Author Archive

  • $45 Per Share? Yes We Can!
    , February 1st, 2011 at 10:45 am

    Guess what stock is up 172% since Obama became president?

    Answer = Haliburton (HAL). It’s at another 52-week high this morning.

  • January ISM = 60.8
    , February 1st, 2011 at 10:14 am

    Wow. The ISM was very strong. The index for January hit 60.8 up from 58.5 in December.

  • Another Look at the Cyclical Top
    , February 1st, 2011 at 9:54 am

    On January 10th, the ratio of the Morgan Stanley Cyclical Index (^CYC) to the S&P 500 reached an all-time high of 0.844.

    Then from January 11th to January 21st, the CYC underperformed the S&P 500 for seven-straight sessions. This lead me to say that cyclicals were probably headed for a long period of underperformance.

    The CYC responded by beating the S&P 500 for four-straight days before getting crushed on Friday. That turned out to be the CYC’s worst relative performance in over five months.

    The CYC looks to outperform the S&P 500 again today. Here’s an updated look at the CYC divided by the S&P 500:

  • Waiting on AFLAC and the ISM
    , February 1st, 2011 at 9:09 am

    Yesterday, the Dow closed out its best January in 14 years. Today, the focus will be on the ISM report which is due out later this morning and AFLAC’s earnings which are due after the bell.

    The current estimate for the ISM Index is 57.5 which sounds about right. As I’ve mentioned before, the ISM is probably one of the best indicators that tells us if we’re in a recession or not.

    The index is wired so that any reading above 50 indicates that the economy is expanding and any reading below 50 signals a contraction. NBER, the folks who date recessions, have shown a strong tendency to declare months below 45 as recessions. In the chart below, notice how strongly declines in the ISM correspond with recessions (the grey bars).

    January will most likely be the 18th-straight month of a 50+ reading. What I especially like about the ISM is that it comes out on the first business day of the month, and there aren’t endless revisions.

    We’re also going to get a report on construction spending plus auto and truck sales.

    The economic news that came out yesterday was very encouraging. The Chicago PMI, which gauges economic activity, jumped to its highest level since 1984. For January, the index hit 68.8 up from 66.8 in December.

    The Commerce Department reported that personal incomes rose 0.4% in both November and December. The problem is that spending rose by 0.7% in December and 0.3% in November.

    The numbers showed that Americans saved $613 billion in December which was a drop of $20 billion from November. The savings rate fell from 5.5% to 5.3%. This data series will get a jolt this year thanks to the 2% cut in payroll taxes which began on January 1st.

  • Morning News: February 1, 2011
    , February 1st, 2011 at 8:11 am

    S&P Cuts Egypt Outlook

    Kenya’s Shilling Gains Vs. Dollar as IMF Approves $508.7 Million Facility

    Oil’s Rally Ends as Egypt Risk Subsides; Brent Stays Above $100

    Manufacturing Activity Hits Record High

    The Case for Ignoring the Stock Market

    ADM Q2 Profit Tops Street View on Robust Demand

    Warehouse Giants AMB Property, ProLogis to Merge

    Bank of America Top Bank Brand, Goldman 16th in Survey

    Coke Adds Billion Dollar Brand from China to Portfolio

    Exxon’s 4Q Profit Rises, Helped by Higher Oil Prices

    Nokia May Be Lowered at S&P in First-Ever Rating Cut

    Joshua Brown: Carlos Slim Weighs In On Food Inflation

    Howard Lindzon: Wow – It’s a Great Time to Be an Entrepreneur

  • Earnings Season So Far
    , January 31st, 2011 at 4:03 pm

    This earnings season is shaping up to be a good one. Here are some numbers via Zacks:

