The Unusual Suspects (APP, BRK-A, CPB, MTXX, MCO, MHP, RMBS, QQQQ, GDL, UNH)

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It is the weekend, albeit a long three-day weekend for Labor Day.  Earnings season is done, gone, bye-bye, but this coming week there are going to be some key events and key stocks to watch including American Apparel Inc. (AMEX:APP), Campbell Soup Co. (NYSE: CPB), Matrixx Initiatives Inc. (NASDAQ: MTXX), Moody’s Corp. (NYSE: MCO), McGraw-Hill (NYSE: MHP), Rambus, Inc. (NASDAQ: RMBS).  On bigger market pundit calls, we want to watch the key ETF and ETN products of PowerShares QQQ (NASDAQ: QQQQ), the Semiconductor HOLDRS (NYSE: SMH), and Technology Select Sector SPDR (NYSE: XLK), SPDR Gold Shares (NYSE: GLD), the Market Vectors Gold Miners ETF (NYSE: GDX), and the Ultra Gold ProShares (NYSE: UGL).  Elsewhere, there is the death of the PowerShares DB Crude Oil Double Long ETN (DXO).  Sears Holdings Corporation (NASDAQ: SHLD) will also be key to watch because of a response to a nasty Barron’s article.


American Apparel Inc. (AMEX:APP) did not trade down too much on this news, but this could be just another thorn in the company’s side.  It turns out that American Apparel was really running its operations as Illegal Alien Apparel. This week the company announced it was terminating about 1,500 employees after a government investigation.  Immigration and Customs Enforcement said that documents for about 1,800 workers showed they were either illegally working or were potentially not permitted  to work in the U.S.  This is an interesting company that many thought might be able to do for investors what the Gap did in the 1990′s with monster growth.  This is still an unfinished chapter, and the 7% drop or so during the week was not as bad as it could have been.

There were two key developments this week for Warren Buffett and Berkshire Hathaway Inc.(NYSE: BRK-A).  For starters, Buffett and friends are starting to make more bets on real estate.  Secondly, they are also among the top mega-cap stocks over $100 billion in market cap that are holding a cumulative $335 billion in cold hard cash before you get into credit lines, inventory, receivables, and the ability to raise additional cash.

Campbell Soup Co. (NYSE: CPB) is on deck for earnings this Friday.  For a long time this stock was ignored by the rally as if suddenly its canned soups were a luxury brand.  Now, shares are up close to 25% from the recent lows and shares are well above their 50-day and 200-day moving averages.

Matrixx Initiatives Inc. (NASDAQ: MTXX) ran up Friday on hopes that there might be an FDA resolution over the Zicam spray woes.  The problem with this is that this was “outside generated news and trading” volume based solely upon a series of options traders on Thursday.  This might have gone unnoticed had it not been for one of the Najarians from OptionsMonster.com touting the play.  Watch this one this coming week. If this was really about to be resolved, then the strong FDA wording might have been different and you would think that a new CEO might not be needed.  Anything is possible, but this seems like it will be a much longer problem than just a quick resolution and return of the product to the market.

Moody’s Corp. (NYSE: MCO) and McGraw-Hill (NYSE: MHP) will be interesting to watch in the coming weeks.  It turns out that a court decision rejected the claims of credit ratings agencies being immune from suits due to a long-time claim that the First Amendment shielded ratings agencies because of freedom of speech.   But another issue came out late in the week that took very little notice. A Federal Reserve study from Virginia noted that how these companies are compensated will mark their future, and what do you think compensation regulation does for share prices when it comes to a business model?

PowerShares DB Crude Oil Double Long ETN (NYSE: DXO) is about to die this coming week.  The CFTC regulation on position limits and speculation has caused the ETN to shut down and this will likely be the last week you ever see this oil product trade.

Be advised that this is someone else’s call, but Friday’s gains in Rambus, Inc. (NASDAQ: RMBS) were on takeover chatter.  This almost seems unfathomable when you consider the volatility.  Shares were up more than 10% and challenging $18.00 on Friday.  But shares werer more than than $19.00 earlier in the week and dropped down to $16.00…. Anything is possible, but a takeover would be a bet that the company’s higher-speed and higher throughput for DRAM and bus drivers is about to really launch.  Anyhow, this seems hard to swallow, but nothing is too shocking any longer.  If no deal comes, this may see see profit taking and selling next week.

There two trends which were more important this last week than just the day they were out.  One was on a very toppy NASDAQ, and this runs front and center to the PowerShares QQQ (NASDAQ: QQQQ), the Semiconductor HOLDRS (NYSE: SMH), and Technology Select Sector SPDR (NYSE: XLK).  INO.com, an affiliate of our, ran a detailed audio/visual on this noting a SECULAR BEAR MARKET… meaning all rallies are effectively just bigger opportunities to sell for traders.  These tend to be long periods where stocks and the economy overall make little or no real progress, and market rallies or bull markets within this period are short-term in duration and where they do not make significant new highs.

Also worth noting is the big commodity call…. $1,000 Gold!  That is what Adam Hewison and Dennis Gartman are looking for.  The audio/visual presentation from Adam at INO.com pretty much sums this up.  The key ETFs to watch for if this occurs are SPDR Gold Shares (NYSE: GLD), Market Vectors Gold Miners ETF (NYSE: GDX), and the Ultra Gold ProShares (NYSE: UGL).

UnitedHealth Group, inc. (NYSE: UNH) is going to be key to watch.  The HMO/PPO insurer has doubled off of lows if you can believe it.  This is the proxy stock for the healthcare and health insurance reform from the Obama administration.  This coming week will bring an Obama speech to a joint congress session after they return from their end of summer recess.  This stock will be the proxy for how much leverage or how little leverage the administration will be able to get in the current fight for healthcare and insurance reform.

Eddie Lampert must be facing more pressure than we think over at Sears Holdings Corporation (NASDAQ: SHLD).  Lampert responded with a long letter to Barron’s after the publication called for Sears to head much lower, and the defensive nature of the letter could mean that there is starting to be a wider pressure from outside holders.  That Barron’s article can be found here.

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Have a great Labor Day and enjoy your 3-day weekend!

JON C. OGG
SEPTEMBER 5, 2009

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