Wednesday, January 25

Today we observed a milestone in US equity markets – for the first time in history the Dow Jones Industrial Average crossed above 20,000. While this has very little real meaning (it’s been near there repeatedly over the next few weeks) it is a definite mental threshold of sorts. Some market players argue that now that it’s crossed the line we’ll be much more likely to see 20,000+ levels for the rest of 2017. I agree that widespread coverage of this event, even in non-market circles will probably draw new money into the US markets making this a very good week to close positions.

For us this means that closing our position in COTY (which hit its price target today) will be put off until tomorrow afternoon at the earliest, since market conditions continue to seem very positive.

In energy news, President Trump has signed an executive order directing the Department of the Interior to complete construction of both the Dakota Access and Keystone XL pipelines that had been suspended under the previous administration. This will undoubtedly loosen regional differences in spot prices for Natural Gas like we saw in Boston this winter. He also included demands that construction be completed using American made steel, though it’s hard to determine if that section of the order will be completed as the Keystone pipeline is under development by a Canadian company. Since the announcement Energy Transfer Partners (NYSE:ETP) stock has risen 14%. Though we no longer see an opportunity in ETP at its current price we advise following developments around the Keystone pipeline, as a contract for that project has yet to be awarded, though it is likely to involve the TransCanada corporation (NYSE:TRP).

We also received the much awaited Dolby Laboratories earnings report, and were very pleased to learn that they have dramatically outperformed analyst’s expectations. Consensus for EPS was at $0.34 this morning, and at 4:15 they announced EPS of $0.51, 50% higher than expectations. This news came with the announcement of a $0.14/share dividend payable to shareholders of record on February 5 and a doubled stock buyback program (up to $200M). This will bring their outstanding class A shares down to $227M, and this strong buying activity may further drive up prices. We are strongly considering increasing our price target, but in any case we expect strong increases in price for the rest of the week.

 

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