• Unemployment Rate up to 5.1%
    Posted by on October 7th, 2005 at 8:33 am

    The is the first look at Katrina’s impact on the economy. Nonfarm payrolls dropped by 35,000 last month. However, payrolls were revised higher by 211,000 for August. This means, the economy was very strong before the hurricanes.

    Economists predicted payrolls would drop by 150,000 last month from the previously reported 169,000 gain for August, based on the median forecast in a Bloomberg News survey. Estimates ranged from declines of 25,000 to 350,000. The jobless rate, which the department determines through a separate sampling of households instead of employers, matched the median forecast.
    Difficulties in surveying the hurricane-stricken areas may have distorted payrolls figures, economists said. “We’ll know more about the hurricanes’ impact when local employment estimates become available later this month,” said Philip Rones, deputy commissioner of the Bureau of Labor Statistics.

  • Election Fraud at Quality Systems?
    Posted by on October 6th, 2005 at 8:27 pm

    At Quality Systems (QSII), six of management’s eight candidate were just elected to the board of directors. But a dissident group, led by Dr. Ahmed Hussein, may sue for a recount. The Motley Fool is on the case.

    The problem, according to documents obtained by The Motley Fool, is that various brokerages submitted unsigned proxies that were voted in favor of the company’s slate. These proxies represent shares, held in street name at the brokerages, that individual shareholders failed to submit themselves. According to Dr. Hussein, unsigned proxies cannot be counted in a disputed election, and without those votes—approximately 832,000 out of a total 13.1 million shares outstanding—all three of his nominees would have been elected.

  • More Good News for Frontier
    Posted by on October 6th, 2005 at 2:58 pm

    Market Pulse: Frontier Airlines September traffic, load factor rise
    Thursday October 6, 1:40 pm ET
    By Carla Mozee
    SAN FRANCISCO (MarketWatch) — Frontier Airlines on Thursday said traffic in September rose 20.9% to 553.7 billion revenue passenger miles. Its load factor rose 6.6 percentage points to 71%. Capacity at the Denver-based air carrier increased 9.6% to 779.4 billion available seat miles.

  • Gold is Up, Oil is Down
    Posted by on October 6th, 2005 at 1:03 pm

    Today’s shaping up to be a lot like yesterday, only more so. Oil is down again, however gold is rallying. On our Buy List, Frontier (FRNT) is having a very good day. Thor Industries (THO) is also doing well. Lower oil prices are clearly helping us. I wouldn’t be surprised to see oil dip below $60 soon.
    The CEO at Wright Medical Group (WMGI) said that he’s going to step down. This comes one day after his company announced a major earnings warning. This hurt our medical stocks. Zimmer (ZMH), Stryker (SYK) and Biomet (BMET) are all lower again today. However, UBS initiated coverage of Medtronic (MDT) and St. Jude (STJ), each with buys.
    Despite the gold rally, financials are having a decent day. Golden West (GDW) was upgraded by Wachovia, however Commerce Bancorp (CBH) was downgraded by Oppenheimer. In the tech sector, Bear Stearns is maintaining a “peer perform” on eBay (EBAY).

  • A To-Do List for Fannie Mae
    Posted by on October 6th, 2005 at 9:50 am

    Fannie Mae (FNM) has to be one of the most disappointing stocks in recent years. It wasn’t that long ago that Fannie was regarded as one of the best stocks on Wall Street. The stock has slid from nearly $80 a year ago to $60 three months ago, to $41 today. What does it have to do to get back on track? Business Week has a to-do list.

    No, Fannie Mae is not about to implode. Despite late September news stories alleging extensive new accounting violations and a drop from $77 to $41 in the stock price in the past year, the nation’s largest mortgage-finance company is well-capitalized enough to handle any downturn in the housing market and is probably still profitable, say analysts.
    Only probably still profitable? That’s merely most analysts’ best guess, since Fannie doesn’t have any recent earnings statements for them to review. In December, 2004, regulators required Fannie to admit that it had broken accounting rules and to promise to restate past results. It has yet to reissue clean statements for 2004 — or file any new ones since last December.
    Fannie’s investor relations Web site includes this startling disclaimer: “Investors and others should no longer rely on Fannie Mae’s previously issued annual and quarterly financial statements.”

