Thursday, January 31, 2008
Wednesday, January 30, 2008
Tuesday, January 29, 2008
The 3-month period is chosen since this captures a large part of the market's decline. During this time period, the S&P 500 Index is down 11.3% and the NASDAQ Index is down 15.9%. The aristocrats generated a negative return of 10.1%.
Monday, January 28, 2008
Saturday, January 26, 2008
"If the I/S ratio rises, it is generally a sign that spending is slowing since inventories (numerator) are rising amid lackluster demand. Higher I/S ratios, therefore, imply economic softness. Businesses (retailers, wholesalers, and manufacturers) don’t want to be caught with deep inventories amid a pullback in spending. The latest available data suggest that the inventories/sales ratio is 1.24, or 1.24 months of available stock give the current pace of sales. And since this measure is approaching an all-time low, and is not exhibiting any recessionary upward trend like it did leading up to the 2001 recession, we believe that a major economic downturn is not in the cards."
January 25, 2008
- increased quarterly dividend 25% to 37.5 cents per share versus 30 cents per share in the same quarter last year.
- the projected payout ratio on 2008 estimated earnings of $4.13 is approximately 36%. The 5-year average payout ratio is 31%.
- the company carries a S&P Quality Ranking of A.
- increased quarterly dividend 20.8% to 32 cents per share versus 26.5 cents per share in the same quarter last year. The company began paying a dividend in October 2002. The dividend has been increased every quarter since October 2003.
- the projected payout ratio on 2008 estimated earnings of $1.42 (March 2008 year end) is 90%. The 5-year average payout ratio is 16%. Last year's payout ratio was 35%.
- the company carries a S&P quality Ranking of B+.
Thursday, January 24, 2008
In today's release of the American Association of Individual Investors' sentiment survey, it is reported bearish sentiment jumped to a level not seen since 1990. The bearishness level rose to 59.02% versus last week's level of 54.44%. The bullishness level moved slightly higher to 25.14% versus last week's 24.30%. The bull/bear spread also widened to a negative -34% versus -30% last week. A graph of the bullishness level is detailed below.
Wednesday, January 23, 2008
In looking at the broader S&P 500 Index, volume did spike higher in today's trading although the S&P is trading below a longer term uptrend.
Tuesday, January 22, 2008
Following the Enron debacle, which began with the company's bankruptcy filing on December 2, 2001, Standard & Poor's developed the concept of "core earnings." S&P's goal with the core earnings approach is to remove non-core earnings and add back core expenses to reported earnings. According to an article in Better Investing magazine,
"Examples of noncore earnings include capital gains, profits from exchange rate fluctuations and pro forma income on investments of pension plans. Expenses left out by some companies included stock options (which weren’t booked as expenses but served as a form of compensation) and restructuring charges."
The Case for Core Earnings
By: Michael C. Thomsett
Monday, January 21, 2008
"In response to the market breaks in October 1987 and October 1989 the New York Stock Exchange instituted circuit breakers to reduce volatility and promote investor confidence. By implementing a pause in trading, investors are given time to assimilate incoming information and the ability to make informed choices during periods of high market volatility."
Today's trading in the Asian an European markets have seen significant declines in market indices across the board. Will this lead to a capitulation trading day in the U.S. markets on Tuesday?
Sunday, January 20, 2008
The Sun, in the Center at Political Calculations
* Commentary *
The price dividend growth rate ratio will set the pace for what investors can expect from the stock market.
Market Response to Recessions at A Dash of Insight
* Economy *
The most important question for investors and traders is how much of the slowing economy is already reflected in forecasts, earnings projections, and stock prices. If the recession really is underway, hasn't the market already reflected reduced earning potential?
COMMENTARYPatrick Byrne “screws up” Overstock.com and the board of directors rewards him at the Fraud Files blog
The Fraud Files blog reviews a recent press release/8-K filed by Overstock.com. Fraud Files notes Patrick Byrne, OSTK's CEO, admits poor management performance but the Board gives him options anyway.
Invest In What You Know at Free Stock Market Investing Tips
If you are going to beat the market, you will need to do something better than most investors out there. This is no easy task. Remember, most money is managed by professionals. To beat the market, you need to know something that most professionals don't know about the stocks you trade.
Increase your Return in the Stock Market at TheWildInvestor
Anybody can make money in the stock market, but can you make 40%+ returns? With some simple guidelines, you too can improve your chances of great returns. Time to Bottom Fish at Smart Investing & Money Management
Strategies to find bargains in a bear market.
How I've beat the S&P 500 five years running and why you should (and should not) be impressed at The Dough Roller
Beating the S&P 500 isn't all its cracked up to be.
How To Learn To Make A Good Investment at Personal Development
Describes the most effective method for learning to invest well.
Market Timing - When is the Best Time to Invest New Money at Physician Entrepreneur
When is the best time to invest in the stock market? Data shows that timing the market is less important than having a systematic investment plan and sticking with it.
All Inverse Exchange Traded Funds at StockWeb
If you are not focused on specific companies and you are bearish with some industry or with some world stock market index you can try inverse ETFs.
Getting Tired Of The Stock Market Volatility at My Wealth Builder
I think the market will continue to be volatile and choppy for an extended period, before it finally has a major decline. Waiting for the capitulation trading day.
Investing – Home Run vs Home Ruin, Micro Cap vs Large Cap at Debt Free
10-Bagger stocks are not found in OTC-BB listings; however, micro-cap stocks may yield some surprising winners.
Baltic Index Down 37% Since Mid November at Bespoke Investment Group
Every once in a while, an economic term or indicator that was previously not widely followed finds its way into the mainstream financial conversation. One indicator du jour is the Baltic Dry Freight Index. Many economists consider the index to be a good leading indicator of economic activity. If not as many people are looking to move cargo, ships will be in less demand, causing a drop in the price that shippers can charge. However, declines in the index do not necessarily mean that a recession is on the horizon.
Top 10 Pages To Read First In Investors Business Daily at Millionaire Neumes
Investor's Business Daily newspaper is packed with information and can be overwhelming to a new user. Here are the 10 pages I always read.
NEW WEB BLOGS
Campus Stocks - Social Networking for Student Investors at 5 Percent Stocks
Five Percent Stocks establishes new social networking website for student investors. He he notes in his post, "now has come the time for these universities to battle it out on the stock ticker.
AeroGrow Invents New Industry and Continues Growing at Nabloid: Advice From Beyond
Nabloid discusses a potentially up and coming new product sold by Aerogrow. This company company sells indoor gardens to individuals with Aergrow's gardens using an aeroponics process to supply a nutrient solution and water to the plants in this table table indoor garden product.
50 Tools and Resources for Freelancers During Tax Season at Bootstrapper
Estimated payments, deductions, and extra forms is enough to make your head spin. This collection of advice, tools, and resources could ease your stress and get you on the right track for this year’s tax season.
How to Estimate Earnings Growth with Excel at luminouslogic.com
This post explains how to use an Excel program to evaluating a company's financial statements and forecast future financial results.
Thanks to all who submitted great investing and finance related posts. To submit your blog article to the next edition of the Festival of Stocks you can use the carnival submission form. Past posts and the next hosts can be found on the blog carnival index page. If you are interested in hosting a Festival of Stocks post, visit Value Investing News' host page.
Saturday, January 19, 2008
From an economic perspective, we have not seen two quarters of negative GDP growth yet. An important data point to watch for will be advance 4th quarter GDP that is reported on January 30. Preliminary 4th quarter GDP will be reported on February 28 and the final GDP will be reported on March 27. The early GDP figures have a tendency to be revised.
Unfortunately for strategists with an intermediate-term time horizon (six to 12 months), while there have been 11 recessions since 1945, there have been 49 pullbacks, 16 corrections, and 10 bear markets. Therefore 64 of these 75 market sell-offs incorrectly anticipated the 11 eventual recessions. What's more, these alignments usually didn't last very long. Pullbacks typically recovered in about two months, while corrections righted themselves in fewer than four months. So it is imperative that we be confident of a recession before we call for defensive posturing.
Keeping in mind it is difficult to forecast or time economic slowdowns or recessions, could the economy be further into this slowdown or correction and nearer the end?
Are Stocks Signaling a Recession?
By: Sam Stovall
November 27, 2007
Thursday, January 17, 2008
The number of NYSE stocks trading above their 50-day moving average declined to 16%. This is still above the oversold level hit in August 2008.
Tuesday, January 15, 2008
Although US Bancorp (USB) reported lower quarterly earnings of 53 cents per share versus the prior year's result of 62 cents per share, the bank seems to have a good handle on its mortgage related exposures. The bank did announce that 4th quarter results included a $107 million asset write down related to the purchase of some asset backed commercial paper held in money market funds managed by a USB subsidiary.
Analyst estimate 2008 earnings will come in around $2.74 per share versus 2.43 in 2007. The estimated payout ratio on 2008 earnings is approximately 62%. The 5-year average payout ratio is approximately 48%.
In today's announcement from Citigroup (C) it seems we may have simply seen the turn card with the river yet to be played. Following is a table from the presentation provided in the company's conference call today. How much of the $37.3 billion, if any, will need to be written off at a future date?
Sunday, January 13, 2008
While foreign economies have picked up the slack coming from the U.S., they note:
The danger is that the foreign economies may weaken more than expected. Europe and Japan have both relied on trade surpluses to offset soft domestic demand. Can these regions improve their domestic demand enough to offset the weaker exports to the U.S.?S&P's recommended sector weightings are noted below.
Recession Risk Rises
The Outlook Online
Standard & Poor's
January 16, 2008
Saturday, January 12, 2008
The AAII article notes:
These indicators measure the financial health of a company, how well their products are selling, and whether they are able to maintain and even increase a very high level of profitability. A company that scores very high across all eight of these mental model variables is highly likely to have all the characteristics of a potential 10-bagger growth stock.
- Positive Earnings Revisions
- Positive Earnings Surprises
- Sales Growth
- Operating Margin Growth
- Strong Cash Flow
- Earnings Growth
- Earnings Momentum
- Return on Equity
"These indicators measure the financial health of a company, how well their products are selling, and whether they are able to maintain and even increase a very high level of profitability. A company that scores very high across all eight of these mental model variables is highly likely to have all the characteristics of a potential 10-bagger growth stock.
I cannot emphasize enough that you need to use all of these variables when seeking market-beating growth stocks to add to your portfolio. Why not just focus on one or two variables that have performed the best over time?
There will be periods of time when the market favors stocks with earnings momentum, and periods where operating cash flow or earnings before interest, taxes, depreciation and amortization (EBITDA) are the darlings of the day. As soon as the dance cards are full and everyone can be found chasing after the same thing, the band will stop and the party will be over.
Instead you should focus on all eight variables. The amount each variable counts may be changed or tweaked over time, but all eight variables need to be considered.
By concentrating on the numbers, and just the numbers, you can take the guesswork out of picking winning stocks."
Navellier Market Outlook Letter
Navellier & Associates
December 31, 2007
Finding Growth Stock Winners: Focus on 8 Fundamental Factors ($)
American Association of Individual Investors
By: Louis Navellier
Friday, January 11, 2008
Janus recently discussed this topic in an article in the company's quarterly newsletter. The sub title to the article is "How to be an Unemotional Investor." Keeping ones emotion out of investment decisions generally leads to less volatile investment returns. The article cites three guidelines:
- Stick with your strategy: Develop a personalized investment strategy and stick with it through market ups and downs. Remember that you invested in stocks to steadily build and preserve wealth over decades, not to try to jump in and out of the market on a whim.
- Maintain a long-term perspective: What investors fear most is not market volatility, but losing money. Historically, however, investing over longer periods of time has actually reduced the risk of loss. In fact, while the market has suffered 23 losing years since 1926, there has never been a 15-year period when the stock market lost value. This record illustrates the importance of maintaining a long-term perspective, rather than panicking and redeeming your investment during market downturns.
- Keep your emotions in check: Volatility is far from a recent phenomenon. Over the last 80 years (through December 2006), the S&P 500.® Index has produced annualized gains of 10.3%. That's an impressive display of long-term growth, but it doesn't mean that stocks rise 10% every year. In fact, in only six of the 80 years between 1927 and 2006 has the Index's return been within three percentage points of its long-term performance average (i.e., between 7.3% and 13.3%). So whether the market is in a nosedive or skyrocketing to new heights, let yourself be guided by reason and a sensible investment plan, not your emotions.
Dealing with Market Volatility
Thursday, January 10, 2008
Tuesday, January 08, 2008
Saturday, January 05, 2008
The S&P 500 Index has declined -3.84% to start off 2008. Following are links to articles covering investment strategies for volatile markets.
- Buy Any Dip at Forbes.com.
- 10 Tricks for Better Investing at Fortune.com.
- Reduce Risk-Not Returns at Schwab.com.
- Stocks: Should You Ride 2007's Winners? at Businessweek.com.
- Personal Finances for 2008: Secular Phases for Stocks & Current Implications at Optionetics.com.
- Bet on Dividend-Paying Stocks at moneycentral.msn.com.
Updated 1/5/2008 @ 8:38 PM EST
Friday, January 04, 2008
- "The decline in dividend increases reflects the current trend of favoring stock buybacks at the expense of committing to long-term cash dividends," says Howard Silverblatt, Senior Index Analyst at Standard & Poor’s.
- Standard & Poor’s data reveals that negative actions - such as dividend decreases and suspensions - picked up in 2007 amidst heightened concern over the current difficulties within the Financials and Consumer Discretionary sectors. Dividend extras - such as one-time dividend payments and special dividends - increased 1.0% (versus 14.3% in 2006) to 628 from 622 during 2006.
- Howard Silverblatt notes that, while dividend increases within the general market have declined, over 60% of the S&P 500 companies increased their dividend payment in 2007. In addition, Silverblatt estimates that S&P 500 dividend payments will increase 9.3% in 2008.
- "History shows that S&P 500 issues have a greater likelihood to pay dividends than the general market, 78% versus less than 39% for the general market," adds Silverblatt. "In addition, S&P 500 issues have a much greater propensity to increase their dividend rate than the general market."
S&P: Dividend Growth Lags in 2007 as Fewer Issues Pay (PDF)
Standard & Poor's
By: David R. Guarino and Howard Silverblatt
January 3, 2008
Thursday, January 03, 2008
Wednesday, January 02, 2008
It should be noted that National City was featured by Standard & Poor's as one of the 195 companies in the S&P 1500 Index that had increased the dividend annually for the past 10-years.
Tuesday, January 01, 2008
Several of my picks deviate from my traditional dividend growth focused investments since the time period being evaluated is rather short term, i.e., three months. Many times out sized gains in the short run are experienced with stocks that have high betas relative to the market. Additionally, some of my picks, such as First Marblehead (FMD), have significant business risk. In FMD's case, the tight securitization market has negatively impacted their business prospects of late.
The 2008 dogs are detailed below:
The cause for the weak financial sector performance is fairly obvious given the mortgage and subprime mortgage issues. With respect to the consumer discretionary sector, is the market foretelling a weak consumer spending environment as 2008 unfolds?
Performance of Commodity Sub-Groups
The Big Picture
By: Barry Ritholtz
December 31, 2007
S&P 500 Index Return
Standard & Poor's
December 31, 2007