Tuesday, August 25, 2009

Daily Wrapup For August 25th

Thankfully for the bulls, the good-news parade continued today. The three major averages opened up about 0.4%, but they all got a real kicker with the release of the new consumer confidence index number. Rather than increase to 48, it shot up to 54.1. Last month's number was also revised upwards. This item added a kick in the pants to the averages, all of which were up by more than 1% shortly after the release. Then, they reversed completely. By 10:30 AM ET, they were all lower than the level they were as of the start of trading. However, a second rally ensued. More slow than the first, it also lasted longer. It too faded, though: at the day's nadir, the averages were well below the morning's lows. A late-day rally, beginning at 2:45 PM ET, held but only partially. After a session that could be called exciting, or frustrating, the Dow closed up 0.32%, the S&P 500 up 0.24%, and the NASDAQ up 0.31%. After trying yet again to break the $75 a barrel barrier, light sweet crude for October delivery plummeted $2.32 to close at $72.05.

The two main cut-offs for the Low P/E Bin barely budged. The lowest-quintile cut-off dropped one hundredth of a point, from yesterday's 11.96 to today's 11.95. The yield cut-off, the S&P 500 dividend yield, was unchanged at 2.59%. Once ETFs and stocks with market caps of less than 500M were eliminated, along with ones that yielded more than 10%, the Bin was left with ninety-nine stocks for a drop of one from yesterday. Here are the changes in the Low P/E Bin, as dash-listed below:

- Altria Group, Inc.
- CPFL Energia SA

- Bancolombia SA
- Snap-on Incorporated
- United Bankshares, Inc.

The first Arrival is one that's shifted in and out of the Bin for some time now. Altria Group, the U.S. arm of Phillip Morris, fell 0.98% today; that drop brought its P/E slightly below the lowest-quintile cut-off. The second is a newcomer. CPFL Energia, an electric-utility holding company whose operating subsidiary does business in Brazil, got into the Bin through a 3.35% drop in its stock. That plummet put its P/E well below the cut-off.

The first Departure has been a mainstay since the Bin's inception. Bancolumbia, one of Columbia's biggest banks, got out of the Bin thanks to a sustained rise in its stock. Today's 1.94% gain put its P/E over the cut-off. The same happy outcome visited Snap-On, a maker of tools and diagnostic equipment for professionals. Its stock gained 0.87%, which put its own P/E above the lowest quintile. The final Departure benefitted from a reversal in the regional banks. United Bankshares, a bank holding company whose subsidiaries operate in Virginia and West Virginia, gained 2.16% today. That rise put its P/E, like those of the other two Departures, above the Bin's cut-off.

A done deal, done with the FDIC as broker, still adds a kicker to a bank stock. Spanish bank Banco Bilbao Vizcaya Argentaria is now the new owner of most of the assets of the now-failed Guaranty Bank of Texas. The stock didn't react much when it was rumoured that Bilbao had won the bidding, but today's officiality did the trick - or added some fuel to an already-existing rally. Bilbao gained 2.90% in regular trading, and was up a little more in after-hours trading. The benefit was far smaller than BB&T's take-over of Colonial's assets last August 14th, but there still was one. Or what seemed to be one.

That's all for today's Daily Wrapup. Thanks for reading, and hold on to your valuation metrics.

Disclosure: I'm holding Bilbao in the actively-managed Marketocracy mock fund I run.

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