Trend Watcher – Nasdaq, Apple and Dow Hit Milestones

On Tuesday, the Dow Jones Industrial Average crossed and closed above 13,000 for the first time since 2008. Not to be outdone, on Wednesday the Nasdaq traded above 3,000 for the first time since 2000. Although the index quickly fell back below 3,000 and never closed above that level, an eleven year high is nothing to sneeze at. AAPL, which might as well be its own index these days, also crossed the $500 billion market cap threshold.

So what’s working these days? Interestingly, the 50 stocks with the lowest P/Es and the 50 stocks with the highest P/Es are significantly outperforming everything else. While everyone is awestruck by the 34% gain this year in Apple shares, no one seems to have noticed the 117% gain in Sears Holdings (SHLD) or the 36% in Priceline (PCLN).

During the Humphrey Hawkins testimony, Bernanke suggested that QE III might not be necessary going forward. This interpretation walloped Gold (GLD). Rumors circulated that a single large seller may have been behind the almost 3.5% drop. Year to date, Gold is still up over 9% and it’s still above the 50-day moving average. We at Alhambra are getting whiffs of inflation. I’m sure Joe Calhoun will expand more on this in his weekend update. I agree with something someone said last week, own gold but don’t trade gold.

The best performing security in our client accounts this week was Apple (AAPL), up 4.36%. Next week, they are holding the iPad 3 event in San Francisco. It is likely the stock will “sell on the news”. However, I’d like to put Apple’s valuation into perspective.

At a current price of just over $545, AAPL trades at 11.5 times next year’s expected earnings. The S&P 500 currently trades at 13.5 times earnings on a weighted basis, while the average P/E ratio of the 500 stocks in the index on an unweighted basis is 17.7 times earnings. Given the fact that AAPL has one of the highest individual growth rates of any stock in the S&P 500, it isn’t too much of a stretch to assume that the stock should have a ‘market’ multiple. To get there, though, AAPL would need to rally to just under $574 per share, while an average P/E ratio would send the stock close to $800 per share.

While AAPL is a member of the S&P 500 Technology sector, it is often considered one of the best retailers in the country as it boasts one of the highest sales per square foot of any chain. The average retailer in the S&P 500 trades at 16.4 times earnings, and based on that multiple, AAPL would be worth $700 per share.

Below, I have included a list of new highs last week, an economic calendar and key interest rates. Have a pleasant and productive week.

New highs last week

Ticker	Company	Sector	Industry	Market Cap	P/E	Price
MSFT	Microsoft Corporation	Technology	Application Software	269133.95	11.62	32.08
T	AT&T, Inc.	Technology	Telecom Services – Domestic	182966.49	46.77	30.87
PM	Philip Morris International, Inc.	Consumer Goods	Cigarettes	145925.7	17.43	84.55
ABT	Abbott Laboratories	Healthcare	Drug Manufacturers – Major	90237.74	19.13	57.39
EMC	EMC Corporation	Technology	Data Storage Devices	58302.06	25.98	28.58
USB	U.S. Bancorp	Financial	Regional – Midwest Banks	55932.92	11.9	29.27
NKE	Nike Inc.	Consumer Goods	Textile – Apparel Footwear & Accessories	49901.87	23.24	108.74
LOW	Lowe’s Companies Inc.	Services	Home Improvement Stores	35234.51	20.53	28.13
PCLN	priceline.com Incorporated	Services	General Entertainment	32150.91	34.17	645.86
TJX	The TJX Companies, Inc.	Services	Department Stores	27968.7	19.11	37.08
COH	Coach, Inc.	Consumer Goods	Textile – Apparel Footwear & Accessories	22011.53	23.9	76.49
EP	El Paso Corp.	Basic Materials	Oil & Gas Pipelines	21863.52	945	28.35
ISRG	Intuitive Surgical, Inc.	Healthcare	Medical Appliances & Equipment	20340.41	41.99	516.91
RTN	Raytheon Co.	Industrial Goods	Aerospace/Defense – Major Diversified	17459.64	9.71	51.37
M	Macy’s, Inc.	Services	Department Stores	15868	13.12	38.31
GR	Goodrich Corp.	Industrial Goods	Aerospace/Defense Products & Services	15854.57	19.91	126.03
FAST	Fastenal Company	Industrial Goods	General Building Materials	15679.37	43.88	53.1
WFM	Whole Foods Market, Inc.	Services	Grocery Stores	14933.95	40	82.81
AZO	AutoZone Inc.	Services	Auto Parts Stores	14895.79	18.47	378.45
SLE	Sara Lee Corp.	Consumer Goods	Processed & Packaged Goods	12914.41	75.28	21.83
CMG	Chipotle Mexican Grill, Inc.	Services	Restaurants	12328.63	58.34	394.39
DISCA	Discovery Communications, Inc.	Services	CATV Systems	12243.03	16.91	47.36
ORLY	O’Reilly Automotive Inc.	Services	Auto Parts Stores	11233.81	23.74	88.33
TDC	Teradata Corporation	Technology	Diversified Computer Systems	11147.17	32.48	66.59
SHW	The Sherwin-Williams Company	Industrial Goods	General Building Materials	10671.18	24.8	102.44
ICE	IntercontinentalExchange, Inc.	Financial	Diversified Investments	10113.96	20.19	139.33
FMC	FMC Corp.	Basic Materials	Chemicals – Major Diversified	6984	18.12	100
WYN	Wyndham Worldwide Corporation	Services	Lodging	6449.53	17.54	44.19

