The Return of Volatility
Posted by Eddy Elfenbein on May 18th, 2006 at 12:34 pm

The stock market’s volatility may be returning with a vengeance. A few years ago, the market’s daily swings calmed down dramatically.
Here’s a chart of the S&P 500’s daily changes since the beginning of 2002:

By historic standards, that’s a huge change. The “feel” of the market altered entirely in just a few months.
There hasn’t been a 2% or greater daily move in over 2-1/2 years (although we’ve come close). To give you an idea of how big a change that is, there were 43 such days in the second half of 2002.

The Indian Market Cracks
Posted by Eddy Elfenbein on May 18th, 2006 at 11:06 am

As bad as yesterday was here, the market in India is doing much worse. The two rival national indexes, the Sensex and the S&P Nifty, both fell -6.8%, which would be like 700 points on our Dow. That was the worst drop ever.

Orphan Stocks
Posted by Eddy Elfenbein on May 18th, 2006 at 9:40 am

I love finding great stocks that are under-followed by Wall Street. Now we have evidence that the ignored stocks do better than their well-watched peers:

Data compiled by Bloomberg showed 49 companies with market values of $1 billion or more that are covered by no more than one analyst. The median gain for the group over the past year was 17 percent, compared with an 11 percent rise in the S&P 500.
Stocks in S&P’s U.S. indexes with the lowest, yet growing, number of analysts have returned 26 percent annually since 1995, according to a report this month by Trahan. Companies with high and growing analyst coverage did not fare as well, rising 13 percent a year.

Google (GOOG) is followed by over 30 analysts, yet many great companies are completely ignored. Ever heard of Northern Empire Bancshares (NREB)? Neither has Wall Street. There’s not a single analyst who follows it, but check out these earnings:
1999 $0.55
2000 $0.68
2001 $0.77
2002 $0.81
2003 $0.97
2004 $1.18
2005 $1.51
Not too shabby. For the first quarter of 2006, the company earned 39 cents a share versus 37 cents last year. The stock is actually down since last summer.
Some other unfollowed gems are Arden Group (ARDNA), Coastal Financial (CFCP) and NewMil Bancorp (NMIL).

The Day After
Posted by Eddy Elfenbein on May 18th, 2006 at 9:36 am

The market looks to rebound this morning. Home Depot (HD) announced that it’s expanding its share repurchase program by $2 billion to a total of $14 billion. The stock retreated after reporting strong earnings but weaker-than-expected sales.
UnitedHealth (UNH) should open lower after announcing that it’s been subpoenaed by the U.S. attorney’s office for the Southern District of New York.
Today is also D-Day. Dell (DELL) will report its earnings for its third quarter. The company recently lowered guidance to 33 cents a share. I’ll be curious if the company offers a forecast for the fourth quarter (ending in July). Wall Street’s current outlook is for 34 cents a share.
The Burger King “King” (BKC) rang the opening bell at the NYSE. The fast food chain went public today. The offering was price at $17, the high end of the range. Interestingly, Chipotle (CMG) is having a secondary offering. The company had one of the best IPOs of the year.

UNH Subpoenaed
Posted by Eddy Elfenbein on May 17th, 2006 at 8:32 pm

The press release:

MINNEAPOLIS–(BUSINESS WIRE)–May 17, 2006–UnitedHealth Group announced that it received on Wednesday afternoon a subpoena from the office of the United States Attorney for the Southern District of New York requesting documents from 1999 to present relating to the granting of stock options.
The Company also announced that on Wednesday it received a request from the Internal Revenue Service for documents from 2003 to present relating to stock options and other compensation for the named executive officers in the Company’s annual proxy statements.
The Company will cooperate fully with both offices.

-214.28 Points
Posted by Eddy Elfenbein on May 17th, 2006 at 4:02 pm

Yuck! What a rotten birthday.
Let’s look at the damage. The Dow dropped a total of 214.28 points, the biggest loss in three years. Twenty-nine of the thirty Dow stocks fell. Only Hewlett-Packard (HPQ) gained ground.
The S&P 500 lost 21.77 points, or 1.68%. In percentage terms, this was the second-worst day for the S&P 500 since September 2003 (Janaury 20 of this year was the worst). The Dow Oil and Gas Index (^DJUSEN) lost 12.23 points (or 2.60%) to close at 458.01.
Our Buy List lost -1.42%. The 20 stocks are now up 0.05% for the year. Here’s how our stocks did:

There are 100 Dow Jones industry groups. Today, 98 were down. The only two industries that were up were Health Care Providers (^DJUSHP), which includes UnitedHealth; and Computer Hardware (^DJUSCR), which includes Hewlett-Packard.
The culprit for today’s sell-off was the higher-than-expected inflation report. The CPI rose 0.6% in April, and core prices rose 0.3%.
Here’s a look at the CPI and the core CPI for the past few years.

Perhaps it’s me, but I don’t see what’s so scary.

The Last Five Days
Posted by Eddy Elfenbein on May 17th, 2006 at 2:11 pm

Here’s the story:

Consumer stocks are the black line. Early cyclicals are gold, and late cyclicals are blue.
This is not a value-versus-growth issue (growth is actually holding up a bit better). It’s a rethinking of the economy’s prospects.
The Dow is headed for its biggest point loss since March 24, 2003 when it dropped 307 points. But the Dow was only at 8,200 then.
Update: Dow 11,200 has just fallen to the enemy!!

Hold On!
Posted by Eddy Elfenbein on May 17th, 2006 at 1:34 pm

This is turning into a rout!
I guess yesterday was just a brief rest. The Dow (^DJI) is down over 200 points today. H-P is the only Dow component that’s up. The S&P 500 (^SPX) is down 20 points (more than 1.5%).
The Dow Oil & Gas Index (^DJUSEN) is down over 3%. (Again.) I’ll give one to the technical analysts crowd. That index did not like the number 500. The index closed at 500.50 on April 21. Then it finished at 499.27 on May 2, and 499.21 on May 10. Now, it’s at 455.
The cyclicals are getting creamed (largely materials and energy), but the techs are holding up surprisingly well (meaning, they’re not down as much). The Nasdaq Composite (^IXIC) is off by 1.3%
The Buy List is taking the damage well. In fact, stocks like FactSet (FDS), Sysco (SYY) and Medtronic (MDT) are trading higher. We could wind up outperfoming the market by 40 basis points today.

Foreign iShares Since 2003
Posted by Eddy Elfenbein on May 17th, 2006 at 12:02 pm

Foreign markets have been the place to be. Here’s how several foreign iShares have performed since the beginning of 2003:
Brazil (EWZ)………………..433.95%
Austria (EWO)……………..275.42%
Mexico (EWW)……………..242.81%
Sweden (EWD)…………….174.01%
Australia (EWA)……………165.13%
South Korea (EWY)……….162.61%
Canada (EWC)………………161.36%
Belgium (EWK)……………..151.58%
Spain (EWP)…………………143.78%
Germany (EWG)……………139.12%
Italy (EWI)…………………..116.39%
Japan (EWJ)…………………109.14%
France (EWQ)………………107.73%
Switzerland (EWL)…………98.81%
Hong Kong (EWH)…………..97.52%
U.K. (EWU)…………………….89.00%
Netherlands (EWN)…………82.27%
Malaysia (EWM)……………..68.05%
Taiwan (EWT)…………………67.08%
By comparison, the S&P 500 Spyders ETF (SPY) is up just 52.81%.

Gold at 26-Year High
Posted by Eddy Elfenbein on May 17th, 2006 at 11:49 am

From The Onion: