Archive for May 2013

Weekend Open Thread   12 comments

My portfolio finished down 0.85% after the markets took a nosedive at the end of the day today. The only bright side was I beat all the indexes.

But on to happier things, specifically the weekend. For this weekend’s open thread, I offer my three favorite Eurythmics songs:

1. Would I Lie to You? (1985):

2. Missionary Man (1986):

3. Sweet Dreams (Are Made of This): Now, for a twist. I actually prefer the Marilyn Manson version of this song, even though it was the song which made the Eurythmics famous back in 1983. Manson took the song to it’s most disturbing extreme, making it sound like it would easily fit into the soundtrack of a horror film.

Have a good weekend folks, and try not to think about what the markets did today.

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Posted May 31, 2013 by edmcgon in Open Thread, Portfolio

Traders Corner   25 comments

You can ignore yesterday’s positive move on the S&P 500. It didn’t challenge resistance and only bounced off support. Until it breaks through the 10 or 20 day moving averages, I consider this a range-bound market.

The S&P 500 levels to watch today:

UPSIDE: 1655-1656 (2 data points), 1657 (10 day moving average), 1660-1661 (3 data points), 1663 (May 20th’s low), 1667 (May 17th’s high), 1672 (May 20th’s high), 1674 (2 data points), 1681 (top of the Bollinger Bands), and 1687 (May 22nd’s high and the all-time high).
LAST CLOSE: 1654.
DOWNSIDE: 1651-1652 (3 data points), 1648-1649 (4 data points), 1646 (May 15th’s low), 1643 (20 day moving average), 1640 (May 29th’s low), 1635-1636 (4 data points), 1632-1633 (2 data points), 1626 (2 data points), 1622-1623 (3 data points), 1618-1619 (2 data points), 1616 (May 7th’s low), 1614 (May 6th’s low), 1605 (bottom of the Bollinger Bands), 1596-1598 (5 data points, including April’s high and the 50 day moving average), 1581-1583 (2 data points), 1572 (March’s high), 1536 (April’s low), 1530 (February’s high), 1509 (January’s high), 1501 (March’s low), and 1488 (200 day moving average).

Posted May 31, 2013 by edmcgon in Daytrading, Investing, Market Analysis

Ed’s Daily Notes for May 31st   10 comments

I didn’t do this last week, but let’s spend some time looking at the news on my stocks, and the ones on my watchlist:

All Things D: The BlackBerry of BlackBerry Users’ Dreams

In case you missed it, Blackberry’s Q10 is being released by T-Mobile on June 4th. From the review above, it sounds like Blackberry is still competitive, at least with the physical keyboard crowd.

Don’t get me wrong: I don’t see Blackberry becoming dominant in the smartphone market. But they are far from dead too.

Bloomberg: Disney Falls After Rasulo Tempers Expectations for Quarter

Walt Disney Co. (DIS) fell the most in more than a month after Chief Financial Officer Jay Rasulo tempered expectations for the current quarter, citing film marketing costs and tough comparisons with a year earlier.

Shares of Disney, based in Burbank, California, declined 2.4 percent to $64.65 at the close in New York, the most since April 15. The stock has gained 30 percent this year.

Rasulo, speaking at a Nomura Securities investor conference, said he was reiterating and elaborating on comments made earlier this month that the company’s film studio and theme parks would be up against tough year-over-year comparisons in the current fiscal third quarter.

“When I’m looking at estimates across the Street, maybe I wasn’t clear or they weren’t properly reflected,” Rasulo said.

Disney will incur significant marketing costs for “The Lone Ranger” this quarter, while revenue from the film won’t start to flow until July 3, after the period ends, he said. “Iron Man 3,” while collecting about $1.2 billion at the worldwide box office, will fall short of “Marvel’s The Avengers” from last year, he said.

Those items will lower operating income at the film unit by about $150 million from a year earlier, Rasulo said. In addition, cable-sports channel ESPN will recognize about $75 million less in deferred revenue for the period than a year ago, he said.

Theme-park results will reflect one less week of Easter holiday traffic, compared with the same period last year, Rasulo said. The company won’t get the same earnings boost from the new cruise ship Fantasy as it did a year earlier because the ship has now been operating for more than a year.

Analysts predict Disney will earn $1.05 a share this quarter excluding items, the average of 29 estimates compiled by Bloomberg. They forecast sales of $11.8 billion.

I see this as a blip in the overall Disney picture, especially for long-term holding.

