $7 to $10 in the next year.
Jon Markman operates the investment firm Markman Capital Insights. He also offers a daily trading advisory service, Trader’s Advantage, and CounterPoint Options, a service that helps individual traders make steady, consistent profits with volatility-related instruments.
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