  • Today’s Market
    Posted by on October 6th, 2005 at 9:25 am

    Yuck! That wasn’t pretty. The market dropped over 123 points yesterday. The commodity sector, and oils in particular, were hardest hit. The Dow Energy index dropped 3.6%, and the tech index lost 3.1%.
    It seems as if there was almost a delayed reaction to Tuesday’s big drop in oil prices. Oil is now at a two-month low, and I think it’s headed even lower. As oil falls, lower fuel costs will help the better airline stocks, particularly my favorite Frontier Airlines (FRNT). Remember, the price of crude peaked before the hurricanes hit. Oil is already down another $1 a barrel this morning.
    Some of our health care stocks got dinged yesterday when Wright Medical (WMGI) said that its third-quarter earnings will be significantly below Wall Street’s estimate. The stock got nailed for a 20% loss. This spilled over into some of our medical stocks like Medtronic (MDT), Stryker (SYK) and Biomet (BMET). However, Wright is a very small company and its problems shouldn’t be taken as a reflection of the entire industry.
    This morning, Wal-Mart (WMT) said that Hurricane Katrina will shave one penny a share off earnings. Also, GE (GE) said that it will hit the high end of its third quarter forecast of 44 cents a share. The company said that earnings for the entire year will come in at $1.81 to $1.83 a share.
    The market should rally today, but the big news will be tomorrow’s employment report and next week’s earnings.

  • 72,000-Square-Foot Home
    Posted by on October 6th, 2005 at 7:07 am

    David Duffield, of PeopleSoft fame, is smashing an 8,000-square-foot house in order to build a 72,000-square-foot house. His neighbors, however, are not pleased.

    The project already is facing intense opposition from the neighbors who would have to live in the shadow of the proposed three-story home in Alamo, Calif. — a tony suburb about 30 miles east of San Francisco.
    Alamo resident Bruce Smith, whose family previously owned the 8,000-square-foot home that Duffield hopes to demolish to make room for his new house, said the land was never intended for a residence that will dwarf the 60,645-square-foot Hearst Castle and the 55,000-square-foot White House.
    “I really don’t have a problem with a man pursuing his dreams, but this is just too much,” Smith said in an interview Wednesday.

