Tuesday, August 11, 2009

Daily Wrapup For August 11th

Despite some good news on the economic front, the three major averages fared badly today. There wasn't a single moment when any of them were up on the day, and all three dropped by more than 1% as of the close. It was reported this morning that U.S labour costs dropped and labour productivity soared. Also reported was a drop in U.S. wholesalers' inventory levels, which could be seen as an improvement (if this recession were an ordinary one.) Nevertheless, the market either took the gloomy view and/or shrugged both off. The Dow dropped 1.03% on the day, the S&P 500 dropped 1.27% and the NASDAQ dropped 1.13%. Oil closed up, despite a drop earlier in the day: a report about Chinese imports continuing to grow helped put light sweet crude up 33 cents to close at $70.93 per barrel.

The lowest-quintile P/E cut-off also dropped today, from yesterday's 11.60 to today's 11.41. As the S&P dropped, the yield cut-off rose three basis points to 2.68%. When ETFs and stocks with market cap of less than 500M are thrown out, along with ones that yield more than 10%, the Low P/E Bin was left with ninety-nine stocks for a drop of seven from yesterday. Here are the changes in the Bin, as dash-listed below:

- Entertainment Properties Trust
- South Jersey Industries

- Altria Group, Inc.
- CenterPoint Energy, Inc.
- Edison International
- France Telecom SA
- Magyar Telekom Plc
- Navios Maritime Holdings Inc.
- Permian Basin Royalty Trust
- SCANA Corporation
- UIL Holdings Corporation

Entertainment Properties Trust, a REIT that holds movie theatres, was the first of the two Arrivals. It got back because a 5.21% decline in the stock brought its P/E lack below the cut-off. The second and last Arrival, South Jersey Industries, is a natural gas utility holding company whose service area is the southern part of New Jersey. It got in the Bin through its 12-month trailing earnings going up enough to put its P/E below the cut-off.

There were nine Departures today, which made for a mixed lot. Altria Group, the holding company for Phillip Morris' U.S operations, got out because the P/E cut-off fell below its own. CenterPoint, an electric and natural gas utility located in Texas, got out because its P/E rose today thanks to a 0.64% gain in the stock. Another electric utility, Edison International, got out because of a 12-month trailing earnings drop which pushed its P/E above the cut-off; France Telecom got out for the same reason.

Magyar Telekom, the main telecom company in Hungary, got out of the Bin due to its yield rising above 10%. The next two departed because their market caps dropped below 500M. Navios Maritime, a bulk shipper, and Permian Basin, an oil and gas income trust, dropped 5.81% and 2.61% respectively. SCANA Corporation, on the other hand, got out because the P/E cut-off dropped below its own. That electric utility was up 0.24% today. The final Departure was yet another electric utility, UIL Corporation, which left the Bin for the same reason as SCANA.

Some companies are favoured in earnings season, some are not. WSP Holdings, a maker of drill casings and other tubular goods for the oil industry, was not. It announced second-quarter EPS of 10 cents per ADS, as compared with 25 cents for the second quarter of '08. This 60% drop caused the stock to plummet 18.57% on the day. This stock had rocketed up starting June 9th, on a tear that took it above $7.00. The rally fizzled late that month; the stock ended up hanging around $6.00 until today. Today's plummet, to $4.91, puts it only sixteen cents above its price on June 8th. Its reversal makes for a cautionary tale for chart-watchers, and those who think that a ramp-up signifies a recovery in the offing.

That's all for today's Wrapup. Thanks for reading, and watch out for falling bubbles.

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