Friday, July 24, 2009

Daily Wrapup For July 24th

[Note: corrected number of stocks in the Bin.]

It was a real nail-biter for the NASDAQ when Microsoft disappointed the Street. By 10 AM today, that average was down 1.81%. The other two also fell at that time, although to a much lesser extent. Since the three major averages had rallied so much yesterday, a large part of this mornings's drop can be explained by yesterday's rally going too far. There is still some near-term skepticism regarding the recent rally, with doubts also expressed by some otherwise optimistic technical analysts. By mid-afternoon, the Dow and the S&P were at break-even, and the NASDAQ has shaved more than half its loss. Another dose of late afternoon hope managed to put the first two averages into gainer territory, and the NASDAQ up to -0.31%...a lot better than -1.81%. One sector that rose more than 1%, with the largest majority of gainers of all the sectors, was the Utilities. Many utilities in the Low P/E bin have been recent gainers, and some have been in a bull trend for close to a month. This could be a sign that leadership is passing from the recovery-fueled tech sector to value industries that have largely held up, earnings-wise.

The lowest-quintile P/E cutoff also rose today, from 10.78 to 10.87. Since the S&P didn't change all that much today, its dividend yield remained unchanged at 2.77%. When ETFs and stocks with market caps of less than 500M were eliminated, along with too-good-to-be-true cases, the Bin was left with the same number as yesterday: ninety-two stocks. Here are the changes in the Bin, as dash-listed below:

- Financial Federal Corporation

- Cooper Industries, Ltd.

The sole Arrival, Financial Federal, got back in because the P/E cut-off rose more than its own P/E today. Cooper got out because of a drop in its 12-month trailing earnings.

One utility that's now scraping the upper edge of the Bin's P/E cut-off is Nisource, a natural gas and electric utility holding company. Its operating subsidiaries are mainly in the Midwest and the centre-north Eastern Seaboard; Nisource's electricity operations are confined to northern Indiana. The stock was in a brief trading range until the end of May, subsequent to a slump from early May's pre-June high, after which it rallied. Two trading ranges in June, the more recent one higher than the earlier, gave way to a largely steady rise that's pushed it up from its May 27th low of $10.50 to its present $13.30. NiSource has been a stealthy gainer during that time, and its rise shows that the more visible tech group isn't the only sector that's showing mostly steady capital gains.

That's all for today's Wrapup. Thanks for reading, and enjoy the freedom from near-term earnings anxiety that comes with the value investing credo.

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