Stocks in the News — week of April 7, 2014 (April 11th update)

Wells Fargo Reports First Quarter Earnings Beat

(WFC, $48.35, up $0.64 midday)

Financial stocks are one of the stronger industry sectors in the market right now.  As a group, the stocks are going through very orderly, seemingly brief, price corrections.  Some, like Morgan Stanley (MS) and State Street Corp. (STT), are revisiting their February lows; while others, like Wells Fargo & Co. (WFC), Legg Mason (LM), and Invesco Ltd. (IVZ), have established higher trading ranges since the winter.

U.S. bank holding company Wells Fargo reported first quarter ’14 earnings per share (EPS) of $1.05 vs. the consensus estimate of $0.96.  The outperformance is attributed to a $0.07 tax benefit, and higher  income from equity investments.  Good expense controls, and a low loan loss provision, rounded out the good news from today’s report.

Declining loan loss provisions have been contributing to earnings for several years; however, this benefit should be phasing out in the near future.  Earnings are being impacted by lower trust and investment fees, including a significant decline in mortgage revenues.

Wall Street expects EPS to grow 4%, 6% and 9% in 2014 through 2016 (December year-end).  The price-earnings ratio (PE) is 12.0, within a normal range of 8-16.  The dividend yield is 2.5%.

The stock is up 30%, plus dividends, since we told Ransom Notes Radio listeners to buy Wells Fargo shares on April 12, 2013, when the price was $37.21.  We then reiterated our buy recommendation on July 12.

Wells Fargo shares recovered from the 2008 Financial Meltdown last spring, and have since been reaching new highs.  The chart remains bullish.  Current shareholders should hold their shares for additional growth.  WFC has a current trading range of $47-$50.  I would use a stop-loss order at $46.50.

Wells Fargo shares do not meet Goodfellow LLC investment criteria, because the projected earnings growth rate is quite slow.  Subscribe now for good stock ideas, featuring strong earnings growth and bullish charts.

Goodfellow LLC rating: Hold, Volatile, Public.  (04-11-14)

WFC Chart

WFC data by YCharts

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I’m planning to write about biopharmaceutical stocks very soon; I’m just waiting for their support levels to shore up first.  None of them will get a strong buy rating from me, because their charts have recently been weak.  However, there are some tremendous values in that sector.

Nobody is going to miss their opportunity to buy low; it will take a while for biopharmaceutical stocks to rebound.  (04-11-14)

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S&P Reiterates Buy on Kraft Foods Group

Yesterday, I featured Kraft Foods Group (KRFT) as an example of a stock with a bullish chart in my article The Art of Buying Stocks During Volatile Markets.

Standard & Poor’s reiterated their buy rating on KRFT today, saying “While we expect reported [1Q] revenues to decline 1.3% on a shift in the Easter holiday into Q2, we believe the company will benefit from new product introductions and benefits from cost savings initiatives.”

Kraft will report first quarter 2014 after the market closes on Thursday, May 1.

I would not buy KRFT shares, due to the slow projected earnings growth in 2015 & ’16.  In order to minimize investment risk, I always recommend concentrating new purchases on stocks with strong projected earnings growth and bullish charts.

KRFT’s chart is bullish.  Current shareholders — including traders — should hold their shares, as I anticipate additional near-term capital gains.

Goodfellow LLC rating: Hold, Public.  (04-09-14)

KRFT Chart

KRFT data by YCharts

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Happy investing!

Crista Huff


Goodfellow LLC

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