FedEx Repeats Itself Successfully

via WSJ.com: Stocks To Watch Today by Bob O'Brien on 9/28/09

The secret to a successful outlook, as learned Monday by FedEx (FDX): in a circumstance when Wall Street ignores you the first time, just repeat yourself.
Here's the reality: FedEx shares have moved 3% in higher in Monday's trading, after the package-delivery concern said it thought the challenges in the broad economy had troughed, and that conditions could be expected to improve through the balance of the year.
"We think we have hit bottom, and traffic is climbing up from a multi-year low," FedEx chief executive Frederick Smith said Monday in Memphis, where the company is hosting its annual meeting. "We definitely see the light at the end of the tunnel" in terms of the economy.
The stock jumped 3% on his comments.
By contrast, when Smith offered a similar - but actually more precise - assessment of the economy two weeks ago, Wall Street not only ignored the good news, it focused on the year-over-year decline in profit performance the company recorded.
At that time, Smith said he expected the U.S. gross domestic product to grow by 3% in the current quarter, nearly 5% next quarter, and about 3% next year.
Smith wasn't as specific in Monday's outlook, though the tone of his comments sounded similarly constructive.
Of course, it might be asked whether relatively modest growth coupled with some challenging earnings comparisons warranted a 27 times earnings multiple, which is what investors have placed on FedEx shares.

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Where long term value investing is concerned, Benjamin Graham was the original Intelligent Investor. Graham, (1894-1976) contributed enormously to the subjects of Value Investing and Security Analysis. Whether you are performing your own portfolio management or just need ideas on buying stocks to boost your Roth IRA or 401k retirement savings accounts ahead of Wall Street, The Intelligent Investor is a must read for Value Investors.

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If you are an iPhone user looking for a application to follow the market in real-time then you need to download this free application. DailyFinance is the only free application that provides real-time stock quotes, tracking for multiple portfolios, customizable news from over 3,000 sources and professional-grade charting.

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Follow leading global market indicators as well as the individual securities moving the U.S. markets via the top Gainers, Losers, and Most Actives throughout the trading day.

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http://www.nasd100.com is a good source to look for stocks satisfying various fundamental criterias. Of course you will still have to study each stock individually before you blindly go ahead and start buying the top stocks.

Below are rankings of stocks in the S&P 500 Index, based on the following metrics:

P/E Ratio: Price-Earnings Ratio based on EPS for the last 12 months.
Long-Term Growth: Long-Term (next 3-5 years) EPS Growth Rate estimated by Wall Street analysts.
PEG Ratio: Price/Earnings-to-Growth Ratio, which equals P/E divided by Long-Term EPS Growth Rate.
Net Profit Margin: Net Profit Margin for the last 12 months.
Analyst Rating: Average rating given by Wall Street analysts.
Potential Upside: Difference between Wall Street analysts' average target price and current price.
Year-to-Date Performance: Percentage change in stock price year-to-date.
Institutional Ownership: Percentage of shares held by institutional investors.
Short Interest: Short Interest as a % of total publicly owned shares.

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TJX Companies (TJX)

via Stock Picks Bob's Advice on 7/28/09

Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice! As always, please remember that I am an amateur investor so please remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

This past month I presented TJX Companies to my Stock Club and they went ahead and bought a few shares for our portfolio. I do not personally own any shares of TJX Cos. (TJX) but do think it deserves a spot in this blog. TJX closed today (7/28/09) at $36.25, up $.35 or .97% on the day.

Most of us know TJX through the 'flagship' store of the chain TJ Maxx, however, TJX is more than just the Maxx chain. As noted on this Yahoo "Profile" for TJX:

"The TJX Companies, Inc. operates as an off-price retailer of apparel and home fashions in the United States and internationally. It sells off-price family apparel and home fashions through T.J. MAXX and MARSHALLS, HOMEGOODS, and A.J. WRIGHT in the United States; WINNERS and HOMESENSE in Canada; and T.K. MAXX and HOMESENSE in Europe."

In general we have an AWFUL retail environment in the US as well as elsewhere. As this article from the NYTimes points out, June, the latest recorded figures available, continued the trend of weak sales numbers for United States retail firms.

"On Thursday, the industry posted a 4.9 percent sales decline in June, in contrast to a 1.9 percent increase a year ago, according to Thomson Reuters, which said the decline capped the longest negative streak on record."

Then WHY would I be writing up a retail firm in this sort of awful environment? Well it turns out that as one might expect there are always some bright spots even in negative news. In fact, TJX has been bucking the trend and last month reported positive same store sales growth with a 4% same-store sales increase! It seems that customers are still seeking those 'name brands' normally found in more expensive chains but now being sold at TJ Maxx and elsewhere as part of 'close-outs'. Anyhow, that's my take on this apparently paradoxical retail report.

In fact, on July 9th, 2009, TJX raised guidance for the upcoming 2nd quarter report. As reported:

"TJX now anticipates second-quarter earnings from continuing operations of 56 cents to 59 cents per share. Its previous guidance was for earnings of 43 cents to 49 cents per share."

Apparently, as the story relates, analysts from Thomson Reuters had been expecting a profit of 49 cents per share. And the stock has recently been responding to this series of good news reports!

Looking at the latest quarterly report, TJX reported 1st quarter results on May 19, 2009. In the quarter, net sales climbed 1% to $4.35 billion and comparable store sales growth increased 2% over last year. (We can see that for the last couple of months, same store sales growth has been closer to 4-5% each month).

Net income from continuing operations was $209 million, and diluted earnings per share worked out to $.49/share compared to $.44/share last year. Excluding last year's "tax benefit", diluted earnings actually increased 17% over last year's results. The company beat expectations of $.45/share on $4.3 billion in sales according to analysts polled by FactSet Research.

Reviewing the Morningstar.com "5-Yr Restated" financials from Morningstar.com, we can see that sales have grown steadily from $14.8 billion in 2005 to $19 billion in 2009 and $19.05 billion in the trailing twelve months (TTM). Earnings have also steadily increased from $1.41/share in 2006 to $2.00/share in 2009 and $2.05 in the TTM. Dividends have been paid and increased yearly at least since 2005 when $.17/share was paid. This has been increased annually to $.45/share in the TTM. The company has also been reducing outstanding shares from 512 million in 2005 to 438 million in the TTM.

Free cash flow has been steady with $817 million reported in 2007, and $714 million in the TTM. In terms of the balance sheet, TJX is reported by Morningstar to have $1.012 billion in cash and $3.394 billion in other current assets, compared to $3.33 billion in current liabilities and $1.28 billion in long-term liabilities. This works out to a current ratio of approximately 1.3.

Looking at Yahoo "Key Statistics" for some valuation numbers, we can see that this is a Large Cap stock with a market capitalization of $14.99 billion. The trailing p/e is a moderate 17.61 with a reasonable PEG ratio of 1.27. There are 413.5 million shares outstanding with 410.97 million that float. Currently, as of 6/25/09 there are 10.25 million shares out short representing 1.9 trading days (the short interest ratio), less than my own 3 day rule for significance.

The forward annual dividend is $.48/share with a forward dividend yield of 1.3%. The last split according to Yahoo was in May, 2002, when the stock split 2:1.

