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What's Driving Performance During This Rally?

The average stock in the S&P 500 fell 2.91% in January, but the average stock is up 5% since then.  So which stocks have led the way higher, and which ones are underperforming?  Below we have run our decile analysis on the S&P 500 to find out.  To run the analysis, we break the S&P 500 into deciles (10 groups of 50 stocks each) based on various stock characteristics like market cap, valuation, yield, short interest, institutional ownership, international revenue exposure, analyst sentiment, etc.  Then we calculate the average performance of the stocks in each decile since the end of January to see which characteristics are working, and which characteristics are not.

As shown in the matrix, generally the smaller cap stocks in the S&P 500 have outperformed during this rally, but the decile of the 50 largest stocks in the index has also outperformed, mostly due to Apple’s strong gains.  In terms of valuations, the stocks with the lowest P/E ratios have...

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Dollar and Oil Charts

The US Dollar index is on the move higher once again.  Below is a six month candle chart of the dollar.  As shown, after "hooking" lower since mid-January, it's breaking out above its prior highs this morning.  The prior highs from January should now act as support going forward.

Meanwhile, after going down pretty much every day for months, oil is actually starting to form a nice base around the $50/barrel mark.  The commodity has yet to push higher and start to make a dent in its huge losses over the last year, but it has stopped going down for now.  As you can see in the chart below, the "base-building" action for oil has allowed its 50-day moving average to catch up to its price.  Over the last couple of weeks, oil has been tracking right along its 50-day.  Traders will be watching the price action very closely in the coming days to see if it can finally bounce off of this support level.  A break above its highs from February would be a bullish technical signal.


Bespoke Morning Lineup: 3/4/15

Good morning!  Here's a rundown of what's going on heading into today's open. 

Snapshot: European Services PMIs were downgraded slightly versus Flash readings overnight, while Eurozone retail sales followed Germany’s lead, surging by the most month-over-month since May of 2013 and rising to their highest year-over-year rate since mid-2005, 3.7%.  The figures are bullish for Q1 European growth, but markets are trading down as opening highs in continental equities were sold along with US equity index futures, which are currently down 31 bps versus yesterday’s close.  The only headline we could see that could have possibly catalyzed the selling was a report that Russia’s nuclear forces would start a training exercise.  If that was in fact the cause of the sharp selling that knocked 25 bps off of S&P 500 futures (currently -33 bps) at 3:30 AM, we would expect a pop into the open as the training exercise would be a routine event.  That said, it’s impossible to attribute the selling in the US and Europe directly to the Russia headline and other geopolitically sensitive asset classes (gold, Treasuries, Brent crude) saw no reaction, so for the time being it looks like US stocks are set for mild declines again today.  Russell 2000 futures are off 49 bps. 

Elsewhere overnight the Reserve Bank of India cut rates overnight in a surprise move, hitting Indian equities and the Indian rupee.  WTI continues to close the large gap that it’s developed with Brent, up 49 cents or 89 bps as Brent declines 33 cents or 57 bps, taking the Brent-WTI spread to -9.66 (WTI per barrel minus Brent per barrel), its third day of gains in a row.  Gold is still bumping around just above $1,200, currently $1205.54 spot, up 15 bps. Treasuries are mixed with the front end of the curve rallying, yields falling by a basis point versus unchanged yields in the long end of the curve.  The steepening bias since the end of January is intact, with 2s10s rising 26 bps since January 30th and 2s30s rising 27 bps.  The USD is higher overnight, up 12 bps on the Bloomberg USD Index, driven up by gains versus EUR, which is off 40 bps.

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Who Will Buy the Apple Watch?

Earlier today we sent out a report to Bespoke Consumer Pulse members regarding consumer views surrounding the upcoming release of the Apple Watch.  Below is a free look at the report so you can see the type of content we're providing with our new Pulse service.  If you'd like to see more of this type of consumer survey analysis, sign up for a monthly Pulse membership today.  Our monthly Consumer Pulse Report makes up the backbone of the service, but reports like the one below are sent out throughout the month as well.  


30 Recent IPOs Worth Looking Into

Yesterday we posted charts showing the recent underperformance of the Bloomberg IPO index due to weakness in Alibaba (BABA), which has a 44% weighting in the index because of its massive size.

While BABA has been trending lower and dragging down the performance of the Bloomberg IPO index, there are plenty of names that have done well and still look attractive based on their technical chart patterns and momentum trends.  While the cap-weighted index is down 9% YTD, the average stock in the index is actually up 6%+ on the year. 

So many of these companies have yet to generate earnings, and their success is dependent on their ability to meet forward growth targets.  Because of this, in the early stages of IPOs, things like investor interest, momentum trends and technical analysis are more helpful in finding attractive set-ups for short-term and intermediate-term trades.  We recently analyzed the chart patterns for all 214 members of the Bloomberg IPO index to identify the ones that we think look the most attractive here.  Below is a table of the 30 names that currently look the best.  We also provide charts for each stock listed in the table. 

There are a lot of intriguing companies in the table below, and instead of using this as a basket “buy” portfolio, we urge you to explore each of the companies and what they do.  If you like the business model and outlooks for any of them, you have the backdrop of an intriguing chart pattern to go with it.

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Bespoke Morning Lineup: 3/3/15

Good morning!  Here's a rundown of what's going on heading into today's open. 

Snapshot: The stat that’s grabbing the market’s attention this morning: German retail sales.  In real 2010 dollars, sales from German shops grew an astounding 2.9% versus 0.4% expected in January; in annual terms that’s 5.3% versus a year ago, compared with 3.0% expectations.  Along with CPI, PMI, and monetary aggregate beats (mentioned over the past week in this commentary) the economic setup in Europe is looking phenomenal, both relative to expectations and compared to the past few years of awful growth.  Despite the strong data from Germany and a healthy Spanish unemployment beat, a January Eurozone PPI miss has the EUR down a third straight day and closing in on 12 year lows set earlier this year.  European equity is also down (Stoxx 600 -5 bps) as bunds sell off modestly contrasted with tightening spreads for peripherals and a tighter spread bias for cash bonds and CDS in European credit.  S&P 500 futures are -12 bps, while Russell 2000 contracts are down 10 bps.  Brent is reversing its move of yesterday, gaining 3.38% as its spread versus WTI gives back some of the massive 22% narrowing it made yesterday.  In terms of dollar spreads, the $2.82 narrowing of the Brent-WTI gap yesterday was the largest since December 2013, and is now being unwound with force.  WTI is up 1.75%.  Gold is mixed, down 20 bps, while USTs continue to see higher yields, with bonds five years and out up about 2 bps as the yield curve (2s30s) steepens by a basis point and a half. 

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Bloomberg IPO Index Underperforming with New-Addition BABA

Alibaba (BABA) was a strong IPO out of the gate, but it has faltered significantly since peaking late last year, and it's dragging down the Bloomberg IPO index that it has a massive weighting in.  The Bloomberg IPO index is a cap-weighted index made up of companies that have IPOd over the last year.  Because of its massive size compared to most IPOs, Alibaba (BABA) has a ridiculously high 44% weighting in the index!  

BABA's size was great for the Bloomberg IPO index when the stock was going up, but its 30% decline from $120 to $84 over the last few months has caused the index to break down and lose out on a significant amount of outperformance versus the S&P 500 over the last two years.

Below is a chart showing the performance of the Bloomberg IPO index versus the S&P 500 since the start of 2013.  The second chart is simply the spread between the two indexes in the first chart.  You can clearly see the performance erosion that the IPO index has experienced lately. 

While BABA has fallen 20% year-to-date, it's not the only IPO that has struggled.  There are plenty of other recent IPOs that are down significantly in 2015.  Below is a list of the Bloomberg IPO members that are down more than 10% on the year.  Continue reading at our new Think B.I.G. blog site...

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S&P 500 Higher or Lower from Here?

The S&P 500 ended the trading week in the red, but markets are still right near new highs.  So which way will stocks head from here?  Please take part in our weekly Bespoke Market Poll below by letting us know whether you think the S&P 500 will be higher or lower one month from now.  We'll report back with the results on Monday before the open.  Thanks for participating and have a great weekend!

Want to know what Bespoke's research team thinks about this market?  Sign up for a 5-day free trial to any of our subscription services and check out our just-published Bespoke Report newsletter.  Not only will you get in-depth analysis on the current state of the market, but you'll also get to view our Model Stock Portfolio and Model Dividend Portfolio if you're looking for new investment ideas.  Head on over to our Subscribe page and sign up now.  Enter "bespokereport" in the coupon code section to receive a 10% discount on your new membership.

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Energy Inventories Rise More Than Expected

Crude oil inventories for the latest week were higher than expected again, making it seven straight weeks of higher than expected stockpiles.  The last time we saw a similar string of higher than expected inventory reports was nearly a decade ago back in August of 2005.While traders were expecting inventories to increase by 4 million barrels, the actual build was more than twicce that at 8.4 million barrels.

The chart below compares current levels of crude oil inventories to historical average levels over the last ten years and since 1983.  Below that we also show the spread betwen current crude oil inventories and the historical average dating back to 1983.  As has become the norm lately, we once again had to adjust the y-axes higher as inventories build at a record pace.  Following last week's build, crude inventories are currently more than 108 million barrels (32%) above average.

So where does the recent seven week build in crude oil inventories stand relative to the history.  As shown in the chart below, crude oil inventories have risen by a record 51.7 million barrels over the last seven weeks.  Prior to the current build up in inventories, the prior record seven-week increase was 34.6 million barrels, or a third less than the current period.


Here's a List of the Most Heavily Shorted Stocks in the Russell 1,000

Our bi-weekly Short Interest Report is one of the many products included in our paid content membership packages.  Take a look at the report if you're interested in movements in short interest and how it impacts stock performance.  

