Since the recent bull market began on November 15, 2012, investors could have randomly selected a diverse portfolio of stocks and would likely be up on their money. Since that date, the S&P 500 is up 18.7% and a huge majority of stocks stocks are in the green.
But what if investors decided to invest only in stocks with funny and clever ticker symbols?
The FUNY Index is a fabricated, diversified index comprised of 15 stocks and ETFs from the NYSE and NASDAQ. Their businesses range from restaurants to animal healthcare to industrial explosives, and all 15 companies have funny or clever ticker symbols. Here’s how the index has performed since the start of the rally in November.
Surprisingly, the FUNY Index significantly outperformed the broader market. These stocks returned an average of 25.18 percent, while the S&P 500 returned 18.70 percent. The FUNY Index’s return also outperformed the NASDAQ’s 19.48 percent return and the Dow Jones’ 19.01 percent return. Only the Russell 2000 outperformed the FUNY Index, but only by a miniscule .03 percent.
Of course, the FUNY Index’s performance should never dictate an investment strategy. One should never invest in a company based on its ticker, and the Index was arbitrarily assembled without a real investment strategy.
However, the performance of the FUNY Index does carry some teaching value.
During a bull market, a well-diversified portfolio should perform strongly. The FUNY Index is comprised of large and small companies from nearly all sectors, and is therefore able to reap the benefits of a strong economy. Thanks to exceptional returns from Southwest Airlines and OM Group and thorough diversification, the FUNY Index’s performance has been outstanding during this bull market.
[Image via screengrab]
Yum Brands, Inc. (YUM) was hit with an analyst downgrades on Tuesday morning, only hours ahead of it releasing its financial report for the first quarter after the closing bell. The report stated that sales in China were impacted substantially “by adverse publicity from the poultry supply situation in late December 2012,” however earnings from the quarter handily topped Wall Street expectations.
For the quarter, Yum Brands, who operates about 5,300 restaurants (primarily Kentucky Fried Chicken locations) in China, reported revenue of $2.54 billion, down from $2.74 billion in the first quarter of 2012. Net income fell to $337 million, or 72 cents per share, compared to $458 million, or 96 cents per share in last year’s quarter. Excluding special items, Yum’s earnings were 70 cents per share, versus 76 cents per share in the year prior quarter.
Analysts were expected the company to earn 60 cents per share on revenue of $2.56 billion.
Same-store-sales in China were 20 percent lower, while increasing 2 percent in the United States and 1 percent at other YRI (Yum Restaurants International). Global restaurant margins declined by 2.7 percentage points to 15.9 percent on the back of a 7.0 percentage point fallout in China, offset in part by a 2.4 percentage point increase in the States and 1.4 percentage points at YRI.
In addition to Chinese regulators reporting in December that some of Yum’s KFC chicken in China contained excessive amounts of antibiotics, the company has also suffered from lower sales due to a new strain of Avian bird flu breaking out in the country.
Operating profit in China locations plummeted 41 percent during the first quarter. U.S. and YRI locations saw increases of 5 percent and 19 percent, respectively.
“While better than expected, the first quarter was extremely difficult for Yum! Brands,” commented David C. Novak, chairman and chief executive at Yum. “As anticipated, intense media attention surrounding poultry supply in China significantly impacted KFC sales and profit.”
Yum, who operates Pizza Hut, Taco Bell and KFC restaurants worldwide, noted that the negative media around poultry supply in China has now subsided, but added that there is “no doubt” that 2013 will be a challenging year at Yum.
Early Tuesday, Bank of America made a stark reversal in its rating of Yum, downgraded it to “underperform” from “buy” and lowered its price target from $80 to $60 per share.
Yum has pinned a lot of its growth prospective of expansion in China, a meal that is somewhat hard for investors to digest recently given the less-than-expected growth of the world’s second biggest economy and recent concerns of mutating bird virus strains.
Shares have been tossed and turned over the last year and were down about 10 percent as of Tuesday’s close at $64.15 (down 1.7% on the day). The earnings beat helped buoy shares to reverse some of those losses in extended trading, perking back upwards to $68 per share.
Yum! Brands Inc (YUM), the parent company of Kentucky Fried Chicken, Pizza Hut, and Taco Bell fast food chains announced on Wednesday that it expected to take a sizeable hit as a result of China’s recent bid flu scare.
This most recent outbreak of bird-flu, or H7N9 avian influenza, has killed at least ten people in China over the past two months alone, and left many others sick.
This most recent outbreak of avian flu is not believed to spread from person to person, but is rather carried in infected poultry. Either way, it cannot be acquired from properly cooked chicken, but this has not prevented Yum!, who have approximately 5,300 locations in world’s most populous country, from reporting on Wednesday that same-store sales at Chinese KFC outlets were down 16 percent in March, as a result of the scare.
The announcement came during late trading, causing the company’s shares to lose almost 2 percent, to $65.50.
The profit-loss resulting from this most recent outbreak is likely to end the company’s 11 year-long double-digit growth spurt. While this will be to some extent reflected in Yum’s March sales figures, the bigger drop is expected when April sales figures for China come out next month.
The Louisville, Kentucky-based company was already in some measure of trouble with Chinese consumers over reports that the company’s chicken suppliers had been feeding their stock unregulated or unapproved levels of antibiotics. Yum has subsequently cleaned up the supply chain, removing over 1,000 small chicken producers and tightening oversight.
Retail Sales rose 0.3% in November, unchanged excluding autos and up 0.7% excluding autos and gasoline. Initial Jobless fell to 343,000 in the latest week, but is this a trend below the 350,000 recessionary threshold? PPI fell 0.8% in November, up 0.1% excluding food & energy. The Dow Jones Industrial Average traded up to 13,264.41 then down to 13,147.19 staying above its 50-day and 200-day simple moving average at 13,127.93 and 13,003.41. The Nasdaq traded up to 3026.51 then down to 2982.63 versus the 50-day and 200-day simple moving averages at 2997.75 and 2989.00.
Asian stocks were mixed on Thursday. The Nikkei 225 closed at 9743 – up 1.68%. The Hang Seng closed at 22,446 – down 0.26%. European exchanges were lower on Thursday. The FTSE 100 ended the day at 5,930 – down 0.27%. The DAX ended the day at 7,582 – down 0.43%. The CAC 40 ended the day at 3,643 – down 0.10%. The yield on the 10-Year US Treasury increased from 1.683% to 1.744% between the 50-day and 200-day simple moving averages at 1.680% and 1.746%.
Comex gold declined from $1712.8 the Troy ounce to $1690.7 staying between the 200-day simple moving average at $1663.3 and the 50-day SMA at $1726.7. Nymex crude oil rallied to $86.97 per barrel then fell to $85.81 staying below the 50-day and 200-day simple moving averages at $87.82 and $92.91. The euro versus the dollar declined from 1.3098 to 1.3044 staying above its 50-day and 200-day simple moving averages at 1.2922 and 1.2781.
Southcross Energy Partners (SXE) reported Q3 EPS of -$10.09 (may not be comparable to consensus of $0.21), while missing revenue by $63M. Dresser-Rand (DRC) is now Positive from Neutral at Susquehanna. Tesoro (TSO) is taken to Outperform from Neutral at Credit Suisse. Nabors Industries (NBR) is now Underperform from Hold at Jefferies. Big Mover – Basic Energy Services (BAS) is down about 8.5%. Dow components – Chevron (CVX) is down about 0.3%. Exxon Mobil (XOM) is down about 1.1%. Energy Select Sector SPDR (XLE) was trading at $71.45 at 3:00 PM on Thursday, down 0.98% on the day – up 3.36% year-to-date.