If we review a "point & figure" chart on TJX from StockCharts.com, we can see that after hitting a low of $15.00 in February, 2003, the stock climbed the next 5 years to hit a high of $37 in August, 2008. With the retail 'melt-down' TJX melted with the rest of the stocks to a low of $18.00 where it bounced twice first in November, 2008, and then again in December, 2008, only to tun higher in February, 2008, where it has moved strongly from a $19.50 level to its current level of $36.25! The chart looks quite strong if possibly a bit over-extended in its current move.

To summarize, retail is a very difficult place to be 'playing' today. However, maybe the 'cheap chic' so often attributed to Target (TGT) might actually be better-played with TJX. Here is a company that has shown positive same store comparisons the last couple of months, come in with earnings that beat expectations and has raised guidance. Just like old times!

Anyhow, this is the kind of stock that I like and would love to add to my portfolio if I get the right signal at the right time.

Thanks again for visiting and my apologies once more for being so lax about posting here! If you have any comments or questions, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.

Yours in investing,

Bob

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Colgate Palmolive (CL) and Coca-Cola (KO) "Trading Transparency"

via Stock Picks Bob's Advice on 7/30/09

Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice! As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

Colgate-Palmolive (CL) is definitely one of my favorite 'comfort stocks'. However, I wasn't very comfortable when they reported their 2nd quarter results that beat expectations on earnings but missed on revenue. As reported today before the open, profit came in at $1.07/share exceeding expectations of $.98/share, but revenue came in a little light at $3.75 billion, under the expected $3.83 billion. Not really a big deal imho, but enough to spook skittish investors (like myself) who really don't enjoy hanging on to a stock when the market roars ahead and the stock price drops on a small disappointment. Earlier today I sold my 43 shares of CL at $71.92/share. These shares had been purchased 4/24/09, just 3 months ago at a cost basis of $59.55/share. Thus, I had a gain of $12.37/share or 20.8% since purchase.

Preserving gains is about as important as avoiding losses in my strategy and I chose to swap out of Colgate (CL) and purchased some shares of Coca-Cola (KO) hoping that my portfolio would 'go better with Coke'!

I went ahead and purchased 50 shares of Coca-Cola (KO), a slightly smaller position than my Colgate, at $50.39/share this morning.

Let's take a brief look at Coke and see if it makes sense and might offer almost as good an opportunity for this investor as my shares in Colgate!

On July 21, 2009, Coca-Cola (KO) reported 2nd quarter results. Earnings climbed 43% to $.88/share vs. $.61/share last year...but last year's results were dampened by $.40/share in one-time restructuring charges and asset 'write-downs'. Sales dipped 9% to $8.27 billion. So in fact, this was less than stellar.

Looking at the Morningstar.com "5-Yr Restated" financials on Coke, we can see the steady revenue growth from 2004 at $21.7 billion, increasing to $31.9 billion in 2008 only to dip slightly to $31.7 billion in the trailing twelve months.

Earnings have increased from $2.00/share in 2004 to a peak of $2.57/share in 2007, dipping to $2.49/share in 2008 and $2.43/share in the TTM. Again demonstrating a little weakness recently.

Free cash flow is not a problem with KO, with $4.5 billion in 2006 increasing to $5.3 billion in the TTM. This contributes to a balance sheet with $6.8 billion of cash, $7.9 billion of other current assets balanced against current liabilities of $13.2 billion. The company also has a moderate level of $9.2 billion in long-term liabilities.

Looking at some valuation numbers on Yahoo "Key Statistics", we can see that this is a large cap stock with a market cap of $116.5 billion. The trailing p/e is a moderate 18.63 with a forward p/e of 15.16. The PEG ratio, however, is a bit rich at 2.44 suggesting a bit of a premium price for this stock relative to its growth rate as estimated.

There are 2.32 billion shares outstanding with 2.30 billion that float. Currently there are 27.14 million shares out short representing 2.7 trading days of volume (the short interest ratio) below my own 3 day cut-off for significance. The company pays a $1.64 dividend yielding a forward dividend yield of 3.3%. The company last split its shares 2:1 in May, 1996.

And the chart? Looking at the 'point & figure' chart on Coca-Cola (KO), we can see that the stock hit a high of $62 in January, 2008, before pulling back as low as $37 in March, 2009. The stock recently has broken out past resistance and is acting quite strong at its current level of $50.32.

Quite frankly, I like Coca-Cola (KO) stock as a long-term growth and recovery play on the global economy. It is a 'comfort stock' from my perspective, but the numbers are not quite as strong currently as I might like to see in a stock in my portfolio. Technically, the stock appears to be anticipating improved numbers as the stock price has appreciated nicely the past couple of months.

I am not sure if this stock is the 'Real Thing' or not. However, as I build my portfolio, while stepping aside from Colgate--at least temporarily--I shall try to see if this stock has enough 'fizz' to help move my portfolio in the right direction. If instead it turns out to be 'flat' instead, well I can always move on with another stock holding!

Thanks again for stopping by and visiting my blog! If you have any questions, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.

Yours in investing,

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After Strong Week, ETFs Finish Flat Friday (Daily ETF Wrap-Up)

via SmartMoney.com by letters@smartmoney.com (Dan Burrows) on 7/23/09

Market Wrap Up

Exchange-traded funds finished Friday's session flat but posted strong gains for the week as the Dow Jones Industrial Average broke the psychologically key 9000 level for the first time since early January.

Weaker-than-expected results from American Express (AXP), Microsoft (MSFT) and Amazon.com (AMZN) after the close Thursday led to some profit taking Friday, especially among red-hot technology stocks. However, better-than-expected news from Apple (AAPL), Caterpillar (CAT) and Starbucks (SBUX), among others, as well as a third straight monthly increase in existing homes sales, allowed equities to gain 4% on the week.

At market close the Dow added 24 to finish at 9093, while the Nasdaq Composite fell 8 to 1966. The S&P 500 gained 3 to 979. For a detailed rundown on Friday's trading session see our market story.

Winners

Oil prices finished the week above $68 a barrel, boosting shares of energy and oil ETFs. United States Oil Fund (USO) jumped 5.8% for the week, while Oil Service HOLDRS Trust (OIH) gained 6.6%.

Losers

With the Dow above 9000 and the S&P 500 enjoying its best two-week gain since March, it was mostly only leveraged ETFs that suffered significant losses on the week. However, a drop in the price of gold Friday -- just one day after the precious metal hit a six-week high -- didn't do much for gold ETFs. Market Vectors Gold Miners ETF (GDX) and iShares COMEX Gold Trust (IAU) each finished the week with a fractional loss.

This Week's Industry News

Emerging Global Advisors announced the launch of the Emerging Global Shares Dow Jones Emerging Markets Titans Fund (EEG) which seeks to track the performance of the Dow Jones Emerging Markets Titans Composite 100 Index. Fifteen emerging markets countries are represented in the index, giving investors a pure play on stocks in those economies, the company said. The ETF will charge an annual expense ratio of 0.75%.

The Financial Industry Regulatory Authority softened its stance on leveraged ETFs, saying in a podcast that these investment vehicles "can be appropriate if recommended as part of a sophisticated trading strategy that will be closely monitored by a financial professional. At times, this trading strategy might require a leveraged or inverse ETF to be held longer than one day." In June FINRA issued a warning to advisors about holding leveraged ETFs for longer than one day, as compounding causes them to stray from their underlying benchmarks over time.

Next Week's Notebook

Earnings and Conference Calls

Monday
A. H. Belo, Ace Limited, Alberto Culver, American River Bankshares, Buffalo Wild Wings, Cal-Maine Foods, Curtiss-Wright, Franklin Electric, GulfMark Offshore, Honeywell, International Coal Group, Owens & Minor, RadioShack, Rent-a-Center, Sohu.com, Trident Microsystems, Zoran

Tuesday
A.M. Castle, Advent Software, AMB Property, Amedisys, BE Aerospace, BP, Celanese, Ceradyne, Check Point Software Technologies, Chicago Bridge & Iron, Coach, Columbia Sportswear, Coventry Health Care, Deutsche Bank, Energizer, Fresh Del Monte Produce, Heidrick and Struggles, Landec, LCA-Vision, Luxottica, McKesson, Nash Finch, National Oilwell Varco, Norfolk Southern Corp., Office Depot, Panera Bread, Patriot Coal, PepsiAmericas, Questar, RenaissanceRe Holdings, Rockwell Automation, SeaBright Insurance Holdings, Silicon Storage Technology, Supervalu, Teva Pharmaceutical, Textron, Interpublic Group, McGraw Hill, Unisys, U.S. Steel, Valero Energy, Viacom, Western Digital, XL Capital

Wednesday
Acadia Realty Trust, Adolor, Advantest, Aetna, Aflac, Akamai, ArcelorMittal, Assurant, Banco Santander, BorgWarner, Brookfield Homes, Brookfield Properties, Cabot, Cadbury, CB Richard Ellis, CBIZ, Coca-Cola Enterprises, ConocoPhillips, Covance, Daimler, Equity One, Equity Residential, Express Scripts, FBR Capital Markets, Fiserv, FMC, General Dynamics, Hanesbrands, Hess, Hospira, Jones Apparel, Lazard, Lincoln National, Martha Stewart Living Omnimedia, MeadWestvaco, Medco Health Solutions, Meredith, Moody's, Penske Automotive Group, Portfolio Recovery Associates, Qwest, Royal Caribbean Cruises, Sanofi-Aventis, SAP, Sprint Nextel, Symantec, Taser, Teradyne, Scotts Miracle-Gro, Timberland, Thomas Weisel Partners, Time Warner Cabel, Time Warner, Trico Marine Services, Tyco Electronics, United Rentals, Visa, Watson Pharmaceuticals, Wyndham Worldwide

Thursday
Alcatel-Lucent, AmeriSourceBergen, Aon, Apache, Arch Chemicals, AstraZeneca, Automatic Data Processing, Avery Dennison, Avon, Barrick Gold, Becton, Dickinson, Brunswick Corp., Cabela's, Cablevision, Canadian Pacific Railway, CEC Entertainment, Cepheid, CGGVeritas, CH Energy Group, Charles & Colvard, Cigna, Colgate-Palmolive, Covidien, Cummins, Dolby Laboratories, Double Eagle Petroleum and Mining, Dow Chemical, Duke Realty, Eastman Kodak, Evergreen Solar, Expedia, ExxonMobil, First Solar, Franklin Resources, Genworth Financial, Goodyear Tire & Rubber, Helmerich & Payne, Horizon Financial, Ingram Micro, International Paper, Iron Mountain, Kellogg, Kimco Realty, Las Vegas Sands, Level 3 Communications, MarineMax, MasterCard, McAfee, MetLife, Monster Worldwide, Morningstar, Motorola, Mylan, Newell Rubbermaid, Noble Energy, NTT DoCoMo, NYSE Euronext, OfficeMax, Olympic Steel, Oppenheimer Holdings, Oshkosh Corp., Palomar Medical Technologies, Parker Hannifin, PerkinElmer, Pitney Bowes, Provident Financial Holdings, RealNetworks, Reed Elsevier, Regal Entertainment, Republic Airways, Republic Services, Revlon, Rockwell Collins, Sony, SourceForge, Taleo, Taylor Capital, Tennant, The Brinks Company, The Hanover Insurance Group, The Travelers Cos., Tyco International, Varian Semiconductor, Walt Disney, Waste Management, WisdomTree Investments, Wynn Resorts

Friday
Allergan, Anglogold Ashanti, AutoNation, Belo, Calpine, Chevron, Constellation Energy, DryShips, Eldorado Gold, HMS Holdings, ITT, Johnson Outdoors, Lafarge, MDC Holdings, NorthStar Realty Finance, Snap-on Inc., Washington Post Co., Weyerhaeuser

Economic Data

Monday
10:00 a.m. New Home sales

Tuesday
7:45 a.m. ICSC-Goldman Store Sales
9:00 a.m. Consumer Confidence
9:00 a.m. S&P/Case-Shiller Home Price Index

Wednesday
8:30 a.m. Durable Orders
10:30 a.m. Crude Inventories
2:00 p.m. Beige Book

Thursday
8:30 a.m. Initial Jobless Claims
10:30 a.m. EIA Natural Gas Report

Friday
8:30 a.m. GDP
9:45 a.m. Chicago PMI

A look at how the industry's most popular ETFs did on Friday:

10 Largest ETFs

Symbol	Current Price	Net Assets	Volume	Expense Ratio	52 Week High	3 Year Return
SPY	97.86	63,739	153,678,812	0.090	130.7	-5.63
EFA	49.26	29,392	15,432,526	0.340	67.37	-5.11
EEM	35.4	28,449	49,253,525	0.720	43.16	7.33
GLD	93.41	NA	4,732,231	0.420	97.24	13.95
IVV	98.39	18,337	8,785,076	0.090	130.92	-5.61
QQQQ	39.05	14,025	110,144,969	0.200	48.32	NA
IWF	43.67	9,479	2,402,457	0.200	55.45	-2.06
SHY	83.7	7,044	969,766	0.150	85	5.39
VTI	49.39	10,258	1,639,727	0.070	65.56	-4.75
IWD	50.44	7,068	2,337,692	0.200	70.64	-9.07

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3 Stocks With Bigger Dividends (Screens)

via SmartMoney.com by letters@smartmoney.com (Jack Hough) on 7/21/09

For dividend investors, the U.S. stock market is starting to look stingy. The S&P 500 index has rebounded more than 40% since early March, while its underlying dividend payments are forecast to fall 23% this year. The result is a yield of just 2.3%.

That's not as skimpy as the 1.6% yield the index offered over the bubbly decade ended 2007, but it's well below the average yield of nearly 5% that U.S. stocks provided over the past two centuries.

Nonetheless, careful shoppers can still find handsome, growing dividends. Payment trends for the S&P 500 index perhaps paint too grim of a picture, because the index assigns significant weight to the giant banks that have eliminated dividends this year to shore up capital. Viewing all 500 companies as equals, more have increased payments this year than have decreased or cut them.

The three companies below have yields above the index's 2.3%, recently increased their payments and are what Standard & Poor's calls Dividend Aristocrats: companies that have boosted their payments in each of the past 25 years.

Clorox

(CLX)
Dividend yield: 3.4%
Dividend increase: to $2.00 from $1.84 in June

Beyond its namesake bleach, Clorox sells Glad trash bags, Brita water filters, Kingsford charcoal, Hidden Valley salad dressing and much more. More than 80% of company sales come from brands that are the No. 1 or No. 2 sellers in their category. Since the products aren't terribly sensitive to the economy, Clorox is growing despite the current recession. Sales and earnings per share for its fiscal year ended June increased 3% and 17%, respectively.

