Dow Flashes Buy Signal
Posted by Eddy Elfenbein on July 30th, 2009 at 11:30 am

The Dow has gone from 10% below its 200-day moving average to 10% above it. That’s happened 21 times since 1921 and it’s been good for stocks 18 times. The average gain over the next year has been 18%.

What’s the Definition of Speculation?
Posted by Eddy Elfenbein on July 30th, 2009 at 11:16 am

A price move Congress doesn’t like.

Stocks Hate Congress
Posted by Eddy Elfenbein on July 30th, 2009 at 11:10 am

The S&P 500 is close to 1,000 this morning. There could be more good news on the way — Congress will soon go on recess.

Believe it or not, the stock market performs much better than average when Congress is not in session.
That at least is the finding of an academic study several years ago by professors Michael Ferguson of the University of Cincinnati and Hugh Douglas Witte of the University of Missouri at Columbia. Specifically, they found that “about 90% of the capital gains over the life of the Dow Jones Industrial Average have come on days when Congress is out of session.”

Nicholas Financial Reports Big Earnings Gain
Posted by Eddy Elfenbein on July 30th, 2009 at 10:34 am

Nicholas Financial (NICK) just reported earnings for the June quarter which is the company’s fiscal first quarter. Net earnings, excluding non-cash unrealized mark-to-market gain on interest rate swaps increased 34% to $2,081,000 as compared to $1,558,000 for the three months ended.
On an earnings-per-share basis, NICK earned 20 cents a share compared with 15 cents a year ago. Revenue increased 4% to $13,694,000 for the three months ended June 30, 2009 as compared to $13,119,000 for the three months ended June 30, 2008.

According to Peter L. Vosotas, Chairman and CEO, “We are pleased with our solid first quarter results. We concentrated on basic careful lending and collecting fundamentals and will continue to do so. Our results were favorably impacted by a reduction in the net charge-off rate, lower operating expenses as a percentage of average net receivables and a reduction in the cost of borrowed funds. While we remain cautious, we are encouraged that the economy is showing some signs of stability and we feel comfortable proceeding with our planned expansion. This expansion will include new branch locations in Akron, Ohio and in Gastonia, North Carolina, which will bring our number of branch locations to 50 in 12 states. The Company remains open to acquisitions should an opportunity present itself,” added Vosotas.

This is a great report. The most important fact is that the provision for credit losses is lower than it was one year ago. This most likely means that worst of the storm has passed for NICK. Bear in mind that this is a stock that’s still trading around 25% below book value. NICK is an outstanding buy.

Stocks Love Obama
Posted by Eddy Elfenbein on July 30th, 2009 at 9:52 am

The stock market seems to love President Obama. It’s made back nearly everything it lost since he got elected.

The S&P 500 has been as high as 988 this morning. This could be the highest close since 1,005.75 on election day.

Buy List Updates
Posted by Eddy Elfenbein on July 30th, 2009 at 9:32 am

There were three recent Buy List earnings reports to pass on.
First, Aflac (AFL) came through with strong numbers. Aflac has been one of our worst-performing stocks this year but I’m not about to give up. The shares are looking very good at this price.
The company earned $1.20 a share in operating earnings for the second quarter. That easily beat Wall Street’s expectations of $1.14 a share. The company also said that it expects full-year EPS of $4.59 to $4.73. Wall Street had been looking for just $4.65 per share. This means the stock is going for less than eight times earnings. The company said it sees Q3 coming in between $1.19 to $1.22 per share, compared to the Street’s view of $1.16 per share. Alfac is a very good buy.
Fiserv (FISV) earned 90 cents a share, two cents more than estimates. They also affirmed full-year EPS guidance in a range of 10% to 14% growth which comes to $3.61 to $3.75. Fiserv recently sold 51% of Fiserv Insurance Solutions Inc. to a private equity fund for $510 million. The stock will probably take a hit today, but it’s still a good buy.
Finally, Becton Dickinson (BDX) earned $1.30 a share, six cents more than expectations. The company issued full-year EPS guidance of $4.92 to $4.96. This is a good stock but it’s looking a bit pricey here.

