Tuesday, July 21, 2009

What A Change A Difference Of Opinion Makes

A week ago, I pointed to two stocks that shrugged off bad news. Both of them have not plummeted subsequently; in fact, both are up. One of them, Barnes Group, had gotten its earnings estimate slashed by a KeyBanc analyst. It didn't react all that much to the news, although it sunk slightly the next trading day. Today, however another analyst upgraded it. That news was enough to send Barnes up 6.80% on the day.

The second analyst's conclusion is an interesting one. His case is made on undervaluation - specifically, that the stock's "'valuation now fully discounts expected weakness in the company's transportation and industrial end markets and uncertainty in aerospace markets'" At yesterday's price, Barnes met his free-cash-flow yield target.

Barnes' dividend yield is currently 4.97%. Two other companies with similar yields, Caterpillar and Eaton, have both shot up recently in part because it was feared they would cut their dividends. They haven't, and it's likely that they won't. Barnes' dividend was likely questioned earlier.

I won't put words in the analyst's mouth, but I supect that the upgrade is a dividend play.


  1. ok yeah, I read one of your posts on some range breakouts awhile back. forgot if there were other posts on them. what are your favorite range breaks?

  2. None now unless they slump back. Of the six stocks, Banco Bilbao Vizcaya Argentaria [ BBV ] impressed me most with regard to the long-term fundamentals. Deluxe Corp. [ DLX ] had the longest and strongest breakout, and it's a stock whose price to long-term earnings ratio is well in the single digits - even now. The trouble with Deluxe is that it's gone really far recently, and there's a risk it might slump back to its breakout price or close to. I've seen that before with other breakout stocks.

    With regard to other Low P/E Bin stocks, I'm watching ranges right now. One interesting range stock, although it doesn't look to be much of a mover, is Sunoco Logistics Partners [ SXL ].

    I put Bilbao and Sunoco Logistics in my actively-managed mock fund, just to let you know.