Arcelor-Mittal (MT) CEO Lakshmi Mittal has confirmed that the company could be interested in acquiring ThyssenKrupp's (TYEKF) steel plant in Alabama. Molycorp (MCP) is a new Neutral at Robert W. Baird. Titanium Metals (TIE) is taken to Neutral from Overweight at JPMorgan. Graphic Packaging Holding (GPK) is down about 2.6% on over 3x average daily volume. Dow Components – Alcoa (AA) is down about 0.6%. DuPont (DD) is down about 1%. The Materials Select Sector SPDR (XLB) was trading at $36.26 at 3:00 PM on Thursday, down 0.60% on the day – up 8.24% year-to-date.
Canada is reconsidering plans to buy 65 of the Lockheed Martin (LMT) fighter jets after an audit found it would cost $45.8B to acquire and operate the planes over their expected lifespan of 42 years (way about forecasts). It will now look at purchasing alternative aircraft such as Boeing's (BA) Super Hornet. SkyWest (SKYW) has finalized an agreement to acquire 100 Mitsubishi Regional Jets in a deal worth $4.2B at list prices and has taken an option for another 100. Mitsubishi Aircraft expects to start delivering the 70-90 seat planes, which will be fitted with Pratt & Whitney (UTX) engines, in 2017. Hexcel (HXL) now guides FY13 earnings of EPS of $1.66 - $1.78 on revenue of around $1.64B - $1.74B (versus consensus for an EPS of $1.58 on revenue of $1.58B. FY13). Aircastle (AYR) is begun with Buy at Deutsche Bank. BE Aerospace (BEAV) is initiated with an Overweight at JPMorgan. JetBlue (JBLU) is begun with a Buy at Buckingham. Big Mover – AMR Corp. (AAMRQ) is up about 15%. Dow components – Boeing Co (BA) is down about 1.25%. Caterpillar (CAT) is up about 0.4%. General Electric (GE) is down about 0.6%. 3M Company (MMM) is down about 0.8%. United Technologies (UTX) is down about 0.6%. The Industrial Select Sector SPDR (XLI) was trading at $37.625 at 3:00 PM on Thursday, down 0.52% on the day – up 11.48% year-to-date.
ZAGG Inc (ZAGG) announced that its board of directors has authorized a share repurchase program under which the company may repurchase up to $10 million of its outstanding common stock from time to time on the open market. Best Buy (BBY) founder Richard Schulze may be set to finally make a takeover offer for the struggling electronics retailer. Dish Network (DISH) has won approval with U.S. regulators to offer a smartphone service. It will be interesting to watch if there will be a reaction from DirecTV (DTV). Amazon (AMZN) has chalked up another victory in the global book wars after the EU accepted an offer from Apple (AAPL) and four publishers to ease price-cutting restrictions in exchange for ending an antitrust investigation. The publishers include CBS's (CBS) Simon & Schuster and News Corp. (NWS) unit HarperCollins. Japan's Universal Entertainment has filed a criminal complaint against Wynn Resorts (WYNN) CEO Stephen Wynn in the Philippines as the bitter dispute between Wynn and former shareholder Kazuo Okada - who is Universal's majority owner - keeps ratcheting higher. Pier 1 Imports (PIR) beat estimates by a penny and revenue by $6M. Brinker (EAT) and Burger King (BKW) are both Buys at Citigroup, which has a new Neutral on Buffalo Wild Wings (BWLD). Five Below (FIVE) is a fresh Hold at BB&T Capital. Vera Bradley (VRA) is upgraded to Buy from Hold at Jefferies. Yum Brands (YUM) is upgraded to Buy from Neutral at Goldman. Darden Restaurants (DRI) gets downgraded to Neutral from Buy at Goldman. Big Movers – Dex One Corp. (DEXO) is up about 20.5%. Best Buy (BBY) is up about 15%. Zagg Inc. (ZAGG) is up about 12.5%. Dow Components – Disney (DIS) is down about 1%. Home Depot (HD) is down about 0.4%. McDonalds (MCD) is down slightly. The Consumer Discretionary Select Sector SPDR (XLY) was trading at $47.02 at 3:00 PM on Thursday, down 0.72% on the day – up 20.50% year-to-date.
Harbinger Group Inc. (HRG) announced its registered secondary public offering of 20,000,000 shares of HGI common stock has been priced at $7.50 per share. Wal-Mart (WMT) is reportedly in talks to acquire an 80% stake in leading Turkish retailer Migros from U.K. private-equity firm BC Partners in a deal that would value Migros at over $4B including debt. Wal-Mart could possibly face competition from France's Carrefour (CRRFY) and Britain's Tesco (TSCDF). Boston Beer (SAM) raises its FY12 EPS to $4.30 to $4.60 per share (up from its prior view of $3.80 - $4.20 and versus consensus of $4.18). Janney Montgomery Scott starts Annie’s Inc. (BNNY) at a Sell, begins Inventure Foods (SNAK) with a Buy, and has new Neutrals on Flowers Foods (FLO) Green Mountain Coffee Roasters (GMCR) and Hain Celestial (HAIN). B&G Foods (BGS) is taken to Outperform from Sector Perform at RBC Capital. Big Movers – Harbinger Group (HRG) is down about 26.5%. Boston Beer (SAM) is up about 15.25%. Dow components – Coca Cola (KO) is down slightly. Procter & Gamble (PG) is down about 1.1%. Wal-Mart (WMT) is up about 0.5%. The Consumer Staples Select Sector SPDR (XLP) was trading at $36.00 at 3:00 PM on Thursday, down 0.22% on the day – up 10.80% year-to-date.
Telik (TELK) publishes a clinical trial abstract on ICN treatment, which reports the preliminary results of a clinical trial with ezatiostat to study the treatment of patients with idiopathic chronic neutropenia, ICN. Oncolytics Biotech Inc. (ONCY) announced positive top line data for the first endpoint in a randomized Phase III study of its Reolysin drug for head and neck cancers. AstraZeneca (AZN) and its partner Rigel Pharmaceuticals Inc. (RIGL) reported that their experimental rheumatoid arthritis drug failed to show superiority to Abbott's Humira in a midstage study. Nordion (NDZ) postpones the release of its Q4 and FY12 financial results and conference call scheduled for December 18 and 19, respectively, saying it's initiated discussions to amend the terms of the company’s credit facility. AdCare Health Systems (ADK) is an In-line at Imperial Capital. Biogen Idec (BIIB) is added to the Conviction Buy List at Goldman. Charles River (CRL) is upgraded to Outperform from Market Perform at Wells Fargo. Eli Lilly (LLY) is lifted to Neutral from Underperform at Cowen. United Therapeutics (UTHR) is slashed to Sell from Neutral at Goldman. Big Movers – Oncolytics Biotech (ONCY) is up about 44%. Telik Inc. (TELK) is up about 22%. Rigel Pharmaceuticals (RIGL) is down about 36%. Dow Components – Johnson & Johnson (JNJ) is down about 0.4%. Merck (MRK) is down about 2.5%. Pfizer (PFE) is down about 0.4%. United Health Group (UNH) is down about 1%. The Health Care Select Sector SPDR (XLV) was trading at $40.69 at 3:00 PM on Thursday, down 0.80% on the day – up 17.30% year-to-date.
CorEnergy Infrastructure (CORR) has agreed to sell 13,000,000 shares of its common stock at a purchase price of $6.00 per share. Barclays (BCS) is reportedly planning to cut up to 2,000 out of 23,000 positions at its investment bank as part of a company-wide overhaul that could see the firm reduce jobs at other divisions as well. Axis Capital (AXS) is initiated with a Buy at Goldman Sachs. HSBC Holdings (HBC) is upgraded to Buy from Hold at Deutsche Bank. Boston Private Financial (BPFH) gets downgraded to Perform from Outperform at Keefe Bruyette. Big Mover – Investable Correlation Index (CORR) is down about 11.25%. Dow Components – American Express (AXP) is relatively unchanged. Bank of America (BAC) is down about 0.75%. JP Morgan Chase (JPM) is relatively unchanged. The Travelers Companies (TRV) is up slightly. The Financial Select Sector SPDR (XLF) was trading at $16.05 at 3:00 PM on Thursday, down 0.56% on the day – up 23.46% year-to-date.
