Late word is that the China Development Bank may pass on putting $2 billion into Citigroup (C) as was planned. According to The Wall Street Journal the Chinese government may be blocking the deal.
As China puts more and more money into US government debt and invests in troubled financial institutions it would be well to remember that one of its earlier deals, an investment in BlackStone (BX), turned out to be about as bad as an investment could get. Shares in the firm have gone from $38 to $20.
China wants it money back. Maybe then it will put in some more.
Douglas A. McIntyre
A broad band of support at S&P 500 1,124 to 1,225 will likely slow the decline
A fall in the euro sent equity and commodity markets into a downward spiral yesterday. Sentiment against the euro strengthened following Germany��s stand that its government is against raising the lending limit for a euro zone bailout.
In response, Italy��s 10-year bond yield rose 7%-plus, and Spain and France saw their bond yields jump as well. The U.S. dollar rose, of course, and the rise was accentuated by a series of better-than-expected economic reports.
Commodities fell sharply in response to the stronger dollar. The CRB Index fell 3.4%, and gold settled at $1,587.70 an ounce, down 4.6%, and silver lost 7.6%.
The Dow Jones Industrial Average closed at 11,823, off 1.1%, the S&P 500 ended at 1,212, down 1.13%, and the Nasdaq closed at 2,539, down 1.55%. The NYSE traded 928 million shares, and the Nasdaq crossed 512 million. Decliners were ahead of advancers on the Big Board by 3-to-1 and on the Nasdaq by 2-to-1.
Yesterday, every major index violated its near-term support as the dollar rocketed to new highs.
The breakdown of the S&P 500 is significant because it confirmed the failure of the index to break higher at its bearish resistance line (June/July, October and November highs); it turned down from its 200-day moving average — a confirmation that the long-term bear market is intact; and it crushed the near-term support provided by the conjunction of the 20-day and 50-day moving averages.
The question is: How low will it go?
The answer may surprise you: Not very far, at least initially. There is a broad band of support at 1,124 to 1,225 that will more than likely slow the decline, and the uptrend line of a major trading triangle rests at 1,175.
Additionally, the Fibonacci numbers off of the November low to the December are: 50% = 1,212 (yesterday��s close), 61.8% = 1,200.
Finally, we are approaching the holiday period when trading traditionally slows and volume falls until we enter the New Year.
! Yesterda y��s higher close in the PowerShares DB US Dollar Index Bullish Fund (NYSE:UUP) confirmed the bull market in the U.S. dollar, and that conclusion is backed by the MACD buy signal. But volume on the breakout is not as high as the average volume of the October sell-off.
Conclusion: The most followed indices have broken from major support levels, indicating that the bear market is intact and that prices should head modestly lower.
But European politicians are no less nimble than our own. When our credit markets were in jeopardy (not that they still aren��t), the Feds sprang TARP, then QE1 and QE2 while dropping interest rates to near zero. And each move was immediately greeted with a rebound in stocks.
The Europeans have followed the same pattern and will, in desperation, scramble to turn an outgoing tide with each attempt triggering a rally in equities. Thus, shorts should expect violent rebounds. Take profits when you can. (Check out my colleague John Jagerson who turned a 67% profit overnight last week.) And protect positions with stop-loss orders.
The trend is down, but expect more volatility and less predictability.
In response, Italy��s 10-year bond yield rose 7%-plus, and Spain and France saw their bond yields jump as well. The U.S. dollar rose, of course, and the rise was accentuated by a series of better-than-expected economic reports.
Commodities fell sharply in response to the stronger dollar. The CRB Index fell 3.4%, and gold settled at $1,587.70 an ounce, down 4.6%, and silver lost 7.6%.
The Dow Jones Industrial Average closed at 11,823, off 1.1%, the S&P 500 ended at 1,212, down 1.13%, and the Nasdaq closed at 2,539, down 1.55%. The NYSE traded 928 million shares, and the Nasdaq crossed 512 million. Decliners were ahead of advancers on the Big Board by 3-to-1 and on the Nasdaq by 2-to-1.
Yesterday, every major index violated its near-term support as the dollar rocketed to new highs.
The breakdown of the S&P 500 is significant because it confirmed the failure of the index to break higher at its bearish resistance line (June/July, October and November highs); it turned down from its 200-day moving average — a confirmation that the long-term bear market is intact; and it crushed the near-term support provided by the conjunction of the 20-day and 50-day moving averages.
The question is: How low will it go?
The answer may surprise you: Not very far, at least initially. There is a broad band of support at 1,124 to 1,225 that will more than likely slow the decline, and the uptrend line of a major trading triangle rests at 1,175.
Additionally, the Fibonacci numbers off of the November low to the December are: 50% = 1,212 (yesterday��s close), 61.8% = 1,200.
Finally, we are approaching the holiday period when trading traditionally slows and volume falls until we enter the New Year.
! Yesterda y��s higher close in the PowerShares DB US Dollar Index Bullish Fund (NYSE:UUP) confirmed the bull market in the U.S. dollar, and that conclusion is backed by the MACD buy signal. But volume on the breakout is not as high as the average volume of the October sell-off.
Conclusion: The most followed indices have broken from major support levels, indicating that the bear market is intact and that prices should head modestly lower.
But European politicians are no less nimble than our own. When our credit markets were in jeopardy (not that they still aren��t), the Feds sprang TARP, then QE1 and QE2 while dropping interest rates to near zero. And each move was immediately greeted with a rebound in stocks.
The Europeans have followed the same pattern and will, in desperation, scramble to turn an outgoing tide with each attempt triggering a rally in equities. Thus, shorts should expect violent rebounds. Take profits when you can. (Check out my colleague John Jagerson who turned a 67% profit overnight last week.) And protect positions with stop-loss orders.
The trend is down, but expect more volatility and less predictability.
Alamos Gold PT Trimmed At CIBC Reflecting Higher Costs in 2012
CIBC World Markets Inc. cut its price target on Alamos Gold Inc. (TSX:AGI.TO) to $23.00 from $24.00, reflecting higher costs for 2013 estimates.
Barry Cooper, an analyst at CIBC, cut his 2012 EPS estimates for thecompany to US$1.33 from US$1.47 and 2013 estimates to US$1.72 fromUS1.77.
Production in the fourth quarter was essentially in line with ourexpectations of 43,000 ounces, Cooper said. The 46,500 ounces producedincluded 3,000 ounces of non-commercial production from the Escondidazone.
Cooper wrote that the start up of the mill associated with Escondidaore will be a major milestone for the operation. The boost will comefrom both grades and costs and partially offset total cash costs thatare expected to be approaching $600/oz for the heap leach operationalone, he said.
"Grades are expected to be down 23% at the Mulatos pit year-over-yearand follow a previous decline of 18% in 2011. This should be a lowpoint relative to the reserve grade, although higher gold prices will beaffecting reserve figures for AGI as well as others as low gradesbecome economical," Cooper said.
"Throughput for Mulatos may prove difficult to achieve given the17,500 TPD avg that has been forecast. About 500 TPD will come from milltailings, but to avg 17,000 TPD for the main crusher facility may beaggressive," Cooper wrote. "We think that there could be a cushion inthe grade estimate that could help."
The stock is currently trading 0.12% lower at $17.31. The shares havebeen trading in the 52-week range between $13.26 and $20.15.
{$end}
Barry Cooper, an analyst at CIBC, cut his 2012 EPS estimates for thecompany to US$1.33 from US$1.47 and 2013 estimates to US$1.72 fromUS1.77.
Production in the fourth quarter was essentially in line with ourexpectations of 43,000 ounces, Cooper said. The 46,500 ounces producedincluded 3,000 ounces of non-commercial production from the Escondidazone.
Cooper wrote that the start up of the mill associated with Escondidaore will be a major milestone for the operation. The boost will comefrom both grades and costs and partially offset total cash costs thatare expected to be approaching $600/oz for the heap leach operationalone, he said.
"Grades are expected to be down 23% at the Mulatos pit year-over-yearand follow a previous decline of 18% in 2011. This should be a lowpoint relative to the reserve grade, although higher gold prices will beaffecting reserve figures for AGI as well as others as low gradesbecome economical," Cooper said.
"Throughput for Mulatos may prove difficult to achieve given the17,500 TPD avg that has been forecast. About 500 TPD will come from milltailings, but to avg 17,000 TPD for the main crusher facility may beaggressive," Cooper wrote. "We think that there could be a cushion inthe grade estimate that could help."
The stock is currently trading 0.12% lower at $17.31. The shares havebeen trading in the 52-week range between $13.26 and $20.15.
{$end}
(AEHR,TIII, ASTX, CLNO, SHOR) Stock to Watch by DrStockPick.com
Aehr Test Systems (Nasdaq:AEHR), a worldwide supplier of semiconductor test and burn-in equipment, announced financial results for the first quarter of fiscal 2012 ended August 31, 2011.
Net sales were $4.1 million in the first quarter of fiscal 2012, compared with $2.2 million in the first quarter of fiscal 2011. Aehr Test reported net income of $124,000, or $0.01 per diluted share, in the first quarter of fiscal 2012, compared to a net loss of $1.5 million, or $0.17 per diluted share, in the first quarter of fiscal 2011. The Company’s net income for first quarter fiscal 2012 included a gain of $990,000 from the sale of its investment in ESA Electronics PTE Ltd.
Commenting on the results of the first quarter, Rhea Posedel, chairman and chief executive officer of Aehr Test Systems, said, “We are pleased to have started fiscal 2012 off with a profitable first quarter. Our revenues for the quarter grew 90% year-over-year and were up 10% sequentially. A major contributor to this growth was the shipment of a number of FOX(TM)-1 WaferPak contactors for full wafer, one touchdown sort testing of flash memory wafers. We also had an increase in ABTS(TM) revenues in the quarter, reflecting the inroads we are making in adding new customers. At the same time, we gained a new customer in China for our ABTS product and booked follow-on ABTS system orders from existing customers.
“Looking ahead, we are seeing a higher level of interest in our broad base of products,” continued Posedel. “We remain focused on penetrating key production accounts with our ABTS and FOX products to grow our business.”
