Archive for August, 2013

  • S&P 500 Sectors Since March 9, 2009
    , August 31st, 2013 at 9:25 pm

    Here’s how the different S&P 500 sectors have performed since the market bottom on March 9, 2009 (dividends included):

    Sector Gain
    Discretionary 289.72%
    Financials 235.87%
    Industrials 217.97%
    Tech 167.38%
    S&P 500 165.65%
    Material 157.32%
    Health Care 147.62%
    Staples 133.12%
    Telecom 116.40%
    Energy 110.56%
    Utilities 100.87%

  • CWS Market Review – August 30, 2013
    , August 30th, 2013 at 7:04 am

    “Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.” – Charles Mackay

    August is nearly over, and the market’s blahs may soon come to an end. After Labor Day, all the market big shots head back to the office from their summer retreats in the Hamptons or Martha’s Vineyard. The August mini-slump continued this week as President’s Obama’s plans for an attack on Syria’s chemical-weapons facilities put a damper on stocks. On Wednesday, the S&P 500 fell to an eight-week low.

    The market wasn’t really concerned with the fallout from any airstrike; rather, folks looking to unload their positions saw this as good opportunity to move, so they took it. There hasn’t been much news, so it’s easy for market observers to overestimate the importance of the Syria story on the markets.

    Despite the sluggish pace of the market this month, there are some emerging trends that I think bode well for the rest of the year. For one, this week we learned on Thursday that government number crunchers revised second-quarter GDP up to 2.5%. The original report from last month was only for 1.7%. This means the economic growth is actually accelerating, albeit quite modestly. One of the best predictors for the economy is the spread between the two- and ten-year Treasury yields, and that’s looking quite good (see below).

    fredgraph08302013

    On Tuesday, the Conference Board reported that consumer confidence rose to its highest level in five and a half years. This is important, because it tells me that all these “scared ya!” headlines we’ve seen (sequester, taper, Syria, bonds, etc.) aren’t stopping folks from going to the mall. This is especially good news for our retail stocks. Since there hasn’t been much earnings news lately, I’m going to use this issue to run down all of our Buy List stocks and bring you up to speed on each one.

    Updates on the Crossing Wall Street Buy List

    AFLAC ($AFL) had a decent earnings report last month. The shares ran as high as $63.62 on August 1st but have pulled back below $58 since then. Guidance for Q3 was a bit weak, but it was nothing terrible. In October, I think we can look forward to a modest dividend increase. I still like AFL a lot. To reflect the recent pullback, I’m lowering my Buy Below price on AFLAC to $64 per share.

    Bed Bath & Beyond ($BBBY) has been one of our big success stories this year. For the year, BBBY is up more than 32%. The home furnisher is also one of our three Buy List stocks that ends their quarter in August, so we can look forward to another earnings report in September. The company said to expect fiscal Q2 earnings to range between $1.11 and $1.16 per share. BBBY remains a very good buy up to $79 per share.

    CA Technologies ($CA) is our #1 performer on the year, with a 35% gain. Even with the big gain this year, the shares still yield 3.4%. This is a good stock to own for investors who don’t like volatility. CA tends to be fairly stable from day to day. The company said it expects full-year earnings between $2.90 and $3.00 per share. CA is a very good buy up to $31 per share.

    Cognizant Technology Solutions ($CTSH) may be the best bargain right now on our Buy List. Investors were spooked earlier this year by poor earnings results from CTSH’s competitors. There were also concerns that pending immigration legislation would hurt their business model. The stock was crushed this spring but has come back some. The last earnings report was quite good. I doubt this bargain will last. CTSH is an excellent buy up to $78 per share.

    CR Bard ($BCR) also had a good earnings report in July. The medical-equipment company beat consensus by four cents per share. The shares pulled back earlier this month from a 52-week high but have shown some strength lately. I’m keeping a fairly tight Buy Below on Bard. CR Bard is a solid buy any time it’s below $115 per share. Don’t chase BCR. Wait for good stocks to come to you.

    DirecTV ($DTV) has been in the news lately. It’s been reported that Google($GOOG) is talking to the NFL about buying the rights for the Sunday Ticket. Please, that’s longer than a long shot. Bear in mind that anything Google does will make news, so any news story about how they’ll hook up with pro football will get instant clicks. The truth is that the NFL is very happy with DTV. The Sunday Ticket deal is up next year, and of course the NFL will talk to other parties. There’s no reason to believe the NFL will start broadcasting over YouTube. I’m lowering my Buy Below on DirectTV to $64 per share.