Zacks (via Yahoo Finance): EA Launches Fuse

Electronic Arts (EA) and Insomniac Games announced the availability of their new game Fuse in North American stores. The game is also available for download from EA’s online distribution platform Origin. In Europe, the game is set to release on May 31.

…Although co-published with Insomniac, Fuse is EA’s only original game title for fiscal year 2014. EA is slated to release 11 games during the year, of which 10 are sequels and updates to major franchises such as FIFA, Madden NFL, NHL, NBA, Battlefield and Sims.

Major game publishers such as EA and Activision (ATVI) have been criticized by gamers for the lack of new game titles in their portfolio. Their overdependence on sequels of matured franchises has been one of the primary reasons behind gloomy retail sales in recent times.

If you want to know the problem with the gaming industry today, look no further than this. Frankly, the only place I have seen innovation is from small gaming companies in South Korea. However, the other part of the problem is the customers, who complain about lack of innovation, yet they keep plunking down money on re-runs while ignoring the new games.

Bloomberg: Impala to Fusion Impress as Detroit Stymies Hyundai-Kia

Above is a good analysis of the car manufacturing industry, and why I keep Ford (F) on my watchlist.

Seeking Alpha: Aussie Dollar ETF Goes From Star To Laggard

I am still watching CurrencyShares Australian Dollar Trust (FXA), as one of the few currency etf’s that pays a monthly dividend (annual yield about 2.7%, although it fluctuates each month). However, as the article above notes, FXA has taken a beating recently. Analysts are putting targets of 80 and 90 cents on the Aussie dollar, which is currently trading around 96 cents per U.S. dollar. But if you can get into FXA near the low, whatever that happens to be, then this could be a very nice and safe long-term play.

Zacks (via Yahoo Finance): Genworth Down to Underperform

Here is why Zacks has downgraded Genworth:

The introduction of new products and pricing changes in the U.S. Life Insurance Division implemented over the past year are expected to continue in 2013 as well. These actions led to lower sales for Genworth.

Life insurance sales slipped 68% year over year, while long-term care insurance sales decreased 17% year over year. In addition, loss ratios of long-term care insurance business have been increasing over the past several years and ranged from 65% to 71% over the last five years.

Genworth expects operating earnings to be weighed upon by continued low interest rate environment. Genworth expects consolidated operating earnings per share from after-tax spreads to be down by 7 cents per share in 2013 and 11 cents per share in 2014. It also anticipates the U.S. Life Insurance segment to be affected majorly due to its product mix, long-term care and universal life insurance in particular.

Further, to emphasize on generating capital, increasing the financial strength and flexibility of the company as well as to simplify the business model, Genworth decided to divest the wealth management business. It recognized $27 million from goodwill impairment. The company also expects to record an additional after-tax loss of up to $10 million.

Genworth generated $10 billion in revenue in the last 12 months, and Zacks is talking about problems in the millions. Admittedly, Genworth has a low profit margin (3.8%), but it also is severely undervalued, with a price/book ratio of 0.33. If Genworth’s stock was priced according to its book value, it would be trading at $32.90, not $11.02. If the company does start losing money, that can certainly bring down the book value, but to a third? That would take either extreme mismanagement, which the company hasn’t shown, or a severe economic depression, which nobody is realistically predicting.

Another irony is one of the reasons which Zachs mentions for downgrading Genworth: “earnings to be weighed upon by continued low interest rate environment”. If you buy into the Federal Reserve “tapering QE” rumors, which I don’t, then interest rates should be going up in the near future, which would be good for Genworth.

Ultimately, Genworth is a value play, and minor speed bumps in quarterly earnings will not have a significant impact on how undervalued it is.

Market Watch: Barry Diller says closed cable system ‘has outlived itself’

Diller, chairman of IAC, nails it:

Long-time media baron Barry Diller said Wednesday that he sees closed cable TV systems as a dying breed and that programming will eventually shift to open Internet-based platforms.

“I can’t imagine that any of you enjoy the navigation system of cable. If you do, you don’t deserve to be here,” Diller told the crowd at D11, a conference in Rancho Palos Verdes sponsored by the AllThingsD technology blog.

Diller’s IAC is backing a controversial startup called Aereo, which provides antennas for users to pick up digital video broadcasts and still time shift their viewing, like on a cable-system’s DVR. The company has been sued by a consortium of broadcasters that include CBS, Comcast, Walt Disney Co. and News Corp., who allege the service infringes on their copyrights.

Calling the controversy over the lawsuits “overblown,” Diller said he is looking to have Aereo help shift TV platforms away from closed cable systems, adding that the broadcasts offered by Aereo are available available for free over the air.

