• Dividend Guy’s Stock Screen
    Posted by on September 26th, 2012 at 4:03 pm

    I’m not usually a fan of stock screens. I think they’re fine when looking for good prospects but I caution investors not to blindly follow them.

    I do like the five criteria list at The Dividend Guy.

    1. Yield above 3%. I would say “above market,” but 3% is a good rule of thumb.

    2. Five-year dividend growth rate over 1%. Basically, a rising dividend even if it’s small.

    3. ROE over 10%. Yep, that’s always good. That means a company is probably healthy.

    4. Five-year income growth over 1%. This one I’m not so sure about. The problem, of couse, is that the last five years have been very atypical. Many well-run companies have seen their profits plunge.

    5. Dividend payout under 75%. Meaning less than three-fourths of their profits should be paid out. That’s good because it would eliminate companies that don’t have confident plans for future growth.

    The longer I invest, the more impressed I am with dividends. There are several reasons why. They’re easy to follow. Unlike accounting earnings, you know exactly what you’re getting. Dividends also tend to be “sticky,” meaning most companies have an implicit promise to maintain their dividend at the same level, or possibly increase it.

  • The Presidential Election Cycle
    Posted by on September 26th, 2012 at 9:58 am

    I don’t put too much faith in seasonal trading patterns but I do find them interesting from an historical perspective.

    A few years ago, I took the entire Dow from its inception and worked out what the average four-year presidential election cycle looks like.

    The second half of the election year has been one of the best times for the market. The Dow has gained an average of 14.5% during those six months. The good mood lasts until September of the year following the election. After that, the market enters a lousy patch that doesn’t end until the mid-term election.

  • The S&P 500’s First 1% Drop in Two Months
    Posted by on September 26th, 2012 at 9:27 am

    For the first time in two months, the S&P 500 lost more than 1% yesterday. The market didn’t start out so poor yesterday but traders got nervous after Charles Plosser, the head of the Philadelphia Fed, said that QE3 won’t work. Specifically, Plosser said that by pinning so much on the policy, the Fed is risking its credibility. My initial reaction is that I’m afraid that happened a long time ago.

    The market slowly moved down towards yesterday’s closing bell. Financial stocks were particularly hard hit. Members of our Buy List like AFLAC ($AFL), JPMorgan Chase ($JPM) and Nicholas Financial ($NICK) were surprising losers.

    The market is still nervous about events in Europe. The austerity policies have led to more riots in Greece. There are also protests in Spain and bond yields there are back over 6%. The government there is prepared to ask for a bailout. In China, the Shanghai Composite has fallen to a 3.5-year low.

    The key metric that’s on everyone’s mind is the bond market in Europe. The authorities there have made it clear that they intend to defend the euro. That would lead me to believe that yield spreads would tighten. That had been happening but now the yields are moving in the other direction.

  • Morning News: September 26, 2012
    Posted by on September 26th, 2012 at 6:28 am

    Rajoy Bets Italian Woes May Ease Spain Rescue Terms

    Greece Hit By 24-Hour General Strike Ahead of New Budget Cuts

    Germany Clears Last Hurdle To ESM Bailout Fund Ratification

    RBS Instant Messages Show Libor Rates Skewed for Traders

    Toyota Joins Nissan in Saying Deeper China Output Cuts Loom

    AngloGold Mines Halted in South Africa as Strikes Spread

    Housing Market Displays New Vigor as Prices Rise

    Consumer Confidence in U.S. Rises to a Seven-Month High

    Tesla Cuts Revenue Outlook, Unveils Plan to Sell More Shares

    U.S. Regulators Order Discover to Pay $214 Million to End Probe

    EU Rejects US Claim To Have Weaned Boeing Off Subsidies

    ICAP Sees First-Half Revenue Down 14% on ‘Subdued’ Markets

    Barnes & Noble Tablets Aim for Niche Below iPad

    Jeff Carter: Meaningful Tidbits of Information-Job Creation and Bain Capital

    Cullen Roche: When the Egos of Capitalists Ruin a Good Thing…

    Be sure to follow me on Twitter.

  • DirecTV Hits 52-Week High
    Posted by on September 25th, 2012 at 1:29 pm

    From Bloomberg:

    DirecTV (DTV), the largest U.S. satellite-television provider, rose to a record high after Hudson Square Research upgraded the stock to buy from hold.

    The shares climbed 3.2 percent to $54.39 at 12:09 p.m. in New York. DirecTV, already up 23 percent this year, rose as much as 4.7 percent to $55.17 earlier in the session, reaching the highest level since the stock began trading in 1985.

  • Drunken Profits
    Posted by on September 25th, 2012 at 11:15 am

    Josh Brown highlights this amusing tale from the London Telegraph:

    It’s probably not uncommon for City traders to wonder how they burnt so much cash during a drunken night on the town.

    But Steve Perkins was left with a bigger black hole in his memory than most when his employer rang one morning to ask what he’d done with $520m of the oil trading firm’s money.

    It was 7.45am on June 30 last year when the senior, longstanding broker for PVM Oil Futures was contacted by an admin clerk querying why he’d bought 7m barrels of crude in the middle of the night.

    The 34-year old broker at first claimed he had spent the night trading alongside a client. But the story began to fall apart when he refused to put the customer in touch with his desk for official approval of the trades.

    By 10am it emerged that Mr Perkins had single-handedly moved the global price of oil to an eight-month high during a “drunken blackout”. Prices leapt by more than $1.50 a barrel in under half an hour at around 2am – the kind of sharp swing caused by events of geo-political significance. Ten times the usual volume of futures contracts changed hands in just one hour.