    FactSet Research Systems ($FDS) is another Buy List stock with an August quarter, so you can expect earnings in a few weeks. FDS is a great example of how our “set and forget” can beat hyperactive traders. The stock dropped 6.6% after the last earnings report, which merely met expectations. Fortunately, we held on as the stock made back everything it lost and rallied to a new 52-week high. FactSet sees the upcoming earnings report ranging between $1.18 and $1.21 per share. FDS is a buy up to $112 per share.

    Fiserv’s ($FISV) been weak lately after a very good earnings report. Don’t worry about this one. Fiserv reiterated its full-year guidance of earnings ranging between $5.84 and $6.03 per share. FISV is a good buy up to $103 per share.

    It’s hard for me to stop gushing about Ford ($F), so I’ll try to go easy this week. Although the stock popped up as high as $17.68 after the last earnings report, the shares have been pretty sluggish since. Ford even dropped below $15.80 per share but the sale didn’t last long. The stock gapped up 3% on Thursday to close at $16.50 per share. Ford is an excellent buy up to $17 per share.

    Harris ($HRS) announced a dividend hike this week. The quarterly payout will rise from 37 cents to 42 cents per share. Going by Thursday’s close, that works out to a yield of just under 3%. Last month, Harris destroyed its earnings estimates. The stock remains a very good buy up to $62 per share.

    It’s no secret that JPMorgan Chase ($JPM) has been our most frustrating stock this year. The company delivers on the earnings but continues to make terrible headlines for shareholders. The latest is that the government is pressing JPM for $6 billion to settle lawsuits over subprime mortgages. The stock is down 10% in the last four weeks. My patience is wearing thin. I’m lowering my Buy Below to $56 per share.

    Medtronic ($MDT) has been a pleasant surprise this year. It’s our fifth-best-performing stock on the Buy List. I’ve always admired the stability of MDT’s business, so it’s good to see investors give them respect. The stock met earnings expectations a few days ago. They also reiterated full-year guidance of $3.80 to $3.85 per share. In June, MDT raised their dividend for the 36th year in a row. MDT remains a solid buy up to $57 per share.

    As a rule of thumb, it’s probably not a good sign when your CEO’s announcement of his pending retirement causes your market value to rise by $24 billion. But that’s exactly what happened to Microsoft ($MSFT) after Steve Ballmer said he’s going to leave as CEO within the next year. By the way, Ballmer’s made a cool $1 billion on the announcement, as well. I’m expecting a dividend boost soon. MSFT is a buy up to $35 per share.

    Moog ($MOG-A) reported a big earnings beat last month, plus strong guidance, but the stock has been weak lately, which may be due to the government sequester. For now, I’m keeping my Buy Below at $57, but Moog is an exceptionally good buy if you see it trading below $50 per share.

    There’s not much new to say about Nicholas Financial ($NICK), which is how I like it. The earnings report was basically what I expected. I think we’ll see a dividend increase later this year. The shares have recently pushed back above $16.

    Oracle ($ORCL) is another Buy List stock with an August quarter. The next earnings report should be out around September 20th. In my eyes, this is a make-or-break report. The last two reports have been duds, and so far, I’ve given Larry and his team the benefit of the doubt. Now I want to see solid results. In June, Oracle gave us quarterly guidance of 56 to 59 cents per share. Frankly, that’s not terribly impressive (ORCL made 53 cents a year ago). If Oracle has turned the corner, it’s a $40 stock. But that’s a big “if.” Oracle is a buy up to $35 per share.

    Ross Stores ($ROST) reported excellent earnings news last week. I was pleased to see the shares gap higher on Friday to a new 52-week high. The stock also beat its old all-time high by four cents per share. ROST’s forecast for Q3 was a bit light, but I think they’re just being conservative. The strong consumer-confidence report this week bodes well for Ross. ROST remains a very good buy up to $70 per share.

    Stryker ($SYK) missed earnings in July, and lowered its full-year earnings by a bit, but it wasn’t enough for me to be concerned. SYK sees full-year earnings coming in between $4.20 and $4.26 per share. The orthopedic powerhouse has given us big dividend increases the last few Decembers, and I think this one will be no exception. Stryker is a buy up to $71 per share.

    Unlike JPM, Wells Fargo ($WFC) is our well-behaved bank. The earnings here continue to be very good. WFC got caught up in the selling that’s hit all the financials. No need to worry. This is one of the strongest financials around. Due to the pullback, I’m lowering WFC’s Buy Below to $45 per share. This is a very solid stock.

