Wednesday, August 5, 2009

Daily Wrapup For August 5th

[Note: Corrected erroneous inclusion of GATX in Departures, and substituted proper one with appropriate commentary.]

Seemingly, the down days of August are here. A lower-than-expected rise in the ISM services index created enough of a foul mood to put the three major averages down close to 1% by 10:20 AM ET. The Dow and S&P began lumbering back up, but the NASDAQ didn't join in until the afternoon. That rally ended when the former two hit break-even, after which an end-of-day decline took all three down into negative territory. The Dow lost 0.42%, the S&P 500 closed down 0.29%, and the NASDAQ was once again the worst performer of the three: it finished the day down 0.91%. After a mid-session dip, light sweet crude closed up 55 cents to reach $71.97 a barrel.

The lowest-quintile P/E cut-off dropped marginally today, to 11.40 from yesterday's 11.41. The S&P dividend yield edged up by one basis point to 2.69%. After eliminating ETFs, plus stocks with less than 500M market cap and/or yield greater than 10%, the Low P/E Bin was left with one hundred and two stocks for a drop of two from yesterday. Here are the changes in the Bin, as dash-listed below:

- Cousins Properties Inc.
- Empresa Nacional de Electricidad
- Harvest Energy Trust
- Magyar Telekom Plc.
- NTELOS Holdings Corp.
- PH Glatfelter Company

- Allianz SE
- Anglo American plc
- Compass Minerals International, Inc.
- Fairfax Financial Holdings Limited
- Garmin Ltd.
- International Bancshares Corporation
- Tenaris SA
- The Travelers Companies, Inc.

With the exception of Harvest Energy Trust, all of the Arrivals are newcomers. Harvest, an oil, gas and refined petroleum products producer in Canada, fell down hard more than a month ago. Its yield went up above 10%, which got it out of the Bin. At its nadir, Harvest yielded more than 12%. Thanks to a revival in natural gas prices and crack spreads, Harvest has come back to the Bin after its stock recovered to near mid-June price.

Each of the other five Arrivals got in for one of three reasons. Cousins Properties, a real estate investment trust, and PH Glatfelter, a specialty paper producer and sometimes engineer'er, both got in the Bin because their market caps rose above 500M. Cousins was up 6.14% today, on no news, and Glatfelter was up 6.69%, on good earnings news and an upgrade. Empresa is a utility company based in Chile, Argentina, Columbia and Peru; it got in through P/E compression caused by a 1.43% drop in the stock. Magyar Telekom, a phone company in Hungary, got in because its yield has fallen to below 10%. The final Arrival is a phone company closer to home. NTELOS has its base in Virginia and West Virginia, where (like Magyar Tel) it supplies both wired and wireless service in its territory. NTELOS got in through P/E compression after a drop of 1.89% today.

Given the market's performance today, it may come as a bit of a surprise to see that most of today's Departures got out for happy reasons. The most common cause was dividend yield dropping below the yield cut-off. Allianz, a transnational insurance provider; Anglo-American, a global mining company specializing in diamonds, platinum-group metals, coal, base and ferrous metals; Compass Minerals, a rock salt and sulfate-of-potash miner; Fairfax, a Canadian insurance company; International Bancshares, a Texas-based bank holding company with some presence in Oklahoma and Mexico; Travelers, a U.S.-based insurance company: all of them got out through yield droppage. Garmin, a maker of GPS devices, got out because better-than expected earnings made the stock rocket up 23.8% today. Tenaris, a refiner company, is no longer in the Bin because its stock jumped up 2.07%. Both stocks' P/E slipped above the cut-off point, for essentially the same reason.

Sometimes, no news is bad news. Universal Corporation, a stock highlighted in this blog yesterday, had gained on news that it was maintaining its dividend. Today, though, it gave up all that gain and a lot more. Opening slightly below yesterday's close of $39.76, it descended in four stages to close with a loss of 6.16%. This drop could be attributed to people picking through its latest quarterly and seeing hidden flaws in its earnings report, which actually didn't impress all that much at the time of release yesterday. Perhaps the full impact of a falling dollar, in terms of raising Universal's costs, caught up with it today. Maybe the stock went too far, too fast in the last half of July.

That's all for today's Wrapup. Thanks for reading, and may your own lack of news turn out to be good news.

Disclosure: I still have Universal in my actively-managed Marketocracy mock fund.


  1. First time I've been over here on this blog, and I'm pretty impressed. I'll be making much more regular visits.

  2. Thanks so much. I've got your "Finding Value" blog in my blogroll, and I'm checking out the latest entries.