Supervalu

(SVU)
Dividend yield: 5.2%
Dividend increase: to 70 cents from 69 cents in May

America's third-largest grocer, Supervalu ran more than $44 billion through its sales registers over the past year, yet it has a stock market value of just $2.8 billion. That's likely because the company owes a worrisome $8 billion, and sales and earnings per share are expected to fall 5% and 25%, respectively, in its current fiscal year. Simeon Gutman, who covers the stock for Canaccord Adams, an investment bank, recently changed his recommendation to "buy" from "hold," noting that Supervalu has a new chief executive, is well-positioned for a turnaround and has no major debts coming due until 2011. However, until the company's financial results show clear signs of improvement, the stock is perhaps best left to speculative investors rather than those living off their dividends. Supervalu reports fiscal first quarter results Tuesday, July 28.

Johnson & Johnson

(JNJ)
Dividend yield: 3.3%
Dividend increase: to $1.96 from $1.84 in April

Johnson & Johnson is three businesses in one. It sells consumer products like Band-Aids, Tylenol, Mylanta antacid; prescription drugs like Risperdal for schizophrenia; and medical devices like sutures and stents. Drugs have been the weak point lately due to increased generic competition, but analysts say the company's development pipeline looks robust. Earnings per share are forecast to remain largely unchanged this year but resume growth next year. JNJ has negligible net debt, suggesting its dividend is plenty safe.

SMARTMONEY ® Layout and look and feel of SmartMoney.com are trademarks of SmartMoney, a joint venture between Dow Jones & Company, Inc. and Hearst SM Partnership. © 1995 - 2009 SmartMoney. All Rights Reserved.

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Stock Picks: SBUX Up; WFC Down (Market Movers)

via SmartMoney.com by letters@smartmoney.com (AnnaMaria Andriotis) on 7/21/09

Starbucks Shares Perk Up on Brighter Prospects

Shares of coffeehouse chain Starbucks (SBUX) climbed more than 15% in midday trading Wednesday after the company posted better-than-expected profits for its fiscal third quarter.

After the market closed Tuesday, Starbucks reported third-quarter net earnings of $151.5 million or 20 cents per share, beating analysts' estimates of 19 cents per share, according to Thomson Reuters, and compared to a loss of one cent per share a year earlier.

The company credited cost-cuts – mainly in the form of store closures — for the upside surprise. In a statement it said that cost savings reached $175 million, exceeding its third-quarter target of $150 million. The company plans to cut another $180 million in costs during the fourth quarter.

Cost cuts weren't the only thing boosting Starbucks' profits, however.

"We expect that sales may have been positively impacted by the recent advertising campaign and the value initiatives in place," wrote McAdams Wright Ragen analyst Dan Geiman in a July 22 report. "The results also suggest that the competitive pressures some had feared, specifically McDonald's introduction of espresso beverages and the swirl of advertising surrounding it, have had little if any negative impact on SBUX's results."

Geiman expects sales trends to continue their rebound in the coming quarters.

"SBUX can't rely on cost-cutting alone, and over the mid- to long-term must generate continued improvement on the top-line. But we think the company is making significant progress on that front and with the advertising campaign continuing, new products in its arsenal…we expect further progress in coming quarters," Geiman wrote.

The stock is already up 55% this year.

Bottom line: Buy
The future appears bright for Starbucks, which so far has proven itself equipped to handle competitors and budget-strapped consumers

Loan Losses Overshadow Wells Fargo's Big Upside Surprise

Despite beating analysts' second-quarter estimates, shares of Wells Fargo (WFC) fell more than 6% in trading Wednesday amid concerns about the bank's loan portfolio.

Earlier, Wells Fargo reported earnings per share of 57 cents for the second quarter, slightly higher than the 56 cents it reported in the previous quarter and the 53 cents it earned in the year-ago period. Analysts on average expected the company to report second-quarter earnings of 34 cents per share, according to Thomson Reuters.

Revenue hit a record $22.5 billion, up 28% from the first quarter due in part to an increase in average checking and savings deposits (up 20% from first quarter). "This inflow of new customers…has the potential to continue to add to earnings well beyond the turn in the credit cycle," said Wells Fargo CFO Howard Atkins in today's conference call.

Weighing on the strong report, are the deep credit losses the bank has incurred in part due to bad loan write-offs. Total net loan charge-offs came to $4.39 billion for the quarter (the figure includes the loan portfolio of Wachovia.) As a percentage of all of the bank's loans, these charge-offs represented 2.1%, up from 1.5% during the quarter that ended on March 31.

"While the loss amounts are directly correlated to these property values, other events affecting the consumer, such as unemployment, drive the loss frequency," said Wells Fargo chief credit officer Mike Loughlin in a statement. "Many of our home equity losses involve customers who are having problems with their first mortgage due to unemployment or over-indebtedness," said Loughlin.

While credit card charge-offs increased by $82 million to $664 million in the second quarter, the business remains profitable, according to Atkins. "Card fees grew 33% annualized in the first quarter on higher volumes, not by raising the fees we charge our customer," he said.

"The real problem is that their credit continues to deteriorate across all portfolios," says Frederick Cannon, chief equity strategist at Keefe, Bruyette & Woods. He expects that the bank will continue to make money but not at this level. The bank's mortgage banking income (from mortgages they originated and sold in the first half of the year) doesn't appear to be sustainable now that interest rates are rising again and homeowners who could refinance already did, he says. Cannon also expects the bank's loan losses to get worse before they get better.

"There's a pretty rocky road ahead for Wells Fargo…over the next year or so," says Cannon. "That said though Wells Fargo will be here for the long term and investors who have staying power should hold on."

Bottom line: Sell
Wells Fargo stock will experience more declines due to borrowers' inability to repay loans and an uncertain lending market in the near term.

SMARTMONEY ® Layout and look and feel of SmartMoney.com are trademarks of SmartMoney, a joint venture between Dow Jones & Company, Inc. and Hearst SM Partnership. © 1995 - 2009 SmartMoney. All Rights Reserved.

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When Will Buffett Bounce Back?

via SmartMoney.com by letters@smartmoney.com (Dyan Machan) on 7/19/09

For several months now, even the most hard luck investors have had a decent run on Wall Street. Yet one accomplished moneyman is still waiting for good news: a rumpled 78-year-old Omaha resident named Warren Buffett.

He's the second-richest man in the world, so he's not getting any sympathy votes. Still, the past 10 months of Buffett's career have been jaw-droppingly bad—contributing to what he himself says was his worst year ever. He sailed into the crash with a portfolio full of financial stocks, just in time to see the global banking sector implode. Last October, five months before the market hit bottom, Buffett published a widely circulated editorial urging investors to "Buy American, I Am"—giving "Dewey Beats Truman" a challenger in the bad-timing sweepstakes. And when stocks finally rallied, the cheerleader got left off the team bus. Since his editorial hit the presses, the Standard & Poor's 500 stock index has returned nearly 2 percent—but Berkshire's stock is down about 24 percent.

