Archive for 2011

  • Performance of S&P 500 Sectors
    , July 1st, 2011 at 2:57 pm

    Sector Market Cap Level 1-Day MTD QTD YTD
    S&P 500 12,021,157.79 1,320.64 1.01% -1.83% -0.39% 5.01%
    Energy 1,523,789.93 559.46 1.51% -1.93% -5.07% 10.40%
    Materials 440,501.89 245.93 1.34% -0.45% -1.37% 2.64%
    Industrials 1,353,230.38 321.86 1.68% -0.82% -1.21% 6.89%
    Cons Disc 1,280,351.18 317.89 0.92% -0.32% 3.08% 7.56%
    Cons Staples 1,279,408.11 322.66 0.89% -2.85% 4.47% 6.29%
    Health Care 1,407,818.96 410.93 0.34% -1.31% 7.29% 12.65%
    Financials 1,819,164.40 206.87 0.38% -2.92% -6.27% -3.68%
    Info Tech 2,138,517.78 410.91 1.44% -2.64% -1.61% 1.57%
    Telecom Svc 371,707.14 134.34 0.83% -1.47% 0.82% 4.35%
    Utilities 406,668.03 170.03 0.37% -0.48% 5.01% 6.71%

  • CWS Market Review – July 1, 2011
    , July 1st, 2011 at 6:45 am

    The first half of 2011 is now on the books and our Buy List had a very good showing. For the first six months of this year, our Buy List gained 7.27% which is a nice lead over the S&P 500 which gained 5.01% (or 5.0094%, to be precise).

    (As a side note, let me add that I’m pretty impressed at how well the 200-day moving average served as a lower bound for the S&P 500. We had two bounces and a rally. The S&P 500 just closed above 1,320 for the first time in a month. Technical analysis may have little academic respect, but it’s oddly important because everyone else thinks everyone thinks it’s important.)

    When we include dividends, our Buy List gained 8.13% compared with 6.02% for the S&P 500. Bear in mind that we did this without making one single change to our Buy List for the entire year. Absolutely zero trading.

    Frankly, one of the smart moves we made is that our Buy List has a good weighting of healthcare stocks, and healthcare was the top-performing sector for the second quarter. It’s also the best-performing sector for the year so far. If our Buy List keeps delivering, 2011 will be the fifth-straight year that our set-and-forget Buy List has beaten the market. Once again, sloth and patience are an investor’s best friends.

    Also, being well-diversified helped us out. Seventeen of the Buy List’s twenty stocks are up for the year while only Ford (F), AFLAC ($AFL) and JPMorgan Chase ($JPM) are in the red. Our top-performing stock for the year is Jos. A. Banks ($JOSB), which I never would have expected. JOSB is up 24.03% for the year, and that includes the stock’s big 13.3% one-day plunge from a month ago. Fortunately, the shares have recovered a little bit and they closed above $50 for the first time since the last earnings report.

    For those of you keeping score, JOSB dropped over $11 after missing earnings by one penny per share. That’s 1,100 pennies lost due to a one-penny-per-share miss. I thought this was a dramatic over-reaction and the market apparently agrees. Now that JOSB has hit my $50 buy price, I’m raising it this week to $53 per share. JOSB is a good buy.

    In last week’s issue, I highlighted Bed Bath & Beyond’s ($BBBY) great earnings report and higher guidance. The shares have rallied impressively ever since. Not only did BBBY take out its 52-week high from April, but the stock also broke $58 per share which was my new buy price from last week. The stock has managed to become our second-best performer for the year, up 18.76%. For now, I’m going to hold off raising the buy price. BBBY continues to be a very strong buy up to $58 per share.

    The other stock I highlighted last week was Oracle ($ORCL). I feel vindicated because I said that it released a very good earnings report although the market dumped the shares in the very short term. During the after-hours session from last Thursday, Oracle got as low as $30. The shares have so far closed higher every day this week, and on Thursday ORCL came very close to breaking the $33 barrier. Thank you, patience and sloth! Oracle continues to be a very good buy up to $34.

    I’ve also been impressed with how some of our quieter stocks have performed. Abbott Labs ($ABT), for example, is up nearly 10% for the year and that doesn’t include its very generous dividend (now yielding 3.65%). Wright Express ($WXS) is up over 10% in the last nine trading sessions. Johnson & Johnson ($JNJ) is inches away from a new 52-week high.

    Now that the second quarter is behind us, earnings season will start soon. The upcoming earnings season has a very good shot of being an all-time record for the S&P 500. The previous record was set during the second quarter of 2007. Despite the fact that corporate profits are returning to the same level of four years ago, the S&P 500 is down over 12% over that same time. Furthermore, interest rates are much lower so you would expect earnings multiples to be higher, not lower.

