CWS Market Review – April 29, 2011

The market continues to surge higher and our stocks are leading the way. Through Thursday, our Buy List is up 11.44% for the year. That’s not bad for less than four months’ work. On Thursday, the S&P 500 closed at its highest level since June 9, 2008.

The first thing I want to talk about today is AFLAC ($AFL). I feel like I’ve been screaming into the wind with this one. The company clearly and consistently told us that they were doing well, yet the market repeatedly doubted them.

This is what I wrote in last week’s e-letter:

For AFLAC, simply put, the stock is very inexpensive. The earthquake and tsunami in Japan scared Wall Street in a major way. The company has made it abundantly clear that it’s still doing well. Make no mistake: AFLAC is a very well-run ship. Next week, we’ll see the proof.

Indeed we did. AFLAC reported operating earnings of $1.63 which was 11 cents better than Wall Street’s estimate. The only way AFLAC misled us is that they weren’t optimistic enough. It was only six weeks ago that shares of AFLAC bounced off $48! On Thursday, AFL closed at $57. This was the highest close since before the earthquake and tsunami.

I was also happy to see that AFLAC reaffirmed their guidance for all of 2011. They expect full-year earnings to range between $6.09 and $6.34 per share. That’s a lot for a $57 stock. I’ll repeat my claim from earlier this year that AFL will make a run at $60. This is a very good stock.

I also wrote in last week’s e-letter:

Deluxe already told us to expect earnings to range between 69 cents and 73 cents per share. Look for an earnings surprise here. My numbers say to expect at least 75 cents per share.

Sometimes I’m so good, it’s scary. Deluxe ($DLX) earned 75 cents per share on the nose. For Q2, they said to expect 66 cents to 71 cents per share. For the full year, they see earnings ranging between $2.90 and $3.10. Deluxe has been a surprise winner for this year. I still like DLX (especially that rich dividend). DLX is a good buy up to $30.

I also want to touch on Nicholas Financial ($NICK) which has seen some crazy volume lately. I wrote on the blog that the time has passed and that there probably won’t be a deal to buy NICK. Suddenly this week, trading volume in NICK soared and the stock popped to $13.61 per share. I can freely admit that I have no idea what was going on.

The company came out with a statement saying that any deal is off the table. Well, that should have been obvious to anyone. On Thursday, the stock plunged as low as $11.55 before it closed the day at $12.49. You can’t make much sense of that action. Personally, I’m happy that NICK was willing to shoot down an offer.

Here’s all you need to know: Earnings are coming next week and they’re going to be very good. I think NICK can earn as much as 40 cents per share. Honestly, I don’t know why NICK isn’t a $17 stock, but I don’t make the rules around here. WallStreetistan can be a very strange place.

We had an earnings miss this week with Fiserv ($FISV) but I don’t think it’s anything to be majorly concerned about. The company earned $1.02 per share which was two cents below expectations. Fiserv actually missed by a penny last earnings season but that didn’t hold back the price.

Fiserv’s stock dropped 4.53% on Thursday but the most important news is that they reiterated their full-year guidance. For 2011, FISV sees earnings in a range of $4.42 to $4.54 per share. That means the stock is going for 13.5 to 13.9 times this year’s earnings. That’s not a bad deal at all. Fiserv is a solid stock.

The last earnings report came from Becton, Dickinson & Co. ($BDX) and it was very strong. BDX earned $1.38 per share which was eight cents more than expectations. What was even better is that they raised their full-year EPS guidance from the earlier range of $5.45 to $5.55 to a new range of $5.55 to $5.65. (Side note: Their fiscal year ends in September.)

I thought the earnings report was great so I was baffled by BDX’s crazy reaction on Wednesday, especially in the morning. Fortunately, the stock got its act together on Thursday and got to a new 52-week high of $85.93. BDX hasn’t been one of our stronger stocks this year but I think that may change soon.

Stay tuned for earnings reports from Wright Express ($WXS) and Nicholas Financial ($NICK) next week. Wright just hit a new 52-week high. We’ll also get the ISM report on Monday and the big jobs report will come next Friday.

That’s all for now. 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

Posted by on April 29th, 2011 at 8:37 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.