Posts Tagged ‘institutional investors’
While 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
Crude oil has pulled back from its recent price strength, but it’s still holding up pretty well above the $100.00-per-barrel mark for West Texas Intermediate (WTI).
Energy is still a top sector for equity portfolios, but it is the case that many oil stocks have already moved up tremendously and valuations are a little stretched.
I’m a big believer in energy infrastructure and pipelines for income-seeking investors and junior energy stocks for risk-capital investors.
It’s more difficult to find value in this market; that’s for sure. But domestic oil and gas production, transportation, and storage remain a growth industry.
Halliburton Company (HAL) just reported another great quarter, with its oil and gas services still being pretty robust worldwide.
In particular, Halliburton’s management noted solid strength in the U.S. market for energy services, and that’s on top of several tremendously good years in recent history.
According to the company, 2014 second-quarter sales came in at $8.1 billion, up solidly from first-quarter sales of $7.35 billion and comparative second-quarter sales of $7.32 billion last year.
Recent quarterly revenues were a new record for Halliburton, with notable strength in its North American operations. In fact, domestic operations are so strong that management plans to immediately add new equipment, transportation capabilities, and work crews for hydraulic fracturing.
The company’s operating margins are rising (internationally, as well), and the board just increased its share repurchase authorization by a huge $4.8 billion to $6.0 billion in total.
Halliburton’s share price is up 40% year-to-date, and I’d say there’s a good probability the position is going higher yet, as it’s not overpriced for double-digit growth.
The company’s … Read More
One stock that’s experiencing serious upward price momentum is in the equipment rental business. Momentum stocks might typically be associated with other market sectors, but United Rentals, Inc. (URI) is doing fantastic operationally and the market is bidding.
It’s kind of odd to think of an equipment rental company soaring on the stock market, but United Rentals is doing just that. In its most recent quarter, the company handily beat Wall Street consensus and raised its full-year guidance.
According to the company, its second quarter produced sales of $1.4 billion, up 16.7% from $1.2 billion in the same quarter last year.
Management said that the company is experiencing solid demand in non-residential construction. It’s renting out more equipment at higher margins than normal.
Second-quarter earnings were $94.0 million, or $0.90 per diluted share, compared to $83.0 million, or $0.78 per diluted share, representing a gain of about 15%.
Adjusted earnings per share were $1.65 on a diluted basis, which was way above Wall Street consensus.
United Rentals is one of the largest equipment rental companies in the world, with more than 12,000 employees. The company is considered a mid-cap stock and has been doing extremely well since the middle of 2012, which you can see in the stock chart below.
Chart courtesy of www.StockCharts.com
Not only did United Rentals beat consensus, but it also raised its outlook for adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) and tightened its revenue range to $5.55–$5.65 billion for all of 2014, up from the previous outlook of $5.45–$5.55 billion.
Many companies do not have their SEC Form 10-Q documents ready when they … Read More
The numbers are still coming in pretty good this earnings season and corporate outlooks are holding up well for the year.
Stocks have been trading off of Federal Reserve Chairman Janet Yellen’s monetary policy report to Congress, and less so on earnings.
This market is tired and you can see it in the trading action of individual stocks that beat the Street with their earnings. Most market reaction is pretty mute.
One that wasn’t, however, was Intel Corporation (INTC). The company’s second quarter really got institutional investors fired up. The stock was $26.00 a share mid-May; now it’s close to $34.00, which is a very big move for this company.
Microsoft Corporation (MSFT) doesn’t report until next week, but the company’s shares moved commensurately with Intel’s.
Earnings strength from these older technology benchmarks is really good news for both the stock market and the economy in general. It means that the enterprise market is spending money again, and that’s exactly what the technology industry needs.
Even Cisco Systems, Inc. (CSCO) got a boost from Intel’s earnings results. This stock has been trying to break out of a long price consolidation. It hasn’t really done anything on the stock market since its bubble burst in 2000.
I actually view Microsoft as an attractive company for equity portfolios looking for higher-quality stocks.
The position is very fairly priced and offers a current dividend yield of just less than three percent. And management has a multifaceted business plan focused on growth in personal computers (PCs), the cloud, and devices.
But the best potential with a company like Microsoft is its prospects for … Read More
One 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:
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
Stocks are going to gyrate around second-quarter earnings, but that’s exactly what this market needs—the corporate bottom line and expectations for the rest of the year.
With so many stocks trading at their all-time record-highs, I view investment risk in equities as being high at this time.
This is actually a tough environment in which to be an investor looking for new positions. There’s not a lot of value around and good businesses have already been bid.
It’s been years now since the stock market was first in need of a material price correction, and the next one will probably come out of nowhere.
It could be a shock from the Federal Reserve, but the central bank has been extremely delicate in how it effects and communicates monetary policy. More likely, stocks will be vulnerable to an unforeseen shock like a geopolitical event or a big derivative trade gone bad.
The risks are out there and stocks are long overdue for a reckoning.