    Speaking of which, perhaps the most important event of the past few days has been the mass exodus out of the bond market. To be precise, this isn’t a new move in the market. Instead, it’s a sign that the dramatic reaction to the problems in Greece is slowly unwinding. What happened is that nervous investors crowded into trades like the Swiss franc and mid-term U.S. Treasuries. Investors also shied away from many financial stocks, and both AFL and JPM were causalities. Now that the worst fears are passing, these trades are fading as well. AFL, for example, just popped over $46. Most surprisingly, the euro is actually higher (!!) which I thought might never happen again.

    Over the last four days, the yield on the three-year Treasury jumped by 24 basis points. The five- and seven-year notes increased by 36 and 37 basis points, respectively. That’s a very big move for such a short period of time. Some folks think this is due to the completion of the Fed’s QE2 policy. I doubt that. We all knew QE2 would end some day, plus the Fed will still be a big buyer of Treasuries.

    What’s really going on is that investors are now more willing to take on more risk. The big beneficiary is the U.S. stock market. The four-day rally has added more than 4% to the S&P 500, and the index just closed at its highest level in nearly a month. This was our best four-day move in nine months. On top of that, this is a seasonally strong time of the year for the stock market.

    Lately, Wall Street has had a tough time getting a good read on the economy. What happened is that a lot of economists had been overly optimistic with their economic projections. As a result, they lowered their forecasts. But now, the numbers keep topping those lowered projections. It’s a combination of over-reaction and reading long-term trends into only a few points of data.

    The upcoming ISM report, which comes out Friday morning, and next Friday’s employment report will tell us a lot about where the economy is headed. If these numbers are strong, I think the third quarter will be a very good one for stocks and our Buy List.

    Be sure to keep visiting the blog for daily updates. The stock market will be closed on Monday for July 4th. I’ll have more market analysis for you in the next issue of CWS Market Review!

    – Eddy

  • Morning News: July 1, 2011
    , July 1st, 2011 at 6:15 am

    Greece to Receive Up to $124 Billion in New Aid

    Greek Bonds Turn Into World Beaters as Default Concern Ebbs

    Global Manufacturing Slows, Posing Rates Dilemma

    Western Funds Are Said to Have Managed Libyan Money Poorly

    Macau’s Gaming Revenue Soars

    Opec Meeting Reveals Further Degeneration Of The MENA Region

    Geithner Exit Would Force Obama to Rebuild Team

    Gold Falls as Greek Lawmakers Back Austerity Plan, Easing Risk of Default

    Corn Price Plunges as US Acreage Rises

    Antitrust Regulator Makes Twitter Inquiries

    Apple and Microsoft Beat Google for Nortel Patents

    Boeing Labor Dispute Is Making New Factory a Political Football

    Lockheed Promises Electric-Grid Security

    UBS Thwarts Deutsche by Hiring Weber as Next Chairman

    Joshua Brown: A Humble Request

    Todd Sullivan: Ford Sees 2nd Half Sales Increases

    Be sure to follow me on Twitter.

  • Fun With Numbers
    , June 30th, 2011 at 8:31 pm

    I was always amused by the fact that the Nasdaq closed out 2003 at 2003.37.

    Even though a market is made of millions of investors making countless decisions, these numerological events keep cropping up. Or it’s coincidence. A very eerie coincidence.

    The S&P 500 finished the first half of the year today at 1320.64. That works out to a year-to-date gain of exactly 63 points. Percentage-wise, that works out to 5.0093%.

    Hey, if you slip enough coins these things happen, right?

  • McCormick & Brown Forman
    , June 30th, 2011 at 10:15 am

    I’ve been telling investors to be wary of cyclical stocks. Here are two consumer stocks that have performed very well in recent years — McCormick & Co. ($MKC) and Brown Forman ($BF-B). The latter makes Jack Daniels which may be as counter-cyclical as you can get.

    McCormick just reported Q2 earnings of 55 cents per share which was a penny better than consensus. However, the company lowered its full-year forecast to a range of $2.74 to $2.79 per share. The Street was at $2.83 per share.

  • Share Buybacks Are Fueling the Rally
    , June 30th, 2011 at 8:52 am

    Brett Arends has an interesting article at MarketWatch noting that, according to TrimTabs, the market has been pushed higher thanks to companies buying back their own shares. During the first quarter, companies plunged $124 billion back into the stock market.

    At the same time, there’s been a dearth of share buying by corporate insiders. My only quibble with the story is the subhead which reads, “Companies are buying stock, but insiders aren’t.” I would have changed “but” to “because.” And this highlights one of the reasons I don’t like share buybacks. Too often, companies use share buybacks as an indirect way to boost the value of options grants to company executives.

    I have no problem with paying executives lots of money, assuming they’re good. But I do have a problem when we alter the cash flow statement to help these folks indirectly.

    My view is very simple: Pay excess cash to shareholders as dividends. I wish the tax code was friendlier to this strategy, but it’s not. The problem with share buybacks is that any benefit can easily be lost through the normal volatility of a stock. A cash dividend will reach its target audience. Furthermore, if shareholders want to use the dividend to buy stock, they’re free to do so.

