Goodfellow LLC’s “Stocks in the News”
Evidence Found in JPMorgan Chase Probe
(JPM, $50.86, up 28 cents midday)
We recently reported to Ransom Notes Radio listeners that JPMorgan Chase & Co. is under investigation by the SEC’s anti-bribery unit for hiring decisions which may have been made in order to win banking business in China. Now an internal spreadsheet comes to light, linking appointments to specific deals pursued by the bank, reports Bloomberg. However, it is unclear whether any crime has been committed.
JPMorgan is also being investigated for crimes and improprieties in the areas of energy-trading, mortgage-backed securities, balance sheet misstatements, derivatives losses, money-laundering, foreclosures, and credit-card collections.
Earnings growth prospects at JPMorgan Chase are minimal. We would look elsewhere for growth stock opportunities.
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Tragedies and Chairman Resignation Beseige Swiss Conglomerates
(ZURVY, $24.49, down $1.06 midday)
Zurich Insurance Group Ltd. Chairman Josef Ackermann has resigned in the wake of the apparent weekend suicide of the company’s Chief Financial Officer. Ackermann commented, “I have reasons to believe that the family is of the opinion that I should take my share of responsibility, as unfounded as any allegations might be.” Zurich is a Swiss-based multinational company with $60 billion in annual sales. It’s noteworthy that the CEO of Swisscom AG, a $12 billion Swiss telecommunications company, also took his own life in July.
Earnings are expected to grow 5 and 14 percent in the next two years. The dividend yield is 7.33%. Citi Research likes Zurich’s balance sheet quality and capital strength, but considers the stock fairly valued.
We would avoid Zurich shares due to the bearish chart, and suspicions that “Something is rotten in the Eurozone.”
Goodfellow LLC Rating: Sell, Growth & Income, Public. (08/29/13)
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Vodafone May Sell Verizon Wireless Stake
(VZ, $48.13, up $1.57 midday)
(VOD, $31.65, up $2.24 midday)
Verizon Communications Inc. and Vodafone Group PLC are in talks to determine whether Verizon might purchase Vodafone’s 45% stake in Verizon Wireless, America’s most profitable mobile-phone company. The deal could be valued as high as $130 billion, and would require Verizon to raise about $60 billion in financing.
We told Ransom Notes Radio listeners twice this year to avoid Vodafone stock in favor of Verizon, due to much stronger earnings growth prospects at Verizon; and we reiterated our buy recommendation this past Monday. Verizon shares, with a yield of 4.25%, remain very attractive to growth stock investors, with or without complete ownership of Verizon Wireless.
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TiVo Posts Net Profit from One-Time Items
Television technology company TiVo Inc. (TIVO, $11.58) reported a profitable second quarter, supported entirely by litigation awards vs. Motorola Mobility and Cisco. Excluding unusual items, the company had a smaller quarterly loss that Wall Street expected, and revenues were up 53% year-over-year. After many years of net losses, CEO Tom Rogers expects to report profitable quarters from here on out, aided by the successful litigation, which resulted in prospects of both increased licensing revenue and cash resources.
TiVo stock is trading sideways between $10.50 and $12. Aggressive growth investors with a long-term horizon might eventually be rewarded by owning TiVo shares.
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Zale Corp. Stock Surges after Fourth Quarter Earnings Report
Jewelry retailer Zale Corp. (ZLC, $11.63) saw its stock jump today after reporting a smaller-than-expected fourth-quarter loss. The company showed improvements in revenue, gross margin, products, inventory, marketing, and debt levels.
After multiple years of net losses, Zale is expected to earn a profit this year, followed by aggressive earnings growth in the next two years.
The stock price crashed with the 2008 Financial Meltdown, and didn’t begin to recover until May of this year. While the chart is bullish, the shares are tremendously overvalued. Current shareholders should use stop-loss orders.
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TASER Stock Ends Shocking Run-Up
TASER International, Inc. (TASR, $11.15), maker of electronic control devices used in law enforcement, saw its shares fall a bit today after a 35% price run-up in the last two weeks. Police departments around the country are ordering TASER’s Axon wearable video cameras, causing investor excitement around the company’s earnings growth prospects. The cameras not only aid officers on traffic stops and crime situations, but have proven to dramatically decrease the use of force, and civilian complaints in those situations.
Earnings are expected to grow 15, 19, and 24 percent over the next three years. The PE is high at 36.
It’s probably too late for new investors to catch the recent run-up. Expect the stock to trade in the $10 – $12 area in the near future.