    After an astounding run from May through July, WEX Inc. ($WEX) finally took a rest this month. For Q3, they see earnings between $1.16 and $1.23 per share. That’s up from $1.08 per share for last year’s Q3. For all of 2013, WEX sees earnings ranging between $4.27 and $4.37. I rate WEX a buy up to $93 per share.

    That’s all for now. The stock market will be closed on Monday for Labor Day. After that, we get the important first-week economic reports. ISM is on Tuesday, the ADP jobs report on Thursday. Then the big official jobs report comes on Friday. The last four non-farm payroll reports have ranged between 160,000 and 200,000 new jobs. This will be the last jobs data before the Fed’s next meeting in mid-September. Be sure to keep checking the blog for daily updates. I hope everyone has a great three-day weekend. I’ll have more market analysis for you in the next issue of CWS Market Review!

    – Eddy

  • Morning News: August 30, 2013
    , August 30th, 2013 at 6:39 am

    Eurozone Unemployment Steady At Record 12.1% In July

    Rupee Seen on Slippery Path as Volatility Highest

    Europe’s Horrific Unemployment Situation

    Gay Marriages Get Recognition from the I.R.S.

    Fed Staff Violated Bank’s Rules in Early Minutes Release

    United States’ 2nd-Quarter Growth Is Revised Up to 2.5%, From 1.7%

    Nasdaq Says Software Flaw Exposed in Data Flood Led to Halt

    Verizon and Vodafone Rekindle Talks on $100 Billion-Plus Deal

    Apache Sells Egyptian Oil Stake to Sinopec For $3.1 Billion, Forms Global JV

    Pure Storage Valued at Over $1 Billion in T. Rowe Price Funding

    JPMorgan Hiring Put China’s Elite on an Easy Track

    The Relationship Between Oil Prices and Stocks

    Zurich Insurance CFO Mentioned Chairman In Suicide Note

    Cullen Roche: The Ultimate MCRO Bull vs Bear Debate

    Jeff Carter: Building Moats, or Bridges?

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  • Q2 GDP Growth Revised Up to 2.5%
    , August 29th, 2013 at 12:08 pm

    We had some good economic news today. The government revised the second-quarter GDP growth up to 2.5%. The original report showed only 1.1% growth. The big revision was largely due to the trade numbers we got earlier this month.

    For the first time in a long time, the economy appears to be accelerating. For the last three quarters, GDP has gone from 0.1% growth to 1.1% and now, 2.5%.

    The Department of Labor said that jobless claims fell to 331,000 last week. The number for the week before was revised higher by 1,000 to 337,000. The jobless claims report has been very steady lately. Next Friday brings another big jobs report, the last one we’ll see before the Fed’s September meeting.

    The stock market is reacting well. I noticed that Ford ($F) is back above $16.50 per share.

  • Morning News: August 29, 2013
    , August 29th, 2013 at 7:02 am

    Indian Shares Surge Nearly 2% After RBI Provides Dollars To Oil Firms

    The Number of Jobless Germans Unexpectedly Jumped In August

    A Force 10x Bigger Than Syria Is Driving Oil Prices Higher

    Oil Prices Dip as Fears Recede of Imminent Syrian Intervention

    Summers Schooled by Rates at Harvard Now Wants Job Setting Them

    Vodafone in Talks With Verizon Over U.S. Wireless Stake Sale

    US Airways’ Washington Airport Prize Hobbles AMR Merger

    Fast-food Strikes Set for Cities Nationwide

    Ackman Takes $500 Million Loss on Penney as Saga Ends

    Co-Operative Bank Reports After-Tax Loss Of $1.2 Billion

    Pernod Ricard Sees Economic Growth Matching Previous Year

    Nintendo Cuts a Dimension From a Device Aimed at Youths

    The Bond Market ‘Slaughter’ Has Been Brutal, But Not Really

    Jeff Miller: The Difference Between Risk and Fear

    Howard Lindzon: Are Hedge Funders Nuts…?

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  • Morning News: August 28, 2013
    , August 28th, 2013 at 7:15 am

    GBP/USD– Will BoE Governor Mark Carney Scare Sterling Bulls?

    Indian Rupee Hurtles Lower as Foreign Investors Flee

    Chinese Shoppers Set To Become World Leaders Online

    Don’t Blame the Fed for Asia’s Problems

    Brent Crude Could Spike To $150 A Barrel Over Syria: SocGen

    Gold is on a Huge 2-Month Run

    Home Prices Increased in June

    U.S. Bank Legal Bills Exceed $100 Billion

    JPMorgan Chase May Have To Pay $6 Billion To Settle Financial Crisis Lawsuit

    Twitter Hires Commerce Chief to Add Shopping Via Tweets

    Tiffany 2Q Profit Rises, Helped by China Growth

    Keystone Seen as No Local Job Starter Along Prairie Route

    Former JPMorgan Employee Surrenders in Spain in ‘London Whale’ Case

    Credit Writedowns: Fed to QE-Exit Whacked Emerging Markets: Drop Dead

    Cullen Roche: The VIX – It’s Not Really Much of a “Fear” Gauge

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  • The Pete Best of Investing
    , August 27th, 2013 at 3:04 pm

    I recently saw the movie Jobs. Unfortunately, it’s not very good, which is too bad because I think the story has the potential to make for a really good movie.

    One part of the Apple ($AAPL) story that wasn’t covered was the involvement of Ronald Wayne. When Apple was formed, Steve Jobs got 45% ownership, Steve Wozniak got 45%, and Ronald Wayne got 10%. The company was formed on April 1, 1976. They were working out of a garage at this point. Wayne decided to relinquished his stock on April 12, 1976. His proceeds: $800.

    Today, 10% of Apple is worth about $45 billion.

    Last year, Alex Plane of the Motley Fool wrote about Wayne’s blunder.

  • 29 High-Quality Mid-Caps
    , August 27th, 2013 at 11:29 am

    I’d be embarrassed to admit the number of companies I look at each day. My computer overfloweth with spreadsheets. I thought I’d share some of my recent research. Here’s a list of 29 high-quality mid-cap stocks. Some are well-known but a lot aren’t. I’m not saying these stocks are good buys, but they’re certainly ones worth watching.

    Stock Ticker
    American Public Education Inc APEI
    Bio Reference Laboratories Inc BRLI
    Buckle Inc BKE
    CARDTRONICS INC CATM
    Encore Capital Group Inc ECPG
    Epiq Systems Inc EPIQ
    First Cash Inc FCFS
    Hanger Inc HGR
    ICU Medical Inc ICUI
    IPC The Hospitalist Co Inc IPCM
    MWI Veterinary Supply MWIV
    NTELOS Hldg NTLS
    Neogen Corp NEOG
    Netscout Systems Inc NTCT
    OpenTable Inc. OPEN
    OSI Systems Inc OSIS
    Papa John’s Intl Inc PZZA
    Portfolio Recovery Associates Inc PRAA
    SHFL Entertainment Inc SHFL
    South Jersey Industries Inc SJI
    Stamps.com Inc STMP
    Steven Madden Ltd SHOO
    THE ENSIGN GROUP ENSG
    Texas Roadhouse TXRH
    Tyler Technologies Inc TYL
    United Stationers Inc USTR
    Vitamin Shoppe Inc VSI
    World Acceptance Corp WRLD
    rue21 Inc RUE

  • The People’s Broker
    , August 27th, 2013 at 9:20 am

    “In the jungle among the money funds, there is only one king.”

    Those who have been in the investing game long enough will probably remember the slogan for the Dreyfus Fund, the top-performing mutual fund of the 1950s and -60s started by Jack Dreyfus. The ads for the fund featured a lion striding out of the Wall Street subway station and ran essentially unchanged for over 40 years.

    Dreyfus himself was one of the kings of Wall Street, but he also had the common touch. His populist, take-it-to-the-people approach made him not only a financial pioneer (and a very rich man), but also a fierce advocate for the little guy.

    In his memoir, The Lion of Wall Street, he wrote that steam came out of his ears whenever he felt that “the American people have been jerked around.”

    Dreyfus was born exactly 100 years ago, on August 28, 1913, in Montgomery, Alabama. His early career was utterly undistinguished: by his own accounts, he was a lackluster student, both in high school and later at Lehigh University. He fumbled his way through jobs as a candy salesman and industrial designer before landing a kind of apprenticeship at a Wall Street brokerage firm—an apprenticeship that his father surreptitiously paid for.

    After World War II, however, things started to happen. Dreyfus started his own brokerage firm in 1947, and then, four years later, hit upon the inspiration that would change the U.S. investment landscape: the mass-market mutual fund, geared towards individuals instead of large financial institutions. Such funds would, he hoped, give ordinary investors the opportunities previously enjoyed by professional financiers. Now he just needed to attract clients.