With this in mind, I’m still a fan of the market’s existing winners, especially dividend-paying blue chips. In the absence of a shock, I think they’ll just keep pushing new highs going right into 2015.
3M Company (MMM) is an enterprise worth following and owning as a long-term, income-seeking investor.
The company’s earnings are material and offer good market intelligence, even if you aren’t interested in owning the stock.
The position has tripled in value on the stock market since the beginning of 2009, while also paying some great dividends.
The stock is still strong in the current environment, and the company represents exactly the kind of … Read More
If there ever was an equity security epitomizing the notion that the stock market is a leading indicator, Caterpillar Inc. (CAT) would fit the bill.
This manufacturer is in slow-growth mode, but it’s been going up on the stock market as institutional investors bet on a global resurgence for the demand of construction and other heavy equipment and engines.
And the betting’s been pretty fierce. Caterpillar was priced at $90.00 a share at the beginning of the year. Now, it’s $110.00, which is a substantial move for such a mature large-cap. (See “Rising Earnings Estimates the New Catalyst for Stocks?”)
The stock actually offers a pretty decent dividend. It’s currently around 2.6%.
While sales and earnings in its upcoming quarter (due out July 24, 2014) are expected to be very flat, Street analysts are putting their focus on 2015. Sales and earnings estimates for next year are accelerating, and it’s fuel for institutional investors with money to invest.
The notion that the stock market leads actual economic performance is very real. Just like there are cycles in the economy, the stock market itself is highly cyclical. And while every secular bull market occurs for different reasons, there are commonalities in the price action.
Caterpillar’s share price is going up on the expectation that its sales and earnings (on a global basis) will accelerate next year.
Transportation stocks, as evidenced by the Dow Jones Transportation Average, are the classic bull market leaders.
Transportation, whether it’s trucking, railroads, airlines, or package delivery services, is as good a call on general economic activity as any. The Dow Jones Transportation Average was … Read More
One of the best things you can do to learn about the stock market is to read the prospectus of a company that’s either about to list or recently went public.
It’s a learning experience that, in many cases, can reveal how expensive it is to actually become a publicly traded corporation (i.e. Wall Street’s cut) and that each listing is its own unique security, becoming part of a secondary market after the founders cash out.
GoPro, Inc. (GPRO) out of San Mateo, California recently completed its initial public offering (IPO), selling 17.8 million Class A common shares at $24.00 a share—or 20,475,000 shares if the dealer option is fully exercised.
What wasn’t in the headlines is that 8.9 million of those Class A shares were sold by insiders. And there are also Class B common shares. One share of Class A common stock is entitled to one shareholder vote, but Class B shareholders are entitled to 10 votes per share.
So after its IPO, according to the company’s prospectus, GoPro insiders or selling shareholders will have earned proceeds after underwriter fees of $200,784,000.
The company’s executive officers, directors, and related entities still hold about 73% of total shareholder voting power.
The stock had a great debut and the company is no doubt a growth story. But as an individual investor, your ownership of GoPro shares (if you could get any) in their IPO form is mostly an exercise in the willingness of the marketplace to attribute value to an enterprise not giving up operational control.
This is not uncommon in new listings, and it’s why it’s so informative to … Read More
There are some companies—mature businesses with well-known brands—that continue to execute in a manner worthy of the finest growth stories.
While the stock market does its thing every day, I find that there are actually very few investment-quality stocks that deliver respectable returns consistently over time.
The business cycle exists, and so does the enthusiasm that institutional investors have for particular companies.
One company that I continue to like for long-term investors is NIKE, Inc. (NKE). Here’s the thing about this well-known athletic footwear and apparel manufacturer—the company just keeps on growing.
The fact of the matter is that the running shoe business is a good one, and solid management execution has allowed this company to deliver continued double-digit comparable growth in a world where mature economies are barely growing at all.
NIKE is worthy of long-term portfolios. The company pays a dividend with a current yield that is approximately 1.3%.
The stock has been in consolidation for a good seven months, but it’s performed incredibly well over the last 10 years and should continue to do so.
Once again, NIKE beat Wall Street consensus and the stock jumped after it reported great 2014 fiscal fourth-quarter and year-end financial results.
Fourth-quarter sales from continuing operations grew 11% to $7.4 billion. Currency neutral, the gain was more like 13%.
NIKE owns the “Converse” brand, and its sales grew in the double digits to $410 million. NIKE-branded products experienced gains in all geographic regions except Japan, where sales were flat on a comparable basis.
The company’s gross margin expanded due to higher average selling prices and more direct-to-consumer sales.
Bottom-line earnings grew … Read More
The earnings are beginning to flow and it’s a total mixed bag out there again.
Carnival Corporation (CCL) beat the Street with its second-quarter numbers, with cruise line sales growing four percent over the second quarter of 2013.
Guidance, however, was mediocre and the position sold off on its earnings results.