“This is a market that is ripe,” he said of the need for innovation in broadcast TV. “This has been a system that has certainly outlived itself.”

I will admit that holding both IAC and Disney seems like a conflict on the surface, but I don’t see it that way. I hold Disney more for their intellectual properties as well as their other businesses, such as theme parks. On the other hand, IAC is bringing free broadcast tv to the internet, which is overdue. If Disney wants to, they can offer their content on the internet for money, but they think they can make more money from the “old way”. At some point, Disney will be brought kicking and screaming into the 21st century, and I don’t see the process as severely impacting their bottom line due to the wide variety of income sources they have. Disney will eventually adjust their content distribution to account for the new way, and still make plenty of money. Meanwhile, IAC will lead us into a better future where we can get the content we want, when we want it, and not have to pay for content we don’t want. This is what innovative companies should do.

Reuters: Intel scores major win in new Samsung Galaxy tablet

If you need proof that Intel is making progress in its move to mobile, here you go:

Samsung Electronics has chosen an Intel Corp processor to power a new version of one of its top-tier Android tablets, a source with knowledge of the plans told Reuters, in a major victory for the U.S. chipmaker, which is struggling to find its footing in the mobile market.

Samsung has chosen Intel’s Clover Trail+ mobile chip for at least one version of its Galaxy Tab 3 10.1, which competes with Apple Inc’s iPad, a source familiar with the matter told Reuters on Thursday, speaking on condition of anonymity because the specifications have not been announced.

This is even bigger when you consider that Samsung is capable of making their own chips. For Samsung to go with an Intel chip to compete with Apple’s iPad tells you what a significant improvement the Intel chip is.

Mind you, I don’t think Intel is a buy yet, but it could be on a pullback. At this point, I would buy it in the $21.50-22.00 area.

Associated Press (via Yahoo Finance): Netflix to join the Nasdaq-100 index next week

Good news for Netflix, but it is still hugely overpriced. A P/E of 545? A PEG ratio of 7.89? I wouldn’t even consider Netflix until it drops below $160. From it’s current price of $222.66, that’s a big drop.

Wall Street Cheat Sheet: Cramer Says Buy Sprint, Northrop Grumman, and CVR Partners

As soon as I add CVR Partners (UAN) to my watchlist, then this has to happen:

CVR Partners (NYSE:UAN): Jim Cramer ranked this stock a Buy. Cramer previously ranked this stock a Sell on April 3, 2013. The stock’s 52-week high is $30.00, and its 52-week low is $19.21. “It is at the right level, and I’m saying you can buy it,” Cramer said.

There’s a “don’t buy it now” signal if ever I saw one…

Posted May 31, 2013 by edmcgon in Market Analysis, Portfolio, Stocks

May 30th: Ed’s Daily Portfolio Summary   4 comments

BBRY: 0.25 to $14.42 ( 1.76% , -0.21% overall)– bought at $14.45
BEAV: 0.89 to $64.26 ( 1.40% , 8.97% overall)– bought at $58.97
DIS: -1.61 to $64.65 ( -2.43% , -0.32% overall)– bought at $64.86
GNW: 0.31 to $11.01 ( 2.90% , 17.50% overall)– bought at $9.37
GOOG: 2.45 to $870.76 ( 0.28% , 8.77% overall)– bought at $800.52
IACI: -0.04 to $49.45 ( -0.08% , -3.00% overall)– bought at $50.98
IAU: 0.19 to $13.73 ( 1.40% , 2.46% overall)– bought at $13.40
NNVC: 0.01 to $0.63 ( 1.61% , 34.04% overall)– bought at $0.47
QCOM: 0.07 to $64.18 ( 0.11% , 3.55% overall)– bought at $61.98
SIVR: 0.27 to $22.49 ( 1.22% , -1.58% overall)– bought at $22.85
SWHC: 0.19 to $9.14 ( 2.12% , 5.79% overall)– bought at $8.64
YHOO: 0.52 to $26.33 ( 2.01% , 9.03% overall)– bought at $24.15

OVERALL: +0.54%

Posted May 30, 2013 by edmcgon in Open Thread, Portfolio

Quote of the day   Leave a comment

“The Federal Reserve, any central bank, should not be asked to do too much to undertake responsibilities that it cannot responsibly meet with its appropriately limited powers…Credibility is an enormous asset. Once earned, it must not be frittered away by yielding to the notion that a little inflation right now is a good a thing, a good thing to release animal spirits and to pep up investment…The implicit assumption behind that siren call must be that the inflation rate can be manipulated to reach economic objectives. Up today, maybe a little more tomorrow and then pulled back on command. Good luck in that. All experience demonstrates that inflation, when fairly and deliberately started, is hard to control and reverse.”–former Federal Reserve Chairman Paul Volcker

Posted May 30, 2013 by edmcgon in Economy, Federal Reserve

Traders Corner   18 comments

The S&P 500’s 20 day moving average (1639) is still providing some solid support. But I want to see the S&P finish above the 10 day moving average at 1657 before I will say the bulls are back.

