AXXel Knutson of TradingWeapon Sees Major Stock Market Buy Point
AXXel Knutson, CEO of TradingWeapon.com, an "OSJ" office of First Allied Securities, Inc., has issued a major "Strong Buy" recommendation on the US and UK securities markets. In his newsletter he outlines the rationales and updates his stock selections.
October 1, 2001
AXXels
The Day After the Day After the Day After the Day After
Using, AXXel Knutsons
VTAR
[Volume Trade Analysis Research"]
Manage the risk...the profits will take care of themselves"
In this business, being right is not as important as making money...consistently, and one of primary tenets of the quest is the avoidance of the 'obvious risk"
Securities offered through
First Allied Securities, Inc.
Member NASD & SIPC
197 Mountainview Road -- Warren -- NJ -- 07059
Email: axxel@blast.net or tradingweapon@aol.com
Telephone: 908.647.5750 FAX: 708.585.6185
First Allied is registered in all states. Mr. Knutson is registered in all states + Puerto Rico and Washington, DC
TradingWeapon VTAR [Volume Trade Analysis Research] TradingWeapon & TradingEngine is Trade and service marked by and owned by Axxel Knutson.
| | - 1999-2001 all rights reserved, AXXel Knutson
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[Tradingweapon.com" is the business name for AXXel Knutson, who is a Registered Principal of an independently owned office of Supervisory Jurisdiction [OSJ] with First Allied Securities, Inc. TradingWeapon.com offers all of its securities business through First Allied Securities, Inc., a member of the NASD/SIPC. Bear Stearns Securities Corp. is the clearing agent for First Allied. Securities. Inc.
The Most Important Buy Point Since August, 1981
In August of 1981 with the Dow at 888 it was a market environment of doom and gloom.
Someone named Granville was predicting a Dow 375 and nowhere was anyone looking for an up move...well, almost no one. Now 2001: The Dow clunked 685 points on September 17 the first day of resumed trading, 17 more on 9/18 and 144 to the downside on 9/19. During this drop the Fed poured money into the system with $11.7 billion in loans to banks for the week ending 9/12 setting records for liquidity increases by the Fed. On the 14th the Fed stepped up to the plate and bought $80 billion in Treasures and mortgage-backed securities and those of U.S. Agency. Add to this the Fed entered into a $50 billion arrangement with the European Central Bank. In effect the cost of overnight borrowing is down to almost nothing...make that 1%! All of this is inflationary in the intermediate term as government spends money for defense [no bang for that buck vs. investment in private industry related to efficiency]. Rates on 10 Year bonds have already started a move up in anticipation of increasing long-term interest rates. But given the dramatic growth of the 90s the economy can afford this shift as long as it does not become permanent.
A recession is commonly defined as two consecutive quarters of declining GDP and we are likely to see that take place in the second half of 2001 even though the revised GDP numbers for the April-June period were revised upward to a growth rate of 0.3% from the reported 0.2%, hardly a reason to jump for joy. Business investment off the cliff at an un-revised negative 14.6% rate on the heels of the negative 0.2% crunch of Q1 and that represented a decline of 1.99 percentage points in the overall GDP numbers. Inventories continued their shrinkage and posted the largest drop since 1983. Consumer spending rose at the un-revised 2.3% rate-that will most certainly tank in the second quarter and is in part, the reason for the decline in stock prices in the previous week. Imports to the USA dropped 8.4% and that is an upward revision from the previously reported 7.7%
| | - rate of inflation as measured by the price index for personal consumption rose at 1.3% a slight revision downward. The first quarter was + 3.2%. We have cut rates 8 times this year...look for number nine in October. So we have benign inflation, consumers resisting the need to use plastic and all manner of negative news, war, pestilence, a measurable drop in stock prices on high volume...and we have raised out market signal to Strong Buy." This is as important a buy point for U.S. and FTSE shares as we have seen since 1981. We were right then...I think we will be right again.
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We can expect that Defense will gain about $70 billion over the most recent budget + $17 ½ billion for airlines and $20 billion for New York City. Nevertheless, in the short-term in a recession [lets call it what it is] fiscal stimulus is just the ticket at the moment. And now, in 2001 with the Dow not only having seen Dow 3,000 but Dow 11,500+ we can now suggest our long-term objective of Dow 25,000 is still very much a target. On the BBC World Service" upon which I regularly comment, I moved my market stance from Accumulate" to Strong Buy" a week ago Friday, September 21st at about 8300 for the Dow and 1480 on Nasdaq Comp and just under the important break point of 1000 for the S & P 500. With the exception of the Monday following that week, the market has held together and advanced. We think that will likely continue. Here is the 1981 AXXel forecast-See the button below:
Button produced by AXXel Knutson, CEO of The Capital Defense Group in 1981 with the Dow at 888
Not since the malaise of the late 70s and early 80s have I seen a buy signal this strong. We have everything in place for that signal...measurable disbelief in our economys ability to provide growth and jobs, the biggest weekly decline in the Dow since 1933 off 14.3% to 8,236, a recession in this the third quarter of about --0.5% and --0.7% for Q$-2001. Significant and sustained negative price movement in stocks and dramatic increase in volume-all to the downside, novice investors looking for shorts and puts-look at the VIK index-and horrible news both economic and otherwise. The only thing lacking for a better signal would be if my secretary, Bubbles LaRue quit because she couldnt afford the repairs on her broken down Rolls [actually, Rolls never break down." There are TIMES when they fail to proceed."]. The Brits have the marketing down on the Rolls dont they? Fail to proceed, indeed. This market failed to proceed."
We are now going to look at the groups, quickly.
AEROSPACE AND DEFENSE
Lockheed Martin [LMT-43.30] Strong Buy. The recent $46 high looks easy. Is 60 easy? Probably.
General Dynamics [GD-87] and triple digits the target. Stronger than LMT.
Northrop Grumman [NOC-100.45] the top choice in the group. Strong Buy. With the base at $80, it is unlikely to test that range. Large supplier of radars, and the U.S. Air Forces new F-22 Raptor fighter, the unmanned Global Hawk and the new DD-21 destroyer for the Navy.
Raytheon [RTN-33.95] the producer of Tomahawk cruise missiles and its radars cruise along with F-14, F-15, F/A-18s and the B-2. Add also the F-117 stealth fighter and the U-2. Strong Buy.
Alliant Techsystems [ATK-83.75] is the producer of size of solid=propellant rocket motors and bullets. Call these consumables. The base is $70. Strong buy right here.
Drs Technologies [DRS-34.80] Here is the news PARSIPPANY, N.J. -(Dow Jones)- DRS Technologies Inc. (DRS) received a $3.8 million contract from the U.S. Army to provide infrared thermal imaging systems for Abrams M1A2 battle tanks. In a press release Wednesday, DRS said its Second Generation Forward Looking Infrared system will be part of the system enhancement software on the Abrams M1A2, the Army's fully digital ground combat vehicle. The defense technology company said the system provides day and night
vision capabilities enhancing surveillance ranges, "increasing target acquisitions and significantly reducing fratricide." The base $20 then $25-28. The recent high about $40. The buy point here and on any break of $30.
Here are the numbers:
QUARTERLY SUMMARY
HISTORICAL QUARTERLY RESULTS (Thousands of U.S. Dollars)
REVENUES 1999 2000 2001 2002
1st Qtr JUN 44,110 85,646 94,521 103,352
2nd Qtr SEP 44,128 88,253 107,227 0
3rd Qtr DEC 75,193 103,570 95,935 0
4th Qtr MAR 102,418 113,998 129,923 0
EPS (U.S. Dollars per share)
1st Qtr JUN 0.050 0.130 0.180 0.300
2nd Qtr SEP 0.010 0.130 0.200 0.000
3rd Qtr DEC 0.100 0.210 0.280 0.000
4th Qtr MAR 0.220 0.230 0.340 0.000
Engineered Support Systems [EASI-46.05] Engineered Support Systems, Inc. engineers and manufacturers a wide range of electronics and military support equipment for various branches of the U.S. military and commercial customers. The base is 35-40 and the lift off is impressive. One can trade it from here and accumulate size sub $40. This tells the story here: ST. LOUIS, Sep 24, 2001 /PRNewswire via COMTEX/ -- Engineered Support Systems, Inc. (Nasdaq: EASI) has received an order totaling $5.8 million for production of its Chemical Biological Protected Shelter (CBPS) system under an existing contract with the U.S. Army. This order includes funding of certain engineering change proposals (ECPs) on the 113 units currently in production plus the exercise of an option for the production of an additional 10 CBPS units, according to Michael F. Shanahan, Sr., Chairman and CEO.