2009 Earnings: A Moving Target
Posted by Eddy Elfenbein on July 29th, 2009 at 8:46 am

Earlier this week, I mentioned that earnings have been running well ahead of expectations so far this earnings season. Of course, expectations were pretty low.
For all of 2009, Wall Street now sees the S&P 500 earnings $59.80. If we continue to beat expectations, then we have a good shot of exceeding $60.
To put that number in context, here’s a table John Mauldin posted earlier this year of the trend in analyst expectations for 2009.

So expectations are now higher than they were on September 10, 2008. The difference is that the S&P 500 then stood at 1,232.04 compared with yesterday’s close of 979.62.

Decade Inflection Points
Posted by Eddy Elfenbein on July 28th, 2009 at 2:44 pm

If March 9th holds up as the low, this could continue a tradition of major market turning points near the turn of a decade.
The Nasdaq peaked in March 2000 over 5,000. It’s still down over 60%.
The Japanese Nikkei peaked on the last day of trading of 1989 near 39,000. It’s still down around 75%.
Gold peak at $850 just three weeks into the 1980. Gold eventually bottomed out around $253 in 1999, again close to a new decade.
One of the greatest bull markets in history began in June 1949. Thanks to high dividends, the market averaged over 20% a year above inflation for the next seven years.
Finally, in late 1929, stocks ran into a wee bit of trouble.

95 Years Ago This Week on Wall Street
Posted by Eddy Elfenbein on July 28th, 2009 at 1:20 pm

On Tuesday, July 28, Austria-Hungary attacked Serbia, and World War I officially began. Stock markets around the world collapsed (some closed), and the price of gold soared. On Wall Street, trading volume hit 1,020,000 shares, and market officials pondered closing the exchange.
On Wednesday, July 29, politicians were trying to halt the European violence, but Austro-Hungary bombed Belgrade and Russia mobilized troops along Austria’s border. In response, three major European stock exchanges (Vienna, Rome and Berlin) closed their doors.
On Thursday, July 30, the rush to sell stocks and buy gold escalated. Panic selling on the New York exchange reached 1.3 million shares, the highest volume since the Panic of 1907. Many blue chip stocks crashed, falling 20% to 30% that single day. GM fell from $59 to $39 (-34%). Even Bethlehem Steel, which figured to profit from making war armaments, was down 14%. That night, exchange officials met to decide whether or not to close the exchange on Friday.
Early in the morning of Friday, July 31, the London Stock Exchange announced that it would suspend trading until further notice, the first time it had done so in its centuries-long heritage. If the New York Stock Exchange opened for trading on this final day of July, it would have been the only open stock market in the world. Since markets were now connected by undersea cables, all the world’s sellers would converge on Wall Street. In fact, the overnight sell orders “at any price” were lined up for the opening bell, so the NYSE governors decided to close for only the second time in its history. The NYSE was totally closed until the middle of December, 1914, but only a few stocks traded then. The full board only re-opened in April, 1915 – nine months later.
However, U.S. banks stayed open, and the rush to convert cash to gold wiped out many banks. From July 27 to August 7, 1914, $73 million in gold was withdrawn from New York banks alone.
On Monday, August 3, 1914, no stock markets in Europe or America were open. On that day, Germany declared war on France and invaded Belgium; very soon, Britain declared war on Germany, and Turkey signed a military pact with Germany. As the sun set on that dismal day, Sir Edward Grey, British foreign secretary, said, “The lamps are going out all over Europe; we shall not see them lit again in our lifetime.”
(via: Gary Alexander)

IBM Snatches Up SPSS
Posted by Eddy Elfenbein on July 28th, 2009 at 12:22 pm

Fifteen months, I highlighted SPSS (SPSS), the predictive analysis company, as a good stock to own during tough economic times. When I wrote about SPSS, it was around $42 a share and it promptly dropped in half. So much for my predictive analysis.
Fortunately, IBM (IBM) came to my rescue today (admittedly, that probably wasn’t their top priority). They’re buying SPSS for $50 a share.
The lesson is an old one: Just because a trade goes against you doesn’t mean you’re wrong. Good stocks show their value, but it takes patience.