Monday, July 13, 2009

Daily Wrapup For July 13th

Evidently, analysts can still move markets. Favorable comments from Meredith Whitney about Goldman Sachs (and Bank of America) helped kick the financials up today. Bullish comments from some other analysts about Goldman helped move all three averages up too, to well over 2% gains today. The bears seem to have been put into the cupboard for today, although it's relatively easy to find bulls that are still cautious. A likely explanation for today's spurt-up is that the market was oversold as of Friday, and was looking for an excuse to rally.

The P/E cutoff for the Low P/E Bin rose as well, to 9.75. The dividend cut-off fell, in part because the Yahoo!-Finance-published dividend rate for S&P SPDRs dropped somewhat. It wasn't just today's rally that dropped the Bin's rate cut-off from 3% to 2.77%. After getting rid of ETFs, and companies with less than 500M market cap and/or greater than 10% yield, eighty-eight stocks were left in the Bin: an increase of four from last Friday's eighty-four.

Here are today's changes, as dash-listed below:

- AGL Resources Inc.
- BB&T Corporation
- General Dynamics Corporation
- Textainer Group Holdings Limited
- UGI Corporation
- Weight Watchers International, Inc.

- Bank of Hawaii Corporation
- Deere & Company
- Enerplus Resources Fund

Three of the new Arrivals, including General Dynamics, got into the Bin because of the lowered dividend cut-off. UGI got back in because the P/E cut-off rose faster than its own P/E today. Weight Watchers fell today; that slight drop, combined with the P/E cut-off's rise, got it back into the Bin.

The first Departure, Bank of Hawaii, got out through its P/E expansion outpacing the P/E cut-off's increase. It benefitted from the general rise in financials today, closing up 4.38%. Deere enjoyed similar fortune, closing up 3.63%.

Last Wednesday, in a comment on Alcoa's earnings, I forecasted that the Low P/E Bin would see more companies from the Aerospace and Defense industry. Today, the Bin did get another one - a name more well-known than, say, Barnes Group. General Dynamics' name recognition primarily comes from its military contract work. Its arrival in the Bin suggests that the military-contracting industry is not expected to have a robust future.

That's all for today's Wrapup. Thanks for reading, and may your stocks not need analysts' pushes to make them good investments.


  1. "market was oversold as of Friday"

    was thinking same thing. Not sure I understand Whitney's valuation metric for banks. She was saying such and such bank deserves this price to tangible or book bc that's the way to value them. I don't know hardly anything about their balance sheets but I thought it was about imossible to value them bc of all the toxic crap still there...

  2. She said as much earlier. There's nothing like a rising market, and the need to secure fees for one's new firm, to change a stock-valuer's opinion.

    More seriously, though: a large part of contrarian value investing consists of slogging through the financials of an industry with a bad name, in order to find companies that have been inaccurately tarred with the same brush. Example, although it'll be more relevent as of the end of this year: finding a a CRE company or REIT that was sagacious/lucky enough to have minimized the earnings dent from the general commercial real estate decline.

    Goldman may just well be the financials stock that's safest to recommend, not to mention a highly marketable call. I don't think Ms. Whitney has changed her opinion on Citibank.