Posts Tagged ‘stocks’
First-quarter earnings results for Harley-Davidson Inc. (HOG) were good. The motorcycle manufacturer did a solid job boosting its bottom line on what was a decent gain in sales, particularly internationally. First-quarter earnings per share grew 22% to $1.21.
U.S. dealers sold 35,730 new motorcycles in the quarter for a three-percent gain. International dealers sold 21,685 new motorcycles during the quarter, up 11%, with comparative Asia-Pacific sales up 21%.
This produced total bike sales of $1.31 billion in the 2014 first quarter for a gain of 13% over the same quarter of 2013. Gross margin was higher and management reiterated previous guidance of a seven- to nine-percent increase in motorcycle shipments this year.
It was a solid quarter for the company, and the stock bounced nicely higher on the news.
So far this earnings season, the numbers have been pretty modest. Two emerging trends from reporting companies include strengthening business conditions in Europe and Asia, along with the confirmation of existing 2014 guidance. (See “Two Big Trends to Emerge This Earnings Season?”) Generally, the numbers are OK.
Stocks have been able to work through recent jitters and the main indices. Most of the economic data hitting the wires is actually meeting consensus expectations, and this is helping investor sentiment.
However, the NASDAQ Composite and Russell 2000 both have a lot higher to go if the market is to resume an upward trend. The Dow Jones Industrial Average is holding up extremely well.
Harley-Davidson got slammed in 2007 and 2008, dropping from more than $70.00 a share to less than $10.00 in the March low of 2009. What a buying … Read More
Being financial reporting season, it’s important to discern between results that beat Wall Street consensus and real economic growth.
Abbott Laboratories (ABT) just announced better-than-expected first-quarter earnings, but they weren’t better than the comparable quarter of 2013. Operating earnings, earnings from continuing operations, and diluted earnings per share were all down significantly compared to the first quarter of 2013.
So, the illusion can definitely become real in hot markets. Investors are always better off ignoring headlines and going right to the financial statements. Managed earnings are just that—managed.
One company that just produced a very good quarter was The Charles Schwab Corporation (SCHW). The stock broker’s first-quarter sales grew 15% to $1.48 billion on strong growth in asset management and administration fees.
Net earnings leapt 58% to $326 million, or 60% to $0.60 in diluted earnings per share. Top-line growth and strong expense control were the reasons for the strong bottom-line growth.
There’s no real reason why Charles Schwab’s share price should keep on appreciating near-term. All the good news is priced into the shares. The company beat consensus earnings by $0.02 a share, while revenues were in line.
This reporting season, earnings are here to justify current share prices.
I’d be very wary of buying corporate good news now. Market jitters aren’t going away and all it takes is a small catalyst for institutional investors to pull the sell trigger again.
A meaningful correction or price consolidation would be a positive development for the longer-run trend and a good opportunity to consider adding to blue-chip positions.
A good deal of speculative fervor has come out of this market, … Read More
Trading action in stocks has been all over the map so far this year, while investor sentiment remained generally positive. The fact that there was a bunch of profit-taking after the solid recovery in February and March is neither a surprise nor unnatural for a market at a high.
The Federal Reserve continues to be more than accommodative to Wall Street with its words of comfort and its willingness to provide continued monetary stimulus past previously stated benchmarks.
Near-term, geopolitical events in Ukraine are likely the biggest risk for stocks. It’s been a slow start this earnings season with unremarkable results, but the numbers aren’t that bad. Growth is growth.
The NASDAQ Biotechnology Index has just now crossed its 200-day simple moving average, if that’s meaningful. It’s done so several times over the last five years and recovered after a period of consolidation.
Biotechnology stocks aren’t worth paying a lot of attention to in terms of portfolio strategy. These risk-capital stocks trade on their own unique set of business fundamentals. They’ve been powerhouse wealth creators for sure over the last few years. They are due for an extended break.
I think the best plays in this market are still with dividend-paying blue chips as they experience price retrenchments. These stocks continue to have a tremendous amount of favor with big investors in a slow-growth environment. Dividend income is very important when top-line growth is in the single digits.
For those equity investors wanting to take on positions in this market, I’m still a fan of existing winners, particularly among the brand-name stocks that have distinguished themselves with long track records … Read More
Mark Twain once said, “Whenever you find yourself on the side of the majority, it’s time to pause and reflect.” For stock market investors, the time to pause and reflect is now.
Everywhere you look (except in these pages), you’ll find individual investors and institutions bullish on key stock indices. It’s like they believe they can only continue going in one direction—up. Not much attention is being paid to the fundamentals that suggest a market sell-off is nearing.
In January and February, investors bought $43.29 billion worth of long-term stock mutual funds. While March’s money flows into mutual funds are not available, looking at the weekly data, it suggests investors continued to buy the key stock indices. (Source: Investment Company Institute, last accessed April 2014.)
