Friday, August 7, 2009

Daily Wrapup For August 7th

This time, it was different. The number that everyone was waiting for - the unemployment rate - was released before the bell, and the markets went on a tear after its release. For the first time in a long time, the U.S. unemployment rate fell: it's now 9.4%. Payrolls also decreased by far less than expected. Both number contributed mightily to a rally in all three major averages, which were already on a roll before the jobs numbers were released. By 11 AM ET, all three were up about 1.5%. The peak was hit around 2 PM ET. After which, a slow retrenchment brought the Dow down to a 1.23% gain on the day, the S&P 500 to a 1.34% gain, and the NASDAQ to a 1.37% gain. Unlike during the last few trading days, the NASDAQ kept up with the others today. Bucking the trend, oil dropped $1.01 to close at $71.03 per barrel. That pullback didn't stop oil from being another of this week's gainers, though.

The Low P/E Bin expanded somewhat because the lowest P/E quintile cut-off ramped up today. From yesterday's 11.41, the cut-off ended the week at 11.62. Mirroring the S&P 500's rise, the yield cut-off dropped three basis points to 2.67%. After ETFs and stocks with market caps of less than 500M were turfed out, along with any sporting yields of 10% or more, the Bin was left with one hundred and four stocks for a gain of seven from yesterday. Here are the changes in the Low P/E Bin, as dash-listed below:

- Allianz SE
- General Dynamics Corporation
- NuStar Energy LP
- PH Glatfelter Company
- Pepco Holdings, Inc.
- PG&E Corporation
- PriceSmart, Inc.
- SCANA Corporation

- Garmin Ltd.

Today's eight Arrivals are unusual in that three of them are utilities. Two of those are new to the Bin, and one has been gone for a long time. The new ones are Pepco Holdings, an electric and natural gas supplier that services Washington D.C and its environs, and PG&E, based in central and northern California but in the same line as Pepco. Pepco has the highest yield of any electric utility in the Bin, and the highest payout ratio too. SCANA, the one that's been gone for a while, is a pure-play electric utility based in North and South Carolina. All three of them got in through the P/E cut-off rising above their own.

Allianz, a supplier of insurance globally, is another long-term resident returning to the Bin. It got back in for the same reason as the three utilities above. Its absence was short, but not as short as two others which got back in after only a day's absence. General Dynamics, a materiel supplier and owner of Challenger jets, saw its yield rise above the cut-off. The stock was up today, but not enough to keep pace with the S&P. PH Glatfelter, a manufacturer of specialty and engineered paper products, is also back; its 2.93% gain put its market cap above the 500M cut-off again. The final new entrant is a discount chain that operates warehouse shopping club stores. PriceSmart saw its shares leap up 5.19% today because its July net sales were up 4.8%. What got it in the Bin was its 2Q earnings rising, putting its P/E well below the cut-off.

The only Departure, Garmin, climbed back out of the Bin through P/E expansion. The GPS navigation system manufacturer's 2.28% gain today, combined with a lowering of its 12-month trailing EPS, got its P/E a fair bit above the cut-off. It looks like Garmin is gone for good, mostly because it gained 17.0% this week.

Speaking of gainers, Aircastle had a huge leap today thanks to its earnings as released before the bell. Its 2Q '09 EPS was 35 cents, down slightly from 2Q '08 but well above analysts' expectations. The stock started off slow, but roared up for the rest of the day to end with a 23.3% gain. The company owns and leases out commercial aircraft, and it had to deal with a cash-flow misallocation issue last year that covered the years 2005 to 2007. Until today, the stock was churning along in a range reserved for the overlooked...why, I cannot say.

That's all for today's Wrapup. Thanks for reading, and enjoy the weekend - and August while it lasts.

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