CBPS, designed for use in chemically or biologically contaminated areas, is a self-contained, environmentally controlled and contamination-free work area that can serve as a mobile medical aid station, field command post or emergency facility. The CBPS can be deployed and fully operational in less than 20 minutes, which is a critical characteristic since it is designed to be relocated as many as three times each day. With this order, the current CBPS funded backlog totals $20.9 million, plus unfunded production options for another 176 units valued at $62.5 million."
And again the numbers...
REVENUES 1998 1999 2000 2001
1st Qtr JAN 16,238 28,237 86,526 91,101
2nd Qtr APR 23,012 40,697 86,015 100,059
3rd Qtr JUL 24,927 37,900 93,291 99,208
4th Qtr OCT 32,796 58,422 95,657 0
EPS (U.S. Dollars per share)
1st Qtr JAN 0.152 0.224 0.290 0.400
2nd Qtr APR 0.216 0.272 0.290 0.450
3rd Qtr JUL 0.232 0.216 0.420 0.460
4th Qtr OCT 0.336 0.264 0.440 0.000
Hi-Shear Technology [HSR-2.30] on a watch list only. Here is why: from a recent news release: Hi-Shear's electronic firing product revenues for the Patriot Advanced Capability (PAC-3) anti-missile program doubled during fiscal year 2001 reflecting the significant upgrades that the United States Army is making to its National Missile Defense program. The PAC-3 anti-missile is a surface to air missile, which offers increased range and accuracy as compared to current missile systems. This missile program is scheduled to expand rapidly from low rate production to full production over the next several years dependent on
defense department appropriations. Hi-Shear's participation is the result of its ongoing investment to provide an array of the most advanced missile firing systems.
Allied Research [ALR-15.60] and off the stable base at $9.00. the buy point is sub ten and useful for traders only until then. Here is why: DJS Allied Research Gets $17 Million In Ammunition/Components Orders VIENNA, Va. -(Dow Jones)- Allied Research Corp.'s (ALR) defense unit, Mecar S.A., received $17 million in new orders from several unidentified customers for ammunition and components. In a press release Tuesday, the defense and commercial electronic security company said the orders call for various types of large caliber ammunition and components ranging from 105mm to 155mm systems." [Source: Dow Jones].
Oshkosh Truck Corp. [OTRKB-33.75] we like this company without military trucks. But with it? A buy. OTRKB engineers, manufactures, and markets a broad range of fire & emergency apparatus and specialty commercial and military trucks under the OshKosh, Pierce, McNeilus and MTM trademarks. Strong Buy. Here are the numbers:
QUARTERLY SUMMARY
HISTORICAL QUARTERLY RESULTS (Thousands of U.S. Dollars)
REVENUES 1998 1999 2000 2001
1st Qtr DEC 151,801 222,693 243,867 281,517
2nd Qtr MAR 217,836 298,534 330,524 341,970
3rd Qtr JUN 290,104 329,821 391,667 404,248
4th Qtr SEP 243,051 313,906 357,968 0
EPS (U.S. Dollars per share)
1st Qtr DEC 0.250 0.300 0.460 0.480
2nd Qtr MAR 0.250 0.500 0.700 0.660
3rd Qtr JUN 0.390 0.810 0.900 0.800
4th Qtr SEP 0.390 0.770 0.860 0.000
COMPUTERS & COMPUTER PERIPHERALS
Paravant [PVAT-1.90] Not a major player but a unique one. Revenues, small, but there and earnings as well-but erratic. PVAT engages in the design, development, production & sales of computer and communication systems, specializing in rugged, hand-held and
laptop computer products with primarily military applications. For the 9
months ended 6/30/01, revenues rose 53% to $36.1M. Net income fell 96% to
$33K. Revenues reflect the inclusion of a significant contract. Net
income reflects a decreased gross profit due to a change in product mix.
Visionics [VINX-11.55] and way off the base at four bucks. We will put on the watch list. Here is why: Develops & deploys facial recognition technology and designs and manufactures fingerprint biometric identification systems. For the 9 months ended 6/30/01, revenues rose 30% to $22.3M. Net loss before acct. change rose from $612K to $3.8M. Revenues reflect higher FaceIt license and live scan maintenance revenues. Net loss reflects lower gross margins and higher sales, marketing and product development costs and $2.2M in merger related costs.
Roxio, Inc. [ROXI-14.10] the base is about here with a recent spike to $18. We like it here and on any bounce off $11. Buy. They are selling product. Digital content management software that enable individuals to personalize and store music, photos, video and data onto recordable compact discs, or CDs. For the 3 months ended 6/30/01, revenues rose 29% to $37M. Net income fell 2% to $2.4M. Revenues reflect increased sales of Easy CD Creator 5.0 to distributors. Net income was offset by higher payroll costs and increased stock-based
compensation expenses.
SAP AG [SAP-25.60] a chance to buy this high-end supplier of enterprise software
For the 6 months ended 6/30/01, revenues rose 26% to EUR3.38B. Net income rose 88% to EUR323M. Revenues reflect higher software, maintenance and consulting revenues due to the addition of new customers. Earnings also reflect on-going cost control efforts.
Datakey [DKEY-3.07] on watch list because it is a provider of smart card-based information security and digital signature solutions. For the 6 months ended 6/30/01, revenues rose 68% to $2.4M. Net loss from continuing operations increased 38% to $1.9M. Revenues reflect increased acceptance of the Company's information security product offerings. Net loss reflects increased S/G/A expenses due to costs related to the opening and
staffing of three additional sales offices.
Identix, Inc. [IDX-8.18] the move $3.00 to nearly $11.00 was interesting. We have this on our watch list for a break and possible buy sub $5.00. IDX develops, manufactures and markets products that identify individuals through their fingerprints, & products that capture forensic quality fingerprint images. For the FY ended 6/01,
revenues rose 11% to $81.8M. Net loss before acct. change applic. to Comm.
totaled $27.6M, up from $12.9M. Results reflect higher live- scan systems
revenues, offset by $1.9M restructuring charge. No debt and NO EARNINGS.
Efunds, Inc. [EFDS-15.55] reluctant mover to the downside. We can see why given the growth or earnings and revs in a crummy environment. Here are the quarterly numbers:
QUARTERLY SUMMARY
HISTORICAL QUARTERLY RESULTS (Thousands of U.S. Dollars)
REVENUES 1998 1999 2000 2001
1st Qtr MAR 63,316 67,856 100,255 124,498
2nd Qtr JUN 66,455 72,567 100,970 128,199
3rd Qtr SEP 67,726 79,895 104,003 0
4th Qtr DEC 70,023 82,022 112,666 0
EPS (U.S. Dollars per share)
1st Qtr MAR 0.010 0.100 0.030 0.090
2nd Qtr JUN 0.040 -0.060 -0.110 0.180
3rd Qtr SEP -0.550 -0.230 0.090 0.000
4th Qtr DEC 0.140 -0.010 0.090 0.000
Intelli Check, Inc. [IDN-11.95] On watch list and no interest North of ten. IDN manufactures and markets an advanced document verification system to determine the customer's age and validity of the ID to detect and prevent the use of fraudulent identification. For the 6 months ended 6/30/01, revenues rose from $47K to $475K Revenues reflect the initial sales of ID-Check terminals and terminal accessories. Higher loss reflects higher personnel-related and advertising expenses.