Headquartered in Fremont, California, Aehr Test Systems is a worldwide provider of systems for burning-in and testing DRAMs, flash and other memory and logic integrated circuits and has an installed base of more than 2,500 systems worldwide. Aehr Test has developed! and int roduced several innovative products, including the ABTS, FOX and MAX systems and the DiePak(R) carrier. The ABTS system is Aehr Test’s newest system for packaged part test during burn-in for both low-power and high-power logic as well as all common types of memory devices. The FOX system is a full wafer contact test and burn-in system. The MAX system can effectively burn-in and functionally test complex devices, such as digital signal processors, microprocessors, microcontrollers and systems-on-a-chip. The DiePak carrier is a reusable, temporary package that enables IC manufacturers to perform cost-effective final test and burn-in of bare die.
For more information, please visit the Company’s website at www.aehr.com.
Tii Network Technologies, Inc (Nasdaq:TIII) a leader in designing, manufacturing and marketing network products for the communications industry, announced the appointment of Stacey L. Moran as Vice President - Finance, Chief Financial Officer, Secretary and Treasurer.
Tii Network Technologies, Inc., together with its subsidiaries, designs, manufactures, and sells products for use in the networks to service providers in the communications industry in the United States.
Astex Pharmaceuticals, Inc. (Nasdaq:ASTX) announced that preclinical data demonstrating that AT13387, a novel non-ansamycin Heat Shock Protein 90 (HSP90) inhibitor, is active in in vitro gastrointestinal stromal tumor (GIST) models (Abstract #9407) was presented at the 2011 ECCO (European Cancer Organization) European Multidisciplinary Cancer Congress in Stockholm, Sweden.
Astex Pharmaceuticals, Inc., a pharmaceutical company, engages in the discovery, development, and commercialization of novel therapeutics with a focus on oncology and hematology.
Cleantech Transit, Inc. (CLNO)
Cleantech Transit Inc. was founded to capitalize on technology advances and manufacturing opportunities in the gro! wing cle an energy public transportation sector. The Company has expanded its focus to invest directly in specific green projects. Recognizing the many economic and operational advances of converting wood waste into renewable sources of energy, Cleantech has selected to invest in Phoenix Energy (www.phoenixenergy.net). This project could benefit the Company’s manufacturing clients worldwide.
Cleantech Transit, Inc. (CLNO) is pleased to announce it has met its funding requirement to secure the Company’s ability to earn in 25% of the 500KW Merced Project.
The Company is in the final stages of closing its initial interest in the Merced Project and is currently working on completing the necessary documentation and expects closing the transaction soon. As previously announced Cleantech has the option to earn up to 40% of the Merced Project and the Company plans to continue to work towards increasing its interest in the Merced Project as they move ahead.
Biomass is made from plants and is essentially a form of solar energy. Plants absorb energy from the sun as they grow through the process of photosynthesis. Plants use the sun’s energy to break carbon dioxide and water molecules apart into their basic elements, hydrogen, carbon and oxygen. The hydrogen and carbon are used to build the molecules that the plants are made of. Most of the oxygen is released back into the atmosphere.
For more information about Cleantech Transit, Inc. visit its website www.cleantechtransitinc.com
ShoreTel, Inc. (Nasdaq:SHOR) the leading provider of brilliantly simple IP phone systems with fully integrated unified communications (UC), welcomes Sunnyvale Mayor Melinda Hamilton, as she visits ShoreTel headquarters in recognition of the company’s success.
Shoretel, Inc., together with its subsidiaries, engages in the development and sale of Internet protocol (IP) communications systems for enterprises in the United States and internationally.
Net sales were $4.1 million in the first quarter of fiscal 2012, compared with $2.2 million in the first quarter of fiscal 2011. Aehr Test reported net income of $124,000, or $0.01 per diluted share, in the first quarter of fiscal 2012, compared to a net loss of $1.5 million, or $0.17 per diluted share, in the first quarter of fiscal 2011. The Company’s net income for first quarter fiscal 2012 included a gain of $990,000 from the sale of its investment in ESA Electronics PTE Ltd.
Commenting on the results of the first quarter, Rhea Posedel, chairman and chief executive officer of Aehr Test Systems, said, “We are pleased to have started fiscal 2012 off with a profitable first quarter. Our revenues for the quarter grew 90% year-over-year and were up 10% sequentially. A major contributor to this growth was the shipment of a number of FOX(TM)-1 WaferPak contactors for full wafer, one touchdown sort testing of flash memory wafers. We also had an increase in ABTS(TM) revenues in the quarter, reflecting the inroads we are making in adding new customers. At the same time, we gained a new customer in China for our ABTS product and booked follow-on ABTS system orders from existing customers.
“Looking ahead, we are seeing a higher level of interest in our broad base of products,” continued Posedel. “We remain focused on penetrating key production accounts with our ABTS and FOX products to grow our business.”
Headquartered in Fremont, California, Aehr Test Systems is a worldwide provider of systems for burning-in and testing DRAMs, flash and other memory and logic integrated circuits and has an installed base of more than 2,500 systems worldwide. Aehr Test has developed! and int roduced several innovative products, including the ABTS, FOX and MAX systems and the DiePak(R) carrier. The ABTS system is Aehr Test’s newest system for packaged part test during burn-in for both low-power and high-power logic as well as all common types of memory devices. The FOX system is a full wafer contact test and burn-in system. The MAX system can effectively burn-in and functionally test complex devices, such as digital signal processors, microprocessors, microcontrollers and systems-on-a-chip. The DiePak carrier is a reusable, temporary package that enables IC manufacturers to perform cost-effective final test and burn-in of bare die.
For more information, please visit the Company’s website at www.aehr.com.
Tii Network Technologies, Inc (Nasdaq:TIII) a leader in designing, manufacturing and marketing network products for the communications industry, announced the appointment of Stacey L. Moran as Vice President - Finance, Chief Financial Officer, Secretary and Treasurer.
Tii Network Technologies, Inc., together with its subsidiaries, designs, manufactures, and sells products for use in the networks to service providers in the communications industry in the United States.
Astex Pharmaceuticals, Inc. (Nasdaq:ASTX) announced that preclinical data demonstrating that AT13387, a novel non-ansamycin Heat Shock Protein 90 (HSP90) inhibitor, is active in in vitro gastrointestinal stromal tumor (GIST) models (Abstract #9407) was presented at the 2011 ECCO (European Cancer Organization) European Multidisciplinary Cancer Congress in Stockholm, Sweden.
Astex Pharmaceuticals, Inc., a pharmaceutical company, engages in the discovery, development, and commercialization of novel therapeutics with a focus on oncology and hematology.
Cleantech Transit, Inc. (CLNO)
Cleantech Transit Inc. was founded to capitalize on technology advances and manufacturing opportunities in the gro! wing cle an energy public transportation sector. The Company has expanded its focus to invest directly in specific green projects. Recognizing the many economic and operational advances of converting wood waste into renewable sources of energy, Cleantech has selected to invest in Phoenix Energy (www.phoenixenergy.net). This project could benefit the Company’s manufacturing clients worldwide.
Cleantech Transit, Inc. (CLNO) is pleased to announce it has met its funding requirement to secure the Company’s ability to earn in 25% of the 500KW Merced Project.
The Company is in the final stages of closing its initial interest in the Merced Project and is currently working on completing the necessary documentation and expects closing the transaction soon. As previously announced Cleantech has the option to earn up to 40% of the Merced Project and the Company plans to continue to work towards increasing its interest in the Merced Project as they move ahead.
Biomass is made from plants and is essentially a form of solar energy. Plants absorb energy from the sun as they grow through the process of photosynthesis. Plants use the sun’s energy to break carbon dioxide and water molecules apart into their basic elements, hydrogen, carbon and oxygen. The hydrogen and carbon are used to build the molecules that the plants are made of. Most of the oxygen is released back into the atmosphere.
For more information about Cleantech Transit, Inc. visit its website www.cleantechtransitinc.com
ShoreTel, Inc. (Nasdaq:SHOR) the leading provider of brilliantly simple IP phone systems with fully integrated unified communications (UC), welcomes Sunnyvale Mayor Melinda Hamilton, as she visits ShoreTel headquarters in recognition of the company’s success.
Shoretel, Inc., together with its subsidiaries, engages in the development and sale of Internet protocol (IP) communications systems for enterprises in the United States and internationally.
Lehman Forced to Revise Bankruptcy Exit Plan
After some creditors rejected Lehman Brothers' Chapter 11 proposals, the company revised its plan to exit bankruptcy, filing a new plan in New York, Bloomberg reported Wednesday.
The plan didn't list a voting deadline for creditors or propose a date for the confirmation hearing, Bloomberg reports. Lehman will start soliciting votes for the plan after the summer, and final court approval may be near the end of the year.
Lehman plans to raise $61 billion by selling assets and reducing allowable claims to $322 billion, Bloomberg reports. The average Lehman creditor would receive 18.6 cents on the dollar, and senior bondholders would receive 21.4 cents. Creditors with general unsecured claims would receive a 19.8% return, according to Bloomberg.
Derivatives creditors, which include Goldman Sachs, Morgan Stanley, Credit Suisse, Deutsche Bank and Bank of America, would get 22.3 cents, Bloomberg reports. As of the third quarter of 2010, Lehman had settled over 45% of derivatives transactions made by the Lehman Brother Special Financing unit. When Lehman filed for bankruptcy it was involved in 1.2 million derivatives transactions.
Hedge fund Paulson & Co. and other creditors with large claims against Lehman Brothers argued that Lehman's original plan "created conflict among creditors of Lehman's units," and offered their own plan in December, Bloomberg reports. In that plan, bondholders received 24.5 cents, and derivatives creditors received 25.7 cents. The group, which includes the California Public Employees’ Retirement System, PIMCO and Canyon Partners LLC, a Los Angeles-based $19 billion hedge fund, hold $80 billion in claims against Lehman, Bloomberg writes.
Lehman's revised plan incorporates elements of the Paulson plan and offers bondholders more money than the original plan, which proposed giving creditors 17 cents. If the Paulson group opposes the revised plan, their payout will be reduced to the original amount, Bloomberg reports.
“We think this is the fairest way to deal with all the legal issues,” Lehman President John Suckow told Bloomberg by phone Wednesday. “We’re hoping to get people to rally around this plan in coming weeks and months.”
At the end of 2010, Lehman held $24 billion in cash and $37 billion in real estate, private equity and other assets, Bloomberg writes.