    *4Q earnings season off to strong start, with 206 of the S&P 500 reports in, median surprise of 4.28% and surprise ratio of 3.73 for EPS, 1.53% and 2.94 for revenues.
    *Reported (206 firms) fourth quarter earnings growth of 31.2%, expected (294 firms) year-over-year growth of 19.5% for the vast majority of firms yet to report. On the Revenue side, 7.88% growth reported, but decline of 1.37% expected for those yet to report.
    *Full-year total earnings for the S&P 500 expected to jump 43.3% in 2010, 14.7% further in 2011. Growth to continue in 2012 with total net income expected to rise 12.0%.
    *Total revenues for the S&P 500 expected to rise 6.09% in 2010, 4.77% in 2011, and 4.89% in 2012. Excluding Financials, revenues expected to be up 8.99% in 2010, 5.97% in 2011 and 5.45% in 2012.
    *Revisions ratio for full S&P 500 at 1.98 for 2011, at 1.82 for 2012 — both very bullish readings. Ratio of firms with rising to falling mean estimates at 2.05 for 2011, 1.66 for 2012, also very positive readings. Total revisions activity expanding rapidly, making the revisions ratios more significant.
    *S&P 500 earned $544.3 billion in 2009, expected to earn $782.9 billion in 2010, $898.1 billion in 2011. In 2012, the 500 are collectively expected to earn $1.0057 Trillion.
    *S&P 500 earned $57.68 in 2009: $82.62 in 2010 and $94.77 in 2011 expected, bottom-up. For 2012, $106.17 expected in early read. Puts P/Es at 15.7x for 2010, and 13.7x for 2011 and 12.2x for 2012.

  • CWS Buy List Earnings Calendar
    , January 31st, 2011 at 1:55 pm

    Here’s an update of our earnings calendar. So far, every stock but one has beaten Wall Street’s earnings forecast.

    Company Symbol Date EPS Est EPS
    JPMorgan Chase JPM 14-Jan $0.99 $1.12
    Gilead Sciences GILD 25-Jan $0.94 $0.95
    Johnson & Johnson JNJ 25-Jan $1.03 $1.03
    Stryker SYK 25-Jan $0.91 $0.93
    Abbott Laboratories ABT 26-Jan $1.29 $1.30
    Deluxe Corp. DLX 27-Jan $0.71 $0.78
    Nicholas Financial NICK 27-Jan n/a $0.38
    Ford Motor F 28-Jan $0.48 $0.30
    Moog MOG-A 31-Jan $0.63 $0.73
    AFLAC AFL 1-Feb $1.35
    Fiserv FISV 3-Feb $1.07
    Reynolds American RAI 3-Feb $0.61
    Sysco SYY 7-Feb $0.47
    Becton, Dickinson BDX 8-Feb $1.29
    Wright Express WXS 10-Feb $0.71

  • The Ford Story
    , January 31st, 2011 at 1:03 pm

    Via the WSJ’s MarketBeat blog, I came across this piece on Ford (F) written by Itay Michaeli of Citigroup.

    No, although the Q4 miss may (at least temporarily) take some of the premium out of the stock. The Ford investment story has revolved around product, market share gains and robust pricing—metrics that were alive and well in Q4. What we learned is that Ford’s margins weren’t immune from seasonal pressures (as consensus implied) and that commodity/structural costs remain clear 2011 headwinds. Ultimately, if Ford continues to execute on its global strategy, Q4’10 won’t be remembered as a turning point. To that, we remain positive on Ford’s 2011 product cadence, but do believe GM gains an advantage in 2012-14—one of the factors behind our Hold rating on Ford.

  • Moog Beat Earnings By 10 Cents
    , January 31st, 2011 at 9:47 am

    We’re getting the week off to a good start. Moog (MOG-A) just announced that it creamed Wall Street’s estimates.

    For the their fiscal Q1, Moog earned 73 cents per share which was 10 cents more than Wall Street’s expectations.

    That’s not all. The company also raised its estimate for 2011. Moog now sees full-year earnings-per-share coming in at $2.75 compared with their earlier forecast of $2.70.

    First-quarter revenue rose 12 percent to $554 million. Aircraft segment sales were up 12 percent at $196 million, helped by commercial aircraft parts.

    OEM (original equipment maker) production revenues were up for Boeing — from a ramp-up in 787 Dreamliner hardware deliveries — and Airbus, its main customers, the company said in a statement.

    Boeing recently delayed the initial delivery of the Dreamliner to the third quarter from the first.

  • Our Miserable Performance on Friday
    , January 31st, 2011 at 9:39 am

    I want to spend a moment on our performance on Friday. What else can I say? The Buy List was absolutely killed. Unlike other folks on the Internet, I refuse to hide my lousy performance.

    The 20 stocks on the Buy List dropped 2.78% compared with a loss of 1.79% for the S&P 500. That 0.99% underperformance is one of our worst showings in a long time.

    The major culprit was Ford (F) which lost 13.41%, but that wasn’t the only big loser. Deluxe (DLX) lost 5.09% and Bed Bath & Beyond (BBBY) lost 4.03%. Every stock except for Medtronic (MDT) closed lower.

    Fortunately, the Buy List is still ahead of the market for the year. We’re now up 2.59% compared with 1.49% for the S&P 500.