SolarCity Corp (SCTY) makes a huge move during their market debut on Thursday, after the company slashed its IPO price. Amazon (AMZN) has chalked up another victory in the global book wars after the EU accepted an offer from Apple (AAPL) and four publishers to ease price-cutting restrictions in exchange for ending an antitrust investigation. The publishers include CBS's (CBS) Simon & Schuster and News Corp. (NWS) unit HarperCollins. Nearly three months after Tim Cook apologized for the fiasco that is Apple's (AAPL) iOS 6 Maps, Google (GOOG) has released its new Maps app for the iPhone, with an iPad version due later. Ciena (CIEN) missed estimates by a penny and revenue by $3M. Western Union (WU) is a new Neutral at Guggenheim. Avago Technologies (AVGO) is upgraded to Buy from Neutral at Goldman. Microchip (MCHP) is moved to Neutral from Sell at Goldman. RF Micro Devices (RFMD) is raised to Overweight from Equal-Weight at Barclays. Analog Devices (ADI) is now Neutral from Buy at Citigroup. Lexmark (LXK) is lowered to Sell from Hold at Deutsche Bank. Linear Technology (LLTC) is now Sell from Neutral at Citigroup. Allot Communications is downgraded to Hold from Buy at Wunderlich. Big Mover – Allot Communications (ALLT) is down about 11.5%. Dow Components – Cisco Systems (CSCO) is down about 0.3%. Hewlett-Packard (HPQ) is down about 0.3%. IBM (IBM) is down about 0.5%. Intel Corp (INTC) is down about 0.6%. Microsoft (MSFT) is down about 0.9%. The Technology Select Sector SPDR (XLK) was trading at $28.93 at 3:00 PM on Thursday, down 0.86% the day – up 13.67% year-to-date.
Sprint (S) has offered to buy the 48.3% of Clearwire (CLWR) it doesn't already own for $4.23B ($2.90 a share – a 5.45% premium). Big Movers – Clearwire (CLWR) is up about 15.5%. NII Holdings (NIHD) is up about 11%. Dow Components – AT&T (T) is down about 0.4%. Verizon (VZ) is down about 0.4%. The NASDAQ Telecommunications Index (IXTC) was trading at $200.43 at 3:00 PM on Thursday, down 0.27% on the day – up 1.78% year-to-date.
E.ON AG (EONGY) is downgraded to Reduce from Neutral at Nomura. Connecticut Water Service (CTWS) is down about 1.6% on over 3x average daily volume. The Big Names – Dominion Resources (D) is down about 0.6%. Edison International (EIX) is down about 0.8%. First Energy (FE) is down about 1.5%. PG&E Corp (PCG) is down about 0.5%. Southern Company (SO) is down about 0.75%. The Utilities Select Sector SPDR (XLU) was trading at $35.285 at 3:00 PM on Thursday, down 0.58% on the day – down 1.93% year-to-date.
STOCKS: CVX, XOM, AA, DD, BA, CAT, GE, MMM, UTX, DIS, HD, MCD, KO, PG, WMT, JNJ, MRK, PFE, UNH, AXP, BAC, JPM, TRV, CSCO, HPQ, IBM, INTC, MSFT, T, VZ, D, EIX, FE, PCG, SO, SXE, DRC, TSO, NBR, BAS, MT, TYEKF, MCP, TIE, GPK, LMT, BA, SKYW, UTX, HXL, AYR, BEAV, JBLU, AAMRQ, ZAGG, BBY, DISH, DTV, AMZN, AAPL, CBS, NWS, WYNN, PIR, EAT, BKW, BWLD, FIVE, VRA, YUM, DRI, DEXO, HRG, WMT, CRRFY, TSCDF, SAM, BNNY, SNAK, FLO, GMCR, HAIN, BGS, TELK, ONCY, AZN, RIGL, NDZ, ADK, BIIB, CRL, LLY, UTHR, CORR, BCS, AXS, HBC, BPFH, SCTY, GOOG, CIEN, WU, AVGO, MCHP, RFMD, ADI, LXK, LLTC, ALLT, S, CLWR, NIHD, EONGY, CTWS
Personal Income was flat in October while Spending declined 0.2%. The Dow Jones Industrial Average traded up to 13,053.74 then dipped to 12,988.68 versus the 200-day simple moving average at 12,995.25. The Nasdaq traded up to 3014.25 then dipped to 2999.72 staying above its 200-day SMA at to 2986.99.
Asian stocks were higher on Friday. The Nikkei 225 closed at 9446 – up 0.48%. The Hang Seng closed at 22,030 – up 0.49%. European exchanges closed mixed on Friday. The FTSE 100 ended the day at 5,867 – down 0.06%. The DAX ended the day at 7,406 – up 0.06%. The CAC 40 ended the day at 3,557 – down 0.33%. The yield on the 10-Year US Treasury declined from 1.630% to 1.594% staying below the 50-day and 200-day simple moving averages at 1.682% and 1.761%.
Comex gold declined from $1731.2 the Troy ounce to $1708.4 below the 50-day simple moving average at $1738.9 with the 200-day SMA at $1665.6. Nymex crude oil declined from $88.32 per barrel to $87.47 then rebounded to $88.99 versus the 50-day and 200-day simple moving averages at $88.62 and $93.81. The euro versus the dollar declined from 1.3026 to 1.2972 above its 50-day and 200-day simple moving averages at 1.2903 and 1.2793.
Wells Fargo has Market Performs on Hess (HES) and Occidental Petroleum (OXY) while assigning Outperforms on ConocoPhillips (COP), Marathon Oil (MRO) and Murphy Oil (MUR). Dow components – Chevron (CVX) is down about 0.4%. Exxon Mobil (XOM) is down about 0.2%. Energy Select Sector SPDR (XLE) was trading at $70.93 at 3:30 PM on Friday, down 0.27% on the day – up 2.60% year-to-date.
The Nasdaq traded up to 3014.25 then dipped to 2999.72 staying above its 200-day SMA at to 2986.99. Dow Components – Alcoa (AA) is down about 0.7%. DuPont (DD) is down about 0.8%. The Materials Select Sector SPDR (XLB) was trading at $36.64 at 3:30 PM on Friday, down 0.08% on the day – up 9.37% year-to-date.
Lockheed Martin (LMT) is lifted to Fair Value from Sell at CRT Capital. Stanley Black & Decker (SWK) is taken to Neutral from Buy at Longbow. Dow components – Boeing Co (BA) is down slightly. Caterpillar (CAT) is down about 1.25%. General Electric (GE) is down about 0.2%. 3M Company (MMM) is up about 0.2%. United Technologies (UTX) is up about 0.5%. The Industrial Select Sector SPDR (XLI) was trading at $37.08 at 3:30 PM on Friday, down 0.35% on the day – up 9.87% year-to-date.
