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

Equity Market

An equity market refers is an organized secondary financial market where shares of common and preferred stock of corporations are traded. These shares typically trade on a stock exchange, which are now mostly virtual in nature. An equity market is the same as a stock market.

Why I Like These Two Health Care Stocks

By for Profit Confidential

If You Can Stand the Risk… Two Strong Healthcare StocksOne of the problems with pure-play biotechnology stocks is that they are 100% risk-capital securities in which the probability of success is entirely beyond your control.

But healthcare and related industry investments are very much worthwhile in an equity market portfolio for the simple reason that they can be so profitable.

One company that serves the healthcare industry, but isn’t a pure-play drug discovery enterprise, is Bio-Reference Laboratories, Inc. (BRLI). Based in Elmwood Park, New Jersey, this stock is an interesting way to play the sector.

Bio-Reference is the third-largest diagnostic laboratory in the U.S. The company’s customers are physicians, hospitals, long-term care facilities, and government institutions. It has laboratory testing facilities in nine states and provided 7.8 million laboratory test requisitions in 2013, which continue to grow at a double-digit rate.

The company’s latest quarter set a new record in total revenues. Sales grew a solid 20% to $222 million on a 16% increase in patient count and a three-percent increase in revenue per patient.

Quarterly earnings came in at $15.3 million, or $0.55 per diluted share, compared to $14.7 million, or $0.53 per diluted share, in the same quarter last year.

Company management said its earnings per share for the upcoming fiscal quarter should grow approximately 15% above the most recent quarter.

Over the last 10 years, Bio-Reference has really found its stride as an enterprise and the stock is finally breaking out of a two-year price consolidation.

The company is now involved in genetic testing and believes that this will be a growth business going forward.

The stock jumped after the company’s recent earnings results and is … Read More

Jumping on the Risk Bandwagon? Think Again

By for Profit Confidential

The stock market has an underlying strength to it, seemingly only to be undone by geopolitical events. Fed action always has the potential to shock the system. Negative economic news isn’t fazing this market. On the back of a pretty decent second quarter, many corporate outlooks predict another year of decent growth, particularly with earnings. While the stock market retrenched recently, positive days are still led by the Dow Jones Transportation Average, the Russell 2000 Index, and the NASDAQ components, which are traditionally positive for broader sentiment. Some speculative fervor has come back to two stock market sectors that are traditionally volatile—biotechnology stocks and restaurant stocks. But there really isn’t an underlying trend to latch onto. Jumping on the bandwagon of risky stocks seems unwise considering the stock market is at an all-time record-high. This is a market where equity investors have to be highly selective and wait for the right opportunities to present themselves, if you’re considering new positions at all. This can be in the form of a specific sector theme (like oil and gas, for example) or looking for good companies that have retrenched for their own specific reasons. In any case, with the stock market at a record high, it’s difficult to find value, and new positions become entirely reliant on market momentum, not necessarily individual corporate achievement. There are very few companies that I would consider now, but within the context of a long-term stock market portfolio, investors want their money to be put to work. In equities, I still think that portfolio safety is the name of the game. This is a market that hasn’t experienced a material price correction for five years. There have been retrenchments and price consolidations, but no reset, no revaluation that would make stock market investors with cash want to jump into a marketplace still beset with huge monetary stimulus and strong balance sheets—a marketplace still extremely favorable to equities. Companies for consideration at this time that fit into my earnings (and dividends) safety list include Microsoft Corporation (MSFT), PepsiCo, Inc. (PEP), Johnson & Johnson (JNJ), and 3M Company (MMM). There should be exposure to oil and gas in this short list, too. Previously, I liked Kinder Morgan Energy Partners, L.P. (KMP), but with news that this high-yielding limited partnership is being bought out by Kinder Morgan, Inc. (KMI), I’m looking for a solid new pick in this sector. (See “This Company’s $70.0-Billion Acquisition a Boon for Investors.”) A lot of investors are more risk-tolerant than these mature enterprises might present. But institutional investors are still skittish; they are still buying earnings safety in this stock market. Accordingly, dividend-paying blue chips remain highly correlated to the broader market and for the investment risk, given that this market could experience a 20% correction at any time for a multitude of reasons, new buyers of equities should consider stocks offering earnings and dividends safety. In the equity market—which is a secondary market with a pricing mechanism subject to fear, greed, and the herd mentality—capital preservation is a worthy investment goal. So far in this bull market, blue chips have performed exceedingly well relative to the rest of the stock market and they are still where institutional investors want to be.The stock market has an underlying strength to it, seemingly only to be undone by geopolitical events. Fed action always has the potential to shock the system. Negative economic news isn’t fazing this market.

On the back of a pretty decent second quarter, many corporate outlooks predict another year of decent growth, particularly with earnings.

While the stock market retrenched recently, positive days are still led by the Dow Jones Transportation Average, the Russell 2000 Index, and the NASDAQ components, which are traditionally positive for broader sentiment.

Some speculative fervor has come back to two stock market sectors that are traditionally volatile—biotechnology stocks and restaurant stocks.

But there really isn’t an underlying trend to latch onto. Jumping on the bandwagon of risky stocks seems unwise considering the stock market is at an all-time record-high.

This is a market where equity investors have to be highly selective and wait for the right opportunities to present themselves, if you’re considering new positions at all.

This can be in the form of a specific sector theme (like oil and gas, for example) or looking for good companies that have retrenched for their own specific reasons.

In any case, with the stock market at a record high, it’s difficult to find value, and new positions become entirely reliant on market momentum, not necessarily individual corporate achievement.

There are very few companies that I would consider now, but within the context of a long-term stock market portfolio, investors want their money to be put to work.

In equities, I still think that portfolio safety is the name of the game. This is a market that … Read More

Why This Is Still My Favorite Entertainment Stock

By for Profit Confidential

How This Entertainment Stock Has Become a Top BusinessA top stock for investors and a strong equity market leader has been, and continues to be, The Walt Disney Company (DIS).

It’s a Dow Jones component, a solid dividend payer and, similar to other dividend-paying blue chips, it’s offered earnings (growth) safety to date. Institutional investors have bid this business tremendously.

The company’s latest quarter, its third fiscal quarter of 2014 ended June 30, 2014, produced a very good increase in sales, from $11.58 billion in the same quarter of 2013 to $12.47 billion.

Earnings grew impressively as well, coming in at $2.25 billion, or $1.28 per diluted share, compared to $1.85 billion, or $1.01 per diluted share, the year earlier.

These are impressive gains for such a mature business, and they support the company’s strong capital gains on the stock market.

Disney’s two-year stock chart is featured below:

Walt Disney Co. NYSE Chart

Chart courtesy of www.StockCharts.com

Within the numbers, there’s an excellent snapshot of what’s happening in the entertainment industry. Business conditions are really good.

The company’s largest operations are its media networks division, which includes cable networks and broadcasting. This division continues to grow and remains highly profitable.

Also growing is Disney’s theme park business, with fiscal third-quarter revenues coming in at $3.98 billion, compared to $3.68 billion last year.

Along with Shanghai Shendi (Group) Co., Ltd., Disney is building the Shanghai Disney Resort theme park for approximately $5.5 billion. Completion is expected to be early next year. Shanghai Shendi owns 57% of the park, while Disney has majority ownership in its management.

The company noted that it is seeing higher attendance and higher average guest spending at its domestic … Read More

Top Sector Offering More Capital Gains

By for Profit Confidential

The One Sector with More Capital Gains to ComeWhile business conditions are pretty good in the domestic oil and gas business, they’re also holding up very well in the railroad sector.

If railroad companies and related services are old economy, they are still important economic benchmarks and they continue to be great businesses producing excellent returns to stockholders.

