Posts Tagged ‘earnings season’
There are lots of companies but very few stocks I like in this stock market, because stocks have already gone up in value so tremendously.
Countless large-caps provided excellent returns this year, and many of them are old brands that still offer meaningful dividend yields. What’s transpired with the equity market this year has been truly amazing and practically, I don’t think the run is over just yet.
Cracker Barrel Old Country Store, Inc. (CBRL) has a 52-week trading range of $60.07 to $118.44 and a forward price-to-earnings (P/E) ratio of 18.46, according to Thomson Reuters. And guess where the stock is now—right at its all-time record high, up approximately 84% (not including dividends) since this time last year. All this from a mature restaurant brand.
Johnson & Johnson (JNJ), one of my key benchmark stocks and the kind of company that’s welcome in any long-term equity market portfolio, has had a really good year. Its capital appreciation is reminiscent of its performance in the late 90s.
Many blue chips trade similarly to Cracker Barrel and Johnson & Johnson: they go through long periods of consolidation providing minimal capital gains, and then they explode in trading action, typically associated with technology stocks. (See “Why I Like This Blue Chip So Much [55th Dividend Increase Just Announced].”)
So with the huge price moves, the case for a major retrenchment/correction/consolidation in the equity market is very solid. But there needs to be a catalyst for this to happen. The equity market is overbought and looking tired, but there is still a strong willingness on the part of institutional investors to … Read More
Historically, key stock indices and the price of copper have moved in line with each other. Why? The relationship is very simple: copper is an industrial metal, and when demand for it is increasing (and its price rises), it means companies in the economy are producing and selling more. Investors usually take that as a bullish signal for key stock indices.
But today, we see copper prices and key stock indices moving in the opposite direction of each other.
Below, I’ve put together a chart that shows the action of both the S&P 500 (top of chart) and copper prices (bottom of chart). The chart shows that since 2011, the S&P 500 and copper prices have been moving farther apart.
But the chart of the S&P 500 above doesn’t just show its relationship with copper; it also shows that volume on the S&P 500 has been declining. Look at the bars just below the rising trend of the S&P 500, and you will see I have drawn a line showing a significant decline in volume on the S&P 500—fewer and fewer shares are being traded despite the index trading near an all-time high.
Historically, and like any asset, prices rise when demand rises. But today, we have the S&P 500 moving higher on declining volume—a historical omen for the markets!
And corporate revenue growth (the mainstream focuses on corporate “earnings”) are worrisome, too.
We are in the midst of the third-quarter earnings season. As of October 18, of the 97 companies in the S&P 500 that have reported, 69% of the companies have reported earnings above … Read More
Back in early August, I turned negative on the big banks and suggested that a bearish double-top was forming on the Bank Index chart. At that time, the Bank Index was trading at just over 65, as you can see on the chart below. (Read “Four Important Stock Charts Showing Warning Signs.”)
In early October, the Bank Index fell to around 61 (as indicated by the lowest shaded oval in the chart below). The index held and has since rallied back above the upper resistance, suggesting that it could be set for a breakout back up to its July highs. However, my feeling is that the easy money in the big banks has been made and going forward, the big banks are now dividend plays.
Chart courtesy of www.StockCharts.com
Investment guru Warren Buffett continues to like the big banks. I don’t blame him, as Buffett has made more than $5.0 billion in paper profits on his initial $5.7 billion investment in the ailing Bank of America Corporation (NYSE/BAC; dividend yield 0.30%), when the sector was in disarray following the Lehman Brothers collapse.
So far in the third-quarter earnings season, the big banks have largely delivered decent results.
Bank of America reported earnings of $0.20 per diluted share on year-over-year revenue growth of 5.3% to $21.7 billion, beating the Thomson Financial consensus earnings-per-share (EPS) estimate by $0.02.
JPMorgan Chase & Co. (NYSE/JPM; dividend yield 2.90%) reported a loss of $380 million, or $0.17 per diluted share, but this included a massive $9.15-billion pre-tax charge for legal and government fees. The adjusted earnings of $1.42 per diluted share handily beat … Read More
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