Groupon (GRPN) CEO Andrew Mason won't be replaced as CEO in the near-term, the company said following a board meeting yesterday. The L.A. Auto Show is due to open today for the public, with over 20 new models from major automakers set to be unveiled. The showcase for electric vehicles… Look for the Fiat 500e (FIATY), the Chevrolet Spark EV (GM), and BMW's (BAMXF) powerful Concept series to grab a lot of the EV spotlight. Genesco (GCO) beat estimates by 11 cents and revenue by $5M. Five Below (FIVE) beat estimates by 2 cents and revenue by $5M. Christopher & Banks (CBK) beat estimates by 25 cents and revenue by $3M. Zumiez (ZUMZ) missed estimates by 8 cents and revenue by $2M. Pacific Sunwear of California (PSUN) reported Q3 EPS of -$0.03 (in-line), while beating revenue by $2M. Ulta Salon, Cosmetics & Fragrance (ULTA) beat estimates by 3 cents and revenue by $1M. LVMH Moët Hennessy Louis Vuitton (LVMUY) is lifted to Buy from Neutral at Goldman Sachs. Ulta Salon Cosmetics & Fragrance (ULTA) is now Outperform from Market Perform with Wells Fargo. KingFisher (KGFHY) is now Neutral from Buy at UBS. Tiffany (TIF) is lowered to Neutral from Buy at Bank of America-Merrill Lynch. Volvo (VOLVY) gets cut to Underweight from Neutral at HSBC Securities. Yum Brands (YUM) is cut to Underperform from Market Perform at Raymond James, to Neutral from Positive at Susquehanna, and to Neutral from Buy at UBS. Big Mover – Pacific Sunwear of California (PSUN) is down about 14.5%. Dow Components – Disney (DIS) is down about 0.6%. Home Depot (HD) is up about 1%. McDonalds (MCD) is up about 0.25%. The Consumer Discretionary Select Sector SPDR (XLY) was trading at $47.425 at 3:30 PM on Friday, down 0.14% on the day – up 21.54% year-to-date.
Hostess Brands, which yesterday received court approval to liquidate, has received interest from 110 potential buyers for its brands, which include Twinkies, CupCakes, Ding Dongs and Ho Hos. Supervalu (SVU) has said that its review of strategic alternatives is still proceeding, with the comments following a report that potential acquirer Cerberus is having funding problems. United Natural Foods (UNFI) reported FQ1 EPS of $0.46 (in-line) on revenue of $1.41B (in-line). WhiteWave Foods (WWAV) beat estimates by 2 cents with revenue in-line with estimates. Pilgrim’s Pride (PPC) is picked up with an Equal Weight at Stephens. ConAgra Foods (CAG) gets upgraded to Buy from Hold at Jefferies, which is optimistic about its pending purchase of Ralcorp (RAH). Brown-Forman (BF/B) gets slashed Sell from Neutral at Goldman Sachs. Dow components – Coca Cola (KO) is down about 0.4%. Procter & Gamble (PG) is up about 0.25%. Wal-Mart (WMT) is up about 1.4%. The Consumer Staples Select Sector SPDR (XLP) was trading at $35.96 at 3:30 PM on Friday, up 0.14% on the day – up 10.68% year-to-date.
Teva Pharmaceutical (TEVA) is forecasting 2013 EPS of $4.85-$5.15 versus Street consensus of $5.63. Total revenue is expected at $19.5B-$20.5B. Puma Biotechnology (PBYI) is a new Buy at Bank of America-Merrill Lynch. St. Jude Medical (STJ) is moved to Buy from Neutral at Mizuho. Big Movers – Peregrine Pharmaceuticals (PPHM) is up about 20%. Allscripts Healthcare (MDRX) is down about 11%. Dow Components – Johnson & Johnson (JNJ) is up about 0.6%. Merck (MRK) is down about 1%. Pfizer (PFE) is up about 0.4%. United Health Group (UNH) is up about 0.3%. The Health Care Select Sector SPDR (XLV) was trading at $40.20 at 3:30 PM on Friday, up 0.02% on the day – up 15.88% year-to-date.
Barclays (BCS) plans to go to court to fight the Federal Energy Regulatory Commission if the agency insists on fining the bank about $470M over alleged electricity-market manipulation. Royal Bank of Canada (RY) is reduced to Neutral from Buy at UBS. Dow Components – American Express (AXP) is relatively unchanged. Bank of America (BAC) is down about 0.3%. JP Morgan Chase (JPM) is down about 0.6%. The Travelers Companies (TRV) is down about 0.4%. The Financial Select Sector SPDR (XLF) was trading at $15.725 at 3:30 PM on Friday, down 0.35% on the day – up 20.96% year-to-date.
ReneSola (SOL) missed estimates by 13 cents, while beating revenue by $3M. DAQO New Energy (DQ) missed estimates by 22 cents and revenue by $8M. Youku Tudou (YOKU) missed estimates by 12 cents on revenue of $76.9M. OmniVision Technologies (OVTI) beat estimates by 3 cents and revenue by $17M. FQ3 guidance is for revenue of $390M-$425M and EPS of $0.33-$0.46 (mostly above a consensus of $365.2M and $0.35). Splunk (SPLK) beat estimates by a penny, while beating revenue by $5M. FQ4 guidance is for revenue of $58M-$60M (largely above a $58.1M consensus). Mentor Graphics (MENT) beat estimates by 4 cents and revenue by $3M. Mitel (MITL) beat estimates by 10 cents and revenue by $3M. Avago Technologies (AVGO) reported FQ4 EPS of $0.77 (may not be comparable to consensus of $0.73), while beating revenue by $3M. American Software (AMSWA) beat estimates by 2 cents, while missing revenue by $0.6M. LinkedIn (LNKD) is launched with a Neutral at Wedbush. Active Network (ACTV) is boosted by 180 degrees – to Buy from Underperform – at Bank of America-Merrill Lynch. Bel Fuse (BELFB) is boosted to Buy from Hold at Needham. Big Movers – Tellabs (TLAB) is up about 18.5%. Motricity (MOTR) is up about 14.5%. VeriSign (VRSN) is down about 13.5%. Dow Components – Cisco Systems (CSCO) is down about 0.3%. Hewlett-Packard (HPQ) is up about 0.25%. IBM (IBM) is down about 0.9%. Intel Corp (INTC) is up about 0.75%. Microsoft (MSFT) is down about 1.3%. The Technology Select Sector SPDR (XLK) was trading at $29.065 at 3:30 PM on Friday, down 0.33% the day – up 14.20% year-to-date.
NTELOS Holdings (NTLS) was downgraded to Underperform from Market Perform at FBR, with a new target price of $5 (down from $21). Research firm FBR has predicted that the company's partnership with Sprint (S) would not be renewed when the deal expires in 2015. Big Mover – NTELOS Holdings (NTLS) is down about 24%. Dow Components – AT&T (T) is up about 0.25%. Verizon (VZ) is down about 0.2%. The NASDAQ Telecommunications Index (IXTC) was trading at $194.59 at 3:30 PM on Friday, down 0.28% on the day – down 1.19% year-to-date.
Duke Energy (DUK) CEO Jim Rogers plans to retire by the end of 2013, consistent with the expiration of his contract. Big Mover – Centrais Eletricas Brasileiras (EBR) is up about 13%. The Big Names – Dominion Resources (D) is down slightly. Edison International (EIX) is up slightly. First Energy (FE) is down slightly. PG&E Corp (PCG) is relatively unchanged. Southern Company (SO) is down about 0.3%. The Utilities Select Sector SPDR (XLU) was trading at $35.13 at 3:30 PM on Thursday, up 0.52% on the day – down 2.36% year-to-date.