Union Pacific Corporation (UNP) is an important company to follow, even if you aren’t interested in owning a position. What the company reports about its business conditions is material and helpful in advancing your own market view. Union Pacific reports on Thursday.

Norfolk Southern Corporation (NSC) just hit an all-time record-high on the stock market. This time last year, the stock was around $77.00 a share; now, it’s close to $107.00.

CSX Corporation (CSX) is not as large in terms of market capitalization as Norfolk Southern or Union Pacific, but it is still a $31.0-billion company with extensive operations in the eastern United States and Canada.

Its second quarter of 2014 was a record quarter with sales growing seven percent to $3.2 billion on an eight-percent gain in volume.

Earnings growth was more modest, coming in at $529 million, or $0.53 per diluted share, compared to $521 million, or $0.51 per diluted share, for second quarter 2013. But management expects margin expansion going into 2015, and the Street wasn’t fazed.

Like so many other large-caps, the company is buying its own shares, including some $131 million worth during the most recent quarter.

By April of next year, the company will have spent $1.0 billion on share repurchases over the last two years.

Notably, CSX saw double-digit volume and revenue gains … Read More

Why This Institutional Favorite Tops My List of Stocks

By for Profit Confidential

Why This Company Is One Great Long-Term PlayOne of my favorite companies for long-term, income-seeking investors is Johnson & Johnson (JNJ).

While pharmaceuticals are the company’s anchor, its other business lines help with cash flow and dividend increases.

Investors have bid Johnson & Johnson shares tremendously in recent years, and it’s difficult to consider buying the company now, as the position is up another 10 points since March.

But Johnson & Johnson is the kind of stock income-seeking investors should keep an eye on for more attractive entry points, even though they may not come around all that often. The most recent possible entry points were in late September of last year and late January of this year.

My expectations for a mature company like this is for total annual sales to grow by the mid-single digits, with earnings growth and dividends producing an approximate 10% total annual return.

With a 10% annual return on investment, your money doubles every seven years.

Johnson & Johnson is typically priced at a slight premium to the S&P 500, but the company has earned its higher valuation by providing relatively consistent growth, reliable corporate outlooks, and a strong track record of dividend increases.

The company’s stock chart is featured below:

Johnson & Johnson Chart

Chart courtesy of www.StockCharts.com

Johnson & Johnson has typically been a good performer over the long term, but just like any large-cap, it can sit and produce no capital gains for long periods of time.

The position broke out at the beginning of 2013 after a number of years of modest capital gains. Institutional investors, wanting the earnings safety and solid dividends that the company provided, bid the stock … Read More

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The Great Crash of 2014

A stock market crash bigger than what happened in 2008 and early 2009 is headed our way.

In fact, we are predicting this crash will be even more devastating than the 1929 crash…

…the ramifications of which will hit the economy and Americans deeper than anything we’ve ever seen.

Our 27-year-old research firm feels so strongly about this, we’ve just produced a video to warn investors called, “The Great Crash of 2014.”

In case you are not familiar with our research work on the stock market:

In late 2001, in the aftermath of 9/11, we told our clients to buy small-cap stocks. They rose about 100% after we made that call.

We were one of the first major advisors to turn bullish on gold.

Throughout 2002, we urged our readers to buy gold stocks; many of which doubled and even tripled in price.

In November of 2007, we started begging our customers to get out of the stock market. Shortly afterwards, it was widely recognized that October 2007 was the top for stocks.

We correctly predicted the crash in the stock market of 2008 and early 2009.

And in March of 2009, we started telling our readers to jump into small caps. The Russell 2000 gained about 175% from when we made that call in 2009 to today.

Many investors will find our next prediction hard to believe until they see all the proof we have to back it up.

Even if you don’t own stocks, what’s about to happen will affect you!

I urge you to be among the first to get our next major prediction.
See it here now in this just-released alarming video.

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