The plan didn't list a voting deadline for creditors or propose a date for the confirmation hearing, Bloomberg reports. Lehman will start soliciting votes for the plan after the summer, and final court approval may be near the end of the year.
Lehman plans to raise $61 billion by selling assets and reducing allowable claims to $322 billion, Bloomberg reports. The average Lehman creditor would receive 18.6 cents on the dollar, and senior bondholders would receive 21.4 cents. Creditors with general unsecured claims would receive a 19.8% return, according to Bloomberg.
Derivatives creditors, which include Goldman Sachs, Morgan Stanley, Credit Suisse, Deutsche Bank and Bank of America, would get 22.3 cents, Bloomberg reports. As of the third quarter of 2010, Lehman had settled over 45% of derivatives transactions made by the Lehman Brother Special Financing unit. When Lehman filed for bankruptcy it was involved in 1.2 million derivatives transactions.
Hedge fund Paulson & Co. and other creditors with large claims against Lehman Brothers argued that Lehman's original plan "created conflict among creditors of Lehman's units," and offered their own plan in December, Bloomberg reports. In that plan, bondholders received 24.5 cents, and derivatives creditors received 25.7 cents. The group, which includes the California Public Employees’ Retirement System, PIMCO and Canyon Partners LLC, a Los Angeles-based $19 billion hedge fund, hold $80 billion in claims against Lehman, Bloomberg writes.
Lehman's revised plan incorporates elements of the Paulson plan and offers bondholders more money than the original plan, which proposed giving creditors 17 cents. If the Paulson group opposes the revised plan, their payout will be reduced to the original amount, Bloomberg reports.
“We think this is the fairest way to deal with all the legal issues,” Lehman President John Suckow told Bloomberg by phone Wednesday. “We’re hoping to get people to rally around this plan in coming weeks and months.”
At the end of 2010, Lehman held $24 billion in cash and $37 billion in real estate, private equity and other assets, Bloomberg writes.
A Hidden Reason Why the Future Looks Bright for FEI
Here at The Motley Fool, I've long cautioned investors to keep a close eye on inventory levels. It's a part of my standard diligence when searching for the market's best stocks. I think a quarterly checkup can help you spot potential problems. For many companies, products that sit on the shelves too long can become big trouble. Stale inventory may be sold for lower prices, hurting profitability. In extreme cases, it may be written off completely and sent to the shredder.
Basic guidelines
In this series, I examine inventory using a simple rule of thumb: Inventory increases ought to roughly parallel revenue increases. If inventory bloats more quickly than sales grow, this might be a sign that expected sales haven't materialized.
Is the current inventory situation at FEI (Nasdaq: FEIC ) out of line? To figure that out, start by comparing the company's figures to those from peers and competitors:
Advanced inventory
I don't stop my checkup there, because the type of inventory can matter even more than the overall quantity. There's even one type of inventory bulge we sometimes like to see. You can check for it by examining the quarterly filings to evaluate the different kinds of inventory: raw materials, work-in-progress inventory, and finished goods. (Some companies report the first two types as a single category.)
A company ramping up for increased demand may increase raw materials and work-in-progress inventory at a faster rate when it expects robust future growth. As such, we might consider oversized growth in those categories to offer a clue to a brighter future, and a clue that most other investors will miss. We call it "positive inventory divergence."
On the other hand, if we see a big increase in finished goods, that often means product isn't moving as well as expected, and it's time to hunker down with the filings and conference calls to find out why.
What's going on with the inventory at FEI? I chart the details below for both quarterly and 12-month periods.
Foolish bottom line
When you're doing your research, remember that aggregate numbers such as inventory balances often mask situations that are more complex than they appear. Even the detailed numbers don't give us the final word. When in doubt, listen to the conference call, or contact investor relations. What at first looks like a problem may actually signal a stock that will provide the market's best returns. And what might look hunky-dory at first glance could actually be warning you to cut your losses before the rest of the Street wises up.
I run these quick inventory checks every quarter. To stay on top of the inventory story at your favorite companies, just use the handy links below to add companies to your free watchlist, and we'll deliver our latest coverage right to your inbox.
Basic guidelines
In this series, I examine inventory using a simple rule of thumb: Inventory increases ought to roughly parallel revenue increases. If inventory bloats more quickly than sales grow, this might be a sign that expected sales haven't materialized.
Is the current inventory situation at FEI (Nasdaq: FEIC ) out of line? To figure that out, start by comparing the company's figures to those from peers and competitors:
Company | TTM Revenue Growth | TTM Inventory Growth |
|---|---|---|
| FEI | 32.7% | 20.0% |
| Hitachi (NYSE: HIT ) | 0.4% | 11.6% |
| Cognex (Nasdaq: CGNX ) | 25.6% | 19.8% |
| FARO Technologies (Nasdaq: FARO ) | 31.4% | 73.6% |
Source: S&P Capital IQ. Data is current as of latest fully reported quarter. TTM = trailing 12 months.
How is FEI doing by this quick checkup? At first glan! ce, pret ty well. Trailing-12-month revenue increased 32.7%, and inventory increased 20%. Over the sequential quarterly period, the trend looks healthy. Revenue dropped 2.7%, and inventory dropped 5.5%.Advanced inventory
I don't stop my checkup there, because the type of inventory can matter even more than the overall quantity. There's even one type of inventory bulge we sometimes like to see. You can check for it by examining the quarterly filings to evaluate the different kinds of inventory: raw materials, work-in-progress inventory, and finished goods. (Some companies report the first two types as a single category.)
A company ramping up for increased demand may increase raw materials and work-in-progress inventory at a faster rate when it expects robust future growth. As such, we might consider oversized growth in those categories to offer a clue to a brighter future, and a clue that most other investors will miss. We call it "positive inventory divergence."
On the other hand, if we see a big increase in finished goods, that often means product isn't moving as well as expected, and it's time to hunker down with the filings and conference calls to find out why.
What's going on with the inventory at FEI? I chart the details below for both quarterly and 12-month periods.
Source: S&P Capital IQ. Data is current as of latest fully reported quarter. Dollar amounts in millions. FY = fiscal year. TTM = trailing 12 months.
Source: S&P Capital IQ. Data is current as of latest fully reported quarter. Dollar amounts in millions. FQ = fiscal quarter.
Let's dig into the inventory specifics. On a trailing-12-month basis, raw materials ! inventor y was the fastest-growing segment, up 42.6%. On a sequential-quarter basis, finished goods inventory was the fastest-growing segment, up 0.2%. FEI seems to be handling inventory well enough, but the individual segments don't provide a clear signal. FEI may display positive inventory divergence, suggesting that management sees increased demand on the horizon.Foolish bottom line
When you're doing your research, remember that aggregate numbers such as inventory balances often mask situations that are more complex than they appear. Even the detailed numbers don't give us the final word. When in doubt, listen to the conference call, or contact investor relations. What at first looks like a problem may actually signal a stock that will provide the market's best returns. And what might look hunky-dory at first glance could actually be warning you to cut your losses before the rest of the Street wises up.
I run these quick inventory checks every quarter. To stay on top of the inventory story at your favorite companies, just use the handy links below to add companies to your free watchlist, and we'll deliver our latest coverage right to your inbox.
- Add FEI to My Watchlist.
- Add Hitachi to My Watchlist.
- Add Cognex to My Watchlist.
- Add FARO Technologies to My Watchlist.
5 Undervalued Recession-Proof Stocks
Markets were crushed Thursday on signs of slowing growth in China and Germany and a gloomy economic outlook from the Federal Reserve, reported CNBC. In response, investors fled to the safety of the U.S. dollar and government bonds.
The U.S dollar climbed 1.36%, which pushed down U.S crude oil prices by more than 5%. Gold dropped nearly $50/ounce and European stocks fell 4% to a two-year low, "dragging an index of global equities to a one-year trough." This was all before 11 a.m.
Market volatility isn't going anywhere, and more cloudy days may still be ahead for the global economy.
So how can you prepare yourself for more market losses?
For ideas, we went back into time, and identified a list of stocks that outperformed the market during each of the last three big market downturns over the last decade (Oct. 1, 2007 to March 2, 2009, April 19, 2010 to June 28, 2010, and July 18, 2011 to the present).
In addition, all of these stocks appear to be undervalued, when comparing levered free cash flow to enterprise value.
Considering the track record of these companies during downturns, are they being underestimated by the market?
List sorted by each stock's average alpha relative to the S&P 500 during the three downturns over the last decade. (Click here to access free, interactive tools to analyze these ideas.)
1. Arch Capital Group (Nasdaq: ACGL ) : Provides insurance and reinsurance products worldwide. Between Oct. 1, 2007 and March 2, 2009: Price changed from $25.16 to $17.52, a price return of -30.37% (alpha of 24.33%). Between April 19, 2010 to June 28, 2010: Price changed from $25.29 to $25.47, a price return of 0.71% (alpha of 10.98%). Between July 18, 2011 and Sept. 18, 2011: Price changed from $32.32 to $33.65, a price return of 4.12% (alpha of 10.97%). [Average Alpha: 15.43%] Levered free cash flow at $527.50M vs. enterprise value at $4.15B (implies an LFCF/EV ratio at 12.71%).
2. Mea dowbrook Insurance Group (NYSE: MIG ) : Operates as a specialty commercial insurance underwriter and insurance administration services company in the United States. Between Oct. 1, 2007 and March2, 2009: Price changed from $8.72 to $5.58, a price return of -36.01% (alpha of 18.69%). Between April 19, 2010 to June 28, 2010: Price changed from $7.97 to $8.77, a price return of 10.04% (alpha of 20.3%). Between July 18, 2011 and Sept. 18, 2011: Price changed from $9.49 to $9.51, a price return of 0.21% (alpha of 7.06%). [Average Alpha: 15.35%] Levered free cash flow at $53.57M vs. enterprise value at $527.85M (implies an LFCF/EV ratio at 10.15%).
3. Synopsys (Nasdaq: SNPS ) : Provides technology solutions used to develop electronics and electronic systems worldwide. Between Oct. 1, 2007 and March 2, 2009: Price changed from $27.47 to $17.94, a price return of -34.69% (alpha of 20.01%). Between April 19, 2010 to June 28, 2010: Price changed from $23.03 to $21.96, a price return of -4.65% (alpha of 5.62%). Between July 18, 2011 and Sept. 18, 2011: Price changed from $24.15 to $25.99, a price return of 7.62% (alpha of 14.47%). [Average Alpha: 13.37%] Levered free cash flow at $294.70M vs. enterprise value at $2.56B (implies an LFCF/EV ratio at 11.51%).
4. MKS Instruments (Nasdaq: MKSI ) : Provides instruments, subsystems, and process control solutions that measure, control, power, monitor, and analyze parameters of manufacturing processes worldwide. Between Oct. 1, 2007 and March 2, 2009: Price changed from $19.35 to $11.75, a price return of -39.28% (alpha of 15.42%). Between April 19, 2010 to June 28, 2010: Price changed from $20.7 to $20.26, a price return of -2.13% (alpha of 8.14%). Between July 18, 2011 and Sept. 18, 2011: Price changed from $24.86 to $24.65, a price return of -0.84% (alpha of 6.01%). [Average Alpha: 9.86%] Levered fr! ee cash flow at $128.07M vs. enterprise value at $707.26M (implies an LFCF/EV ratio at 18.11%).
5. Fresh Del Monte Produce (NYSE: FDP ) : Produces, transports, sources, markets, and distributes fresh and fresh-cut fruit and vegetables worldwide. Between Oct. 1, 2007 and March 2, 2009: Price changed from $28.97 to $17.88, a price return of -38.28% (alpha of 16.42%). Between April 19, 2010 to June 28, 2010: Price changed from $20.89 to $20.84, a price return of -0.24% (alpha of 10.03%). Between July 18, 2011 and Sept. 18, 2011: Price changed from $26.19 to $23.8, a price return of -9.13% (alpha of -2.28%). [Average Alpha: 8.06%] Levered free cash flow at $167.94M vs. enterprise value at $1.43B (implies an LFCF/EV ratio at 11.74%).
Interactive chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
The U.S dollar climbed 1.36%, which pushed down U.S crude oil prices by more than 5%. Gold dropped nearly $50/ounce and European stocks fell 4% to a two-year low, "dragging an index of global equities to a one-year trough." This was all before 11 a.m.
Market volatility isn't going anywhere, and more cloudy days may still be ahead for the global economy.
So how can you prepare yourself for more market losses?
For ideas, we went back into time, and identified a list of stocks that outperformed the market during each of the last three big market downturns over the last decade (Oct. 1, 2007 to March 2, 2009, April 19, 2010 to June 28, 2010, and July 18, 2011 to the present).
In addition, all of these stocks appear to be undervalued, when comparing levered free cash flow to enterprise value.
Considering the track record of these companies during downturns, are they being underestimated by the market?
List sorted by each stock's average alpha relative to the S&P 500 during the three downturns over the last decade. (Click here to access free, interactive tools to analyze these ideas.)
1. Arch Capital Group (Nasdaq: ACGL ) : Provides insurance and reinsurance products worldwide. Between Oct. 1, 2007 and March 2, 2009: Price changed from $25.16 to $17.52, a price return of -30.37% (alpha of 24.33%). Between April 19, 2010 to June 28, 2010: Price changed from $25.29 to $25.47, a price return of 0.71% (alpha of 10.98%). Between July 18, 2011 and Sept. 18, 2011: Price changed from $32.32 to $33.65, a price return of 4.12% (alpha of 10.97%). [Average Alpha: 15.43%] Levered free cash flow at $527.50M vs. enterprise value at $4.15B (implies an LFCF/EV ratio at 12.71%).
3. Synopsys (Nasdaq: SNPS ) : Provides technology solutions used to develop electronics and electronic systems worldwide. Between Oct. 1, 2007 and March 2, 2009: Price changed from $27.47 to $17.94, a price return of -34.69% (alpha of 20.01%). Between April 19, 2010 to June 28, 2010: Price changed from $23.03 to $21.96, a price return of -4.65% (alpha of 5.62%). Between July 18, 2011 and Sept. 18, 2011: Price changed from $24.15 to $25.99, a price return of 7.62% (alpha of 14.47%). [Average Alpha: 13.37%] Levered free cash flow at $294.70M vs. enterprise value at $2.56B (implies an LFCF/EV ratio at 11.51%).
4. MKS Instruments (Nasdaq: MKSI ) : Provides instruments, subsystems, and process control solutions that measure, control, power, monitor, and analyze parameters of manufacturing processes worldwide. Between Oct. 1, 2007 and March 2, 2009: Price changed from $19.35 to $11.75, a price return of -39.28% (alpha of 15.42%). Between April 19, 2010 to June 28, 2010: Price changed from $20.7 to $20.26, a price return of -2.13% (alpha of 8.14%). Between July 18, 2011 and Sept. 18, 2011: Price changed from $24.86 to $24.65, a price return of -0.84% (alpha of 6.01%). [Average Alpha: 9.86%] Levered fr! ee cash flow at $128.07M vs. enterprise value at $707.26M (implies an LFCF/EV ratio at 18.11%).
5. Fresh Del Monte Produce (NYSE: FDP ) : Produces, transports, sources, markets, and distributes fresh and fresh-cut fruit and vegetables worldwide. Between Oct. 1, 2007 and March 2, 2009: Price changed from $28.97 to $17.88, a price return of -38.28% (alpha of 16.42%). Between April 19, 2010 to June 28, 2010: Price changed from $20.89 to $20.84, a price return of -0.24% (alpha of 10.03%). Between July 18, 2011 and Sept. 18, 2011: Price changed from $26.19 to $23.8, a price return of -9.13% (alpha of -2.28%). [Average Alpha: 8.06%] Levered free cash flow at $167.94M vs. enterprise value at $1.43B (implies an LFCF/EV ratio at 11.74%).
Interactive chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Wall Street Too Lazy To Sleep
Stocks poised themselves for a higher opening Thursday, but it may be that Wall Street simply has gotten too indifferent to care about the recent selloff.
Stocks have fallen in four straight sessions, but only one of them amounted to anything of any consequence. Aside from Tuesday’s 20-point selloff by the S&P 500 Index(SPX), Wall Street has behaved much the way it did Wednesday, when the index hugged the flatline for most of the session before finishing just 3 points lower on the close.
Futures suggest an eight-point improvement from the open, which would push the S&P back above the 1000-point mark, a level that has manifested a bit of psychological – if not actually technical – resistance.
On the other hand, the market has been – and can be expected to continue – battling a host of headwinds: Sluggish trading, owing to seasonal factors. An uptick in risk aversion. A speculative bubble forming that’s formed in some financials. And a rise in the kind of momentum moves in individual issues that smacks of day traders with no real commitment to fundamentals.
The one thing that has been working the bulls’ corner has been the economic data. This week’s reading on industrial trends showed the manufacturing sector of the domestic economy improved for the first time since the recession started. Wednesday’s release of the minutes of the last FOMC meeting suggested the central bank had evidenced increased confidence the recession has ended.
The stumbling block could be the consumer, especially as an iteration of the labor market. Friday brings the release of the monthly nonfarm payrolls report, expected to show that job losses persisted in August, but at a slower pace than in prior months; the forecast calls for a decline of 233,000 jobs, versus a loss of 247,000 in July.
The weekly unemployment claims reading came in just about where expected, showing 566,000 people without jobs filed claims for t! he week, down from 570,000 the prior week.
Monthly same-store sales figures from retailers can be expected to show the reticence of consumers amid the persistent weakness in the labor markets.
Furthering the bearish case, risk aversion has percolated over the course of the week’s action. Treasuries have risen in price for much of this week, although they have retreated a bit Thursday on some profit-taking. The decline in risk appetite has manifested itself more dramatically in the gold market, a conventional safe-haven for the inflation bugs. Gold prices broke out Wednesday, and continued to rally Thursday.
The session’s equity action has a constructive look on the open, but there’s a real chance that, with dwindling trading levels in the last week of the summer season, investors could opt to book some profits on any improvement, and think about answering the call of the open road.
Stocks have fallen in four straight sessions, but only one of them amounted to anything of any consequence. Aside from Tuesday’s 20-point selloff by the S&P 500 Index(SPX), Wall Street has behaved much the way it did Wednesday, when the index hugged the flatline for most of the session before finishing just 3 points lower on the close.
Futures suggest an eight-point improvement from the open, which would push the S&P back above the 1000-point mark, a level that has manifested a bit of psychological – if not actually technical – resistance.
On the other hand, the market has been – and can be expected to continue – battling a host of headwinds: Sluggish trading, owing to seasonal factors. An uptick in risk aversion. A speculative bubble forming that’s formed in some financials. And a rise in the kind of momentum moves in individual issues that smacks of day traders with no real commitment to fundamentals.
The one thing that has been working the bulls’ corner has been the economic data. This week’s reading on industrial trends showed the manufacturing sector of the domestic economy improved for the first time since the recession started. Wednesday’s release of the minutes of the last FOMC meeting suggested the central bank had evidenced increased confidence the recession has ended.
The stumbling block could be the consumer, especially as an iteration of the labor market. Friday brings the release of the monthly nonfarm payrolls report, expected to show that job losses persisted in August, but at a slower pace than in prior months; the forecast calls for a decline of 233,000 jobs, versus a loss of 247,000 in July.
The weekly unemployment claims reading came in just about where expected, showing 566,000 people without jobs filed claims for t! he week, down from 570,000 the prior week.
Monthly same-store sales figures from retailers can be expected to show the reticence of consumers amid the persistent weakness in the labor markets.
Furthering the bearish case, risk aversion has percolated over the course of the week’s action. Treasuries have risen in price for much of this week, although they have retreated a bit Thursday on some profit-taking. The decline in risk appetite has manifested itself more dramatically in the gold market, a conventional safe-haven for the inflation bugs. Gold prices broke out Wednesday, and continued to rally Thursday.
The session’s equity action has a constructive look on the open, but there’s a real chance that, with dwindling trading levels in the last week of the summer season, investors could opt to book some profits on any improvement, and think about answering the call of the open road.
Oracle Flies Past Targets & Taking Share (ORCL, SAP, IBM)
Oracle Corp. (NASDAQ: ORCL) just posted earnings. Its GAAP EPS was $0.25 but non-GAAP was $0.31 EPS on revenues of $5.3 Billion. First Call had estimates at $0.27 non-GAAP EPS on revenues of $5.04 Billion. Look at these metrics individually:
Oracle’s stock closed down 2.3% at $20.76 today, and shares are at $21.70 in after-hours trading. The 52-week trading range is $15.97 to $23.00.
Jon C. Ogg
December 19, 2007
Jon Ogg can be reached at jonogg@247wallst.com; he produces the SPECIAL SITUATION newsletter and he does not own securities in the companies he covers.
- software license revenues up 35%, the strongest growth of any quarter in ten years,
- software license sales up 38%
- applications new license sales grew 63% compared to SAP’s new license sales growth rate of 15%
- Charles Phillips, president, said, "We like our growth strategy of expanding beyond ERP into high-end industry specific vertical software in contrast to SAP’s strategy of moving down market to sell ERP systems to small companies."
- CEO Larry Ellison said, "Our database and middleware new license sales grew 28% in Q2. We continue to take market share from IBM in both product categories."
Oracle’s stock closed down 2.3% at $20.76 today, and shares are at $21.70 in after-hours trading. The 52-week trading range is $15.97 to $23.00.
Jon C. Ogg
December 19, 2007
Jon Ogg can be reached at jonogg@247wallst.com; he produces the SPECIAL SITUATION newsletter and he does not own securities in the companies he covers.
The Global Debt Bubble Damns 2012
The curse of too much debt is playing havoc? with the presidential political campaign, with the threat of sovereign defaults in Europe, and with the strained financial condition of banks in Europe, the US, China, and causing a steep decline in takeover and merger activity here is the U.S.
Nations, banks and corporations are late in tackling? this problem for the reason it means deleveraging, less takeover activity, the need to pay off debt with more newer debt– and the absolute mandatory austerity, ie less growth, lower stock prices, higher unemployment all? this implies.
Example; JP Morgan CEO Jamie Dimon said publicly that JPM has $15 billion in lines of credit to Portugal, Ireland, Italy, Greece and Spain, and could under bad circumstances, lose $5 billion of that, a sum that seemed not to shake Dimon.
Example: It has been reported that BankAmerica would like to shift tens of trillions in derivative contracts from the books of its subsidiary, Merrill Lynch & Co, to the Federal Deposit Insurance Corp, so as to avoid the threat to its balance sheet from the possibility not being able to collect on these contracts. No one is confirming this need to pass off huge derivative liabilities? to the federal government.
Debt stands at the summit of the debate over what kind of capitalistic system we want. Because money cost near to nothing, deals were being done in 2006 that were bound to create huge nonperforming loans, losses for pension funds, a black eye for Wall Street– and a huge issue of the coming campaign about the money-making tactics of Republican candidate Mitt Romney.
This should trigger a rigorous debate about Wall Street’s role in the US economy– and its monied influence on the lawmakers in Washington.
Hardly anyone noticed a frank blunt speech by Carlyle founder David Rubenstein in Debai on October 15, 2008– at the very apex of the meltdown that threatened stability of gthe financial system. I wrote abo! ut it th en– and want to repeat its findings as a warning signal just as Carlyle is going to issue its shares publicly.
Credit the brainy Rubenstein for outing the rates of leverage in the financial system. Take Private Equity– the Mitt Romney issue– where most firms were dangerously borrowing $6.20 for every $1.00 in equity capital they had invested in a deal. That’s a? ratio of debt to equity of 6 to 1– meaning that if any deal lost more than 17% in value it was in effect insolvent and unless it sold assets could not pay its debt, or for that matter raise more.
Hedge funds in the fall of 2008, were borrowing on average about $ $4.00 in debt for every $1.00 in equity. The European banks like Deutsche Bank, UBS and Barclays were leveraged up 7 to 10 times more than the Private Equity Crowd– and the American investment banks were basically insolvent with debt to equity in some cases 6-7 times more than Carlyle and Blackstone. While Private Equity might have single transactions file for bankruptcy, entire banks like Lehman had to file for bankruptcy– and Merrill Lynch, Wachovia would have done so without shotgun marriages– and Citigroup and BankAmeriuca would have followed suit without federal bailouts.
Today, the stigma is in Europe. The Greek Prime Minister warned yesterday that $1 trillion? Euros must be refinanced in Europe by the end of March– and that hedge funds owned some 25% of Greece’s debt. Expect the fallout from too much debt everywhere to colr market action and part of gthe public debate about t he future of Capitalism.
Nations, banks and corporations are late in tackling? this problem for the reason it means deleveraging, less takeover activity, the need to pay off debt with more newer debt– and the absolute mandatory austerity, ie less growth, lower stock prices, higher unemployment all? this implies.
Example; JP Morgan CEO Jamie Dimon said publicly that JPM has $15 billion in lines of credit to Portugal, Ireland, Italy, Greece and Spain, and could under bad circumstances, lose $5 billion of that, a sum that seemed not to shake Dimon.
Example: It has been reported that BankAmerica would like to shift tens of trillions in derivative contracts from the books of its subsidiary, Merrill Lynch & Co, to the Federal Deposit Insurance Corp, so as to avoid the threat to its balance sheet from the possibility not being able to collect on these contracts. No one is confirming this need to pass off huge derivative liabilities? to the federal government.
Debt stands at the summit of the debate over what kind of capitalistic system we want. Because money cost near to nothing, deals were being done in 2006 that were bound to create huge nonperforming loans, losses for pension funds, a black eye for Wall Street– and a huge issue of the coming campaign about the money-making tactics of Republican candidate Mitt Romney.
This should trigger a rigorous debate about Wall Street’s role in the US economy– and its monied influence on the lawmakers in Washington.
Hardly anyone noticed a frank blunt speech by Carlyle founder David Rubenstein in Debai on October 15, 2008– at the very apex of the meltdown that threatened stability of gthe financial system. I wrote abo! ut it th en– and want to repeat its findings as a warning signal just as Carlyle is going to issue its shares publicly.
Credit the brainy Rubenstein for outing the rates of leverage in the financial system. Take Private Equity– the Mitt Romney issue– where most firms were dangerously borrowing $6.20 for every $1.00 in equity capital they had invested in a deal. That’s a? ratio of debt to equity of 6 to 1– meaning that if any deal lost more than 17% in value it was in effect insolvent and unless it sold assets could not pay its debt, or for that matter raise more.
Hedge funds in the fall of 2008, were borrowing on average about $ $4.00 in debt for every $1.00 in equity. The European banks like Deutsche Bank, UBS and Barclays were leveraged up 7 to 10 times more than the Private Equity Crowd– and the American investment banks were basically insolvent with debt to equity in some cases 6-7 times more than Carlyle and Blackstone. While Private Equity might have single transactions file for bankruptcy, entire banks like Lehman had to file for bankruptcy– and Merrill Lynch, Wachovia would have done so without shotgun marriages– and Citigroup and BankAmeriuca would have followed suit without federal bailouts.
Today, the stigma is in Europe. The Greek Prime Minister warned yesterday that $1 trillion? Euros must be refinanced in Europe by the end of March– and that hedge funds owned some 25% of Greece’s debt. Expect the fallout from too much debt everywhere to colr market action and part of gthe public debate about t he future of Capitalism.
Looking for a Fixer-Upper? Try Home Center Stocks
This is not the best of times to be in retail in general, or home-related retail in particular, but it may be the moment for investors to look at hardware store stocks.
Let's look at the hardware big boxes, where there is plenty of room for improvement in the market. Just in mid-November, Home Depot CEO Frank Blake was telling analysts: "Inventories remain high, pricing is under pressure and credit is still difficult."
That pretty much sums it all up for hardware stores. All the plastic, copper, and lumber you need for pipes, wiring, and two-by-fours is having commodity price pressures. And that means margin pressure. At the same time, the hardware chains are having to invest in improving store facilities after taking costs out to balance their books earlier in the recession.
Neither Home Depot (NYSE: HD ) nor Lowe's (NYSE: LOW ) is baking a housing recovery into its 2012 estimates, so if housing were to surprise even slightly on the upside, the effect on their stocks could be noticeable.
Housing: still in the doghouse
The biggest snag for home center chains has been simply that the housing slump has lasted longer than expected, leaving them no room for error. At first, they cut costs and moved focus from selling to construction pros to pushing moderately priced stuff such as paint and flooring to DIY homeowners fixing the homes they couldn't sell.
But by the end of 2011, they had made real structural changes, closing stores and investing in technology to make store operations more efficient. That meant higher capital expense at a time when inventory costs were also under pressure.
In Lowe's case, it added a fair amount of expenses as part of its latest restructuring, which included overhauling inventory and closing stores. The latest move was buying online retailer ATG at the end of the year. Like many retailers, Lowe's needed a ha! ndle on e-commerce and decided to buy instead of build.
However, there is good news as well. COO Robert Hull indicated Lowe's is expected to crank out about $2.1 billion in free cash flow during the next fiscal year. Lowe's managers also said they've laid out a five-year plan to get them to 2015 with no expectation of a "frothy housing market."
Lowe's is where Home Depot was a couple of years ago, trying to fix stores and boost sales, and its stock has been driven down by those issues, which gives it a bit more upside potential. Fool Austin Smith likes Lowe's over Home Depot as a better shareholder value for buying back far more of its shares.
And Home Depot has burned through quite a bit of upside potential already. It was one of the best performers in the Dow in 2011, as The Fool pointed out recently. It hit its 52-week high recently, and as fellow Fool Dan Caplinger mentioned, it's expensive and investing in it requires faith in the housing recovery, so the short-term upside is slim.
But Home Depot has been paying dividends regularly and accelerated its share repurchase plan last year. If you're a value investor, there are worse places to be in retail than a sector leader who pays regular dividends.
It's up to you whether you want to back the favorite or the scrappy upstart. But keep in mind, the U.S. is not Japan -- retail is not facing a lost decade. Housing and consumer spending will pick up, because Americans are shoppers and homeowners by nature. Saturday morning at the hardware store is not a ritual in danger of extinction.
So if you are hoping for a real retail recovery, invest in Home Depot, Lowe's, or even Orchard Supply Hardware -- these days, it beats putting your money on stocks of clothing chains or bookstores -- but keep a long horizon.
If you're interested in the Dow's top stocks on your quest for great dividend-paying stocks, The Motley Fool has compiled a special free report outlining our 11 favorite dependable dividend-paying stocks.! It's ca lled "Secure Your Future With 11 Rock-Solid Dividend Stocks." You can access your free copy today! Just click here to discover the winners we've picked.
Let's look at the hardware big boxes, where there is plenty of room for improvement in the market. Just in mid-November, Home Depot CEO Frank Blake was telling analysts: "Inventories remain high, pricing is under pressure and credit is still difficult."
That pretty much sums it all up for hardware stores. All the plastic, copper, and lumber you need for pipes, wiring, and two-by-fours is having commodity price pressures. And that means margin pressure. At the same time, the hardware chains are having to invest in improving store facilities after taking costs out to balance their books earlier in the recession.
Neither Home Depot (NYSE: HD ) nor Lowe's (NYSE: LOW ) is baking a housing recovery into its 2012 estimates, so if housing were to surprise even slightly on the upside, the effect on their stocks could be noticeable.
Housing: still in the doghouse
The biggest snag for home center chains has been simply that the housing slump has lasted longer than expected, leaving them no room for error. At first, they cut costs and moved focus from selling to construction pros to pushing moderately priced stuff such as paint and flooring to DIY homeowners fixing the homes they couldn't sell.
But by the end of 2011, they had made real structural changes, closing stores and investing in technology to make store operations more efficient. That meant higher capital expense at a time when inventory costs were also under pressure.
In Lowe's case, it added a fair amount of expenses as part of its latest restructuring, which included overhauling inventory and closing stores. The latest move was buying online retailer ATG at the end of the year. Like many retailers, Lowe's needed a ha! ndle on e-commerce and decided to buy instead of build.
However, there is good news as well. COO Robert Hull indicated Lowe's is expected to crank out about $2.1 billion in free cash flow during the next fiscal year. Lowe's managers also said they've laid out a five-year plan to get them to 2015 with no expectation of a "frothy housing market."
Lowe's is where Home Depot was a couple of years ago, trying to fix stores and boost sales, and its stock has been driven down by those issues, which gives it a bit more upside potential. Fool Austin Smith likes Lowe's over Home Depot as a better shareholder value for buying back far more of its shares.
And Home Depot has burned through quite a bit of upside potential already. It was one of the best performers in the Dow in 2011, as The Fool pointed out recently. It hit its 52-week high recently, and as fellow Fool Dan Caplinger mentioned, it's expensive and investing in it requires faith in the housing recovery, so the short-term upside is slim.
But Home Depot has been paying dividends regularly and accelerated its share repurchase plan last year. If you're a value investor, there are worse places to be in retail than a sector leader who pays regular dividends.
It's up to you whether you want to back the favorite or the scrappy upstart. But keep in mind, the U.S. is not Japan -- retail is not facing a lost decade. Housing and consumer spending will pick up, because Americans are shoppers and homeowners by nature. Saturday morning at the hardware store is not a ritual in danger of extinction.
So if you are hoping for a real retail recovery, invest in Home Depot, Lowe's, or even Orchard Supply Hardware -- these days, it beats putting your money on stocks of clothing chains or bookstores -- but keep a long horizon.
If you're interested in the Dow's top stocks on your quest for great dividend-paying stocks, The Motley Fool has compiled a special free report outlining our 11 favorite dependable dividend-paying stocks.! It's ca lled "Secure Your Future With 11 Rock-Solid Dividend Stocks." You can access your free copy today! Just click here to discover the winners we've picked.
Will Nordic American Tankers Whiff on Revenues Next Quarter?
There's no foolproof way to know the future for Nordic American Tankers (NYSE: NAT ) or any other company. However, certain clues may help you see potential stumbles before they happen -- and before your stock craters as a result.
A cloudy crystal ball
In this series, we use accounts receivable and days sales outstanding to judge a company's current health and future prospects. It's an important step in separating the pretenders from the market's best stocks. Alone, AR -- the amount of money owed the company -- and DSO -- the number of days' worth of sales owed to the company -- don't tell you much. However, by considering the trends in AR and DSO, you can sometimes get a window onto the future.
Sometimes, problems with AR or DSO simply indicate a change in the business (like an acquisition), or lax collections. However, AR that grows more quickly than revenue, or ballooning DSO, can also suggest a desperate company that's trying to boost sales by giving its customers overly generous payment terms. Alternately, it can indicate that the company sprinted to book a load of sales at the end of the quarter, like used-car dealers on the 29th of the month. (Sometimes, companies do both.)
Why might an upstanding firm like Nordic American Tankers do this? For the same reason any other company might: to make the numbers. Investors don't like revenue shortfalls, and employees don't like reporting them to their superiors.
Is Nordic American Tankers sending any potential warning signs? Take a look at the chart below, which plots revenue growth against AR growth, and DSO:
Watching the trends
When that red line (AR growth) crosses above the green line (revenue growth), I know I need to consult the filings. Similarly, a spike in the blue bars indicates a trend worth worrying about. Nordic American Tankers' latest average DSO stands at 102.5 days, and the end-of-quarter figure is 117.3 days. Differences in business models can generate variations in DSO, and business needs can require occasional fluctuations, but all things being equal, I like to see this figure stay steady. So, let's get back to our original question: Based on DSO and sales, does Nordic American Tankers look like it might miss it numbers in the next quarter or two?
Investors should watch the top line carefully during the next quarter or two. For the last fully reported fiscal quarter, Nordic American Tankers' year-over-year revenue shrank 56%, and its AR grew 9.8%. That's a yellow flag. End-of-quarter DSO increased 149.3% over the prior-year quarter. It was up 186.6% versus the prior quarter. That demands a good explanation. Still, I'm no fortuneteller, and these are just numbers. Investors putting their money on the line always need to dig into the filings for the root causes and draw their own conclusions.
What now?
I use this kind of analysis to figure out which investments I need to watch more closely as I hunt the market's best returns. However, some investors actively seek out companies on the wrong side of AR trends in order to sell them short, profiting when they eventually fall. Which way would you play this one? Let us know in the comments below, or keep up with the stocks mentioned in this article by tracking them in our free watchlist service, My Watchlist.
A cloudy crystal ball
In this series, we use accounts receivable and days sales outstanding to judge a company's current health and future prospects. It's an important step in separating the pretenders from the market's best stocks. Alone, AR -- the amount of money owed the company -- and DSO -- the number of days' worth of sales owed to the company -- don't tell you much. However, by considering the trends in AR and DSO, you can sometimes get a window onto the future.
Sometimes, problems with AR or DSO simply indicate a change in the business (like an acquisition), or lax collections. However, AR that grows more quickly than revenue, or ballooning DSO, can also suggest a desperate company that's trying to boost sales by giving its customers overly generous payment terms. Alternately, it can indicate that the company sprinted to book a load of sales at the end of the quarter, like used-car dealers on the 29th of the month. (Sometimes, companies do both.)
Why might an upstanding firm like Nordic American Tankers do this? For the same reason any other company might: to make the numbers. Investors don't like revenue shortfalls, and employees don't like reporting them to their superiors.
Is Nordic American Tankers sending any potential warning signs? Take a look at the chart below, which plots revenue growth against AR growth, and DSO:
Source: S&P Capital IQ. Data is current as of last fully reported fiscal quarter. FQ = fiscal quarter.
The standard way to calculate DSO uses average accounts receivable. I prefer to ! look at end-of-quarter receivables, but I've plotted both above.Watching the trends
When that red line (AR growth) crosses above the green line (revenue growth), I know I need to consult the filings. Similarly, a spike in the blue bars indicates a trend worth worrying about. Nordic American Tankers' latest average DSO stands at 102.5 days, and the end-of-quarter figure is 117.3 days. Differences in business models can generate variations in DSO, and business needs can require occasional fluctuations, but all things being equal, I like to see this figure stay steady. So, let's get back to our original question: Based on DSO and sales, does Nordic American Tankers look like it might miss it numbers in the next quarter or two?
Investors should watch the top line carefully during the next quarter or two. For the last fully reported fiscal quarter, Nordic American Tankers' year-over-year revenue shrank 56%, and its AR grew 9.8%. That's a yellow flag. End-of-quarter DSO increased 149.3% over the prior-year quarter. It was up 186.6% versus the prior quarter. That demands a good explanation. Still, I'm no fortuneteller, and these are just numbers. Investors putting their money on the line always need to dig into the filings for the root causes and draw their own conclusions.
What now?
I use this kind of analysis to figure out which investments I need to watch more closely as I hunt the market's best returns. However, some investors actively seek out companies on the wrong side of AR trends in order to sell them short, profiting when they eventually fall. Which way would you play this one? Let us know in the comments below, or keep up with the stocks mentioned in this article by tracking them in our free watchlist service, My Watchlist.
- Add Nordic American Tankers to My Watchlist.
Why Are Atheists So Obsessed With God?
Michele Bachmann raised eyebrows again last weekend when she claimed that Hurricane Irene was God's way of sending a message to American politicians to listen to the American people. Although the allegation that God would kill Americans in order to get politicians to listen to those same Americans is strange enough (wouldn't he kill the politicians themselves or their first born sons, not the people whose voices he wished to be heard?), many were amused by the thought that one of the leading presidential candidates believes that God causes natural disasters in a show of support for her policies. Others agreed with her and one group in particular was pulling its hair out after hearing Bachmann's latest sound bite.
Atheists complain that religion is irrational, has no basis in fact and shouldn't play a part in national politics. Still, it's odd that they will condemn politicians like Bachmann for bringing God into a political discussion, yet they throw their support behind leaders like President Barack Obama, a Christian who says that he is opposed to gay marriage because "God is in the mix". (A weak attempt at making his Christianity sound cool). Hmm, Michele Bachmann is crazy for thinking that there is a God who backs her political agenda but President Obama is just fine even though he's against letting consenting adults who love each other marry because the same God says no?
Why is it that so many atheists who feel that anyone who believes in God is delusional and should seek help support leaders like President Obama? If believing in God is a sign of mental illness, would you really want a man who is suffering from this delusion to have a nuclear arsenal at his disposal?
One reason is that, like many Republicans, they don't really believe that Obama is a Christian. Not surprising, considering that this is the man who said that guns and God were something for bitter, small town Americans to fall back on when he said that "they get bitter, they cling to guns or religion or antipathy t! o people who aren't like them."
It never ceases to amaze me that besides religious fundamentalists it's the people who don't believe in God who want to push their religious views in your face the most. Of all the Christians, Muslims, Buddhists, Jews and agnostics that I personally know, none of them seem interested in making me accept their personal beliefs. Just as important, none of them go out of their way to insult members of other religious faiths. Most of them seem to believe that whatever faith you belong to is a personal choice and that if it brings comfort without harming others, than any religion can play a positive role in one's life.