  • Morning News: June 30, 2011
    , June 30th, 2011 at 7:04 am

    German Banks, Government Agree on Draft Greek Plan

    New Investment Strategy: Preparing for End Times

    Greece to Vote on Austerity Details

    European Consumer Prices Rose in June

    London Stock Exchange Now Seen as Takeover Target

    The German Jobs Miracle Continues

    U.S. Small Business Borrowing Surges

    Chinese Carmaker BYD Slumps as Profit of Buffett-Backed Automaker Declines

    California Online Tax Law Pressures Amazon

    Leonard Green, CVC to Buy BJ’s Wholesale for $2.8 Billion

    BofA Haunted by Countrywide Deal

    Visa, MasterCard Climb as Fed Increases Caps on Debit-Card Fees

    News Corp. Sells MySpace for $35 Million

    Lindsay Lohan Shills for Pump-and-Dump Stocks on Twitter

    Jeff Miller: Investment Profits from Understanding Government

    Howard Lindzon: Trading Is…

    Be sure to follow me on Twitter.

  • Three Days in a Row
    , June 29th, 2011 at 6:48 pm

    Wall Street had another good day today. The S&P 500 gained 10.74 points to close at 1,307.41. That’s an advance of 0.83%. The four-day rally now totals a gain of 3.07%. A further retest of the 200-DMA is very possible, but this most recent bounce looks pretty good.

    With one day left in the first half of 2011, the S&P 500 is up nearly 5% for the year including dividends. That’s roughly inline with the long-term average.

    The most interesting market lately has been the bond market. Yields on most Treasuries have gapped higher in the past few days. Outside of very short-term rates, yields are up around 20 to 30 basis points. Last Thursday, the yield on the five-year Treasury dropped as low as 1.37% yet today it got as high as 1.73%.

    That’s a big move for such a short period. Rather than representing a shift in sentiment, it seems that the unusual trading previously due to Greece is slowly unwinding. For example, shares of AFLAC ($AFL) have slowly recovered and they dipped their heads just above $46 today. JPMorgan ($JPM) also had a good day today. The stock gained 2.3%.

    Oracle ($ORCL) got as high as $32.68 today, which just makes me laugh. There hasn’t been one important piece of information that should have changed anyone’s mind on this stock since earnings came out. Not one! The market is simply coming to its senses.

    Medtronic ($MDT) lost 2.36% today due to the bad news I mentioned earlier. After the market close, Fiserv ($FISV) announced it is buying CashEdge for $465 million and that the transaction won’t impact this year’s earnings-per-share.

    I’ve said before that this is a slow week. Except for tomorrow being the last day of the quarter, not much is going on. I will be curious to see this Friday’s ISM report. The last report (the one for May) was much worse than I expected. It will be interesting to see if this is a trend.

  • The StockTwits Edge
    , June 29th, 2011 at 11:39 am

    I’m very happy to announce that StockTwits has written a book: The StockTwits Edge: 40 Actionable Trade Set-Ups from Real Market Pros which is available now through Amazon.

    I have to congratulate Howard Lindzon, Phil “Doctor Phil” Pearlman and Ivaylo Ivanhoff for making the book a reality. The book is divided into 46 chapters all written by StockTwits contributors. The chapters cover several different topics from trend-following to options to forex trading.

    Your humble blogger contributed Chapter Nine, “Dividend Don’t Lie.” If you want to see what StockTwits is all about, I recommend getting the book. (And if you enjoy it, please give it a good review on Amazon.)

  • AFLAC Prices 50 Billion Yen of Senior Notes
    , June 29th, 2011 at 10:40 am

    Borrowing at low rates isn’t always a bad thing:

    Aflac Incorporated announced today that it has priced yen-denominated (Samurai) bonds totaling 50 billion yen (par value), or approximately $625 million at the current yen/dollar exchange rate. The issuance consists of 28.7 billion yen ($359 million) of three-year fixed-rate notes with a coupon of 1.47%; 15.8 billion yen ($197 million) of five-year fixed-rate notes with a coupon of 1.84%; and 5.5 billion yen ($69 million) of three-year floating-rate notes with a coupon of three-month Japanese yen Libor plus 1.15%. The company anticipates using the proceeds from this issuance primarily for debt repayment and general corporate purposes. The bonds will be issued in Japan under a previously announced shelf registration filed with Japanese regulatory authorities. This issuance is the first issuance from the November 2009 shelf registration.

    Commenting on the pricing of the debt issue, Aflac Incorporated President and Chief Financial Officer Kriss Cloninger III commented: “This debt issuance will facilitate our repayment of approximately 35 billion yen of Uridashi notes that mature in September 2011, and further strengthens our liquidity position.”

    The yen’s impact on 2011′s operating earnings is pretty straightforward. At an exchange rate of 87.69 yen per dollar, the earnings will grow by 8% to $5.97 per share for 2011. Every one point below that adds roughly five cents per share to AFL’s bottom line.