Monday, August 3, 2009

Daily Wrapup For August 3rd

[Note: Corrected a miscategorized Arrival as not being a newcomer.]

It was a day of breaking round numbers for two of the three major averages. The S&P 500 closed above 1000, and the NASDAQ broke 2000. All three averages had strong gains today, leaving more than a few wondering when it'll end. Oil shot up once again, along with silver and copper, but gold barely moved. It's no wonder why basic materials was the strongest-performing sector today, followed by energy. The China-as-bubble-economy meme keeps spreading, as more people see but don't believe.

The lowest-quintile P/E cut-off shot up today, from Friday's 10.93 to today's 11.35. This P/E marks the highest cut-off number since the Bin got started. In accordance with the S&P's 1.53% rise, the yield cut-off for the Low P/E Bin fell to 2.69%. (Just to remind everyone, that cut-off is the S&P 500's dividend yield.) When ETFs, stocks with market caps of less than 500M and ones with yields of greater than 10% are thrown out, the Low P/E Bin is left with one hundred and two stocks: an increase of eleven from yesterday. By far, this day's additions outnumber any other day since the Bin got rolling. Here are today's changes, as dash-listed below:

- Cracker Barrel Old Country Store, Inc.
- CVB Financial Corp.
- DTE Energy Company
- EarthLink, Inc.
- Enersis SA
- Entertainment Properties Trust
- Garmin Ltd.
- H&R Block, Inc.
- Hillenbrand, Inc.
- Merck & Co., Inc.
- Permian Basin Royalty Trust
- Sempra Energy
- SK Telecom Co., Ltd.
- Telkom SA Limited
- Tsakos Energy Navigation Ltd.
- Willis Group Holdings Limited

- AstraZeneca plc
- Royal Dutch Shell plc
- Snap-on Incorporated
- Titanium Metals Corporation

Eleven of the sixteen Arrivals were old Bin residents that have come back. Cracker Barrel Old Country's P/E is well within the lowest quintile, but its yield got it out of the Bin earlier; it's now above the cut-off. Garmin's in much the same boat, and Telkom's in a similar one: it's dropped to the point where its yield is above the S&P's. CVB, Hillenbrand, Merck, Sempra and SK Telecom got back in because the cut-off P/E jumped above their own. Tsakos returned because its yield fell below 10%. Permian Basin's market cap rose above 500M today, bringing it back in too. DTE Energy one that hasn't been in the Bin for a long time. It's an electric and natural gas utility located in Michigan, and got in thanks to a rise in its 12-month trailing EPS.

The other five are newcomers to the Bin. Enarsis is another utility, but it's a foreign one that operates down in Latin America. It got in because its dividend was raised. Entertainment Properties is a REIT, but an unusual one: it owns movie theaters. Thanks to a rise in the stock's price, its yield is now below the 10% cut-off.

Those who remember the old dot-com boom days should remember Earthlink: it was one of the Internet jewels of the time. Had someone suggested ten years ago that Earthlink would be a low-P/E high-yield stock in August 2009, (s)he wouldn't have been believed. And yet, here it is. After crashing in 2000, and bottoming in 2002, the stock went basically nowhere while losses slowly changed into earnings. As it turns out, EarthLink's gotten in because it declared a dividend for the first time ever: the expected yield is 6.62% at today's close.

The next newcomer is a more well-known name. H&R Block got in because of the P/E cut-off's jump. Less well known is the final newcomer and Arrival. Willis Group specializes in the brokerage end of insurance, and has operations in several countries. Like H&R Block, it was shunted to the Bin by the P/E cut-off leaping above its own.

Astra Zeneca, the first Departure, dropped its dividend below the cut-off point. Royal Dutch, Snap-On and Total got pushed out because of earnings declines in the second quarter. Titanium's P/E also rose, but for a happier reason: the stock gained 6.21% in regular trading today.

A still-current Bin stock with a big gain too was Barclay's plc. It reported its first half year earnings this morning, which were up 8 percent over the first half of 2008's. Despite the fact that its net income came in well below the consensus figure, the stock shot upwards today to close at $22.15 for a gain of 7.84%. Its investment-banking division was the reason for the increase, as the bank is still dogged by bad loans. In retrospect, Barclay's purchase of Lehman Brother's investment-banking arm was quite shrewd. It's where a lot of this half's profit came from.

That's all for today's Wrapup. Thanks for reading...and think of October. Whichever one you please.

1 comment: