CWS Market Review – January 14, 2011

Fourth-quarter earnings season has begun! This morning, our first Buy List stock reported earnings. As I said before, I expected JPMorgan Chase ($JPM) to soundly beat expectations and that’s exactly what happened.

The bank earned $1.12 per share. Wall Street was expecting 99 cents per share. JPM has been greatly helped in recent quarters by having smaller reserves for its loan losses. I was really impressed to see turnarounds in JPM’s credit card and retail banking divisions. Both divisions were money-losers a year ago. The improving economy is definitely helping their bottom line and this is why they have smaller loan reserves.

JPM still needs to get approval from the Fed to raise their dividend, but I think an increase is coming soon. Jamie Dimon has said that he’d like to pay out between 75 cents and $1 per share. My guess is that we can expect to see a dividend increase by April.

As I write this, the stock is up about 1.5% for the day. Shares of JPMorgan Chase are an excellent buy up to $47 per share.

I sent you an email earlier this week to highlight the good news from Stryker ($SYK) and Nicholas Financial ($NICK). I’m happy to see that Stryker is still holding above $57.50. The stock popped above $58 earlier this week on its strong guidance. Nicholas Financial is also finding a new home between $11.50 and $12 per share. Both stocks are excellent buys.

We also had more good economic news today. The Federal Reserve reported that industrial production rose by 0.8% in December. That’s the biggest increase in five months. On top of that, the increase for November was revised up to 0.3%. I think this explains much of the strength we’ve seen in cyclical stocks. Ford Motor (F), for example, is already a 10% winner for us this year.

A few of our other stocks are doing well for us. Both Leucadia ($LUK) and Fiserv ($FISV) hit new 52-week highs today.

There’s not much else to say so I’ll keep it brief. The market has been very good to investors in high-quality shares. Through Thursday, the Buy List was up 3.89% for the year compared with 2.08% for the S&P 500.

This is an oddly perfect investing moment for us. Volatility has plunged. The S&P 500 has stayed above its 10-day moving average for six-straight weeks. That’s one of the longest runs in history. This won’t last forever, so I encourage investors to play it safe and focus on the high-quality names on the Buy List. Stocks like AFLAC ($AFL), Wright Express ($WXS), Gilead ($GILD) and Reynolds American ($RAI) continue to look very strong.

Volatility will probably pick up as more earnings are released. I don’t yet know the dates for most of our Buy List companies’ earnings reports, but the reports will likely begin the week after next. I’ll have complete coverage on the blog.

Remember that even strong stocks can fall after strong earnings announcements so please be well-diversified.

That’s all for now. I’ll have more market analysis for you in the next issue of CWS Market Review!

Best – Eddy

Posted by on January 14th, 2011 at 7:37 am

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.