• Barron’s on Abbott Labs
    Posted by on April 2nd, 2011 at 8:28 am

    Barron’s is sweet on yet another Buy List stock. In this weekend’s issue, Michael Santolli highlights Abbott Labs ($ABT):

    Abbott Laboratories is a decidedly above-average company trading at a below-average price, a health-care leader that consistently has rewarded shareholders’ patience and taken good care of investors’ capital over many decades.

    At a recent price near 49, down from a 2010 peak above 53, Abbott (ticker: ABT) is among the more compelling values in a stock market being carried toward three-year highs by riskier, more cyclical names.

    Abbott, with superior historical growth, a well-balanced revenue mix and powerful core health-care franchises, merits a substantial premium over pure pharmaceutical companies, which face regulatory pressures and patent expirations that will hurt key products.

    Yet at 10.7 times forecast 2011 profits of $4.59 a share, up from $4.17 in 2010, Abbott’s price/earnings ratio is only about 1½ multiple points above both Merck’s (MRK) and Pfizer’s (PFE), and about 1½ points lower than similarly balanced Johnson & Johnson’s (JNJ).

    (…)

    This year, the company will focus more on building cash than making acquisitions. Abbott boosted its dividend in February for the 39th straight year, to an annual $1.92 a share, taking its yield near 4%. Given that yield, plus Abbott’s demonstrated ability to raise earnings at a low-double-digit clip, the stock should deliver upside of 25% or better over the next two years–even if it doesn’t win the enhanced valuation it deserves.

  • April Ain’t the Cruelest Month
    Posted by on April 2nd, 2011 at 8:17 am

    From Gary Alexander:

    The market’s best month begins on Friday – no fooling. April is the best-performing month in market history, rising by an average 2% since 1950 (as measured by the Dow Jones Industrials).

    The story gets even better in recent years. Over the last 50 years, the Dow has gained an average 2.02% in April (#2 is December – up only 1.51%). Over the last 20 years, the Dow has averaged 2.65% gains in April – 85 basis points above December’s second-best 1.80%. And over the last five years, April has grown every year, netting an average gain of 4.25% in the Dow and S&P.

    As spring flowers unfold, so do stocks: April 1999 was the first month to gain over 1000 Dow points. Then, the Dow gained 856 points two years later, in April 2001 and 708 points in April 2007. The broader market indexes have done even better: In April 2009, the Russell 2000 rose by an astonishing 15.3% (double the Dow’s gain) and in April 2001, NASDAQ rose 15%.

    The best month ever, in percent terms, was April of 1933 (FDR’s first full month in office) at +40.2%. Since 1950, we’ve seen 42 rising Aprils and 19 downers, including a 3.8% drop in 2005, but we haven’t seen a real stinker since April 1970 (-9%), but how about April of 2011?

  • New High for the Buy List
    Posted by on April 1st, 2011 at 7:29 pm

    Today was another strong day for our Buy List. We gained 0.77% to the S&P 500’s 0.50%. We’re now up 8.46% for the year which is a new high while the S&P 500 is up 5.95% for the year.

    The S&P 500 closed at its highest level since the market broke six weeks ago. All we need is one small push and the index can close at it highest mark in 33 months.

    Several of our stocks broke out to new 52-week highs today: Deluxe ($DLX), Leucadia National ($LUK), Moog ($MOG-A), Reynolds American ($RAI) and Oracle ($ORCL). I’m very glad to see Oracle above $34.

    I was also pleased to see AFLAC ($AFL) close at $53.50 today which is its highest close in several sessions. The stock has made back much of what it lost since the earthquake although it still has a way to go. Let’s hope today is a good omen for Q2.

  • Investing on the First Day of the Month
    Posted by on April 1st, 2011 at 2:56 pm

    The S&P 500 has risen on the first trading day of the month for 19 of the last 24 months — and today looks like it will be another “up” for the index.

    How well does the market perform on the first day of the month?

    Let’s put it this way: Since 1996, the S&P 500’s return on the first day of the month has outpaced the rest of the month combined…by far…even though the days in the rest of the month outnumber first days by a ratio of 20-to-1.

    The total gain for the 183 first days of the month is 76.49%. The gain for the other 3,657 days comes to just 21.97%.

  • “Picking Up Speed”
    Posted by on April 1st, 2011 at 11:23 am

    David Leonhardt writes at the New York Times, “Job growth is picking up speed, reaching 216,000 in March.”

    This is technically correct. The economy created 216,000 jobs in March compared with 194,000 in February. In other words, the economy created 11.3% more jobs in March than in February.

    However Leonhardt neglects to mention that March has 10.7% more days than February does.

  • Introducing Gmail Motion
    Posted by on April 1st, 2011 at 10:31 am

  • March ISM = 61.2
    Posted by on April 1st, 2011 at 10:04 am

    Today’s ISM report was 61.2 for the month of March. This is the 20th-straight reading over 50. Last month’s number of 61.4 was tied for the best reading since 1983.

    Even though we’re down slightly from that, we’re still at a very high level. In the last 30 years, there have only been 22 months were the ISM has been 60 or more — and we’ve now done that for three-straight months.

  • March Payrolls +216,000
    Posted by on April 1st, 2011 at 8:34 am

    Today’s jobs report:

    216,000 jobs were created last month which beat expectations; 230,000 were in the private sector. The unemployment rate ticked down from 8.9% to 8.8%.