Key Rates by Bloomberg.com

	CURRENT	1 MO PRIOR	3 MO PRIOR	6 MO PRIOR	1 YR PRIOR
Fed Funds Rate	0.12	0.10	0.07	0.12	0.16
Fed Reserve Target Rate	0.25	0.25	0.25	0.25	0.25
Prime Rate	3.25	3.25	3.25	3.25	3.25
US Unemployment Rate	8.30	8.50	8.90	9.10	9.10
1-Month Libor	0.24	0.26	0.27	0.22	0.26
3-Month Libor	0.48	0.53	0.53	0.33	0.31

Mortgage* (National Average)

provided by Bankrate.com

	CURRENT	1 MO PRIOR	3 MO PRIOR	6 MO PRIOR	1 YR PRIOR
30-Year Fixed	3.90	3.85	4.00	4.21	4.84
15-Year Fixed	3.16	3.18	3.35	3.37	4.12
5/1-Year ARM	2.80	2.85	2.94	2.97	3.56
1-Year ARM	2.71	2.73	2.78	2.95	3.01
30-Year Fixed Jumbo	4.66	4.64	4.66	4.79	5.40
15-Year Fixed Jumbo	4.03	3.99	3.93	4.08	4.69
5/1-Year ARM Jumbo	3.26	3.31	3.15	3.17	3.82

Economic Calendar by Econoday.com

Monday Mar 5	Tuesday Mar 6	Wednesday Mar 7	Thursday Mar 8	Friday Mar 9
Market Focus » Factory Orders 10:00 AM ET ISM Non-Mfg Index 10:00 AM ET 4-Week Bill Announcement 11:00 AM ET 3-Month Bill Auction 11:30 AM ET 6-Month Bill Auction 11:30 AM ET	ICSC-Goldman Store Sales 7:45 AM ET Redbook 8:55 AM ET 4-Week Bill Auction 11:30 AM ET 52-Week Bill Auction 11:30 AM ET Treasury STRIPS 3:00 PM ET	Bank Reserve Settlement MBA Purchase Applications 7:00 AM ET Challenger Job-Cut Report 7:30 AM ET ADP Employment Report 8:15 AM ET Productivity and Costs 8:30 AM ET EIA Petroleum Status Report 10:30 AM ET Consumer Credit 3:00 PM ET	Weekly Bill Settlement52-Week Bill Settlement Jobless Claims 8:30 AM ET Bloomberg Consumer Comfort Index 9:45 AM ET Quarterly Services Survey 10:00 AM ET EIA Natural Gas Report 10:30 AM ET 3-Month Bill Announcement 11:00 AM ET 6-Month Bill Announcement 11:00 AM ET 3-Yr Note Announcement 11:00 AM ET 10-Yr Note Announcement 11:00 AM ET 30-Yr Bond Announcement 11:00 AM ET Fed Balance Sheet 4:30 PM ET Money Supply 4:30 PM ET	Monster Employment Index Employment Situation 8:30 AM ET International Trade 8:30 AM ET Wholesale Trade 10:00 AM ET

Clients, principals and/or employees of Alhambra Investment Partners may have long or short positions of any above-mentioned securities. For information on Alhambra Investment Partners’ money management services and global portfolio approach to capital preservation, Joseph Gomez can be reached at jag@4kb.d43.myftpupload.com.

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