CWS Market Review – January 14, 2011
Posted by Eddy Elfenbein on January 14th, 2011 at 7:37 am

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

Morning News: January 14, 2011
Posted by Eddy Elfenbein on January 14th, 2011 at 7:34 am

Can Europe Be Saved? (When he’s not calling innocent people murderers, Paul Krugman writes very well on economics.)

China Raises Banks’ Required Reserves Again

China, Japan, And The Sudan Proxy Playground

Goldman Says S&P 500 to Gain 18%, Forecasts `Decent’ Year for Treasuries

Bernanke Says Joblessness to Linger Despite Growth

Uncle Sam Wants His AAA Rating

Stock Index Futures Dip; Eyes on Intel

Citigroup Was On The Verge Of Failure, New Report Finds; Rescue Was Based On ‘Gut Instinct’

Cupcake IPO

JPMorgan’s Fourth Quarter Profits Rise 47% to $4.8 Billion

Marathon Oil Credit-Default Swaps Surge on Risk Tied to Spinoff Proposal

Joshua Brown: Ancient Asian Cooling Technique

Leigh Drogen: Social Capital and Collaborative Consumption

30 Straight Days Above the 10-DMA
Posted by Eddy Elfenbein on January 13th, 2011 at 1:24 pm

Here’s a fascinating factoid I found via Sentiment Trader via ZeroHedge via Pragmatic Capitalist: The S&P 500 has closed above its 10-Day Moving Average for the last 30-straight trading sessions.

That’s the longest streak since a 42-day run from February to April 2010. The longest I can find (my records go back to the 1930s) is a 59-day streak from November 1970 to February 1971.

We’re about 15 points above the 10-DMA which means that this run may have some room to go, especially if volatility stays so low.

Part of this, I think, is due to the market’s ultra-low volatility combined with a slow-motion rally. The S&P 500 has closed higher for 21 of the last 30 days and for 43 of the last 67 days.

What If Apple Were In the Dow?
Posted by Eddy Elfenbein on January 13th, 2011 at 11:31 am

In June 2009, the gatekeepers of the Dow Jones Industrial Average decided to put Cisco (CSCO) in the index in place of General Motors (GM). The guys at Bespoke wonder what would have happened if they had chosen Apple (AAPL) instead. The difference: 1,000 more points.

FBR’s Target for AFL = $69
Posted by Eddy Elfenbein on January 13th, 2011 at 11:00 am

I thought Aflac made it pretty clear that they were going to survive Europe’s troubles, but apparently FBR was late to get the word:

Aflac is well positioned to weather credit losses in Europe and investors should take advantage of the discounted stock of the disability insure, an analyst said Thursday.

FBR Capital Markets analyst Randy Binner upgraded Aflac’s shares to “Outperform” from “Market Perform,” and lifted the price target to $69 from $59. Binner said the stock has lagged its peer group by 14 percent in the last three months, likely on heightened concerns over European sovereign debt.

Aflac’s exposure to debt holdings from Portugal, Ireland, Italy, Greece and Spain total $3.4 billion, or 34 percent of equity. Binner said the company has more than enough cash on hand, about $1.3 billion, to cover losses in even the most stressed scenarios.

Additionally, the analyst still expects Aflac to buy back between 6 million and 12 million shares over the next two years, despite European losses.

Morning News: January 13, 2011
Posted by Eddy Elfenbein on January 13th, 2011 at 7:41 am

Stock Futures Flat Ahead of Jobless Data, Intel Results

Trichet Faces `Annus Horribilis’ as Crisis Tests European Central Bank

China Expands Yuan’s Role to Overseas Investment

Indian Oil Margins May Fall on Rising Crude Oil Prices

Another Asian Economic Power Just Hiked Rates To Fight Inflation

Beige Book Shows Increased Activity

1 Million Homes Repossessed in 2010

AIG Readies for Recapitalization

Auto Rebound Pays Dividend to Ford, GM Work Forces

In Nielsen’s Public Offering, a Bellwether for Buyout Firms

Paul Kedrosky: The Debt Ceiling and Gravity

The Most Amazing Press Release Ever Written

An Empty “Ghost town” – Ordos, China

Maria Bartiromo Interviews Jamie Dimon
Posted by Eddy Elfenbein on January 12th, 2011 at 4:09 pm

It’s a good interview. (One nitpick: He says he wants to reinstate the dividend. Um, Jamie…you already have one.)

Louis Navellier
Posted by Eddy Elfenbein on January 12th, 2011 at 1:19 pm

I want to give a shout-out to my good friend Louis Navellier. He has a great (and free) e-letter that you can sign up for here. I highly recommend it.

Louis is one of Wall Street’s legends. He’s one of the original “quant guys.” Nowadays, Wall Street is full of number crunchers, but Louis was doing this kind of work long before everyone else was. Not only that, but he has an amazing track record to boot.

His e-letter always has some interesting insight or take on the market that you can’t find anywhere else. If you want to see a sample, here’s his latest.

To sign up, just follow this link.

S&P 500 = 1285
Posted by Eddy Elfenbein on January 12th, 2011 at 1:10 pm

Today is a busy day for me so I’m not doing much posting, but I will note that it’s another good day for stocks. The S&P 500 is up to 1285 which is another two-year high. The Buy List is also doing well and we just broke through the 4% mark for the year.

The strength today seems to be coming from financials. JPMorgan Chase (JPM) will soon give us a better read of what’s going on. As I’ve said before, I’m expecting a big earnings beat. The Street expects 99 cents per share. I think they’ll report $1.10 or more. The earnings call is scheduled for Friday morning, so the press release may come as early as Thursday after the closing bell.

You can also follow my incoherent ramblings insightful market analysis on Twitter and StockTwits.

Morning News: January 12, 2011
Posted by Eddy Elfenbein on January 12th, 2011 at 8:06 am

Bunds Drop as GDP Jumps, Stocks Climb; Portugal Bonds Drop After Auction

US to Press China on Yuan, Economy Ahead of Hu Visit

Treasuries Fall as Japan Pledge to Buy Europe’s Debt Stokes Risk Appetite

Rising Chinese Inflation to Show Up in U.S. Imports

Public Strongly Opposes Debt Ceiling Increase

Housing’s Anemic Rebound Gives Little Boost to U.S. Economy

Goldman’s 10 Best Stock Picks for 2011

JPMorgan’s 13 Favorite Stocks for 2011

ITT to Split, AIG to Sell Taiwan Unit

That Guy Who Called the Big One? Don’t Listen to Him.

StockTwits and Earnings: Smarter, Faster, Deeper

10 Things I Learned Working With Jim Cramer

True Grit Script