Please look at the chart below of the National Association of Active Investment Managers (NAAIM) Exposure Index. This index looks at how exposed managers are to the key stock indices.
This chart says fund managers are heavily exposed to key stock indices, with 90% of their portfolios invested in stocks. The exposure to the key stock indices has been high since the beginning of 2014, but at the same time, stock prices have been coming down.
Sadly, this isn’t all. Pension funds, the so-called conservative investors, have increased their exposure to key stock indices as well. Take the New York State Teachers’ Retirement System, for example. It is one of the biggest in the U.S. In 2013, the net assets of the fund increased to $95.4 billion. Its exposure to the equity market was $39.87 billion—roughly 41% of all assets … Read More
The significant price reversal in biotechnology stocks is very meaningful and appropriate, considering the massive capital appreciation the sector provided over the last three years.
There’s a reset going on with stocks, even with the Fed still onside. Earnings are not expected to grow that much in the first quarter of 2014, and big investors are booking profits as investment risk for both new and existing positions is going up.
This has been a very tough market for buyers, as stocks have already gone up in anticipation of decent earnings and revenue growth. There is very little in the way of value for investors, and there hasn’t been for a while.
This choppy action is a good reason not to get complacent when stock market indices are hitting new records. As prices go up, so does investment risk. Portfolio risk management is more important than the expectation for potential returns with stocks. Price trends easily last beyond reasonableness, but as history proves, the bubbles do eventually burst.
Right now is a great time to be reevaluating portfolio risk and identifying great stocks that you’d like to own if they were much better priced. (See “Risk vs. Reward: Is It Time to Cash Out of This Bull Market?”) There’s no reason to be a buyer in a market right near its highs with slowing expectations for growth.
One company that I think is worth having on your radar now is NIKE, Inc. (NKE); a position appropriate for long-term portfolios.
This stock experienced a substantive run up over the last five years, but with this in mind, the stock is … Read More
Growth in the U.S. economy, as it stands, can be explained with one word. That word is “mirage.” The Merriam-Webster dictionary explains the word mirage as “something that is seen and appears to be real but that is not actually there.” (Source: Merriam-Webster online, last accessed April 3, 2014.)
It’s a story that is getting old. On the surface, economic data looks rosy, but when you look closer, you find a picture that is completely distorted. In fact, the fundamentals suggest the U.S. economy is deteriorating.
Take auto sales in the U.S. economy as one example. In the month of March, auto sales reached an annual level of 16.4 million units, up from 15.24 million units in January. (Source: Motor Intelligence web site, last accessed April 3, 2014.)
On the surface, the increase in auto sales looks good for the U.S. economy. Automaker stocks are going up. And the politicians can say, “Look, Americans are spending money once again!”
But when we look closer, we discover auto sales in the U.S. economy have reached a new six-year high—with the help of subprime lending. Cars are being sold to those with poor credit ratings.
You remember subprime lending? It was a big thing in 2004–2006, when consumers with very bad credit were getting loans to buy houses in the U.S. economy that they really couldn’t afford to buy. The same thing is happening in the auto market today. And the bubble in auto subprime lending is getting close to bursting.
In the first nine months of 2013, the 31+ day delinquency rate was up 23% from the same period in … Read More
Those who follow the stock market closely know that on days when we hear the chairwoman of the Federal Reserve speak and she mentions something about “easing” or how the central bank will continue to use its “extraordinary measures” for a long period of time, the stock market jumps.
I’ve talked about this phenomenon many times in these pages. Another example of this happened on March 31, when the Fed chairwoman spoke in Chicago. Please see the chart below. It’s a minute stock chart of the S&P 500. I’ve circled a rough area around the time when Janet Yellen spoke.
As she spoke more of that “easing” talk, the stock market jumped, as usual.
So it has come to the point where the stock market rises when it hears the Fed will keep interest rates artificially low for a prolonged period of time and when a poor jobs report comes out (like last Friday morning’s), saying jobs have been created in spite of the fact that there is a heavy concentration of jobs growth in low-paying sectors and millions of people have given up looking for work.
In other words, we have reached the point where the stock market takes any news as a reason to move higher; this is characteristic of a market top.
When we look at the fundamentals of the stock market, we see companies in the S&P 500 are using financial engineering to boost per-share earnings. These companies have bought back their shares and have been cutting costs to boost profits as revenue growth just isn’t there anymore.
The proof? In the … Read More
With the broader stock market selling off, it’s amazing to see a company’s share price defy the near-term trend and appreciate in value.
Time and time again, Johnson & Johnson (JNJ) gets bid when the broader market faces convulsion. It’s a powerful signal, and there is still a great deal of angst among institutional investors; they still want those dividends and the relative safety of earnings that are predictable.
Johnson & Johnson has been—and continues to be—an excellent wealth creator. The stock’s been bouncing off $95.00 a share the last while and just recently, it seems to have broken past this price ceiling.