STOCKS: CVX, XOM, AA, DD, BA, CAT, GE, MMM, UTX, DIS, HD, MCD, KO, PG, WMT, JNJ, MRK, PFE, UNH, AXP, BAC, JPM, TRV, CSCO, HPQ, IBM, INTC, MSFT, T, VZ, D, EIX, FE, PCG, SO, HES, OXY, COP, MRO, MUR, LMT, SWK, GRPN, FIATY, GM, BAMXF, GCO, FIVE, CBK, ZUMZ, PSUN, ULTA, LVMUY, KGFHY, TIF, VOLVY, YUM, SVU, UNFI, WWAV, PPC, CAG, RAH, BF/B, TEVA, PBYI, STJ, PPHM, MDRX, BCS, RY, SOL, DQ, YOKU, OVTI, SPLK, MENT, MITL, AVGO, AMSWA, LNKD, ACTV, BELFB, TLAB, MOTR, VRSN, NTLS, S, DUK, EBR
Initial Jobless Claims came in at 410,000 still well above the 350,000 recessionary threshold. The Dow Jones Industrial Average traded up to 12,845.99 staying well below the 200-day simple moving average at 12,991.82. The Nasdaq traded up to 2928.17 below the 200-day SMA at to 2984.97.
Asian stocks were higher on Wednesday. The Nikkei 225 closed at 9,223 – up 0.87%. The Hang Seng closed at 21,524 – up 1.39%. European exchanges closed higher on Wednesday. The FTSE 100 ended the day at 5,752 – up 0.07%. The DAX ended the day at 7,185 – up 0.16%. The CAC 40 ended the day at 3,477 – up 0.44%. The yield on the 10-Year US Treasury traded between 1.642% and 1.695% staying below the 50-day and 200-day simple moving averages at 1.702% and 1.773%.
Comex gold rebounded from $1718.4 the Troy ounce to $1732.0 still between the 200-day and 50-day simple moving averages at $1665.3 and $1743.3. Nymex crude oil rebounded from $86.65 per barrel to $87.89 still below its 50-day and 200-day simple moving averages at $89.57 and $94.20. The euro versus the dollar rebounded from 1.2740 to 1.2831 trading around its 200-day simple moving average at 1.2803.
Boardwalk Pipeline (BWP) gets lifted to Outperform from Neutral at Credit Suisse. Petróleo Brasileiro (PBR) is reduced to Market Perform from Outperform at Raymond James. LinnCo (LNCO) is begun with a Neutral at Bank of America-Merrill Lynch and an Outperform at Robert W. Baird. Linn Energy (LINE) is a new Neutral at Bank of America-Merrill Lynch, Credit Suisse, and Goldman Sachs. Marathon Petroleum (MPC) is resumed with a Buy at Bank of America-Merrill. Matrix Service (MTRX) is initiated with a Buy at DA Davidson. MPLX LP (MPLX) is begun with a Buy at Citigroup. Pioneer Natural Resources (PXD) is a new Buy at Citigroup. Inergy (NRGY) is now Outperform from Neutral at Robert W. Baird. Inergy Midstream (NRGM) is now Outperform from Perform at Robert W. Baird. Lukoil (LUKOY) is upgraded to Outperform from Market Perform at Credit Suisse. Repsol (REPYY) gets a Buy-from-Hold hoist at brokerage boutique Kepler. Dow components – Chevron (CVX) is up about 0.4%. Exxon Mobil (XOM) is up about 0.4%. Energy Select Sector SPDR (XLE) was trading at $70.54 at 3:30 PM on Wednesday, up 0.44% on the day – up 2.04% year-to-date.
AK Steel (AKS) is now Neutral from Sell at Goldman Sachs. Cliffs Natural Resources (CLF) is lowered to Sell from Neutral at Goldman Sachs. K+S Aktiengesellschaft (KPLUF) is cut to Underweight from Equal Weight at JPMorgan. Dow Components – Alcoa (AA) is down slightly. DuPont (DD) is down about 0.6%. The Materials Select Sector SPDR (XLB) was trading at $35.88 at 3:30 PM on Wednesday, unchanged on the day – up 7.10% year-to-date.
Deere's (DE) FQ4 net profit edged up 2.7% to $687.6M as EPS of $1.75 missed forecasts, although revenue climbed 14% to $9.79B and beat expectations. Joy Global (JOY) is boosted to Market Perform from Underperform at BMO Capital. Emerson Electric (EMR) is downgraded to Perform from Outperform at Oppenheimer. BE Aerospace (BEAV) is an Outperform at Imperial Capital. Wesco Aircraft (WAIR) is a new In-line at Imperial Capital. Dow components – Boeing Co (BA) is up about 0.9%. Caterpillar (CAT) is down slightly. General Electric (GE) is up about 0.3%. 3M Company (MMM) is down slightly. United Technologies (UTX) is up about 1.1%. The Industrial Select Sector SPDR (XLI) was trading at $36.24 at 3:30 PM on Wednesday, up 0.06% on the day – up 7.38% year-to-date.
Richard Schulze is now reportedly working separately with P-E firms Cerberus, TPG Capital and Leonard Green on a bid for Best Buy (BBY) despite previous speculation saying Cerberus had dropped out. Hedge fund Tiger Global disclosed it had acquired a 9.9% stake in Groupon (GRPN). Apollo (APO) and KKR (KKR) are unlikely to collaborate with Schulze on an offer. News Corp (NWS) is reportedly in preliminary negotiations to acquire CBS's (CBS) Simon & Schuster book business. Kid Brands (KID) missed estimates by 7 cents and revenue by $7M. Zale (ZLC) missed estimates by 20 cents and revenue by $7M. Books-A-Million (BAMM) reported Q3 EPS of -$0.18 on revenue of $104.7M. Coach Inc. (COH) is initiated with an Outperform at Wells Fargo. Deckers Outdoor (DECK) is a new Outperform with Wedbush. Six Flags Entertainment (SIX) is started with a Neutral at Longbow. Expedia (EXPE) is taken to Equal-Weight from Underweight by Barclays. Yum Brands (YUM) is initiated with an Outperform at Macquarie. Penn National Gaming (PENN) is now Buy from Neutral at Lazard Capital. Skechers USA (SKX) is moved to Positive from Neutral at Susquehanna. Big Movers – Zale (ZLC) is down about 26.5%. Groupon (GRPN) is up about 14.5%. Skechers USA (SKX) is up about 10%. Dow Components – Disney (DIS) is up about 0.7%. Home Depot (HD) is up about 0.5%. McDonalds (MCD) is up about 0.4%. The Consumer Discretionary Select Sector SPDR (XLY) was trading at $46.545 at 3:30 PM on Wednesday, up 0.36% on the day – up 19.28% year-to-date.
Hostess Brands will again ask bankruptcy Judge Robert Drain to authorize its liquidation after mediation talks with the company's striking bakers' union failed to resolve their differences. Potential suitors for all or part of Hostess' assets include Flowers Foods (FLO), which said on Monday that it has renegotiated lending terms to enable it to borrow additional cash. Archer Daniels Midland (ADM) is upgraded to Outperform from Market Perform by BMO Capital. Whole Foods (WFM) gets upgraded to Buy from Hold at Goldman. Brasil Foods (BRFS) is initiated with a Buy at Citigroup. Hormel Foods (HRL) is cut to Underperform from Outperform at Crédit Agricole. Dow components – Coca Cola (KO) is up about 0.5%. Procter & Gamble (PG) is up slightly. Wal-Mart (WMT) is down slightly. The Consumer Staples Select Sector SPDR (XLP) was trading at $35.132 at 3:30 PM on Wednesday, up 0.09% on the day – up 8.13% year-to-date.
