Archive for November, 2012

  • Tupperware Brands (TUP)
    , November 5th, 2012 at 2:53 pm

    I’ve been eyeing Tupperware Brands ($TUP) recently. It looks to be a good mid-cap stock with steadily rising earnings.

    Here’s how Hoover’s describes them:

    Tupperware Brands Corporation (TBC) knows that there’s more than one way to party. The company makes and sells household products and beauty items. Tupperware parties became synonymous with American suburban life in the 1950s, when independent salespeople organized gatherings to sell their plasticware. TBC deploys a sales force of about 2.7 million people in about 100 countries. The company also sells its products online. Brands include Armand Dupree, Avroy Shlain, BeautiControl, Fuller, NaturCare, Nutrimetics, Nuvo, Swissgarde, and, of course, Tupperware. Its BeautiControl unit sells beauty and skin care products and fragrances in North America, Latin America, and the Asia/Pacific region.

    TUP should probably earn close $5 per share this year, and $5.50 or more next year. Unfortunately, when I was first looking into TUP, the shares were at $54. The good earnings report sparked a rally to $62. The stock still looks good; it’s just not the outstanding bargain it had been.

    The World Simplest Stock Valuation model give TUP a fair value of $77.

  • The Dow’s Four-Year Cycle
    , November 5th, 2012 at 11:39 am

    With voting tomorrow, I thought I’d post this chart again. This is the Dow’s average four-year cycle since 1896.

    I ran the entire numbers set from May 1896 to September 2011. Except for the 12 months preceding a mid-term election, the Dow generally does well. There’s another slow period for the nine months preceding Memorial Day of the election year.

  • The 200-DMA Is Within Sight
    , November 5th, 2012 at 10:18 am

    The stock market’s stall of the last few weeks has brought it closer to its 200-day moving average. Right now, it’s around 1,380 and we’re hovering about 2% above that.

    The 200-DMA is an example of a dumb rule that has a surprisingly decent track record. Academics hate things like moving averages, and I agree that we shouldn’t place too much weight on their judgements, but they are worth watching.

    What investors need to understand is that financial markets are biases towards trends. When something is going in motion, either up or down, it has a decent chance of continuing to go in that direction. Capturing the turning points is the tricky part and is best left alone. The 200-DMA is simple but it’s able to capture the stock market’s momentum.

    Three years ago, I ran the numbers and this is what I found:

    So does the 200DMA work? The evidence suggests that it’s a pretty good indicator of future price performance. When the S&P 500 has been below the 200DMA, it’s dropped a total of about 20% over the equivalent of 27 years. In other words, the S&P 500 has been below its 200DMA about one-third of the time.

    Historically, the best time to invest has been when the S&P is less than 1.7% below the 200DMA.

    When the index is above the 200DMA, well, then everything looks much brighter. All of the market’s gain and then some have happen when we’re above the 200DMA which occurs about two-thirds of the time.

    The market seems to like nearly every point of being above the 200DMA. Danger only clicks in when the S&P 500 is over 17.5% above the 200DMA which is a very high reading.

  • Sysco Earns 49 Cents Per Share
    , November 5th, 2012 at 10:09 am

    The stock market is down a few points this morning. Obviously, traders are waiting for tomorrow’s election so this is causing some anxiety. Leaving aside any partisan issues, I think investors are nervous that the outcome may be undecided for a few days. That’s probably what concerns people most. I don’t think anyone wants to go through what we had in 2000 again.

    Shares of Nicholas Financial ($NICK) took a beating on Friday. Don’t let that scare you. At Friday’s closing price, the stock yields almost exactly 4%. The company will have no trouble covering its dividend. As I said before, the earnings report was slightly disappointing. Note word slightly. All would have been fine if it was, say, four cents more, so how can a four-cent miss turn into a $1 per share loss? I’m not sure. That’s 25 times missing earnings for a stock going around seven times earnings. Such is the mindset of short-term trading.

    This morning, Sysco ($SYY), the food services outfit, reported fiscal first-quarter earnings of 49 cents per share which was one penny below expectations. Sales rose 4.7% to $10.6 billion which was an all-time record for Sysco. The shares have pulled back some this morning, but I’m not too concerned. Sysco had a one penny share charge for some severance issues. Like NICK, Sysco pays a generous yield and the stock has had a good run since the market’s swoon in May.

  • Morning News: November 5, 2012
    , November 5th, 2012 at 5:52 am

    European Stocks, Euro Drop With Copper on Greece, U.S. Elections

    Euro Area Resolve for Single Currency Faces Greek Test

    US Fiscal Cliff, Europe’s Debt Woes Worry G20

    HSBC Sets Aside Extra $800 Million for U.S. Money Laundering Case

    Despite China Hit, Toyota Trebles Q2 Profit, Raises FY Forecast

    Oil Trades Near Four-Month Low on Greece Concern, U.S. Elections

    Berkshire’s Cash Nears Record as Buffett Extends Elephant Hunt

    Apple Paid Only 2% Corporation Tax Outside US

    Sharp Is Seen Seeking Bailout After Record Loss Forecast

    Ryanair Raises Full-Year Forecast

    Jim Beam Didn’t Get Putin Memo as Whiskey Eyes Russians

    Fight Builds Over Online Royalties

    Foxconn International Surges 35 Percent As Citi Report Lifts Iphone Hopes

    Howard Lindzon: Patents are the New Biotechs…Shame!

