Friday, August 28, 2009

Daily Wrapup For August 28th

The week ended with the three major averages stuck in a holding pattern. After opening with all three in positive territory, particularly the NASDAQ, the averages began a drift downwards starting at about 10 AM ET. The University of Michigan consumer confidence index, released at about that time, showed a "Consumer Mood at Four-Month Low." Quantitatively, the Reuters-University of Michigan index dropped from 66.0 to 65.7. Oddly, it contradicted the Conference Board's own number released three days ago; the latter exhibited a surprising leap upwards. Suffice it to say that the current picture consumer-wise is murky. Other consumer-related data released today showed a small rise in spending combined with flat incomes for July.

The downdrift in the three major averages continued to just before 12:30 PM ET, when they all showed losses. The rest of the day saw a slow trundle upwards, although faster for the NASDAQ. At the end of the regular trading day, the Dow was down 0.38%, the S&P 500 was down 0.20%, but the NASDAQ was up 0.05%. Encouraging results from Dell before the bell, along with the recent performance of the NASDAQ itself, encouraged speculation that tech might save the overall market from an expected September-October correction.

The lowest-quintile P/E cut-off rose from yesterday's 11.92 to today 11.95. Also rising was the yield cut-off, being the S&P dividend yield, which inched up a basis point to 2.59%. Once ETFs and stocks with less than 500M market cap were thrown out, along with ones that yield more than 10%, the Low P/E Bin was left with one hundred stocks for a drop of three from yesterday. Here are the changes in the Low P/E Bin, as dash-listed below:

- PriceSmart, Inc.
- Snap-on Incorporated

- Cooper Industries, Ltd.
- France Telecom SA
- General Dynamics Corporation
- PartnerRe Ltd.
- Safety Insurance Group, Inc.

Both Arrivals have been in the Bin before, with one of them straddling the borderline. The stock of PriceSmart, a chain of warehouse shopping clubs, dropped 0.67% today; that drop brought its P/E down below the lowest-quintile cut-off. The second Arrival, tool maker Snap-On, got back in for the same reason; its stock dropped 0.62%.

Three of the five Departures got out because their yields dropped below the S&P 500 yield cut-off. France Telecom, defense company General Dynamics, and international reinsurer PartnerRe were the three. Of the other two, only one got out of the Bin due to a rise in its stock. Cooper Industries saw a gain of 1.79%, putting its P/E above the Bin cut-off. On the other hand, the stock of Safety Insurance dropped 0.92% today. That fall put its market cap below the 500M cut-off.

J.P. Morgan's upgrade of Compass Minerals International seemed to have set off a cascade. This last week, two other investment firms have added Compass to their watch lists and assigned it a "buy" and an "outperform" respectively. The first firm was KeyBanc, which initiated coverage last Monday with the "buy." The second is BMO Capital Markets, which initiated coverage today with the "Outperform." The latter recommendation notes that winter's a'comin, and expects the sulfate of potassium market to pick up. [It also assumes normal winter conditions.] Considering that two firms have already followed in his or her wake, the J.P. Morgan analyst responsible has something to eat out on.

That's all for today's Daily Wrapup. Thanks for reading, and have a restful weekend - whether it be hot or cold.

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

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