    Here’s another way of looking at it: The official recovery will soon turn two years old. Nonfarm payrolls went from being 8.72 million below the high to now being only 7.26 million below the high.

  • CWS Market Review – April 1, 2011
    Posted by on April 1st, 2011 at 8:02 am

    The first quarter of 2011 is now officially on the books and it was a very good one for our Buy List. Once again, patient investing and sticking with high-quality stocks paid off.

    For the first three months of the year, the S&P 500 gained 5.42% while our Buy List gained 7.62%. That’s an outperformance of 220 basis points which is pretty good for such a diversified portfolio. Including dividends, we gained 8.06% to the S&P 500’s 5.92%. Of course, I should mention that we accomplished this without making one single change to the Buy List all year, nor will we make any changes for the next nine months.

    Our Buy List yields slightly less than the S&P 500, but it’s not a very big gap. Annualized, the S&P 500 out-yields us at about 1.9% to our 1.6%. If this matters to you, the beta of the Buy List was 1.035 for the first three months of the year. (Personally, I gave up on that mumbo-jumbo years ago.)

    My goal for the Buy List is to beat the S&P 500 by a few percentage points each year and do it with slightly less risk. It’s an odd notion but an important lesson for investors: if you don’t try and swing for the fences, but rather just try to punch out singles, you can do much better. In fact, trying to go deep all the time actively hurts you.

    Now let’s look at the long-term record: For the five-and-a-quarter years that I’ve been tracking our Buy List on the blog, we’re up 44.83% to the S&P 500’s 18.62%. That’s a hefty out-performance. (Our long-term beta is 0.943, again, to anyone who cares.)

    To restate the rules of the Buy List, which have been the same rules since we started, the Buy List contains 20 stocks. We don’t make any changes during the trading year. At the end of each year, we add and delete just five stocks which keeps our turnover very low. It’s simple, but it works.

    Now let’s turn to recent happenings on Wall Street. This past week was fairly quiet for the stock market and for our Buy List, but that will change soon. Earnings season kicks off in a few weeks and most of our stocks will report their earnings for the first quarter.

    We did, however, get one very strong earnings report this week from Jos. A Bank Clothiers ($JOSB). This report was a crucial one for the company since it covers the holiday shopping season. Usually, JOSB makes about half of their annual profit during December-January-February period.

    For the quarter, Joey Banks said it made $1.47 per share which was four cents more than Wall Street’s consensus. In the CWS Market Review from three weeks ago, I said that Wall Street’s consensus was probably too low. I said I expected earnings of $1.50 per share or more. I was wrong on the $1.50 or more, but I was right that Wall Street was too low.

    JOSB is a very impressive company. I’ll warn that the stock can be highly volatile, but the business results are impressive. For 2010, earnings-per-share jumped 20% to $3.08 compared with $2.56 in 2009. JOSB has no debt, and earnings have risen for the last 19 quarters in a row and for 37 of the last 38 quarters. That’s a very good record.

    Three weeks ago, I urged investors not to chase JOSB but rather to wait for a pullback below $45 per share. As it turned out, the stock did indeed pull back to a low of $44.93 before resuming its climb. At Wednesday’s opening bell, the stock gapped up to a high of $52.50 before drifting lower. Since then, it’s mostly bounced around between $50 and $51.

    In light of the strong earnings report, I’m going to raise my Buy Price to $50 per share. Once again, I suggest letting JOSB come to you. Please be disciplined here. Chasing stocks you want to own is a sucker’s game. It’s hard watching the good ones pull away from you, but sometimes you need to do it.

    I think it’s interesting that Oracle ($ORCL) followed a similar pattern to JOSB’s pattern. If you recall, Oracle posted very good earnings (as predicted by moi). As I expected, ORCL made a new 52-week high of $34.10. Since then, it’s pulled back and found a range roughly between $33 and $33.50. Last week, I raised my buy price to $34 which I think is a good place. Oracle is a very strong company and I wouldn’t be surprised to see it break out soon.

    The next Buy List earnings report will most likely be from Bed Bath & Beyond ($BBBY) and that’s due on April 6th. The company said to expect earnings to range between 91 cents and 95 cents per share. My take: That sounds about right, though maybe a little low.

    What I’ll be most interested in hearing is if they give guidance for this year. If so, I’m looking for something between $3.30 and $3.40 per share. BBBY tends to give conservative guidance. I’m not ready to offer a specific buy price on BBBY until I hear more from them. Fundamentally, this is a very sound company and I expect the shares to do well.

    I like all 20 stocks on the Buy List, but a few stand out as particular bargains. I like Johnson & Johnson ($JNJ) below $60. Sysco ($SYY) hasn’t performed well lately and I think it’s looking pretty cheap. It could be a $30 stock. You probably won’t be surprised to hear that I like AFLAC ($AFL) at this reduced price. The company will report earnings on April 27th and we’ll see proof of how well this outfit is managed.

    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!

  • The Nasdaq and ICE Bid for the NYSE
    Posted by on April 1st, 2011 at 7:58 am

    This is getting interesting. In February, Deutsche Boerse agreed to buy the New York Stock Exchange for $9.53 billion. Now the Nasdaq has teamed up with ICE to offer a counter bid of $11.3 billion.

    Under the terms of the proposed acquisition, NYSE Euronext stockholders would receive $14.24 in cash, plus 0.4069 shares of NASDAQ OMX common stock and 0.1436 shares of ICE common stock for each NYSE Euronext share.