    Jeff Miller: Weighing the Week Ahead: Approaching Dangerous Curves?

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  • Our Highly Unscientific Poll
    , November 3rd, 2012 at 5:29 pm


  • October Unemployment = 7.9%
    , November 2nd, 2012 at 3:52 pm

    This morning was the important jobs report for October. This will be the last major economic report before the election next week.

    The government said that the U.S. economy created 171,000 net jobs last month. The gain for August was revised upward from 142,000 to 192,000. The gain for September was also revised higher, to 148,000 from 114,000. The economy has now gained back slightly more than half of the 8.78 million jobs lost between January 2008 and February 2010.

    The unemployment rate ticked up from 7.8% to 7.9%. Oddly, part of the reason the unemployment rate rose is that more people rejoined the workforce looking for jobs. The official unemployment had been held down because so many people had simply stopped looking for work altogether.

    For the U.S. economy to have the same jobs-to-population ratio as we had 12 years ago, we would need either 13.3 million more jobs, or 20.8 million fewer people.

    Here’s a look at the unemployment for the final month before a presidential election. The current one ranks highest of the last 17.

    Date Rate
    Oct-12 7.876%
    Oct-76 7.683%
    Oct-80 7.530%
    Oct-84 7.351%
    Oct-92 7.341%
    Oct-08 6.510%
    Oct-60 6.084%
    Oct-72 5.572%
    Oct-04 5.454%
    Oct-88 5.375%
    Oct-96 5.211%
    Oct-64 5.083%
    Oct-00 3.880%
    Oct-56 3.863%
    Oct-48 3.725%
    Oct-68 3.408%
    Oct-52 2.968%

  • CWS Market Review – November 2, 2012
    , November 2nd, 2012 at 8:28 am

    “Success or failure in business is caused more by the mental attitude even than by mental capacities.” – Walter Scott

    In last week’s CWS Market Review, I mentioned how I saw the market heading for “rough waters.” Of course, I meant that as a metaphor but it came literally true this week as Hurricane Sandy pounded the New York area. For the first time in more than 120 years, the New York Stock Exchange closed for two days in a row due to weather. I hope everyone survived the storm intact.

    Despite the abbreviated trading this week, our Buy List continues to do well. I told you in last week’s issue to “look for an earnings beat” from Ford ($F), and that’s exactly what we got. The automaker smashed Wall Street’s expectations by 33%. Once trading resumed on Wednesday, the stock gapped up nearly 8%, and it pushed even higher on Thursday to reach its highest close in six months. Also on Thursday, shares of AFLAC ($AFL) closed at their highest level since May 17, 2011.

    However, not all of our earnings reports have been great. Nicholas Financial ($NICK) had a mildly disappointing report, and WEX Inc. ($WXS), the new name for Wright Express, fell six cents shy of estimates. I still want investors to position themselves defensively. We’re not out of the woods just yet, but we are getting close.

    In this week’s issue, I’ll survey our recent Buy List earnings reports; plus I’ll discuss the final batch of earnings reports due next week. But first, let’s look at the remarkable turnaround at Ford Motor.

    Ford Is a Strong Buy Up to $13

    I have to admit that I had been baffled by the steady erosion in Ford’s ($F) share price since the beginning of last year. The company was clearly doing well and all of the problems negatively affecting their business were out of their control. Sure, their European sales were going down the drain, but they’ve been working to cut back production there.

    On Tuesday, we got the results and they were very good. For the third quarter, Ford earned 40 cents per share which was 10 cents more than Wall Street’s consensus. This was despite a 4% drop in overall revenues. I’ve looked over Ford’s numbers and what’s most impressive is that they got their profit margins in North America up to 12%. That’s outstanding.

    The success of this earnings report was laid a few years ago when the company dramatically restructured itself. Ford worked to cut costs and change its operations. That’s basically what Ford is planning to do in Europe today. Looking at the numbers, we can see that Europe was clearly Ford’s weak spot. The company lost $468 million in Europe.

    Ford is doing amazingly well in North America and that drove the strong results. On Wednesday, Ford jumped 7.7% to $11.16. On Thursday, the stock rose another nine cents to $11.25. The last time the stock was this high was on April 30th. Despite the rally, shares of Ford are still attractively priced. I think Ford can earn as much as $1.62 per share next year which means the stock is going for less than seven times next year’s earnings. I’m raising my Buy-Below on Ford to $13 per share.

    Nicholas Financial Earns 42 Cents Per Share

    I had been eagerly waiting for Nicholas Financials’ ($NICK) earnings report but the results were a slight disappointment. For the third quarter, the used-car financier made 42 cents per share. Their results were hurt by higher operational costs and for their interest rate swaps. I don’t want to overstate my disappointment. The company is still doing very well and my long-term view of the company hasn’t changed. With short-term interest rates poised to remain low for the next few years, plus a slowly recovering economy, the future looks bright for NICK. I think the company can continue to earn about 45 cents per share (give or take) for the next several quarters. Don’t let any short-term bumps rattle you, NICK is doing well. The stock continues to be a strong buy up to $15.