Of course, one bad year doesn't negate a storied career. The last time Buffett trailed the market this badly was during the tech bubble—and he had the last laugh. Unlike a decade ago, however, Buffett was hurt this time by going with the grain, his portfolio sucked into the same downward spiral as everyone else's, his reputation scuffed by a foray into derivatives.

Investors have long seen Buffett as a safe harbor in rough seas. Today, some are asking the unthinkable: Has the Buffett Way lost its magic?

That magic has influenced the investing habits of millions of Americans, everyone from do-it-yourselfers who studied his strategies to mutual fund managers who believed that Buffett's way was the only way. Building on the teachings of his mentor, Ben Graham, Buffett has become the most famous practitioner of the "buy and hold" school of investing. His approach: Seek out companies with big "moats," or advantages over competitors; buy them cheap, ideally when other investors are pessimistic; plow their profits and dividends into other investments; and hold on as long as the businesses are valuable, no matter what the stock price does.

Those tactics worked like a charm for decades. But in the past year, investors lost confidence in the Buffett Way to an unprecedented degree. Berkshire's stock dropped 50 percent between December 2007 and the market bottom in March, wiping out $110 billion in wealth for its Class A shareholders. Although it rallied last week along with the overall market, it's still about 40 percent off its peak.

Losing Faith in the Buffett Way?

The sell-off was driven by harsh short-term numbers. Berkshire's nearly 80 subsidiary companies include dozens that were especially vulnerable to the downturn, including home builders, furniture makers and insurance companies. Its operating profits fell 62 percent in 2008 from the previous year, to $7.5 billion. And investors were just as leery of the $128 billion portfolio that Buffett manages under Berkshire's umbrella. Around 85 percent of that cache is concentrated in a small handful of stocks—many of which got clobbered in 2008. When the credit crisis started, Buffett held major stakes in American Express, Wells Fargo and U.S. Bancorp, all of which plummeted. He built a huge stake in ConocoPhillips, then watched oil prices nose-dive. And just as consumers began to see derivatives as a dirty word, the news emerged that Buffett had a $37 billion bet on future prices of the S&P 500 and other stock indexes.

Not all of Buffett's bets have gone bad, of course. He bought Goldman Sachs as it was sinking and was vindicated when it survived the crash and went on to post strong earnings. He snared preferred stock in General Electric that could pay him royally when the economy fully recovers. But last year's perceived slipups may still be driving investors away from Berkshire's stock. And Buffett himself raised his public profile just as he hit this exceptionally rough patch: He didn't just strike out; he struck out on national TV. Over the past two years, he has spent much more time in the public eye, with a ramped-up schedule of media appearances. Is it coincidence that Berkshire's performance stalled just as Buffett stepped out? "It's a false correlation," he insists, saying he needed to appear more often in public as Berkshire grew. (Buffett declined to be interviewed more broadly, saying he prefers speaking to TV anchors "because the reach is so much wider.")

The Buffett cognoscenti have learned some lessons from the annus horribilis. They now suspect Buffett's not as good an economist as he is an investor. As recently as his May 2008 shareholder meeting, when sidekick Charlie Munger predicted "turmoil as far ahead as we can see," Buffett shushed him, saying the real estate bubble wouldn't hurt the economy. Oops. "Buffett's a great, disciplined investor," says Bruce Greenwald, finance professor at Columbia University, "but he shouldn't make those calls." Others say Buffett's gospel of buy-and-hold is outmoded, now that markets have grown increasingly volatile. It's telling to compare his recent performance with those of hedge funds, which often dip quickly in and out of stocks. Over the past decade, the average North American stock-oriented hedge fund earned 9.7 percent a year after fees, compared with 2.9 percent for Berkshire, according to research by asset-management firm Lyster Watson & Co.

But most investors still believe in the Buffett Way. In their telling, it's the guru's timing, not his analysis, that went wrong—and to true Buffett acolytes, short-term timing is irrelevant. Buffett has said he underestimated the impact of banks' fuzzy math and called his ConocoPhillips buy "a mistake." As for his other decisions, if there's anyone with the patience to wait for them to pay off, it's the oracle in Omaha.

SMARTMONEY ® Layout and look and feel of SmartMoney.com are trademarks of SmartMoney, a joint venture between Dow Jones & Company, Inc. and Hearst SM Partnership. © 1995 - 2009 SmartMoney. All Rights Reserved.

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High-Flying Week Ends With a Whimper (Daily ETF Wrap-Up)

via SmartMoney.com by letters@smartmoney.com (Will Swarts) on 7/16/09

Market Wrap-Up

Traders remained cautious on Friday as they digested earnings results from Bank of America (BAC) and Citigroup (C). Tepid earnings from General Electric (GE) also clouded the session. The Dow Jones Industrial Average added 32 points to close at 8744. The Nasdaq gained 1.6 to 1887 and the S&P 500 stayed flat at 940. For a detailed rundown on Friday's trading session see our market story.

That lukewarm session came after a series of rallies that saw the Dow climb almost 600 points higher over the course of the week.

Winners

Boosted by blowout results from Goldman Sachs (GS) and JPMorgan Chase (JPM), financial stocks had a strong week despite tepid Friday trading. That pushed the iShares Dow Jones US Financial Sector (IYF) ETF up almost 9% for the week. The SPDR KBW Bank (KBE) ETF gained more than 8%.

Losers

As equities rose, money came out of the investment grade corporate bond market. The iShares iBoxx $ Invest Grade Corporate Bond (LQD) ETF shed nearly 1%. Meanwhile, the specter of trillion-dollar deficits hurt long-term government debt. The iShares Barclays 20+ Year Treasury Bond (TLT) ETF lost more than 5% on the week.

This Week's Industry News

Massachusetts Secretary of State William Galvin launched an inquiry into how three leveraged ETF providers -- Rydex, ProShares and Direxion -- are selling their products to investors in his state. (See story.)

Next Week's Notebook

Earnings and Conference Calls

Monday
Boston Scientific, Brown & Brown, Citizens South Banking, Great Atlantic & Pacific Tea, Halliburton, Hasbro, Johnson Controls, Legg Mason, M&T Bank, Merck, PetMed Express, Texas Instruments, Volterra Semiconductor, Zions Bancorp

Tuesday
Advanced Micro Devices, AK Steel Holding, Apple, Arbitron, Bank of Florida, BJ Services, BlackRock, Boston Properties, Caterpillar, Charlotte Russe Holding, Coca-Cola, Comerica, Dearborn Bancorp, Dr. Reddy's Laboratories, DuPont, First Cash, Gilead Sciences, Illinois Tool Works, Jefferies, Journal Communications, Lexmark International, Lockheed Martin, McClatchy, Peabody Energy, Precision Castparts, Regions Financial, Robert Half International, Schering-Plough, Seagate Technology, Sherwin-Williams, SLM, Southwest Airlines, Starbucks, State Street, Stryker, Sybase, TD Ameritrade Holding, UAL, United Technologies, UnitedHealth Group, Western Union, Yahoo

Wednesday
AirTran Holdings, Alcon, Allegheny Technologies, Alliance Data, Altria Group, Amdocs Limited, BancorpSouth, Bank of New York Mellon, Boeing, Chipotle Mexican Grill, Cirrus Logic, Cohen & Steers, Delta Air Lines, Domino's, E*Trade Financial, eBay, Eli Lilly, Equifax, Genzyme, GlaxoSmithKline, iRobot, KeyCorp, Lennox International, Logitech International, Northern Trust, Old Dominion Freight Line, P.F. Chang's China Bistro, PepsiCo, Pfizer, SanDisk, SunTrust, Tupperware Brands, U.S. Bancorp, VMware, Wells Fargo, Westell Technologies, Whirlpool, Wipro