The S&P 500 levels to watch today:

UPSIDE: 1651-1652 (3 data points), 1655-1656 (2 data points), 1657 (10 day moving average), 1660-1661 (2 data points), 1663 (May 20th’s low), 1667 (May 17th’s high), 1672 (May 20th’s high), 1674 (2 data points), 1685 (top of the Bollinger Bands), and 1687 (May 22nd’s high and the all-time high).
LAST CLOSE: 1648, inside the 1648-1649 (3 data points) range.
DOWNSIDE: 1646 (May 15th’s low), 1640 (May 29th’s low), 1639 (20 day moving average), 1635-1636 (4 data points), 1632-1633 (2 data points), 1626 (2 data points), 1622-1623 (3 data points), 1618-1619 (2 data points), 1616 (May 7th’s low), 1614 (May 6th’s low), 1596-1598 (5 data points, including April’s high and the 50 day moving average), 1593 (bottom of the Bollinger Bands), 1581-1583 (2 data points), 1572 (March’s high), 1536 (April’s low), 1530 (February’s high), 1509 (January’s high), 1501 (March’s low), and 1487 (200 day moving average).

Posted May 30, 2013 by edmcgon in Daytrading, Investing, Market Analysis

Ed’s Daily Notes for May 30th   Leave a comment

Bloomberg: Costco’s Profit Advances 19% as Membership Fees Boost Revenue

If you are looking for the next Wal-Mart, Costco might be it:

Costco Wholesale Corp. (COST), the largest U.S. warehouse-club chain, said third-quarter profit rose 19 percent, beating analysts’ estimates, as revenue from membership fees increased.

Net income in the quarter ended May 12 rose to $459 million, or $1.04 a share, from $386 million, or 88 cents, a year earlier, the Issaquah, Washington-based company said today in a statement. Analysts projected profit of $447 million, the average of 11 estimates compiled by Bloomberg.

Costco has worked to lower its already-discounted prices to lure more shoppers to its annual memberships. Third-quarter sales at stores open for more than a year increased 7 percent, excluding changes in gas prices and foreign-currency exchange rates. Revenue by similar measures fell 1.4 percent at Wal-Mart Stores Inc. (WMT) in the U.S. and 0.6 percent at Target Corp. (TGT) in their most recent quarters.

Revenue from membership fees advanced 12 percent to $531 million, the company said. That was part of a 7.9 percent increase in total revenue to $24.1 billion, Costco said. That compared with the $24.2 billion average estimate of 17 analysts.

Costco isn’t cheap at the current stock price, but it is worth adding to my watchlist to look for a good entry point later.

Financial Times: Ads on Facebook dropped after appearing next to offensive posts

Facebook has some big problems:

Major advertisers including Nissan and Nationwide have suspended Facebook marketing campaigns after their ads appeared alongside offensive posts, highlighting the risks of a new form of “targeted” advertising.

The cancellations follow complaints on Twitter and from women’s rights organisations over the publication of misogynistic content, including images of abused women, on the social networking site.

Targeted advertising identifies that a person is likely to buy a particular product, and then automatically places ads for that product on whatever page he or she visits.

Adverts for Japanese carmaker Nissan, Nationwide, the UK’s largest building society, Unilever’s Dove skincare brand, were automatically placed next to the offensive images that Facebook users either sought out or stumbled upon accidentally. To the companies’ embarrassment, screenshots juxtaposing the misogynistic images with their products were then widely circulated.

This does bring up the problem with targeted ads: Advertisers have no control over what their targets are viewing, and run the risk of having their ads appear on pages with content completely unrelated to their product.

This also brings up the problem with social media websites like Facebook and Twitter: If they don’t censor their content, they run the risk of offending advertisers. On the other hand, if they do censor their content, they run the risk of going too far, and running off their users. It is a Catch-22.

My advice: Avoid companies that rely on social media for their revenue stream. They can’t win until they can move away from social media for the majority of their revenue.

Posted May 30, 2013 by edmcgon in Market Analysis, News, Stocks