    Oopsie.

  • Scattered Thoughts
    Posted by on September 25th, 2012 at 10:55 am

    The stock market is up again this morning but only by a modest amount. The market was helped by a strong Case-Shiller report and news that consumer confidence rose to a seven-month high.

    I want to pass on a few scattered unrelated thoughts about some stocks.

    FactSet Research Systems ($FDS) is down today even though they beat earnings and guided inline. I like this company a lot and it used to be a Buy List member. Unfortunately, I think the price is way too high. I wish it would come down a lot.

    I often tell investors to ignore what happens to stocks after you sell them. Of course, I ignore this advice all the time only to my detriment. Of last year’s sells, I see that Gilead ($GILD) is up over 65% this year, Deluxe ($DLX) is up by 38% and Abbott Labs ($ABT) is up by 25%. Deep sigh.

    I’ve been watching Global Payments ($GPN) lately. The stock was crushed earlier this year due to an embarrassing security breach. You’ll notice that many good bargains often have dents and scratches in them, but the question is how damaging are they. GPN still looks like a strong business. They report earnings tomorrow. The stock should probably be about $10 higher but I understand the market’s reticence. I’m not saying it’s a clear buy but it’s one to watch.

    Seneca Foods ($SENEA) is one of those odd stocks I love. No one follows them but they continue to prosper. The stock is at a new 52-week high.

    Cummins ($CMI) seems to be a very attractive stock. I’m surprised the stock is so low. The same could be said for Crane ($CR).

  • Morning News: September 25, 2012
    Posted by on September 25th, 2012 at 6:30 am

    Merkel Says Markets Worried About Euro States Repaying Debt

    The Trade-Off That Created Germany’s Job Miracle

    Draghi Rally Lets Skeptics Dump Spain for Bunds

    Spain Presses ECB to Quantify Bond Purchases as Bill Yields Rise

    IMF No ‘Yes-Man’ For Euro Zone, Lagarde Says

    I.M.F.’s Call for More Cuts Irks Greece

    South Africa Warms To Shale Gas

    Riot at Foxconn Factory Underscores Rift in China

    Williams Says Fed to Pursue QE3 Until Job Market Rebounds

    After U.S. Inquiries, Discover Agrees to Refund Some Credit Protection Fees

    ‘Free’ Checking Costs More

    Jump in Home Deliveries Boosts Lennar’s Profit

    Verizon to Pay More Than $510 Million to TiVo, ActiveVideo

    Joshua Brown: Drunk-Trading

    Roger Nusbaum: Something No One Needs

    Be sure to follow me on Twitter.

  • Google Hits All-Time High
    Posted by on September 24th, 2012 at 12:28 pm

    After five years, shares of Google have finally made an all-time intra-day high. On November 7, 2007, the stock got to $747.24.

  • Black Friday — 143 Years Ago Today
    Posted by on September 24th, 2012 at 11:59 am

    Today is the 143rd anniversary of Black Friday when some speculators tried to corner the gold market. The government started selling gold and the speculators were wiped out.

    Here’s the entry from Wikipedia:

    During the reconstruction era after the American Civil War, the United States government issued a large amount of money that was backed by nothing but credit. After the war ended, people commonly believed that the U.S. Government would buy back the “greenbacks” with gold. In 1869, a group of speculators, headed by James Fisk and Jay Gould, sought to profit off this by cornering the gold market. Gould and Fisk first recruited Grant’s brother-in-law, a financier named Abel Corbin. They used Corbin to get close to Grant in social situations, where they would argue against government sale of gold, and Corbin would support their arguments. Corbin convinced Grant to appoint General Daniel Butterfield as assistant Treasurer of the United States. Butterfield agreed to tip the men off when the government intended to sell gold.

    In the late summer of 1869, Gould began buying large amounts of gold. This caused prices to rise and stocks to plummet. After Grant realized what had happened, the federal government sold $4 million in gold. On September 20, 1869, Gould and Fisk started hoarding gold, driving the price higher. On September 24 the premium on a gold Double Eagle (representing 0.9675 troy ounces (30.09 g) of gold bullion at $20) was 30 percent higher than when Grant took office. But when the government gold hit the market, the premium plummeted within minutes. Investors scrambled to sell their holdings, and many of them, including Corbin, were ruined. Fisk and Gould escaped significant financial harm.

    Subsequent Congressional investigation was chaired by James A. Garfield. The investigation was alleged on the one hand to have been limited because Virginia Corbin and First Lady Julia Grant were not permitted to testify. Garfield’s biographer, Alan Peskin, however, maintains the investigation was quite thorough. Butterfield resigned from the U.S. Treasury. Henry Adams, who believed that President Ulysses S. Grant had tolerated, encouraged, and perhaps even participated in corruption and swindles, attacked Grant in an 1870 article entitled The New York Gold Conspiracy. Grant’s suspected involvement also led his presidency to be called the Era of Good Stealings.

    Although Grant was not directly involved in the scandal, his personal association with Gould and Fisk gave clout to their attempt to manipulate the gold market. Also, Grant’s order to release gold in response to gold’s rising price was itself a manipulation of the market. Grant had personally declined to listen to Gould’s ambitious plan to corner the gold market, since the scheme was not announced publicly, but he could not be trusted. Gould had promoted the plan to Grant as a means to help farmers sell a bountiful 1869 wheat crop to Europe.[1]

    A highly fictionalized account of Fisk’s life, culminating in a dramatic presentation of the gold corner, was shown in the 1937 film The Toast of New York.