Thursday
3M Company, ABB, Airgas, Alaska Airlines, Amazon.com, American Express, Ameriprise Financial, AT&T, Ball Corp., Bristol-Myers Squibb, Broadcom, Capital One Financial, Cheesecake Factory, Chubb, CIT Group, Compuware, Eastman Chemical, Fifth Third Bancorp, Freescale Semiconductor, Goodrich, Healthways, Hercules Offshore, Hershey, Huntington Bancshares, Immucor, Invesco, Janus Capital Group, JetBlue Airways, L-3 Communications Holdings, Manpower, McDonald's, NCR, Netflix, Newmont Mining, Nucor, Occidental Petroleum, Philip Morris International, PNC Financial Services, Potash Corp. of Saskatchewan, ProLogis, Provident Financial Services, Raytheon, Ryder System, Safeway, Synovus Financial, Union Pacific, United Parcel Service, W.R. Grace, Wyeth, Xerox

Friday
Arch Coal, Black & Decker, Fortune Brands, Ingersoll-Rand, Schlumberger, United Community Banks

Economic Data

Monday
10:00 a.m. June Conference Board Leading Indicators

Tuesday
7:45 a.m. ICSC Chain Store Sales Index for July 18
8:55 a.m. Redbook Retail Sales Index for July 18
5:00 p.m. ABC/Wash Post Consumer Confidence for July 18

Wednesday
No economic events scheduled

Thursday
8:30 a.m. Initial Jobless Claims for July 18
10:00 a.m. July Philadelphia Fed Business Index
10:00 a.m. July Existing Home Sales
10:00 a.m. DJ-BTMU Business Barometer for July 11

Friday
10:00 a.m. End-July Reuters/Univ. Michigan Sentiment Index

A look at how the industry's most popular ETFs did on Friday:

10 Largest ETFs

Symbol	Net Assets	Price	52 Week High	52 Week Low	Volume
SPY	63,739	94.13	130.7	68.13	138,303,571
EFA	29,392	46.82	67.84	32.16	16,180,892
EEM	28,449	33.57	43.75	19.12	56,896,466
GLD	NA	91.93	97.24	70.14	8,747,804
IVV	18,337	94.48	130.92	68.24	2,729,764
QQQQ	14,025	37.56	48.32	25.51	103,564,248
IWF	9,479	42.12	55.45	30.49	1,862,134
SHY	7,044	83.75	85	82.52	833,076
VTI	10,258	47.32	65.56	33.75	1,761,473
IWD	7,068	48.02	70.64	34.22	1,678,389

SMARTMONEY ® Layout and look and feel of SmartMoney.com are trademarks of SmartMoney, a joint venture between Dow Jones & Company, Inc. and Hearst SM Partnership. © 1995 - 2009 SmartMoney. All Rights Reserved.

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Pepsi remains the choice of a new generation

07-17-2009

From: BloggingStocks

Forget the mantra about Pepsi's North American market's beverage and snack revenue being hurt, yada yada.

I'm Reiterating my Buy rating for PepsiCo, Inc. (NYSE: PEP) first recommended on March 13, 2009 at a price of $48.62.
Pepsi has successfully positioned itself in the health and sports drink segment with its Gatorade and Aquafina brands, and Tropicana is still the standard in branded, mass-appeal orange juice. The FY2009/FY2010 EPS estimates for PEP are $3.68 to $4.00.

Who will dance, on the floor, in the round...
Further, Pepsi's market share gains in international markets, from its namesake cola to snacks, will continue to drive solid top-line growth: a company with a 200-country presence, international markets accounted for 40% of FY2008 revenue. Further, the company's decision to add 20% more product in snack packages with no price! increas e will also undoubtedly support sales, gladden the hearts of shareholders, and no-doubt Doritos lovers, as well.

Stock Analysis: PepsiCo is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in PEP now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your PEP position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $27.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

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Consider Baxter: Its products don't go out of style

07-18-2009

From: BloggingStocks

I'm reiterating my Buy rating for Baxter (NYSE: BAX) first recommended on March 13, 2009 at a price of $51.16.

Baxter's near-recession-proof story remains intact. Baxter, a maker of a variety of medical products across three divisions, including drugs and vaccines, dialysis equipment, and IV supplies, should record a FY2009 revenue increase of 2-4%, led by demand for recombinants, plasma proteins, and antibody therapies in its bioscience unit.

Slower growth is seen in its medication delivery unit, but Baxter has done a good job focusing on high-margin businesses, divesting low-margin lines, and eliminating excess manufacturing capacity.

Further, Baxter's buy of a hemofiltration product line from Edwards Lifesciences (NYSE: EW) should reinvigorate the company's renal care business. The FY2009/FY2010 EPS estimates for BAX are $3.77 to $4.24.

Stock Analysis: Baxter is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 25% position in BAX now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your BAX position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $37.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

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For Buffett Fans, the Price Is Right

via SmartMoney.com by letters@smartmoney.com (Andrew Bary) on 7/13/09

WARREN BUFFETT HAS TAKEN ADVANTAGE of the past year's financial turmoil to make more than $20 billion of promising investments for Berkshire Hathaway, including preferred stock and warrants issued by Goldman Sachs and General Electric , and a convertible issue from Swiss Re, the European reinsurer.

Buffett's investment coups haven't registered on Wall Street, where Berkshire's class A shares (BRK.A) are languishing at around $85,000. Down 12% this year, and way below their late 2007 peak of $149,000, the shares haven't participated much in the stock market's rally since the end of March.

Yet Berkshire itself looks appealing, at just 1.2 times our estimate of its current book value of $72,000 a share. In the past decade, the stock has traded for an average of 1.6 to 1.7 times book value, a measure of shareholder equity per share. The current price-to-book ratio is near the low reached in early 2000, when Berkshire's stock bottomed at about $40,000.

One fan tells Barron's that the stock could top $110,000 in the next year. If so, it would trade for roughly 1.4 times our estimate of book value in 12 months: $80,000 a share. That price target doesn't seem outlandish in view of the projected price-to-book-value ratio. In a better economic and financial environment, Berkshire might even trade up to $125,000 a share, implying a multiple of book value closer to the 10-year average.

Berkshire's class B shares (BRK.B), worth 1/30th of the A shares, fetch about $2,750 each. The B shares look like a better buy than the A shares, because they sell at a 3% discount to their theoretical value. But the discount has persisted for some time, and could continue, as the B shares can't be converted into A shares.

Berkshire's book value, which stood at $66,250 per share as of March 31, likely has risen since then because of the market's powerful rally. That has lifted the value of the company's famed equity portfolio, which now totals more than $50 billion. The market value of Berkshire's equity and bond derivatives also has increased, and we assume the company earned more than $1,000 a share from operations in the second quarter, in line with reported first-quarter figures. That's how we arrive at an estimated book value of $72,000 a share.

Following Buffett's advice, most Berkshire watchers focus on book value as a measure of the company's valuation, as reported earnings can be distorted by realized investment gains and losses. Historically, Berkshire's shares have tracked changes in book value.