Factual Data Corp [FDCC-10.15] Accumulate the eights and nines. We like the mortgage finance area. FDCC provides a broad range of information services including business-to-business services to the mortgage lending industry For the 6 months ended 6/01, revenues
increased 63% to $25.8M. Net income totaled $2.1M, up from $199K.
CONSUMER DURABLES
Helen of Troy [HELE-9.75]. Strong Buy sub ten. Helen of Troy Limited designs, develops and sells hair dryers, curling irons, hot air brushes, brush irons, lighted mirrors, hair setters,
brushes, combs, hair accessories, women's shavers, footbaths, body massagers and hair clippers. For the 3 months ended 5/31/01, sales rose 20% to $91M. Net income rose 97% to $4.6M. Revenues reflect increased sales in the Tactica operating segment. Earnings also benefited improved margins.
Charts courtesy of www.clearstation.com
CONSUMER NON-DURABLES
Sketchers [SKX-11.19] and warning and warning again the obvious. Now solidly in the base. Buy. Sketcher U.S.A., Inc. designs and markets branded contemporary casual, active, rugged and lifestyle footwear for men, women and children in over 100 countries. For the 6 months ended 6/30/01, net sales increased 54% to $458.4M. Net income rose 81% to $33.9M. Revenues reflect continued products demand and increased brand awareness and marketing efforts. Earnings also reflect increased gross margins due to reduced
inbound ocean freight costs. But going forward, the word is moderation.
Avon Products [AVP-45.85] a voice from the past. It appears that AVP has figured life out and that is showing up in good numbers in terms of both REVS and EPS. It is a global manufacturer and marketer of beauty and related products including cosmetics, fragrance and toiletries, gifts and decorative apparel, and fashion jewelry and accessories. For the 6 months ended 6/01, revenues rose 4% to $2.82B. Net income before acctg. change rose 12% to $219.7M. Revenues benefited from growth in worldwide beauty sales and increased representatives. Net income also reflects improved operating margins.
CLEANING PRODUCTS
Church & Dwight [CHD-25.29] from this solid base, a buy. Manufactures and sells sodium bicarbonate-based products which the Company sells under the "ARM & HAMMER" trademark. For the 6 months ended 6/29/01, net sales rose 30% to $513.6M. Net income rose 6% to $25.6M. Revenues benefited from increased consumer product sales due to the addition of USAD acquired brands. Net income was partially offset by a lower margin sales mix and plant and warehouse shutdown expenses.
There are others.
DISCLAIMER
Investment decisions should not be based solely on our proprietary indicators, which are intended as an adjunct to your additional analysis. Please accept these comments as market commentary. We do not intend these comments to replace detailed fundamental analysis. We urge you to accomplish that additional research via your contacts on the Internet or through a trusted financial advisor. If you want additional information on any of the securities discussed within, we will give it upon your request.
This report has been prepared from original sources and company data we believe to be reliable, but we make no representation as to its accuracy or completeness. This report is published solely for information purposes. It is not to be construed either as an offer to buy or sell or the solicitation of an offer to buy or sell any security or the provision of or an offer to provide investment services in any state where such an offer, solicitation or provision would be illegal. Any opinions expressed herein are statements of our judgment on this date and are subject to change without notice and we likely not update that change to you. The opinions expressed are that of AXXel Knutson and are not necessarily representative of First Allied. First Allied Securities, Inc., its affiliates and subsidiaries and/or their officers and employees may from time to time acquire, hold, or sell a position in the securities mentioned herein.
The author of this report, Axxel Knutson, does not invest in any of the securities mentioned in this report nor does his immediate family unless such securities are management companies of mutual funds or indirectly if such equities are included in mutual funds or index options. Equity investment involves risk of capital loss. We recommend that your portfolio be diversified by company size, industry group, and geographic region and by currency.
It should not be assumed that future selections will be profitable or will equal the performance of past selections. Securities listed herein illustrate selections made using proprietary indicators known as VTAR [Volume Trade Analysis Research]. These names, VTAR, TradingWeapon, www.TradingWeapon.com Trading Engine, www.tradingengine.com , Volume Trade Analysis Research, are service marks/trademarks of AXXel Knutson.