    Fiserv ($FISV) has been a great stock for this year (+28.35% YTD). Except for a dip in May, the stock has climbed nearly every month this year. On Tuesday, the company reported third-quarter earnings of $1.27 per share which was inline with Wall Street’s consensus. Fiserv also reiterated its full-year forecast of earnings growth of 11% to 14% which comes to $5.05 to $5.20 per share. Earnings for the first three quarters were up 13% to $3.75 per share so Fiserv should have little trouble hitting their full-year target. In fact, I think they have a shot of slightly beating that. Fiserv remains a very good buy. I’m raising my Buy-Below price to $80 per share.

    For such a quiet stock, Harris ($HRS) has been very volatile recently. The shares got knocked down by 8% over two days in mid-October due to a downgrade. On Monday, the company reported quarterly earnings of $1.14 per share which was two cents more than expectations. The most important news is that Harris is sticking by its full-year guidance of $5.10 to $5.30 per share. If the next three quarters are like the first, Harris will hit that target easily. When trading resumed on Wednesday, the stock dropped, which I found puzzling. Sure enough, the shares rallied back strongly on Thursday to reach a three-week high. Harris remains a good buy up to $50.

    WEX Inc. ($WXS), which used to be known as Wright Express, reported third-quarter earnings of $1.08 per share which was six cents below estimates. Revenues rose 6% to $161 million. WXS sees Q4 earnings ranging between $1.01 and $1.08 per share. The Street had been expecting $1.10 per share. Despite the earnings miss and poor guidance, the shares are holding up well. WXS is a good buy anytime the shares are below $75.

    The Last Batch of Q3 Earnings Reports

    We have three more Buy List earnings reports coming up. Moog ($MOG-A) reports on Friday, November 2. The results are probably out by the time you’re reading this. Unfortunately, Moog’s stock has been a dud this year. It’s the single worst-performing stock on our Buy List.

    The problem is that Moog makes flight control systems for commercial and military aircraft. That whole sector has been…well, a no-fly zone this year. Wall Street expects earnings of 89 cents per share (this will be for Moog’s fiscal Q4). I’ll be curious to see if Moog reiterates their guidance for FY 2013 (which we just started). Earlier Moog had said it expects fiscal year earnings of $3.50 to $3.70 per share. The good news is that the stock’s lagging performance has made it an attractive buy. I rate Moog a strong buy up to $45 per share.

    On Monday, November 5th, Sysco ($SYY) is due to report earnings, and DirecTV ($DTV) follows on Tuesday, November 6th, which is also Election Day. Sysco is expected to earn 50 cents per share which sounds about right. The stock currently yields 3.42% which is a very good deal. Here’s the thing: Sysco has raised its dividend for the last 42 years in a row. Even though their earnings were about the same as last year’s, I think they’ll want to keep the dividend streak alive, so look for a penny-per-share increase in the quarterly dividend very soon. Sysco is a good buy up to $32.

    That’s all for now. Obviously the big news next week will be the election. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!

    – Eddy

  • Morning News: November 2, 2012
    , November 2nd, 2012 at 6:26 am

    Deutsche Bank Faces Top Surcharge as FSB Shuffles Tiers

    R.B.S. Expects Libor Fine Amid Third-Quarter Loss

    Japan’s Electronics Behemoths Speak of Dire Times Ahead

    World Bank Offers Myanmar Development Grant

    Dollar Advances Against Most Peers Before U.S. Jobs Data

    FERC Takes Aim at Wall Street

    Consumer Comfort in U.S. Held Close to Six-Month High Last Week

    Big Storm Was Just A Fender-Bender For U.S. Auto Sales

    Retail Sales Climb In October, But Sandy Clouds Outlook

    Starbucks Grows Stores, Sales

    Exxon and Shell Earnings, Hurt by Natural Gas, Are Helped by Refining

    AIG Earnings and Revenue Exceed Expectations

    Honda to Nissan Extend China Sales Plunge on Islands Dispute

    Cullen Roche: Why the Stock Market is Rooting For Obama

    Jeff Carter: MF Global, One Year Later. No One Charged

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  • Consumer Confidence Hits Four-Year High
    , November 1st, 2012 at 10:38 am

    The stock market is up nicely this morning. We had a few nuggets of good economic news. I was very pleased to see that the ISM report came in at 51.7. That was a small increase over the 51.5 for September. Any number over 50 means that the manufacturing sector of the economy is expanding.

    The Conference Board reported that consumer confidence rose to its highest level since February 2008. ADP, the private payroll firm, said that 158,000 new jobs were created last month. Everyone is waiting for tomorrow morning when the official employment numbers from the government are released. Economists expect a gain of 125,000. Today’s jobless claims reports fell by 9,000 to 363,000. Economists were expecting 370,000.

    On our Buy List, Ford ($F) said that Alan Mulally will stay on as CEO through 2014. That’s good news for Ford’s shareholders.