Lazard launches Buys on Aetna (AET) and UnitedHealth (UNH). It has a new Neutral on WellPoint (WLP). Medicines Company (MDCO) is a new Outperform at Oppenheimer. Merck (MRK) is moved to Buy from Neutral at MKM Partners. Biogen Idec (BIIB), Celgene (CELG), and Threshold Pharmaceuticals (THLD) are all begun with Buys at Brean Capital. Infinity Pharmaceutical (INFI) is resumed with an Outperform at RBC Capital. Repros Therapeutics (RPRX) is resumed as a Buy at Roth Capital. HeartWare (HTWR) is moved to Market Perform from Outperform with Wells Fargo. St. Jude Medical (STJ) gets moved to Market Perform from Outperform with Wells Fargo. Big Movers – Sequenom (SQNM) is up about 13.5%. Vivus (VVUS) is up about 12.5%. Keryx Biopharmaceuticals (KERX) is up about 10%. St. Jude Medical (STJ) is down about 12%. Dow Components – Johnson & Johnson (JNJ) is down about 0.2%. Merck (MRK) is up about 0.75%. Pfizer (PFE) is up about 0.2%. United Health Group (UNH) is up about 0.8%. The Health Care Select Sector SPDR (XLV) was trading at $39.54 at 3:30 PM on Wednesday, down 0.05% on the day – up 13.98% year-to-date.
New York Attorney-General Eric Schneiderman reportedly plans to sue Credit Suisse (CS) for allegedly misleading investors who lost over $11.2B on mortgage bonds. A federal judge has allowed a lawsuit from the Federal Housing Finance Agency to go forward against Barclays (BCS) over the sale of $4.9B in questionable mortgage bonds to Fannie Mae (FNMA) and Freddie Mac (FMCC). Richard Schulze is now reportedly working separately with P-E firms Cerberus, TPG Capital and Leonard Green on a bid for Best Buy (BBY) despite previous speculation saying Cerberus had dropped out. Apollo (APO) and KKR (KKR) are unlikely to collaborate with Schulze on an offer. Credit Suisse assigns Outperforms on East West Bancorp (EWBC), First Republic Bank (FRC), Signature Bank (SBNY), and Susquehanna Bank (SUSQ). SVB Financial (SIVB) is taken to Buy from Hold at Citigroup. Realogy (RLGY) is a new Neutral at Citigroup. British Land (BTLCY) is moved to Overweight from Equal Weight at Morgan Stanley. First Republic Bank (FRC) is raised to Buy from Hold at Jefferies. Greenlight Capital (GLRE) gets upgraded to Buy from Neutral at UBS. Lloyds Banking Group (LYG) is lifted to Equal Weight from Underweight at Morgan Stanley. Webster Financial (WBS) is moved to Equal Weight from Overweight at Morgan Stanley. Commerce Bancshares (CBSH) is cut to Underweight from Equal-Weight at Morgan Stanley. Eaton Vance (EV) gets slashed to Sell from Neutral at Citigroup.
Big Movers – Ambac Financial (ABKFQ) is up about 12.5%. MBIA (MBI) is up about 12%. Dow Components – American Express (AXP) is up about 0.2%. Bank of America (BAC) is up about 1.25%. JP Morgan Chase (JPM) is up slightly. The Travelers Companies (TRV) is up about 0.5%. The Financial Select Sector SPDR (XLF) was trading at $15.635 at 3:30 PM on Wednesday, down 0.10% on the day – up 20.276% year-to-date.
Hewlett-Packard (HPQ) has taken an $8.8 billion write-down in its fourth-quarter earnings, including $5.3 billion on its acquisition of software company Autonomy. The FBI is reportedly investigating H-P's accusations of accounting improprieties at Autonomy prior to H-P buying the software company and for which it took an $8.8B charge in FQ4. The company’s Q4 earnings beat estimates by 2 cents, but revenue missed estimates by $430M. Hewlett-Packard (HPQ) is moved to Market Perform from Outperform at Raymond James. H-P is also taken to Underperform from Neutral at Mizuho and to Sector Perform from Outperform at RBC Capital. The FTC is reportedly uncertain that it can successfully sue Google (GOOG) for placing links to its products and services above those of its competitors in search results. A judge has to decide how much Microsoft (MSFT) should pay for the use of Google (GOOG) wireless and video patents following the end of a week-long trial yesterday. Google wants $4B a year, although Microsoft reckons that $1M+ is all that Google deserves. The Department of Justice and the FTC plan to hold informal hearings next month on whether patent trolls, which license IP but don't sell any tangible products, do more harm than good. A crackdown could well hurt the likes of Acacia (ACTG), InterDigital (IDCC) and Rambus (RMBS). Salesforce.com (CRM) beat estimates by a penny and revenue by $10.9M. The company expects FQ4 revenue of $825M-$830M and EPS of $0.38-$0.40 (versus consensus of $829.9M and $0.40). The company is setting FY14 revenue guidance of $3.8B-$3.85B (in-line with a $3.83B consensus). Millennial Media (MM) is a new Buy at Janney Montgomery Scott. NCR Corp. (NCR) is added to JPMorgan’s Focus List of favored equities. Research In Motion (RIMM) is raised to Hold from Underperform at Jefferies. Riverbed Technology (RVBD) is upgraded to Outperform at Northland Securities. ARM Holdings (ARMH) is downgraded to Outperform from Strong Buy at Raymond James. Intel (INTC) gets cut to Neutral from Buy at UBS.
Big Movers – China Digital TV Holdings (STV) is down about 38%. Nokia (NOK) is up about 14.5%. Dow Components – Cisco Systems (CSCO) is up about 0.6%. Hewlett-Packard (HPQ) is up about 2.7%. IBM (IBM) is up about 0.75%. Intel Corp (INTC) is down about 0.8%. Microsoft (MSFT) is up about 1.1%. The Technology Select Sector SPDR (XLK) was trading at $28.398 at 3:30 PM on Wednesday, up 0.35% the day – up 11.58% year-to-date.
America Móvil (AMX) is taken to Neutral from Buy at Citigroup. Dow Components – AT&T (T) is up about 0.3%. Verizon (VZ) is up about 0.6%. The NASDAQ Telecommunications Index (IXTC) was trading at $188.33 at 3:30 PM on Wednesday, up 0.59% on the day – down 4.37% year-to-date.
Big Mover – Centrais Eletricas Brasileiras (EBR) is down about 10.5%. The Big Names – Dominion Resources (D) is down about 0.6%. Edison International (EIX) is down about 1.1%. First Energy (FE) is down about 0.9%. PG&E Corp (PCG) is down about 0.8%. Southern Company (SO) is down about 0.9%. The Utilities Select Sector SPDR (XLU) was trading at $34.06 at 3:30 PM on Wednesday, down 0.79% on the day – down 5.34% year-to-date.
STOCKS: CVX, XOM, AA, DD, BA, CAT, GE, MMM, UTX, DIS, HD, MCD, KO, PG, WMT, JNJ, MRK, PFE, UNH, AXP, BAC, JPM, TRV, CSCO, HPQ, IBM, INTC, MSFT, T, VZ, D, EIX, FE, PCG, SO, BWP, PBR, LNCO, LINE, MPC, MTRX, MPLX, PXD, NRGY, NRGM, LUKOY, REPYY, AKS, CLF, KPLUF, DE, JOY, EMR, BEAV, WAIR, BBY, GRPN, APO, KKR, NWS, CBS, KID, ZLC, BAMM, COH, DECK, SIX, EXPE, YUM, PENN, SKX, FLO, ADM, WFM, BRFS, HRL, AET, UNH, WLP, MDCO, MRK, BIIB, CELG, THLD, INFI, RPRX, HTWR, STJ, SQNM, VVUS, KERX, CS, BCS, FNMA, FMCC, EWBC, FRC, SBNY, SUSQ, SIVB, RLGY, BTLCY, FRC, GLRE, LYG, WBS, CBSH, EV, ABKFQ, MBI, HPQ, GOOG, MFST, ACTG, IDCC, RMBS, CRM, MM, NCR, RIMM, RVBD, ARMH, INTC, STV, NOK, AMX, EBR
The presidential race is coming down the straight-away now with President Barack Obama and Republican presidential candidate Mitt Romney neck-in-neck in a sprint that is too tight to still call as the opening bell rang on Wall Street. According to gallop.com, the last poll before voting today has Romney at 49 percent and Obama at 48 percent of the vote.