All recommendations and commentary are directed toward sophisticated, aggressive traders who have significant experience trading in a volatile market and who possess the financial resources to risk a loss of some or all of their invested funds. Commissions and, if you use margin, interest charges will lessen any return on investment. VTAR [Volume Trade Analysis Research] centers around the proprietary analysis of trading volume, price, general fundamental analysis, beta concerns, group rotation and detailed analysis of risk as it relates to entry and exit points in reasonably liquid stocks.
Axxel Knutson, President
axxel@blast.net
www.TradingWeapon.com is a premium investor service -
VTAR [Volume Trade Analysis Research]
197 Mountainview Road, Warren, NJ 07059-8038
Telephone: 908-647-5750; FAX 708-585-6185.
AXXel Knutson is a registered Principal of and securities are offered through
First Allied Securities, Inc. Member
NASD/SIPC"
Axxel is guest co-host at JAGfns Internet television every four weeks or so-tune in at www.JAGfn.com. [currently re-organizing]. [He is a regular commentator for the BBC World Service" and you may hear AXXels commentaries via short wave on the various BBC bands including the BBC World Service" and BBC 5s Wake Up to Money." He is guest commentator for Radio Scotland out of Glasgow. These reports may be available at www.multex.com and www.ibes.com.
AXXel was on AOLs MarkeTalk every day for two years on AOL. The program has shifted to www.sageonline.com and Axxel is on every Tuesday at noon. Transcripts are available via SageOnline. You can ask specific questions on line and AXXel will attempt an answer to your stock and investment questions
Bloomberg: Help, Axxel" -- then # 7, then # 2 for recommendations transmitted to Bloomberg. Not all recommendations are transmitted to Bloomberg. Market Commentaries on the BBC World Service," Radio Scotland, Bloomberg Radio and Television, www.multex.com, www.allstocks.com, www.afterhourtrades.com, www.marketdigestonline.com, www.ibchannel.com, www.vcall.com, ,www.tradingideas.com, www.pinkbulll.com, www.TradingWeapon.com, Additional message boards: www.siliconinvesor.com, [search Axxel] www.ragingbull.com [search Axxel], Tampa Bay Television, Channel 9, and others.
Email: axxel@blast.net or tradingweapon@aol.com
If you want me to handle your account...
In response to inquiries relative to opening securities accounts handled directly by AXXel Knutson, here is the deal: Accounts are handled directly by Knutson [TradingWeapon.com is the business name for AXXel Knutson, who is a Registered Principal of an independently owned office of Supervisory Jurisdiction [OSJ] with First Allied Securities, Inc. TradingWeapon.com offers all of its securities business through First Allied Securities, Inc., a member of the NASD/SIPC. Bear Stearns Securities Corp. is the clearing agent for First Allied. There are no additional investment management fees and there is no sharing of profits or losses. Client-selected stocks may not enter the account unless approved by AXXel and this is not a likely occurrence. AXXel hates your stocks. The minimum account accepted is $100,000. Sob stories are listened to for amounts under $100k but rarely accepted unless AXXel is in the mood. These accounts tend to be trading accounts so dont even ask if you cant stand the activity and at times total inactivity and cash. AXXel does not personally trade in the same stocks as clients or those written about in his newsletters or spoken about in media appearances although First Allied Securities, its brokers and its officers may take and have positions although they receive no advance notice of new recommendations or changes in opinion. The opinions expressed within are those of AXXel Knutson and may not be shared by First Allied Securities, Inc. its management or its brokers. Those interested in additional information on any stocks discussed within may call at 908-647-5750 or email AXXel at axxel@blast.net. We do not deal in BB stocks [with the exception of some ADRs]. Refreshing, isnt it?
AXXel Knutsons VTAR Research at www.TradingWeapon.com. You may email AXXel at axxel@blast.net or you may not; its up to you after all.
Stock charts provided through the good offices of www.clearstation.com. Our research can also be found soon at WWW.Multex.com and on www.ibes.com on a pay-per-report basis.
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