The sluggish performance of Berkshire's shares may owe to several factors. Investors recently have favored economically sensitive and other "offensive" stocks; Berkshire is perceived to be defensive due to its financial strength, including a cash position of $23 billion on March 31.

Also, investors remain concerned about Buffett's miscalculated sale of long-term put options on $35 billion of equity indexes, including the Standard & Poor's 500, when stock prices were much higher. The puts showed a loss of about $5 billion on March 31, and it is difficult to value them based on Berkshire's limited disclosure. Berkshire has taken a big hit, as well, on some of its own equity holdings, including large stakes in ConocoPhillips (COP) and American Express (AXP). Both stocks have fallen more than 50% from their highs.

IT ALSO DOESN'T HELP THAT SHARES of property-and-casualty insurers are out of favor amid concerns about weak insurance pricing. Berkshire owns Geico, the No. 3 domestic auto insurer, as well as reinsurer General Re and a specialized reinsurance business focused on hurricanes, earthquakes and other high-risk events shunned by many insurers. Some investors worry, too, that Berkshire's large size -- the company now has a market value of $132 billion -- makes it tough for Buffett to generate high returns. Then there is his age: The Great One turns 79 next month.

None of these issues, save Buffett's age, is significant. Buffett sounded upbeat at Berkshire's annual meeting in May, saying he thought Berkshire stock could best the S&P 500 in the coming years. He noted that the stock hadn't kept pace with the growth in retained earnings in recent years. Asked whether Berkshire's competitive advantage would die with him, Buffett replied that Berkshire's strengths, including a unique business mix and culture, long-term orientation and patient shareholder base, will outlive him.

Vice chairman Charlie Munger, 85, was more blunt about the difference between Berkshire's view and the short-term focus of much of Corporate America: "The stupidity of other companies' approach will likely give us a long-term advantage," he said, according to a meeting attendee. Buffett declined to comment for this story.

Barron's has written about Berkshire often in recent years, including a bearish cover story in late 2007, when the stock was near its peak. Last year, we were more bullish on the shares, and have speculated in other stories that Buffett's likely successor as CEO will be David Sokol, chairman of Mid- American Energy, Berkshire's big utility.

EVEN IF THE MARKET TANKS again this year, the downside in Berkshire stock seems limited due to its low price/book ratio and the company's earnings power. Despite its cyclical businesses, Berkshire's after-tax profits from operations could top $7 billion, or $4,500 a share, this year. Peak profits could approach $7,000 a share. And behind Berkshire's rising earnings are the shrewd investments Buffett has made in recent quarters (see table). The company bought $5 billion worth of 10% Goldman Sachs (GS) preferred stock; $3 billion of GE (GE) 10% preferred; and $2.75 billion of Swiss Re (RUKN.Switzerland) 12% convertible preferred. All likely have risen in value.

Berkshire's ability to nab these deals highlights the company's deep pockets, Buffett's willingness to make quick decisions, and the desire of many other companies to get Berkshire's money, with its implied vote of confidence from the world's greatest investor. These new investments will throw off more than $2 billion of annual income, much of it tax-advantaged.

The Goldman and GE preferred issues carry above-market yields, and came with stock warrants. The warrants to buy 43 million Goldman shares carry an exercise price of $115 and a maturity date of 2013. With Goldman shares above $140, the warrants are worth more than $1 billion. Given Goldman's improved balance sheet and profits since last fall, the firm might redeem the $5 billion of preferred this year by paying Berkshire a 10% premium. If that happens, look for Berkshire to exercise its warrants and become Goldman's single largest holder.

Berkshire would benefit from a stronger stock market and economy because of its large equity portfolio, derivatives holdings, and wholly owned businesses, including carpet maker Shaw Industries, paint producer Benjamin Moore, Acme Brick, Clayton Homes, and private-jet operator NetJets. Their depressed profits are likely to recover as business conditions improve.

Berkshire's large insurance operations are doing well, even in a weak economy. Geico picked up more than 500,000 new auto-policy holders in the first four months of 2009, 75% of its '08 total, as cost-conscious consumers gravitated toward the company, whose ads trumpet potential insurance savings of 15% or more for many drivers.

Berkshire's largest unit, MidAmerican Energy, owns electric utilities in the U.S. and Britain, and two big U.S. natural-gas pipelines. Both Geico and MidAmerican probably are worth at least $15 billion, although valuing them is academic, given Buffett's aversion to selling any businesses.

Some think Berkshire's best days are over and there isn't much money to be made in the stock, which was just $20 when Buffett took control in 1965. Yet the company looks stronger than ever, due to its promising portfolio and some top-flight businesses. Investors could now buy that package for a low premium to book value and get the talents of Buffett, who continues to demonstrate his incomparable investment skills.

SMARTMONEY ® Layout and look and feel of SmartMoney.com are trademarks of SmartMoney, a joint venture between Dow Jones & Company, Inc. and Hearst SM Partnership. © 1995 - 2009 SmartMoney. All Rights Reserved.

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Earnings preview: Johnson & Johnson could surprise Wall Street

07-13-2009

From: BloggingStocks

Johnson & Johnson (NYSE: JNJ), a company that counts Procter & Gamble (NYSE: PG) and Pfizer (NYSE: PFE) as colleagues, will report results for the second quarter on Tuesday, July 14. JNJ is expected to post a bit of a profit decline. Last year's Q2, according to Earnings.com, saw the health-care business earn $1.18 per share. This time around, analysts are thinking that JNJ will do somewhere around $1.11 per share.

Will JNJ beat the analysts? It's quite possible, since the company has a good record on this count. As a matter of fact, JNJ beat predictions by four cents back in April. Sales, however, came in a little weak. Interestingly enough, the market didn't really care too much about the earnings performance on that day. Shares had rallied a bit in pre-market trading, but they closed slightly down by the end of the regular session. I found a similar situation back in January.

So, if you ask me, I think we'll see a beat on the bottom line this week, but I'm not convinced the market will send shares of JNJ higher. Of course, how many individual investors actually trade a blue chip like JNJ? For the most part, shareholders are probably keeping this one for the long term in a core portfolio. Recently, Joseph Lazzaro highlighted the business as a potential idea for a college fund. I would tend to agree. To that point, most investors love to read the statement of cash flows and gauge how well JNJ is doing when it comes to money generated from operations. So long as that metric is keeping ahead of dividend obligations, everything should be fine. Investors love JNJ and its dividend-growth quotient.

JNJ just isn't on my radar in terms of buying ahead of the report. I'll leave such posturing to the bigger guns on Wall Street. I just want to know that cash is still flowing to the company's coffers -- and I'm sure it will be.

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Guangshen (GSH): Riding the rails in China

07-13-2009

From: BloggingStocks

"A focal point of China's ambitious $586 billion stimulus package will be railroads; in fact, investment in railways has already tripled over this time last year." explains value Investor Nathan Slaughter.

In his Half-Priced Stocks he adds, "Guangshen Railway Limited (NYSE: GSH) looks to be an obvious choice to benefit from this trend. Indeed, pricing flexibility, stellar efficiency and utilization has made Guangshen the most profitable rail company in China."

"Growth in China's railways doesn't come as a surprise. Years before this plan was put in motion, China already had bold ideas about building out its railway system -- and was bankrolling those ideas with about $200 billion in government cash.