In Tuesday trading, the Dow is ahead by 63 points, the broader S&P 500 is up 3.8 points and the tech-heavy Nasdaq has inched forward 2.3 points.
Of course, the web is littered with commentary on how to play stocks based on the outcome of the election with the general consensus that Romney is more favorable towards Wall Street. This is evidenced by information from the Center for Responsive Politics that shows Wall Street professionals have contributed more than three times as much to Romney than what has gone to Obama along this campaign trail.
Romney’s background at Bain Capital has many viewing him as a businessman that can utilize his skillset to benefit the country.
An interesting point to note is the impact that Romney could have on commodities, especially gold. It has been made very clear that Ben Bernanke will not remain seated as Fed Chairman if Romney is elected President. Most of gold’s run recently has been based on the Federal Reserve’s bond-buying campaigns, so called “quantitative easing,” and Operation Twist, which converted short-term debt to long-term. Quantitative easing devalues the dollar and increases investors’ appetite for bullion as a hedge against inflation.
QE3, or “QE forever” as it has been dubbed by many, is an open-ended program of buying $40 billion per month in mortgage-back securities that helped charge gold back up near $1,800 per troy ounce. If Bernanke is booted, there is a real concern that the program will be ended much sooner than later, which could hamstring gold trying to break upwards of $2,000 per ounce as many experts have predicted. As gold goes, so do many other metals, so the upside to silver plays could be gagged to a degree.
Romney has also been vocal about calling China a “currency manipulator” and said that he will label the country as such on his first day in office. Now, the reality is that the wannabe Commander in Chief may actually lack the authority to make the designation. Further, there should be careful consideration as to whether or not the U.S. wants to get into a trade war with the world’s second largest economy. If things do happen to shake-out that way, however, look for major companies like Apple Inc. (AAPL), Tiffany and Co. (TIF) or Yum Brands Inc. (YUM) to potentially be impacted because of strong growth ties to China.
Big banks have been rebounding from doldrums after the financial collapse in 2008 and should continue to prosper if Romney takes office. Romney has issues with Dodd-Frank and is perceived by Wall Street to want to treat the banking sector in a more balanced manner. Leading campaign contributors such as Goldman Sachs (GS) and Bank of America (BAC) quickly come to mind for upside potential. (That is not implying that contributions are affecting policy, just noting that they have been supporters.)
Romney is also a big supporter of defense, so companies like Lockheed Martin Corp. (LMT), Raytheon (RTN) and Northrup Grumman Corp. (NOC) – which have been on nice climbs for the past five months – could have even more upside.
If more votes say “Obama” on Tuesday, then those companies mentioned above could see inverse results. Some of the stocks that could be impacted from a second term by our current president reside in the healthcare space. There is truly a spider web of potential impacts related to initiatives such as the Patient Centered Outcomes Research Institute (PCORI), the Independent Payment Advisory Board (IPAB), insurance modifications, tax hikes and more, but it is generally accepted Obamacare is not particularly friendly to drug makers and innovation may be muted.
This is a topic for debate as certain components could stymie growth, but Democrats are also typically friendlier towards funding organizations such as the National Institute of Health that in turn support research with grants. Point being here that the true impact on biotechnology companies will be a “time will tell” situation. Some companies that derive a lot of research funds from NIH grants, such as Illumina, Inc. (ILMN) may benefit more with Obama back in the oval office.
Cliffs – namely the patent cliff and the fiscal cliff – could have as big of an impact on the traditional biotechnology sector more than who is elected.
Obama's Affordable Care Act will sting medical device companies with a 2.3 percent excise tax starting January 1; a tax Romney says he’ll eliminate. The tax will impact the bottom line for players such as Medtronic, Inc. (MDT) and Stryker Corp. (SYK).
On the other side of the drug counter, health care systems and hospital operators such as Universal Health Services (UHS), LifePoint Hospitals Inc. (LPNT) and Tenet Healthcare Corp. (THC) are expected to perform better if Obamacare is enacted. It is notable that the focus is primarily on the presidential election, but Congress has votes being cast as well which could create headwinds against Obamacare if any significant changes take place as a result of voting.
Housing plays favor Obama over Romney. Obama is supportive of helping homeowners, which will continue to reduce the inventory of foreclosed homes, while Romney is a bit more “business, or free-market”-oriented, meaning the foreclosure process could amplify again. Homebuilders have also produced stellar gains in 2012 and that should continue going forward for plays like Hovanian Enterprises, Inc. (HOV) and Lennar Corp. (LEN).
In the energy space, Obama is a supporter of natural gas, calling the U.S. “the Saudi Arabia of natural gas,” while speaking about his energy policies in Nevada earlier this year. For all intents and purposes, Obama was only trying to make a point, but was actually far from the truth as the U.S holds the sixth largest amount of natural gas reserves in the world. Looking to drive use for natural gas, though, should put sector plays like United States Natural Gas Fund (UNG) or maybe even VelocityShares 3x Long Natural Gas ETN (UGAZ) on radar.
Obama has hurt coal plays, so look for further downside should he retail his seat, but he is also a fan of alternative energy, which gives headroom to plays like NextEra Energy Inc. (NEE), the largest generator of wind and solar power in North America.
On that same slate, railroads could benefit from Romney defeating Obama because some loosening of policy that has damaged the coal sector might rejuvenate coal mining and shipping. This would leave majors like CSX Corp. (CSX) and Canadian Pacific Railway (CP) aligned for further growth as coal shipment accounts for more than 20 percent of overall sales each year.
According to CNN Money, this has been the most expensive election to date with more than $4.2 billion in funds raised through Sunday. It’s obviously a tight race and speculation has been running rampant. At least it’s almost over and the rhetoric and speculation about who is going to guide the country for the next four years can soon be put to rest.
Google (GOOG) released a disappointing earnings report on Thursday that helped guide the tech-heavy Nasdaq exchange more than 1 percent into the red. Coupling reports after the closing bell yesterday with Friday morning reports, more big board staples are disclosing financials that are coming-up shy of Wall Street’s expectations.
Notable laggards resulting from less-than-expected earnings include, Microsoft Corp. (MSFT), McDonald’s Corp. (MCD), General Electric Co. (GE) and Chipotle Mexican Grill Inc. (CMG).
Yesterday evening, Microsoft reported a 22 percent drop – from $17.37 billion to $16 billion - in its fiscal first quarter revenue, citing challenges in the broad PC market and lowered inventories of Windows 7 as part of the transition to Windows 8 operating system. Windows 8 is expected to finally debut next Friday.
The Redman, Washington-based tech firm said profits for the quarter equaled $4.47 billion, or 53 cents per share, as compared to profit of $5.74 billion, or 68 cents per share, in the year prior quarter. Analysts were calling-for $16.5 billion in revenue and 56 cents per share in earnings.
The company did defer about $1.35 billion in sales related to it Office software and in pre-sales for Windows 8. Shares fell about 2 percent in early Friday trading from Thursday’s $29.50 closing price.
McDonald’s also missed analyst predictions by posting a 3 percent drop in third-quarter profit to $1.46 billion, or $1.43 per share. In the year prior quarter, McDonald’s reported profit of $1.51 billion, or $1.45 per share. Revenue during the latest quarter edged-down 0.2 percent to $7.15 billion. Analysts were calling for revenue of $7.14 billion and earnings per share of $1.47.
Like many other companies with heavy sales generated overseas, an unfavorable forex market hampered profits. Excluding currency fluctuations, revenue was up 4 percent.
Shareholders of the world’s biggest burger chain aren’t singing “I’m Loving it” to the latest financials as shares are down more than 3 percent in early trading from yesterday’s closing price of $92.86.