    He had his work cut out for him. Back in the pre-IRA day, investing in the stock market was for high rollers and wheeler-dealers, not for ordinary families with their 401(k)s. Average Joes kept their money in their mattress, which is to say, in the bank, so Dreyfus learned to master the burgeoning art of advertising. His firm’s TV spots blended ebullience and earnestness: “The Dreyfus Fund hopes to make your money grow, and takes sensible risks in that direction.” “Christopher Columbus: America’s first speculator.”

    It worked. The company exploded. Investor’s Business Daily shows the Dreyfus Fund as yielding 604% from 1953 to 1964, compared with 346% for the Dow Jones and 502% for the next-best fund. Life magazine did a spread on the “Wall Street Lion,” and later Barron’s would call Dreyfus the second-most-influential money manager of the 20th century.

    It was at this point that Dreyfus had the first of many battles with Goliath of government institutions. Just after his firm premiered its trademark commercials featuring the king of the cats, the SEC passed a law forbidding TV spots for mutual funds. For years, the company was unable to air any new ads. The SEC later rescinded the law, but the episode doubtless confirmed Dreyfus in his opposition to bureaucracies that, in his view, denied ordinary citizens access to potentially beneficial information.

    His greatest battle was yet to come. In the 1960s, Dreyfus began to suffer from severe depression, which he thought was caused by too much “electricity” in his body. Flawed reasoning, but strangely, it served him well: when he asked a doctor for a prescription for Dilantin (phenytoin), an epilepsy medication, the drug seemed to cure him almost overnight.

    Thus began the crusade that would last the rest of his life. Convinced that the drug had medical uses beyond those for which it was commonly prescribed, he wrote an earnestly titled book, A Remarkable Medicine Has Been Overlooked, and began lobbying for further investigation of phenytoin’s benefits. His aim was to help people who suffered as he had, but he soon found his way blocked by a formidable opponent: the FDA.

    It turned out that FDA regulations forbid so-called off-label uses of medications—i.e., prescribing drugs for ailments other than those they were designed to alleviate. No matter how beneficial a drug may be, companies and individual doctors cannot publicize its effects in the official literature if it hasn’t been specifically approved for a given purpose. In Dreyfus’s view, this hyper-cautious bureaucratic attitude caused millions of ordinary Americans to suffer needlessly: “Without FDA approval, drug companies cannot market phenytoin as anything other than an anticonvulsant, and most doctors remain in the dark as to its versatility…Millions of people in this country alone suffer because of the letters FDA.”

    Dreyfus spent the next 30 years trying to persuade doctors, senators, even President Clinton himself to liberalize FDA regulations, but to little avail. The $100 million of his own money that he spent to promote phenytoin for other uses never succeeded in winning widespread approval for the medication, in part because its manufacturer, Parke-Davis, didn’t want to invest in a product whose patent was about to expire.

    But if Dreyfus’s medical lobbying yielded little fruit, his legacy to ordinary investors was tremendous. His methods for managing his mutual fund, which included trading stocks rapidly, buying companies that are on the upswing regardless of their price, and close scrutiny of charts that track stock prices, have influenced countless major investors such as Charles Schwab and Ned Johnson. Meanwhile the popularization of the mutual fund as a financial product has changed retirement as we know it.

    Jack Dreyfus was an American original. If an institution is the lengthened shadow of a single man, his shadow is long indeed.

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  • Morning News: August 27, 2013
    , August 27th, 2013 at 6:49 am

    Emerging Stocks Fall to Six-Week Low on Syria as Currencies Drop

    British Fraud Investigator In China TV Confession

    German Business Confidence Rises to Highest in 16 Months

    Indian Rupee Plumbs New Depths As Confidence In Government Ebbs

    NOMURA: India’s Lower House Just Passed A Food Bill That’s Going To Make Its Economic Situation Even Worse

    Bitcoin Meeting, OTC Derivatives, Trump U: Compliance

    Bats CEO Sees Value of Stock Data Rising From Merger

    Bill Ackman to Sell Entire J.C. Penney Stake

    The Deal: American Airlines Profit Soars

    Billabong Losses Triple as 40-Year-Old Brand Seen Worthless

    Facebook Market Value Tops $100 Billion Amid Mobile Push

    AstraZeneca to Buy U.S. Cancer Firm for Up To $500 Million

    Judge Rules Against JPMorgan in Suit Over Billionaire’s Losses

    Roger Nusbaum: Grim Savings Numbers

    Phil Pearlman: Hyperloop, Tesla & Transportation Disruption with Gregor Macdonald

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