  • Valuing the Market
    Posted by on October 5th, 2005 at 1:47 pm

    I’m beginning to fall in love with Morningstar’s database. I wanted to look at the valuations of a number of large-cap stocks. I decided to use a PEG ratio of 1.5 as fair value. I should say that I’m not a fan of the PEG ratio, but I simply wanted to find a rough estimate of what the market is thinking.
    I looked at all the stocks that are followed by 10 or more analysts. That comes to about $8 trillion in market value, so that’s a pretty good slice of the entire market. Going by a PEG 1.5, I found that the market is undervalued by 7.4%, which sounds about right.
    Here’s a list of 100 of the largest-cap stocks on Wall Street and how the market is pricing them (100% is fairly valued, more than that is overpriced, less is underpriced). My Buy List stocks are in bold.
    GE 101.80%
    MSFT 103.50%
    C 72.33%
    JNJ 109.69%
    PFE 93.92%
    WMT 81.79%
    BAC 73.01%
    AIG 60.57%
    INTC 79.86%
    PG 124.01%
    IBM 106.60%
    JPM 73.95%
    CSCO 78.90%
    AMGN 95.49%
    WFC 73.86%
    DNA 142.24%
    VZ 267.93%
    GOOG 102.74%
    TWX 116.53%
    HD 72.18%
    HPQ 113.70%
    DELL 73.26%
    NOK 114.57%
    SBC 174.74%
    UPS 103.41%
    QCOM 137.71%
    WB 81.19%
    UNH 86.13%
    ABT 118.87%
    MDT 109.54%
    ORCL 87.83%
    CMCSA 212.22%
    WYE 145.30%
    AXP 77.79%
    LLY 123.28%
    ERICY 122.93%
    MWD 64.98%
    BA 131.87%
    GS 57.69%
    MOT 107.61%
    EBAY 105.16%
    SAP 139.94%
    TXN 82.60%
    VIA.B 92.56%
    UTX 95.23%
    USB 76.37%
    LOW 74.32%
    DIS 98.23%
    BLS 168.53%
    YHOO 125.11%
    WLP 82.07%
    TGT 86.51%
    WAG 104.64%
    AAPL 113.44%
    CCL 82.64%
    MCD 128.96%
    FNM 40.04%
    ACL 139.69%
    MET 75.60%
    ALL 65.19%
    EXC 146.88%
    S 77.80%
    PRU 70.38%
    WM 66.80%
    EMC 83.55%
    SGP 202.36%
    HON 100.29%
    LEH 57.71%
    KRB 79.47%
    FDC 90.67%
    SO 251.40%
    CL 138.56%
    AMAT 107.92%
    CAH 95.58%
    SYMC 84.92%
    LMT 100.73%
    DUK 201.46%
    FDX 74.63%
    ADP 121.60%
    BAX 134.03%
    AET 77.12%
    STI 91.63%
    ITW 81.24%
    HIG 62.48%
    GDT 139.03%
    AFL 81.50%
    ACN 86.45%
    CMX 85.66%
    BK 84.68%
    TEVA 65.46%
    NKE 77.64%
    GILD 109.84%
    NCC 94.44%
    AT 209.18%
    HCA 81.42%
    BBT 94.64%
    COF 48.30%
    BEN 105.04%
    COST 108.40%
    PGR 94.05%
    BBY 78.34%
    SYY 102.79%
    FITB 75.78%
    BSX 55.37%
    SYK 94.67%
    SBUX 126.09%
    INFY 79.92%
    K 141.32%
    CFC 36.47%
    AMZN 178.62%
    GENZ 108.34%
    GDW 62.27%
    CCU 128.70%
    STJ 120.62%
    ZMH 80.94%
    GCI 96.71%
    ERTS 134.06%
    KSS 69.64%
    STT 99.73%
    PNC 107.74%
    DHR 83.08%
    CA 170.26%
    BRCM 94.70%
    SPLS 83.41%
    AEP 303.93%
    CI 95.56%
    MHS 96.81%
    LU 138.42%
    GPS 69.11%
    OMC 103.10%
    GNW 75.50%
    ADBE 124.96%
    MCK 97.94%
    NT 300.91%
    PAYX 140.94%
    MXIM 80.64%
    RF 103.99%
    YUM 107.50%
    MAR 92.31%
    ADI 120.62%
    ACE 60.78%
    BIIB 115.37%
    MEL 101.64%
    FRX 73.96%
    HDI 70.35%
    MRVL 85.60%
    KEY 109.73%
    HOT 109.78%
    IR 70.77%
    JNPR 98.62%
    MGM 106.95%
    CPB 175.52%
    HET 85.46%
    BBBY 73.77%
    NFB 75.03%
    ED 365.80%
    COH 79.71%
    EDS 170.09%
    APOL 78.75%
    LLTC 85.00%
    PGN 289.75%
    NTRS 107.48%
    FD 79.98%
    DHI 30.84%
    EQR 176.85%
    PHM 37.79%
    TRB 126.89%
    ADSK 143.60%
    MI 94.36%
    XLNX 101.51%
    ASD 91.69%
    CMA 101.68%
    AMD 538.44%
    KLAC 90.01%
    ESRX 95.57%
    TJX 74.22%
    LEN 34.23%
    ETN 66.10%
    WFMI 192.63%
    JWN 92.50%
    CIT 69.12%
    NSM 121.57%
    LNC 72.79%
    ASO 99.63%
    RCL 74.06%
    BMET 82.15%
    CSC 89.03%
    FISV 87.21%
    SNV 85.24%
    HLT 118.60%
    NTAP 82.81%
    TROW 123.43%
    MEDI 331.86%
    MU 399.21%
    CHIR 127.89%
    ABC 128.05%
    LTD 84.18%
    ASN 292.23%
    SOV 81.46%
    HUM 101.41%
    Advanced Micro Devices is the most overvalued, followed by Micron and Consolidated Edison. The best bargain is D.R. Horton, followed by Lennar and Fannie Mae.

