Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

Earnings Season

Public companies, firms that have their shares trade on an exchange, must make their financial reports available for investors to research every quarter, or four times a year. In an earnings report, a firm must supply revenue, expenses, net income, earnings per share, and all of the details in an income statement, cash flow, and balance sheet. Usually the months following the quarter-end are busiest, as this is when most companies will report their earnings.

Best Stocks Going Into 2015

By for Profit Confidential

Stocks Going Into 2015A lot of good companies with solid investment prospects going into 2015 are pushing new highs in an otherwise trendless stock market before the end of another reporting period.

Market leaders have kept their momentum the last few years and are likely to keep doing so as earnings reliability and dividends keep investors buying.

Microsoft Corporation (MSFT) continues to tick higher in this market. The position was $35.00 a share at the beginning of the year and is now just short of $50.00.

What many of these established blue chips offer are good balance sheets, reasonable financial growth, and good prospects for rising dividends going forward. A stock like Microsoft is a simple, large-cap solution that continues to work in a slow-growth environment.

There’s no need for an equity market portfolio to be complicated at this stage of the business cycle. Dividend income is key, because that’s what institutional investors are buying.

And the good news with blue chip leadership is that it comes with less investment risk. The business cycle is not yet mature enough to support itself and therefore the investing marketplace remains somewhat risk averse.

Or at the very least, many institutional portfolios comprise dividend-paying blue chips, peppered with the stock market’s more aggressive names, like Facebook, Inc. (FB) and Chipotle Mexican Grill, Inc. (CMG). (See “Where You Can Find Value in Stocks Right Now.”)

This is a marketplace where you don’t need to be in the riskiest sectors in order to capture most of the stock market’s potential capital gains. Dividend reinvestment remains an excellent way in which to build wealth in a low … Read More

The Stocks to Watch as Small-Caps Stall

By for Profit Confidential

Stocks to Watch as Small-Caps StallDespite the choppy trading action before the end of the third quarter, a lot of the market’s best stocks are still ticking higher. And the positive trading action remains especially prevalent with large-caps and dividend-paying blue chips.

Big investors want earnings reliability and dividend income in a slow-growth environment. It’s a trend that began with the stock market’s breakout at the beginning of 2013 and it still has legs right into next year.

The Walt Disney Company (DIS) is a dividend-paying blue chip that I continue to like. With solid operating momentum (sales and earnings) in both media assets and theme parks, this stock has been consistently ticking higher since October of 2011.

It remains a great holding with solid prospects for more capital gains near-term. This stock is a perfect example of what institutional investors are buying—revenue and earnings growth combined with some income and reliability in regards to its outlook.

Another dividend-paying blue chip that just broke through to new record highs is PepsiCo, Inc. (PEP). This mature enterprise has been consistently bid by investors since February.

Still yielding almost three percent, the company’s food and snacks business is expected to keep its earnings momentum in the upcoming quarter. Management increased its quarterly dividends substantially this year and investors have been buying the story.

On any major price retrenchments, I do believe these two companies make for attractive long-term holdings.

Previously, we considered these two companies with the addition of NIKE, Inc. (NKE), Johnson & Johnson (JNJ), V.F. Corporation (VFC), Microsoft Corporation (MSFT), Kinder Morgan, Inc. (KMI), and 3M Company (MMM). (See “Eight Stocks to Beat the Read More

My All-Around Favorite “Growth” Company

By for Profit Confidential

All-Around Favorite “Growth” CompanyTomorrow, Oracle Corporation (ORCL) reports its numbers for its first fiscal quarter of 2015. What the company has to say about its business conditions is material to the equity market.

Oracle is a benchmark technology stock that’s not expensively priced. The company offers dividends; its current yield is approximately 1.2%, which may not be enough for some investors looking for a large-cap, mature technology stock.

Oracle’s share price tends to experience waves of buying enthusiasm. If the company just slightly beats consensus, there will be solid buying in the stock.

But being a mature business, this company isn’t a fast grower. What it offers investors is a benchmark in enterprise information technology (IT) demand. A quick read of the company’s SEC form 10-Q can be very informative regarding enterprise customers and their spending.

Oracle’s share price has been steadily climbing back and it’s almost at its all-time record-high set during the technology bubble of 2000. It’s been a great comeback from the irrational exuberance of those days. The company’s long-term chart is featured below:

Oracle Corporation Chart

Chart courtesy of www.StockCharts.com

Dollar for dollar, however, I still prefer Microsoft Corporation (MSFT) for those investors looking for a blue chip technology stock.

The company pays more in dividends, its valuation is about the same as Oracle’s, and it has a multifaceted business strategy that includes both consumer and enterprise customers.

Furthermore, I think Microsoft is more likely to deliver better capital gains over Oracle in the near- to medium-term.

This doesn’t mean that Oracle can’t accelerate its business growth going forward. All the company has to do is get the next business cycle in … Read More

Eight Stocks to Beat the Street

By for Profit Confidential

How Investors Can Beat the StreetCountless stocks are pushing new highs and a lot of them are still blue chips. The Dow Jones Industrial Average is lagging the other indices this year, but this is not unusual.

The fact that many blue chips are still slogging higher is further indication of a bull market, despite all the shocks, risks, and the fact that stocks haven’t experienced a real correction for a number of years now.

PepsiCo, Inc. (PEP) had a great second quarter (for such a mature brand). The company increased its quarterly dividend once again and Wall Street earnings estimates for this year and next have been going up across the board.

What large corporations and well-known business brands say about their operating conditions is as useful as any other kind of information or opinion regarding the equity market. Stocks get overvalued and undervalued, but the best investing information I’ve found is what corporations actually report about their businesses, regardless of whether a company meets, beats, or comes in below consensus.

What Caterpillar Inc. (CAT) says about its global heavy equipment sales is material information, even if you aren’t interested in buying the stock. The same goes for Intel Corporation (INTC), The Boeing Company (BA), Visa Inc. (V), and The Walt Disney Company (DIS).

Second-quarter earnings season came in better than expected, and while many blue chips reiterated their existing guidance, I suspect it’s a simple strategy to make it easier to beat the Street by keeping expectations modest.

It could easily be another great year for stocks with a fundamental backdrop that is still so favorable to equities. And this includes the reality … Read More

This Luxury Retailer Now Affordable?

By for Profit Confidential

Should You Take This Opportunity to Buy This Luxury StockThe top one percent are spending and don’t really care about the other 99%. For the retail sector and particularly the luxury-brand stocks, this is welcome news.

High-end jeweler Tiffany & Co. (NYSE/TIF) pleased investors and Wall Street on Wednesday after reporting better-than-expected results and increasing its fiscal 2015 earnings estimate for the second time. Consumers in the Americas, Asia, and Europe are spending in the retail sector.

While Tiffany is now near the top of its 52-week range and near a fair valuation, there are a couple of other luxury-brand stocks that may be worth a look.

In the luxury apparel and accessories area, Coach, Inc. (NYSE/COH), a former darling of Wall Street, is struggling just above its 52-week low. While there could be a speculative contrarian buying opportunity with Coach, the anemic revenue outlook would make me think twice. Fiscal 2015 revenues are estimated to contract 11.4% and rebound a mere 3.3% in fiscal 2016. These are not good metrics; unless you want a speculative trade, I would be looking elsewhere in the retail sector.

For a much better luxury apparel buying opportunity in the retail sector, you could take a look at a stock like Michael Kors Holdings Limited (NYSE/KORS), which is my favorite in this area. The stock is currently struggling and down 18% from its 52-week high of $101.04 on February 25, 2014, which suggests it could be a good buying opportunity

Concerns of slower growth rates have been hurting the stock, but the reality is that the growth continues to be excellent, especially for a company with a market cap of more than $16.0 … Read More

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