Walgreen Co. (WAG) has been very strong on the stock market over the last 12 months. The drugstore chain produced a six-percent gain in sales to $19.4 billion, and a 16% gain in earnings to $722 million.
But the company is getting squeezed both by health insurers and pharmaceutical manufacturers, so its business model is getting pressured.
Walgreen is considering reincorporating overseas to reduce its tax burden, but it won’t have details on any potential plan until later in the summer. The stock went up on the news.
Second-quarter earnings results were actually a bit better than expected and once we get into blue chip numbers, I think the market will be a bit more appeased.
It is important to remember where stocks are coming from. It’s been an exceptionally good last few years for equities; 2013 was outstanding.
The first quarter was a tough one, both due to the weather and general business cycle conditions. The market isn’t expecting second-quarter numbers to be strong, and that goes for both gross domestic product (GDP) and corporate earnings.
All that corporations have to do is meet or beat on one financial metric and either affirm or improve existing full-year guidance. With this backdrop, institutional investors will keep buying.
Monsanto Company (MON) soared to a record 52-week high after releasing a … Read More
Everything in the stock market experiences its own cycle of enthusiasm among investors. And this is especially well illustrated among speculative issues.
There was a time only a few years ago when some of the hottest speculative stocks were in solar energy. Now this small equity universe is still trying to rebuild itself.
And in more recent history, 3D-printing companies experienced incredible capital gains, only to experience incredible capital losses in what is a commonality among the market’s most speculative stocks.
At the end of the day, high-flying positions are still real businesses that have to deal with managing their own business conditions and hype among institutional investors.
As an investor, you have to consider both realities—the growth an underlying business is experiencing and the enthusiasm the marketplace has for such an enterprise or sector.
Twelve months ago, 3D Systems Corporation (DDD) was trading at $44.00 a share. Then it appreciated to a high of $97.28, before spending most of this year retreating to the $50.00-per-share level.
It’s only recently that the position broke the $55.00-per-share barrier, still sporting a forward price-to-earnings ratio of approximately 46.
Fervor for speculative stocks definitely diminished at the beginning of this year, and it’s part of the cycle that equities perpetually experience.
At the beginning of 2013, the breakout was in large-cap blue chips. Institutional investors had just started buying these stocks, and they led the broader market higher.
Then the NASDAQ Composite began to improve and actually took the lead for a while. But even with the Federal Reserve onside, it didn’t take too long for big investors to just book some profits. … Read More
Union Pacific Corporation (UNP) is a company that’s getting upgraded by the Street and earnings estimates are ticking higher. It’s great news for this benchmark stock and top wealth creator.
The business cycle in old economy industrial businesses still has legs, and while Union Pacific’s share price is up some 25 points over the last 12 months, I think this stock can keep ticking higher into 2015.
The railroad business has proven to be a good one over the last several years. Most railroad companies have been able to increase their prices for freight without affecting demand, and that’s a very important metric and telling indicator.
Union Pacific’s share price was around $26.00 a share this time in 2009. Now it’s just over $100.00 (the company recently effected a two-for-one stock split) and the company has increased its dividends paid seven times since 2009. This is a good business, and it continues to pay as a stock market investment.
The company’s volume growth is coming from both agricultural and industrial products. And even its coal transportation business is showing improvement.
Union Pacific is moving a lot of freight cars related to the domestic oil business. While many might see this as carloads of crude, the company actually ships more carloads of fracturing sand than oil. It’s a growth area for the business, and it has been for several years.
The company’s one-year stock chart is featured below:
Chart courtesy of www.StockCharts.com
This is a stock that has proven to be a worthy buy when it’s down. It hasn’t been down for long, and it remains a favorite among institutional investors, … Read More
It’s a difficult environment in which to be constructing new equity portfolios right now, mostly due to the very simple reason that the stock market is at an all-time record high and it’s likely that monetary policy will change soon.
But there is still a great deal of interest in equity securities and in a lot of cases, individuals require the income that they provide.
There are a lot of really good investment funds and money managers in the marketplace; but for those who wish to build and manage their own stock market portfolios, you want to approach the process methodically and with a great deal of care.
As a stockbroker, I learned a long time ago that financial products are typically sold not bought. Don’t let anyone sell you anything in this market—stocks are at all-time highs.
If you’re looking to the stock market to create a portfolio of companies, just remember that there is no rush to do so. Because of the financial crisis and subsequent recession, policy has been about the re-inflation of assets (mostly financial), and the stock market’s been going up based on the certainty that the Federal Reserve will be extremely accommodative.
Right or wrong, institutional investors used that certainty to buy equity securities.
Traders might like to buy high in order to sell higher, but momentum trading isn’t investing and as an investor, it’s tough buying stocks at their highs.
But the current environment is a good one in which to identify good businesses that can become core positions in a portfolio over time.
In terms of creating a new, risk-averse stock market … Read More
Profit Confidential — IT'S FREE!
"A Golden Opportunity for Stock Market Investors"