However, it's always the atheists that seem to feel a need to insult others who don't share their views. I don't know if they realize it but when mocking anyone who happens to believe in God (they're criticism is usually aimed at Christians because criticizing other religions too much might mark them as racists or close-minded) atheists often sound much like the people they claim to despise the most: religious fundamentalists. Claiming that anyone who doesn't share your beliefs is misguided, delusional or just plain wrong is a tactic used by fundamentalists of every religion.
When they get on their soapbox, atheists don't sound much different than the Westboro Baptist Church members who enjoy protesting at the funerals of fallen soldiers, shouting insults about God's wraith at the people who are trying to comfort each other while mourning the loss of a loved one. An example of this is my fellow writer at Benzinga who thinks that anyone who believes in God is crazy. Another funny thing is that if you get away from talk of religion and ask them about the people they admire, most atheists will name many people of great faith such as Mohandas (Mahatma) Gandhi and Martin Luther King Jr.
While I understand the frustration caused by hearing a politician like Michele Bachmann claiming that a deadly natural disaster like Hurricane Irene is also a message f! rom God that just happens to be right in line with her own political opinions, there's no need to insult every member of every religious faith because of the words uttered by one headline seeking politician.
Atheists complain that religion is irrational, has no basis in fact and shouldn't play a part in national politics. Still, it's odd that they will condemn politicians like Bachmann for bringing God into a political discussion, yet they throw their support behind leaders like President Barack Obama, a Christian who says that he is opposed to gay marriage because "God is in the mix". (A weak attempt at making his Christianity sound cool). Hmm, Michele Bachmann is crazy for thinking that there is a God who backs her political agenda but President Obama is just fine even though he's against letting consenting adults who love each other marry because the same God says no?
Why is it that so many atheists who feel that anyone who believes in God is delusional and should seek help support leaders like President Obama? If believing in God is a sign of mental illness, would you really want a man who is suffering from this delusion to have a nuclear arsenal at his disposal?
One reason is that, like many Republicans, they don't really believe that Obama is a Christian. Not surprising, considering that this is the man who said that guns and God were something for bitter, small town Americans to fall back on when he said that "they get bitter, they cling to guns or religion or antipathy t! o people who aren't like them."
It never ceases to amaze me that besides religious fundamentalists it's the people who don't believe in God who want to push their religious views in your face the most. Of all the Christians, Muslims, Buddhists, Jews and agnostics that I personally know, none of them seem interested in making me accept their personal beliefs. Just as important, none of them go out of their way to insult members of other religious faiths. Most of them seem to believe that whatever faith you belong to is a personal choice and that if it brings comfort without harming others, than any religion can play a positive role in one's life.
However, it's always the atheists that seem to feel a need to insult others who don't share their views. I don't know if they realize it but when mocking anyone who happens to believe in God (they're criticism is usually aimed at Christians because criticizing other religions too much might mark them as racists or close-minded) atheists often sound much like the people they claim to despise the most: religious fundamentalists. Claiming that anyone who doesn't share your beliefs is misguided, delusional or just plain wrong is a tactic used by fundamentalists of every religion.
When they get on their soapbox, atheists don't sound much different than the Westboro Baptist Church members who enjoy protesting at the funerals of fallen soldiers, shouting insults about God's wraith at the people who are trying to comfort each other while mourning the loss of a loved one. An example of this is my fellow writer at Benzinga who thinks that anyone who believes in God is crazy. Another funny thing is that if you get away from talk of religion and ask them about the people they admire, most atheists will name many people of great faith such as Mohandas (Mahatma) Gandhi and Martin Luther King Jr.
While I understand the frustration caused by hearing a politician like Michele Bachmann claiming that a deadly natural disaster like Hurricane Irene is also a message f! rom God that just happens to be right in line with her own political opinions, there's no need to insult every member of every religious faith because of the words uttered by one headline seeking politician.
Has This Company's Luck Turned?
The following video is part of our "Motley Fool Conversations" series in which consumer goods editor and analyst Austin Smith and industrials editor and analyst Brendan Byrnes discuss topics across the investing world.
Boeing (NYSE: BA ) was on an order hot streak in 2011, with a multibillion-dollar order seemingly every month. But Boeing's issue has never been securing the orders, but rather building and delivering the planes in a reasonable amount of time. To that end, Boeing recently announced that it will not hit its delivery goal for the year. How much does this hurt the aerospace giant, and what does it mean going forward?
While we still believe that 2012 could be a great year for Boeing, there is one specific stock that we believe will grow tremendously and take Latin American retail by storm. There is astounding growth potential for this company that we've dubbed our "Top Stock for 2012." ?The Motley Fool has compiled a special FREE report outlining this company. In it you'll discover the company hand-picked by our analysts that is positioned to be the titan of retail in the future. You can access the report -- 100% free of charge -- by clicking here. Fool on!
Boeing (NYSE: BA ) was on an order hot streak in 2011, with a multibillion-dollar order seemingly every month. But Boeing's issue has never been securing the orders, but rather building and delivering the planes in a reasonable amount of time. To that end, Boeing recently announced that it will not hit its delivery goal for the year. How much does this hurt the aerospace giant, and what does it mean going forward?
While we still believe that 2012 could be a great year for Boeing, there is one specific stock that we believe will grow tremendously and take Latin American retail by storm. There is astounding growth potential for this company that we've dubbed our "Top Stock for 2012." ?The Motley Fool has compiled a special FREE report outlining this company. In it you'll discover the company hand-picked by our analysts that is positioned to be the titan of retail in the future. You can access the report -- 100% free of charge -- by clicking here. Fool on!
EXOU Exousia Continues Supplier Relationship with China United Engineering Corporation(DrStockPick.com News Report!)
EXOU, Exousia Advanced Materials Inc, EXOU.OB
DrStockPick News Report!
Thursday August 13, 2009
DrStockPick News Report!
Exousia Continues Supplier Relationship with China United Engineering Corporation
Fifth Order Represents CUC’s Continued Confidence in Exousia as a Supplier
SUGAR LAND, Texas /CRWENEWSwire/ Exousia Advanced Materials, Inc. (OTC Bulletin Board: EXOU), a company that manufactures advanced industrial coatings for worldwide infrastructure applications and engineered composites for eco-friendly wood substitutes, proudly announces its fifth order from China United Engineering Corporation (CUC) for industrial coatings. Exousia Chairman & CEO, J. Wayne Rodrigue, explained, “The significance of this order is that it represents the ongoing cycle of business that Exousia is striving to achieve. Every day, we gain momentum as our order flow increases at our now established plant in China.”
CUC is a large-scale engineering, design, and construction enterprise headquartered in Hangzhou, China. CUC engages in numerous project categories including general contracting, infrastructure and industrial projects. “We look forward to expanding our relationship with CUC and to Exousia’s future growth throughout China,” conclud! ed Mr. R odrigue.
About China United Engineering Corporation
China United Engineering Corporation (CUC) is a large-scale scientific and technological enterprise headquartered in Hangzhou in China’s central region. CUC engages in numerous project categories including general contracting, infrastructure and industrial projects. More information on CUC can be found at http://en.chinacuc.com.
About Exousia Advanced Materials, Inc.
Exousia manufactures advanced resins, engineered particles, high-performance coatings and structural products. Exousia products enhance strength, durability, cost effectiveness and performance for a wide range of manufacturing, commercial and construction applications. The Company serves both domestic and international markets. Additional information on Exousia can be found at http://www.exousiacorp.com.
FORWARD-LOOKING STATEMENTS
Statements released by Exousia Advanced Materials, Inc. that are not purely historical are forward-looking within the meaning of the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding the company’s expectations, hopes, intentions, and strategies for the future. Investors are cautioned that forward-looking statements involve risk and uncertainties that may affect the company’s business prospects and performance. The company’s actual results could differ materially from those in such forward-looking statements. Risk factors include but are not limited to general economic, competitive, governmental and technological factors as discussed in the company’s filings with the SEC on Forms 10-K, 10-Q and 8-K. The company does not undertake any responsibility to update the forward-looking statements contained in this release.
Source: Exousia Advanced Materials, Inc.
DrStockPick News Report!
Dr Stock Pick HOT News & Alerts!
Exousia Continues Supplier Relationship with China United Engineering Corporation
Thursday August 13, 2009
DrStockPick News Report!
Exousia Continues Supplier Relationship with China United Engineering Corporation
Fifth Order Represents CUC’s Continued Confidence in Exousia as a Supplier
SUGAR LAND, Texas /CRWENEWSwire/ Exousia Advanced Materials, Inc. (OTC Bulletin Board: EXOU), a company that manufactures advanced industrial coatings for worldwide infrastructure applications and engineered composites for eco-friendly wood substitutes, proudly announces its fifth order from China United Engineering Corporation (CUC) for industrial coatings. Exousia Chairman & CEO, J. Wayne Rodrigue, explained, “The significance of this order is that it represents the ongoing cycle of business that Exousia is striving to achieve. Every day, we gain momentum as our order flow increases at our now established plant in China.”
CUC is a large-scale engineering, design, and construction enterprise headquartered in Hangzhou, China. CUC engages in numerous project categories including general contracting, infrastructure and industrial projects. “We look forward to expanding our relationship with CUC and to Exousia’s future growth throughout China,” conclud! ed Mr. R odrigue.
About China United Engineering Corporation
China United Engineering Corporation (CUC) is a large-scale scientific and technological enterprise headquartered in Hangzhou in China’s central region. CUC engages in numerous project categories including general contracting, infrastructure and industrial projects. More information on CUC can be found at http://en.chinacuc.com.
About Exousia Advanced Materials, Inc.
Exousia manufactures advanced resins, engineered particles, high-performance coatings and structural products. Exousia products enhance strength, durability, cost effectiveness and performance for a wide range of manufacturing, commercial and construction applications. The Company serves both domestic and international markets. Additional information on Exousia can be found at http://www.exousiacorp.com.
