The explosive finish to 2013 continues as a work in progress and the surge makes Santa Claus rallies of the past look like flurries. With relatively few trading days left in 2013, the Value Line Arithmetic Average is now up 37.8%, the S&P has surged 31.8%, the Wilshire 5000 some 32.9% and the NASDAQ, a mere 38.1%. The flaky stocks are still in 4-wheel drive with after burners engaged. Yes, if you were anywhere near “fully invested,” a time to howl.
Speaking of howling, I did go to see The Wolf of Wall Street starring Leonardo DiCaprio this week. It’s vintage Martin Scorsese and tells the tale (through the eyes of the perpetrator) of boiler room brokerage firm Stratton Oakmont. If you’ve seen Boiler Room, it’s the same story but from the snarky angle of those responsible for the carnage. I’m not sure how the film managed to maintain an “R” rating while delivering a steady stream of naked bodies, drugs (quaaludes, specifically) more drugs and as someone suggested, the only purpose of the freely-flowing alcohol was to wash down the drugs. If the “F” word makes your skin crawl, imagine the expletive frequency of Boiler Room combined with GlenGarry Glen Ross. Now double it. You’ve been warned.
Taken in whole, it’s quite a statement on segments of humanity. Think Gordon Gecko. Greed. Now double it and triple the sleaze factor. I am pretty sure that I was contacted by Stratton Oakmont some twenty years ago. I’ve heard the “SCRIPT” personally. I was able to resist because of a grounding in fundamental analysis and an understanding of long-term expectations and stock market performance.
They call it dark humor. It’s been a long time since I’ve heard a motion picture audience laugh that much … even if much of the laughter was painfully muted and dipped in disgust. It’s telling that when reliving the auto crash sequence at the end of the movie, the hero/author/villain neglects to share that a head-on collision placed a young woman in intensive care where she nearly lost her life. And at least the Boiler Room version exposed the damage done to cold-call victims, innocent would-be investors turned penny stock speculators with pockets emptied before they figured out they were being financially molested. And maybe that’s the real car wreck.
Leonardo’s character, after committing hundreds of millions of dollars of fraud, was offered a securities industry ban and a fine of something like $100,000 at the time. Really? And he declined the offer, ultimately ending up with a 4-year prison sentence (served 22 months) and a larger fine — that is still largely uncollected. Really?
But what really tugs at my heart and soul are the massive legions, the raunchy queue of opportunists who lined up at Stratton Oakmont’s front door following an expose in Forbes that detailed the scumbaggery. I can only hope that we can blame embellishment and cinematography for the chest-beating zombie predators, a large room full of agents of doom, that is documented near the end of the movie as they cheer Leonardo’s decision to renege on his SEC deal and hastily get back on the phone to maul a few more people.
That’s a whole lotta wreckage.
Companies of Interest
The opportunities in Issue 6 are still very slim, with a Morningstar P/FV of 111% and S&P checking in at 109%. The post-Christmas sales are more likely to be found at Target versus Issue 6. Jacobs Engineering (JEC) checks in with one of the better return forecasts (10%) but the Value Line low total return forecast for JEC is 1-2%.
Materially Stronger: Kimball (KBALB), Packaging Corp (PKG), La-Z-Boy (LZB)
Materially Weaker: Central Garden & Pet (CENT), KB Home (KBH), Texas Industries (TXI)
The Value Line low total return (VLLTR) forecast is 3.1%, down from 3.4%. We’re not sure whether these are uncharted waters, but at 3.1% — we’re certainly in waters that have not been navigated “recently.”