Shares of General Electric are down about 3 percent to $22.10 in Friday morning trading after the U.S.’s largest conglomerate posted a 2.8 percent increase in third quarter revenue to $36.35 billion from $35.36 billion the year earlier, but missed Wall Street estimates of $36.94 billion. A weak currency exchange cost earnings $1.1 billion, according to the Fairfield, Connecticut-based company.
GE reported a profit of $3.49 billion, or 33 cents a share, versus $3.22 billion, or 22 cents a share, a year earlier. Analysts were calling for 36 cents per share in earnings.
Chipotle shares are getting crushed by more than 14 percent to $243 each in early trading after providing an earnings miss and weak forecast after Thursday’s closing bell. The Denver-based burrito maker notched an 18 percent climb in third-quarter revenue to $700.5 million and a quarterly profit of $72.3 million, or $2.27 per share, compared to $60.4 million, or $1.90 per share last year. The increases missed analyst forecasts of earnings of $2.30 per share and $702 million in revenue.
What hurt Chipotle the most is a deceleration in growth. Once one of the most-loved restaurant plays that regularly posted double digit gains in same-store sales, Chipotle has cooled in growth and its shares have suffered; losing more than 40 percent from April highs of $442.40 a share. Last quarter, same-store sales grew by 4.8 percent, short of 5.4 percent growth analysts expected.
Early in October, influential hedge fund manager David Einhorn, who runs the $7.7 billion fund at Greenlight Capital, call Chipotle’s market cap a “nosebleed valuation” and indicated the company was a viable short option as competition for Yum Brands (YUM) stiffens through its Taco Bell restaurants.
Yum Brands (YUM) apparently added the right ingredients together this past quarter as the operator of Taco Bell, Kentucky Fried Chicken and Pizza Hut recorded a 23-percent rise in net income during the third quarter and raised its full-year profit guidance to a growth rate of at least 13%, or $3.24 a share. Yum had previously projected profits of $3.22 per share.
For the third quarter, Yum reported that revenue rose to $471 million, or $1 per share, as compared to $383 million, or 80 cents a share, in the same quarter a year ago. Excluding one-time items like re-franchising costs, earnings rose to 99 cents from 83 cents. Revenue perked to $3.57 billion, up from $3.27 billion.
Wall Street was expecting a profit of 97 cents a share on revenue of $3.65 billion.
Whereas many global companies have cried weakness in China as a source of decreasing revenue, Yum’s growth in the world’s second largest economy remained stable, albeit slower than recent quarters. Same-store-sales (stores open at least one year) in China rose by 6 percent (compared to figures in excess of 20 percent in recent quarters) and operating profits surged by 22 percent in Q3 when adjusted for currency fluctuations.
Stateside, Yum appears to be getting some traction after posting dismal numbers in 2011. Operating profit rose 13 percent in the quarter, fueled in part by the revamped menu at Taco Bell that lifted same-store-sales by 7 percent. Pizza Hut and KFC saw rises in same-store-sales of 6 percent and 4 percent, respectively, during the latest quarter.
With the U.S. market absolutely flooded with competition, Yum has primarily set its sights for growth overseas. The Louisville, Kentucky-based company is aiming to change the ratio that has about 18,000 restaurants in the States, with only about 5,000 in China and a minimal percentage of its businesses in smaller emerging markets.
Yum said it is planning on opening a record number of stores overseas this year; calling for at least 1,750 new locations.
Yum is one the first reporting companies as earnings season is once again upon us. Alcoa kicked-off yesterday with earnings after the closing bell that showed Alcoa (AA) swinging to a third quarter loss, although adjusted earnings and revenue topped analyst expectations.
Earnings season is here again as companies prepare to announce their third quarter results. While most on Wall Street aren't excited at the prospect of negative year-over-year earnings growth, excessive pessimism could set the table for surprises. However, though that may have been the case in previous quarters, the growing headwinds could prove even stronger for companies to overcome this time around.
We asked Toni Turner of TrendStar Trading Group in this week's interview on her expectations as companies begin to report this week.
EQ: Earnings season for the third quarter is set to begin as Alcoa (AA) and a few other names such as YUM Brands (YUM) is set to announce. Are there any major themes or trends that you’re anticipating as we head into reporting?
Turner: The theme is how strong the market can stay considering where it currently trades. Earnings growth in the third quarter is likely to turn negative for the first time in three years, and we know that. So far 91 companies have lowered earnings per share guidance for the season. At the same time, the S&P 500 is trading near the 2000 and 2007 highs. With everybody expecting a nasty earnings season, you have to wonder if we can really expect over the next three to four weeks for the S&P 500 to trend higher here. Is it more likely to either chop sideways because some of the disappointment is already factored in, or slide lower from here, as it is today? So I’m not expecting a trend here so much as I am expecting choppiness which may turn into volatility. We have headwinds in Europe with Spain and Greece, which is a factor in today’s downturn. Conversely, we have QE3, which will support stocks and housing. So I don’t know if we get much more here than just an uncomfortable good news, bad news ride.
EQ: What are some of the names that you’re watching this week to help set the tone for earnings? Costco (COST), Wells Fargo (WFC), and Groupon (GRPN) are among some of the more noticeable names.
Turner: On an overall basis, I’m watching the market leaders and connecting them to their sectors so I can get a better overall feel as to what each sector is doing. Of course the more names that come under each sector, the more confirmation we will see. I’ll be watching Alcoa, which represents Basic Materials—and to an extent Industrials—and that particular sector is going to be impacted by the China slowdown; we just have to see to what degree. Costco is of course a very successful retailer, and its earnings results will tell us about global retailers. On Thursday, Safeway (SWY) in Consumer Staples is coming out with earnings and I’m anxious to see what they report because they've been consolidating lately, and food purveyors have had a rough time.
JP Morgan (JPM) and Wells Fargo are very important on Friday when they come out. They’re icons of the Financial sector and we want to see what they've done in this third quarter, especially with the upward momentum in the housing industry.
The week of October 15, I’ll be watching IBM (IBM) because that’ll be huge for Technology. In the weeks following, AT&T (T) and Verizon (VZ) are coming out and we’ll watch that for Telecom.
EQ: California gas prices have spiked to record highs recently due to a power failure at an Exxon Mobil (XOM) refinery, coupled with a fire at a Chevron (CVX) plant. Did this supply shock have any impact on the energy market?
Turner: Sure, we've seen a 4-point swing in the last four days on the West Texas Intermediator crude futures for November. It comes between $87.70 and $91.85. California’s gasoline prices have been absolutely jaw dropping, and I live in southern California, so I am experiencing it. They say that prices will fall by 50 cents per gallon here soon. We who live here hope that is true. U.S. refiners lower fuel production every year around this time for maintenance, but the unplanned outages cut the number of refineries that turn oil into gasoline, diesel, and other fuel. So it’s definitely caused wide price swings in the oil futures market. Today, oil is breaking above 92 on news of a pending announcement from Netanyahu, and relations are straining more between Syria and Turkey. We’ll have to see if this trend break can maintain its momentum to the upside. I would advise caution here, as we could see more wide price swings in the near-term.
EQ: Any additional sectors or groups that you’re watching closely this week?
Turner: Well, you know me. I've been watching Utilities Select Sector SPDR (XLU), and it’s been rising on the anxiety that investors feel about third quarter earnings. It bounced off its 200-day moving average and it’s had strong volume coming in since mid-September. I’d much rather sit through earnings season in utilities than in a more volatile sector such as Technology. So I am watching the XLU and I’m watching the other sector ETFs as earnings announcements come out like the Financial Select Sector SPDR (XLF) and the Technology Select Sector SPDR (XLK).