FORWARD-LOOKING STATEMENTS
Statements released by Exousia Advanced Materials, Inc. that are not purely historical are forward-looking within the meaning of the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding the company’s expectations, hopes, intentions, and strategies for the future. Investors are cautioned that forward-looking statements involve risk and uncertainties that may affect the company’s business prospects and performance. The company’s actual results could differ materially from those in such forward-looking statements. Risk factors include but are not limited to general economic, competitive, governmental and technological factors as discussed in the company’s filings with the SEC on Forms 10-K, 10-Q and 8-K. The company does not undertake any responsibility to update the forward-looking statements contained in this release.
Source: Exousia Advanced Materials, Inc.
Keep a close eye on EXOU today, do your homework, and like always BE READY for the ACTION!
Duke Energy Corporation posted a Year Record Price - NYSE:DUK
Duke Energy Corporation (NYSE:DUK) achieved its new price of $20.89 where it was opened at $20.95 up 0.37 points or +1.81% by closing at $20.86. DUK transacted shares during the day were over 10.20 million shares however it has an average volume of 14.63 million shares.
DUK has a market capitalization $47.80 billion and an enterprise value at $45.53 billion. Trailing twelve months price to sales ratio of the stock was 1.91 while price to book ratio in most recent quarter was 1.20. In profitability ratios, net profit margin in past twelve months appeared at 12.89% whereas operating profit margin for the same period at 20.61%.
The company made a return on asset of 3.11% in past twelve months and return on equity of 8.21% for similar period. In the period of trailing 12 months it generated revenue amounted to $14.31 billion gaining $10.76 revenue per share. Its year over year, quarterly growth of revenue was 0.50% holding -29.60% quarterly earnings growth.
According to preceding quarter balance sheet results, the company had $2.18 billion cash in hand making cash per share at 1.64. The total of $20.11 billion debt was there putting a total debt to equity ratio 87.83. Moreover its current ratio according to same quarter results was 1.23 and book value per share was 17.11.
Looking at the trading information, the stock price history displayed that its S&P500 52 Week Change illustrated 1.19% where the stock current price exhibited up beat from its 50 day moving average price $20.46 and remained above from its 200 Day Moving Average price $19.30.
DUK holds 1.33 billion outstanding shares with 1.33 billion floating shares where insider possessed 0.25% and institutions kept 47.70%.
DUK has a market capitalization $47.80 billion and an enterprise value at $45.53 billion. Trailing twelve months price to sales ratio of the stock was 1.91 while price to book ratio in most recent quarter was 1.20. In profitability ratios, net profit margin in past twelve months appeared at 12.89% whereas operating profit margin for the same period at 20.61%.
The company made a return on asset of 3.11% in past twelve months and return on equity of 8.21% for similar period. In the period of trailing 12 months it generated revenue amounted to $14.31 billion gaining $10.76 revenue per share. Its year over year, quarterly growth of revenue was 0.50% holding -29.60% quarterly earnings growth.
According to preceding quarter balance sheet results, the company had $2.18 billion cash in hand making cash per share at 1.64. The total of $20.11 billion debt was there putting a total debt to equity ratio 87.83. Moreover its current ratio according to same quarter results was 1.23 and book value per share was 17.11.
Looking at the trading information, the stock price history displayed that its S&P500 52 Week Change illustrated 1.19% where the stock current price exhibited up beat from its 50 day moving average price $20.46 and remained above from its 200 Day Moving Average price $19.30.
DUK holds 1.33 billion outstanding shares with 1.33 billion floating shares where insider possessed 0.25% and institutions kept 47.70%.
Searing Heat for Sears Stock (SHLD)
I recently wrote that consumer behavior was changing dramatically in the face of rising oil prices. Demand is down and interest in smaller, more fuel efficient vehicles is growing. The great thing about capitalism is that if we fail to change our ways, markets will do it for us. What is just beginning to happen with oil and consumer behavior is happening on the corporate level dealing with a slowing economy.
That is to say, competition for a share of the consumer dollar is fiercer than at any other time in recent history. Corporations that adapt to the new field of play will survive. Those that don’t won’t.
Let’s take a look at stock pick Walmart (WMT). For most of the new millennium, WMT was getting taken to the cleaners by sleek rival Target (TGT).
Seen mostly as a bargain bin basement with little knack for style, WMT had trouble prying extra dollars away from the consumer. TGT had little trouble increasing dollars spent at its stores as they focused on luxury brands and style at low prices.
That worked great in an expanding economy, but what happens when that growth disappears? (For more on Target’s recent share decline you’ll want to read, “Why are Target Shares Off Target?”)
We are seeing the results before our very eyes. All of a sudden that bargain basement doesn’t look so bad with oil prices hitting $135 per barrel!
In fact, the ChangeWave Alliance has been showing tremendous strength for both Wal-Mart and Cosco since late February. For more details, check out Paul Carton’s recent article, “World Takeover By Wal-Mart and Costco (COST).”
Behavior is changing, and that change is benefiting WMT as they remain focused on pushing lower pr! ices to its consumers.
Target is not faring as well. Those little extra spending sprees by its customers are no longer the norm and as a result TGT results have been less than stellar. TGT will have to find a new formula that will work given the current and expected conditions moving forward.
With the game still being played, it will be interesting to see how things pan out for both companies.
One company that is not faring so well in the current environment is… Sears Holding (SHLD). The star child of private equity guru, Eddie Lampert, SHLD has not fared well with the collapse in economic activity. Highly leveraged to the homebuilding cycle, sales of its large consumer items like dishwashers, refrigerators and laundry machines dropped hard as new home sales fell.
As a result of the slowing sales, shares of SHLD have lost more than $100 per share in just the last year alone. What had been a former high flyer enjoying the benefits of monetizing real estate holdings is now simply a retail stock playing in a very difficult field under very difficult circumstances.
Does Eddie Lampert have it in him to change behavior in a way that generates positive results for shareholders? I’m not so sure. While Mr. Lampert has the skills as a financier, does he have what it takes to adapt to intense competition?
I would be worried if I were a SHLD shareholder. Just today, the company announced that it had lost $56 million in the first quarter coming fall short of Wall Street estimates. Sales dropped 6% as the company blamed higher fuel and food costs for its woes.
The blame game is a natural reaction, but I think SHLD needs to look hard in the mirror. There are retailers that are adapting well to the current environment and even those that may have had trouble in the early stages adjusting strat! egy in a way that is already showing results.
That is not happening at Sears.
Where we go from here is anyone’s guess. I can give Lampert a free pass in the short term, but there needs to be a plan for going forward.
The bottom line: will the company better manage inventories improving its mix of products to enhance sales even in this difficult market? If they do, SHLD will bounce back big. If not, it will be more pain for shareholders.
One market that is still growing and growing fast is China. And more importantly, competition is not nearly as fierce as it is in the United States. Check out Robert Hsu’s China Strategy letter for the companies that can be expected to prosper in that environment.
Jamie Dlugosch
Executive Editor, InvestorPlace
Join China Strategy risk-free today, and Robert Hsu bring you the latest news and developments from China. He’ll tell you how to profit from this extraordinary global opportunity and which companies and industries to avoid. Be among the first to know which companies to buy and when by joining China Strategytoday. Don’t miss out!
That is to say, competition for a share of the consumer dollar is fiercer than at any other time in recent history. Corporations that adapt to the new field of play will survive. Those that don’t won’t.
Let’s take a look at stock pick Walmart (WMT). For most of the new millennium, WMT was getting taken to the cleaners by sleek rival Target (TGT).
Seen mostly as a bargain bin basement with little knack for style, WMT had trouble prying extra dollars away from the consumer. TGT had little trouble increasing dollars spent at its stores as they focused on luxury brands and style at low prices.
That worked great in an expanding economy, but what happens when that growth disappears? (For more on Target’s recent share decline you’ll want to read, “Why are Target Shares Off Target?”)
We are seeing the results before our very eyes. All of a sudden that bargain basement doesn’t look so bad with oil prices hitting $135 per barrel!
In fact, the ChangeWave Alliance has been showing tremendous strength for both Wal-Mart and Cosco since late February. For more details, check out Paul Carton’s recent article, “World Takeover By Wal-Mart and Costco (COST).”
Behavior is changing, and that change is benefiting WMT as they remain focused on pushing lower pr! ices to its consumers.
Target is not faring as well. Those little extra spending sprees by its customers are no longer the norm and as a result TGT results have been less than stellar. TGT will have to find a new formula that will work given the current and expected conditions moving forward.
With the game still being played, it will be interesting to see how things pan out for both companies.
One company that is not faring so well in the current environment is… Sears Holding (SHLD). The star child of private equity guru, Eddie Lampert, SHLD has not fared well with the collapse in economic activity. Highly leveraged to the homebuilding cycle, sales of its large consumer items like dishwashers, refrigerators and laundry machines dropped hard as new home sales fell.
As a result of the slowing sales, shares of SHLD have lost more than $100 per share in just the last year alone. What had been a former high flyer enjoying the benefits of monetizing real estate holdings is now simply a retail stock playing in a very difficult field under very difficult circumstances.
Does Eddie Lampert have it in him to change behavior in a way that generates positive results for shareholders? I’m not so sure. While Mr. Lampert has the skills as a financier, does he have what it takes to adapt to intense competition?
I would be worried if I were a SHLD shareholder. Just today, the company announced that it had lost $56 million in the first quarter coming fall short of Wall Street estimates. Sales dropped 6% as the company blamed higher fuel and food costs for its woes.
The blame game is a natural reaction, but I think SHLD needs to look hard in the mirror. There are retailers that are adapting well to the current environment and even those that may have had trouble in the early stages adjusting strat! egy in a way that is already showing results.
That is not happening at Sears.
Where we go from here is anyone’s guess. I can give Lampert a free pass in the short term, but there needs to be a plan for going forward.
The bottom line: will the company better manage inventories improving its mix of products to enhance sales even in this difficult market? If they do, SHLD will bounce back big. If not, it will be more pain for shareholders.
One market that is still growing and growing fast is China. And more importantly, competition is not nearly as fierce as it is in the United States. Check out Robert Hsu’s China Strategy letter for the companies that can be expected to prosper in that environment.
Jamie Dlugosch
Executive Editor, InvestorPlace
Join China Strategy risk-free today, and Robert Hsu bring you the latest news and developments from China. He’ll tell you how to profit from this extraordinary global opportunity and which companies and industries to avoid. Be among the first to know which companies to buy and when by joining China Strategytoday. Don’t miss out!
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