Below is a basic list of the most heavily shorted stocks (short interest as a percentage of equity float) in the Russell 1,000 (large cap stocks).  Each stock on this list has at least 20% of its floated shares sold short.  For each stock, we also include its year-to-date performance.  The average year-to-date change of the stocks on this list is currently +0.75%.  Compared to the average YTD change of roughly 3.5% for all stocks in the Russell 1,000, the most heavily shorted stocks are underperforming this year.  

Pilgrim's Pride (PPC) is the most heavily shorted stock in the Russell 1,000 with 58.31% of its float sold short!  One other stock -- Cliff's Natural Resources (CLF) -- has more than 50% of its float sold short.  GoPro (GPRO) is a name in the top five that market followers certainly know after its IPO last year.  As shown, 42.59% of GPRO shares are short right now.  With a decline of 30.45% YTD, the GPRO shorts are certainly winning right now, but such high short interest leaves open the possibility of huge short squeezes any time positive news comes out.

Other notable names on the list include Sears (SHLD), 3D Systems (DDD), SolarCity (SCTY), Zillow (Z), Tesla (TSLA), Stratasys (SSYS) and Intercept (ICPT).   


Health Care/Biotech Names Still Dominating

The average stock in the Russell 3,000 (which makes up roughly 98% of US-listed stocks) is now up 1.68% in 2015.  Below we have calculated the average year-to-date performance of stocks by sector.  As shown, Health Care stocks are up by far the most with an average YTD gain of 8.06%.  Technology stocks are up the second most at just +2.29%, followed by Telecom at +2.14%.  Health Care, Technology and Telecom are the only three sectors outperforming the average stock in the Russell 3,000 as a whole this year.  The average stock in the other seven sectors is underperforming.  Leading the way on the downside is Utilities, with the average stock down 1.38%.  The average Financial stock is down 0.63%, while the average Energy stock is down 0.39%.

In the chart below, Health Care is the one true standout on the upside.  In 2014, it was Health Care and Utilities leading the way higher, but so far this year, Health Care stocks have continued higher, while Utilities stocks have faltered.

Below is a list of the 30 best performing stocks in the Russell 3,00 year-to-date.  As you can see, the bulk of the stocks on the list are from the Health Care sector.  In fact, the top 6 names and 20 of the top 30 are in Health Care stocks, with most in the wildly-hot Biotech group.  Egalet (EGLT) and Foundation Medicine (FMI) are the two names up more than 100%.

While it's nice to see a bunch of Health Care stocks with big returns this year, some investors want to see stocks in other sectors that are doing well.  In this regards, below is a list of the 30 best performing non-Health Care sector stocks in the Russell 3,000 year-to-date.  The two names on the list that are the most widely followed are probably Netflix (NFLX) and Twitter (TWTR).  NFLX is up 38% in 2015 while TWTR is up 35%.


Apple (AAPL) Now Twice as Big as the 2nd Largest Company in the World!

Apple (AAPL) has been straight up since the start of the year, gaining $22 (or 19%) to push it above the $130 level.  Below is Apple's trading range chart, with the red area representing between one and two standard deviations above the stock's 50-day moving average.  As shown, AAPL is currently trading well into extreme overbought territory at more than two standard deviations above its 50-day.  It's currently at the very top of its uptrend channel, so we would expect some sort of "cool-off" period to begin soon.

Apple's (AAPL) ever-expanding market cap continues to make headlines.  This morning we tweeted out that Apple's market cap is now larger than the combined market caps of every single stock in the S&P 600 Small Cap index!

Apple is also now more than twice as large as the second largest company (Exxon Mobil) in the world.  Below is a comparison of the market caps for Apple and Exxon going back to 2000.  Just 15 years ago, Apple was struggling as a public company -- in December 2000 its market cap had dipped to just $4.65 billion.  15 years later, and Apple now has a market cap of $770 billion!

Below is a list of the 40 largest stocks in the S&P 500.  For each stock, we highlight its "Apple Multiplier", or the amount that each company would have to multiply by to reach the size of Apple.  As shown, Apple is currently 2.04x as big as Exxon Mobil -- the second largest company in the S&P.  Apple is more than 3x the size of companies like General Electric (GE), Procter & Gamble (PG), Facebook (FB) and JP Morgan (JPM).  Pretty staggering numbers.

Also of note is how close Google (GOOGL), Berkshire (BRK/B) and Microsoft (MSFT) are getting to over-taking Exxon (XOM) in the #2 spot.  All three are within roughly $16 billion in market cap of XOM.  

Apple's (AAPL) ever-expanding market cap continues to make headlines.  This morning we tweeted out that Apple's market cap is now larger than the combined market caps of every single stock in the S&P 600 Small Cap index!


Bullish Sentiment Declines; Still Above 60%

After hitting the top end of its historical range a week ago, bullish sentiment in our weekly Bespoke Market Poll declined to 61% this week.  This marks three consecutive weeks above the 50% mark for bullish sentiment after a one-week dip below 50% to start the month.


Bespoke's Paul Hickey Squawk Box Appearance

This morning Bespoke's Paul Hickey appeared on CNBC's Squawk Box, discussing market trends and volatility in US equities alongside Charles Kantor of Neuberger Berman.