There’s not a lot new with this position. One Wall Street firm recently boosted its earnings expectations for the company in 2015. Sales growth is expected to be in the low single-digits this year, but annual earnings growth combined with dividends should be in the low double-digits once again. The company reports its first-quarter numbers on April 15.
There’s definitely been a change in investor sentiment regarding speculative positions. Biotechnology stocks, which have been the market’s multiyear winning sector have finally seen investors book profits. It’s been long overdue and from a market perspective, is a healthy development for the primary trend.
The selling migrated to large-cap technology names and the shakedown just might last a while longer. Anything can happen during an earnings season, but a “sell in May and go away” type of scenario is a real possibility again this year.
Other blue chip names that are also defying the market’s recent action include 3M Company (MMM), Union Pacific Corporation (UNP), Kimberly-Clark Corporation (KMB), Microsoft … Read More
Boy…did investors ever get excited about Friday’s jobs market report. In case you haven’t heard, in March, 192,000 jobs were added to the U.S. economy.
The chart below shows stock market investor reaction after March’s jobs market report was released Friday morning; and investors bought more stocks!
Sure, the March jobs market report showed some improvement. But investors overreacted, as usual. In fact, for me, it’s just more of the same old thing: investors are taking any type of good news as an excuse to push stock prices higher, which is a classic sign of a market top.
Deep in March’s jobs market report, we just see more of the same structural problems that have been plaguing the U.S. economy for years now.
- 15% of all the jobs created in March were in the low-paying food services and drinking sector. That’s 30,000 jobs.
- The number of part-time workers in the economy continues to rise at an alarming rate. In March, there were 225,000 more part-time workers than in February—there are a total of 7.4 million part-time workers in the U.S. economy!
- The long-term unemployed in the U.S. jobs market continues to rise. In March, they accounted for 35.8% of all unemployed. Right now, the average duration of unemployment for an American worker is 35.6 weeks. At the end of 2007, it was 17 weeks. (Source: Federal Reserve Bank of St. Louis web site, last accessed April 4, 2014.)
Finally, the underemployment rate—which includes people who have given up looking for work and people who have part-time jobs, but who want full-time work—remains very high. … Read More
There’s one company that is likely to have a very good year in 2014.
As my readers will know, the most valuable information going as an equity investor (businessperson) is what an enterprise says about its business conditions. And according to this company, business conditions are looking up.
Acuity Brands, Inc. (AYI) is a well-known lighting company out of Atlanta that serves mostly commercial and industrial markets. The company operates a number of brands, selling through independent agents, electrical wholesalers, and sales reps.
Total sales for the company’s fiscal second quarter (ended February 28, 2014) grew a solid 12% over the comparable quarter to $546 million.
Earnings grew substantially, up 32% in the quarter to $32.7 million. Earnings per share also grew 32% over the comparable quarter to $0.75.
Sales in the most recent quarter actually grew 13%, but this growth was reduced by one percent due to unfavorable currency translation.
Company management cited an improving marketplace for retrofit and renovation lighting applications. Fiscal 2014 should experience mid- to high-single-digit growth over the last fiscal year, with March order rates showing solid improvement.
Acuity Brands actually missed Wall Street consensus on both revenues and earnings, but the stock went up anyway after management said its order trend was improving. The company’s one-year stock chart is featured below:
But even with the relative good news and positive market reaction to the company’s latest results, Acuity Brands remains one expensive stock. And this is the dilemma for a good portion of this market.
Stocks have already gone up. Many good businesses have seen their valuations and share prices … Read More
In a nervous market trading right near its high, it’s worth looking for value. But there’s not a lot of it around, as stocks are fully priced and expectations for earnings are modest.
One company we’ve looked at before is Chart Industries, Inc. (GTLS) out of Garfield Heights, Ohio. This business manufactures specialized equipment for the production and storage of hydrocarbons and industrial gases. It’s a good business to be in these days and should make for a decent long-term investment.
This is a $2.0-billion company whose share price is down substantially from its all-time record-high set last October. It’s not that this business isn’t growing, but only that the position sold off after not quite meeting consensus.
I like this business and its long-term fundamentals. Energy end-products represent about 53% of the company’s total sales.
The company has also developed specialized expertise in cryogenic storage, which is equipment that can produce temperatures close to absolute zero (-459 degrees Fahrenheit).
Most of Chart Industries’ customers are large, multinational producers of hydrocarbons and gases. The company’s top-ten customers account for 37% of total revenues.
Biomedical customers are 23% of total sales, including respiratory products, cold storage systems, and commercial oxygen generation systems. As a global manufacturer and seller, just less than 60% of total sales are generated by international customers.
You can learn a lot about this business by reading its Form 10-K annual report for 2013. Chart Industries’ share price appreciated 550% from October 2010 to October of last year. It’s now more fairly priced. The company’s stock chart is featured below:
This is a very … Read More
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