  • Reuters: Stocks slide as warnings weigh on techs
    Posted by on October 5th, 2005 at 1:11 pm

    NEW YORK (Reuters) – U.S. stocks fell on Wednesday, with technology shares sliding after some companies said they would miss analysts’ quarterly earnings forecasts.
    Shares of network infrastructure company ADC Telecommunications Inc. and software maker Mercury Interactive Corp. were lower after the companies said they expected to miss Wall Street’s expectations.
    The Dow Jones industrial average was down 55.30 points, or 0.53 percent, at 10,385.81. The Standard & Poor’s 500 Index was down 9.51 points, or 0.78 percent, at 1,204.96. The technology-laced Nasdaq Composite Index fell 21.99 points, or 1.03 percent, to 2,117.37.
    “There is probably a higher level of uncertainty about how this earnings season is going to play out than in any other earnings season in a long time,” said Hugh Johnson, chief investment officer at Johnson Illington Advisors in Albany, New York. “There are a lot of tight stomachs when it comes to looking at earnings season.”
    The major indexes also retreated after a report from the Institute for Supply Management that its services index fell to 53.3 in September, down from 65 in August and well below the median Wall Street forecast of 61. Any number above 50 indicates growth.
    The U.S. Energy Information Administration reported that crude inventories declined 300,000 barrels last week. Economists polled by Reuters had expected a 100,000 barrel drop.
    U.S. light crude oil futures were unchanged at $63.90 a barrel.
    ADC forecast quarterly earnings from continuing operations would fall below analysts’ expectations. Its shares plunged 17.5 percent to $18.71 on the Nasdaq.
    Mercury said it expects third-quarter revenue to fall short of its previous target and Wall Street forecasts. The software maker’s shares fell 13.6 percent to $31.89 on the Nasdaq.
    Other declining tech shares included Microsoft Corp. off 12 cents at $24.86 and Apple Computer Inc., down 47 cents to $53.28. Both trade on Nasdaq.
    Among economically sensitive blue-chip stocks, shares of heavy-equipment maker Caterpillar Inc. were down 1.9 percent at $56.65 and airplane manufacturer Boeing Co. was off 1.2 percent at $67.17. Both trade on the New York Stock Exchange.

  • Stuck in a Trading Range with You
    Posted by on October 5th, 2005 at 6:50 am

    Yesterday, the Dow closed for its 237th consecutive day above 10,000 and below 11,000. As trading ranges go, that’s pretty tight and long-lasting. There’s even a trading range within the trading range. The Dow has closed between 10,400 and 10,700 for 155 of the last 237 trading days. That’s nearly two-thirds of the time, plus it includes 59 of the last 62 trading days.
    Can we break out of it? Absolutely, and I think that day may be at hand. But first, the market needs a catalyst. We need something that will get investors excited again. I think the upcoming round of third-quarter earnings reports might do the trick.
    Wall Street is expecting earnings growth of 17.8% for the third quarter. That’s pretty impressive although, truth be told, it’s heavily tilted toward energy stocks. The energy sector is expected to deliver an amazing 73% profit growth. Still, if we exclude energy stocks, the rest of the S&P 500 is expected to have 11% earnings growth, which ain’t too shabby.
    Perhaps the best news from yesterday is that General Electric (GE) reaffirmed its third-quarter earnings outlook of 43 cents to 44 cents a share, and $1.80 to $1.83 a share for all of 2005. That translates to earnings growth of 13.2% to 15.8% for the third quarter. Of course, with GE, a penny a share is about $106 million which is far more than what most companies can hope to earn in three months.
    GE is just the beginning. Apple Computer (AAPL) reports next Tuesday. It won’t be long before we get an idea of how strong the earnings environment is. Hopefully, the Dow will finally be able to leave this trading range behind.