"And now, those commitments will be supplemented with an additional $100 billion earmarked from this latest stimulus package.

"To be sure, the sprawling country is certainly in need of additional rail capacity, and many rural areas have no service at all.

"Meanwhile, we all know that China has a ravenous appetite for iron ore, petroleum, coal and just about every other raw material.

"Much of the nation's commodities production takes place in the Western provinces, and those goods must then be shipped to population centers and economic hubs on the Eastern seaboard.

"However, the Chinese Railway Ministry estimates that railroads can only handle about 35% of the country's massive cargo demand -- the other two-thirds must be carried by less efficient means of transportation.

"But this is all changing. Thanks to heavy investment from both foreign and domestic sources, more than 10,000 miles of new railroad networks will be on the ground within the next few years.

"Guangshen Railway Limited operates both passenger and freight lines, and it's sitting on some prime real estate -- including routes between Guangzhou and Shenzhen, as well as the only network linking Hong Kong with the Mainland.

"Despite damaging earthquakes, record snowfall and other headaches, GSH still carried about 83 million passengers to their destinations last year -- representing volume growth of +15%.

"And the company has started off 2009 on the right foot, posting healthy double-digit first quarter gains in both revenues and earnings. Going forward, recent acquisitions and continued optimization of existing lines should lead to solid (though not spectacular) growth.

"I like the fact that GSH is sitting smack in the middle of the Pearl River delta of Guangdong Province, among the most affluent and rapidly expanding regions in all of China.

"This is a heavily traveled artery, and the company has it all to itself -- as a state-owned enterprise, I don't see many competitors being allowed in.

"The shares are currently approaching a 52-week high, but I think they could continue on this path and take investors on a quick ride to fair value at $30. Nevertheless, the stock is still best suited to risk-tolerant investors, preferably with a wide +25% or greater margin of safety."

Steven Halpern's TheStockAdvisors.com offers a free daily overview of the favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.

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Reiterating: CVS - Defensive play, extraordinaire

07-13-2009

From: BloggingStocks

Do hang onto to those CVS Caremark Corporation (NYSE: CVS) shares, to say the least: I'm Reiterating my Buy rating for the company, first recommended on February 16, 2009 at a price of $27.30.

CVS, a classic defensive, is performing well, despite choppy macroeconomic conditions. Nothing has occurred within the last half-year to suggest that CVS will not be able to successfully incorporate recent acquisitions, and increase sales in key, new growth markets in the U.S.


Hence, as noted, if you're thinking about opening a "Mom & Pop' drug store next to CVS, think again. The First Call FY2009/FY2010 EPS estimates for CVS are $2.60 to $2.99.

Stock Analysis: CVS is a moderate-risk stock. CVS is an investment, not a trade. If you've already purchased CVS's shares, hold them. If not, consider buying a 25% position in CVS now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your CVS position before October 2009.! Sell/St op Loss if you were to buy shares in this company: $18.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

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Posted Jul 9th 2009 5:40PM by Joseph Lazzaro @ www.bloggingstocks.com
Filed under: Western Union (WU), Stocks to Buy

This is a case in which the technical indicators have tipped the scale vs. the fundamentals. I'm issuing a Buy recommendation for Western Union (NYSE: WU) after the stock held a key technical support level.

That support level: the 200-day moving average - the toughest average to break in trading. After trending lower for about two months, veering toward the 200-Day MA, WU has closed above the 200-day moving average for four consecutive days, not including today. And, trading at $16.50 Thursday afternoon, WU is likely to close above the average, at $15.13, again.

Western Union's fundamentals are mixed: revenue is likely to fall 6% in FY 2009 and increase 3-5% in FY2010 - not the best outlook nor growth scenario, and not enough to build on, despite a restructuring, cost cuts, and a solid market position (375,000 agent locations in more than 200 countries) in the money transfer segment.

However, the 200-day MA has held and that suggests institutional investors may know something that others don't, hence the Buy. However, don't buy WU if you can not tolerate moderate risk. The First Call FY2009/FY2010 EPS estimates for WU are $1.26 to $1.39.

Stock Analysis: Western Union is a moderate-risk stock. Consider buying a 25% position in WU now; then buy another 25% in four months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your WU position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $9.

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Posted Jul 9th 2009 6:40PM by Sheldon Liber @ www.bloggingstocks.com
Filed under: Other issues, Management, Rants and raves, Interviews, Market matters, Next big thing, Headline news, Recession, Financial Crisis

This morning Warren Buffett was interviewed and said he would be in favor of the federal government passing legislation for a second stimulus bill -- increasing the money supply again by gargantuan proportions.

While "my pal" Warren got plenty of ink (and pixels) for his comments it left me wanting more. Buffett has the most to gain, and the most to lose -- and at the same time he cannot really lose.

Since Buffett has so many billions of dollars and controls billions more, and influences still more in the hundreds of billions, he clearly has been and continues to be negatively affected by our economic firestorm more than almost any other individual could be.

Clearly a second influx of capital into the economy would be of great benefit to him directly. However, I also stated that he cannot lose, simply because he could lose 95% of his fortune and not have to change much in his life.

Getting past all this, what troubles me the most, is that Warren Buffett, the greatest investor of the last three generations only tells us what he would do in general -- not specifically!

If he thinks he could do some good by sharing a more detailed plan or approach to healing the economy then by all means he should do so. It bothers me that he does not get more involved. It bothers me that he does not get in the trenches and use his brilliance where it would do some good. Giving his opinion on talk shows and the occasional phone call from the President and others in Congress is just not good enough.

I cannot accept his broad concepts on the fly, along with his criticism of Congress if he does not get involved. There are very few people that think the folks that got us into this mess know what they need to do to get us out. Many of them will tell you that, in all candor, they are doing their best, trying this and that to see what works.

Buffett does not have all the answers, but he could help more than he does, and Warren, if you are doing more than any of us are aware of, at least let us know you are on the case. That alone might calm the markets.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money.

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Posted Jul 10th 2009 10:30AM by Tom Johansmeyer @ www.bloggingstocks.com
Filed under: Earnings reports, Hewlett-Packard (HPQ), India, International Business Machines (IBM), Stocks to Buy

Infosys Technologies (NASDAQ: INFY) increased its first quarter profits by 17% by tapping new markets and wrangling in 27 new clients, according to the Financial Times. The second-largest software services exporter in India, Infosys even scored some major clients, such as Waitrose, a top-shelf food retailer in the United Kingdom. Tough economic conditions can tend to favor companies that provide outsourcing services -- as well as consulting services with high, easily justifiable returns on investments (ROIs).

Nonetheless, this is a competitive space, and Infosys did caution that IBM (NYSE: IBM), Accenture (NYSE: ACN) and Hewlett-Packard (NYSE: HPQ) will be formidable global foes. With the announcement, Infosys increased the lower end of its forecast for the year, expecting revenues to fall in the $4.45 billion to $4.52 billion range.

Investors seem to be pretty happy with the company's performance. Shares were up 2.8% on the announcement and are up 53% for the year. And, as Indian software and outsourcing companies begin to carve out their global spaces, they will see the United States as an available market, taking pieces of the pie owned by the major consulting firms. The next six to nine months will be tough, but Infosys will be a long-term success story.

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