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Tiffany’s Beats Quarterly Estimates Again
Luxury jewelry retailer Tiffany & Company (TIF, $80.82) reported second quarter earnings per share of 83 cents, blowing away Wall Street’s 74 cent estimate. Profits came from higher operating margins, buoyed by product price increases and lower silver costs. Sales surged in China, Japan, and Europe, but were flat in America.
Full year earnings growth estimates rose again today to 9% for the year, and 14% next year. The dividend yield is 1.7% and the PE is 23.
The share price is up 18% since we told Ransom Notes Radio listeners to buy Tiffany stock in March. Then in May, we told investors to hold their shares because the stock was likely to trade down $10 in the near-term, which it did. The price is climbing higher now, towards medium-term resistance at $84. We would accumulate shares below $80.
Goodfellow LLC Rating: Accumulate, Growth & Income, Public. (08/27/13)
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Hedge Fund Dumps Penney Shares for Half Billion Dollar Loss
On Aug. 12, we reported that hedge fund manager Bill Ackman was urging J.C. Penney Company, Inc. (JCP, $13.17) to replace its Chairman. After receiving corporate opposition, Ackman resigned from the Board of Directors the next day. Now we learn that Ackman’s fund, Pershing Square Capital Management, has hired Citigroup to sell its 39 million shares of J.C. Penney. The fund is expected to lose nearly half a billion dollars on the trade.
Penney’s is projected to have annual net losses for at least another three years, and cash flow problems are severe.
We told investors repeatedly to sell their shares in J.C. Penney this year. We cannot imagine any reason for any investor to own shares in J.C. Penney Company.
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Facebook Market Value Tops $100 Billion
Facebook Inc.’s (FB,$39.64) market value passed $100 billion as aggressive growth investors continue to buy shares in the world’s largest social network. The company surprised investors in late July when reporting a rapid and successful transition from desktop to mobile advertising, delivering hope for a profitable future at Facebook.
Earnings are expected to grow about 33% per year for the next three years.
The stock is finally trading above its May 2012 IPO price of $38. The share price is up 40% since we said “buy Facebook” on May 2. Investors should be prepared for volatility by using stop-loss orders.
Goodfellow LLC Rating: Hold, Aggressive Growth, Volatile, Public. (08/27/13)
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Anadarko to Receive $2.6 Billion from Sale of Partial Stake in Mozambique Offshore Gas Field
(APC, $91.50, up $1.70 midday)
Global oil & gas company Anadarko Petroleum Corp. has agreed to sell a 10% stake in its Mozambique offshore gas field to an energy company in India for $2.64 billion cash. After taxes, the transaction brings Anadarko’s cash position to about $6.4 billion. Morgan Stanley expects the company to announce a large share repurchase plan.
Earnings are expected to grow 26 and 18 percent over the next two years. The PE is 21.
Several investment firms raised their price targets as high as $122 on Anadarko shares today. The stock began breaking past a medium-term trading range in July, currently trading between $89 – $93.
Goodfellow LLC Rating: Strong Buy, Aggressive Growth, Volatile, Value. (08/26/13)
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Verizon Expected to Increase Dividend Next Week
(VZ, $47.20, down 41 cents midday)
Morgan Stanley is expecting Verizon Communications Inc. to announce an annual dividend increase on or near Thursday, Sept 5. Verizon is the largest U.S. wireless carrier, with 2012 revenues of $116 billion.
Earnings per share estimates have increased since we began recommending Verizon stock in February, currently reflecting 21, 15, and 10 percent growth over the next three years. The dividend yield is 4.34%, and the PE is 17.
We began recommending Verizon shares to Ransom Notes Radio listeners in February, saw the stock price rise 23%, then cautioned investors to wait for a pullback to buy more shares. The pullback took place this summer, and the price is attractive again.
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Amgen and Onyx in $10 Billion Purchase Deal
(AMGN, $114.00 up $8.40 midday)
Biopharmaceutical-maker Amgen Inc. has agreed to purchase Onyx Pharmaceuticals Inc. (ONXX) with cash and low-interest rate, five-year financing. Shareholders will receive $125 per share when the deal closes in the fourth quarter. Onyx cancer products, combined with Amgen’s deep late-stage pipeline, are expected to add to earnings beginning in 2015.
Prior to the deal, Amgen’s earnings were projected to grow 14 and 12 percent in the next two years. The PE is 15.6. Amgen remains committed to growing the dividend, currently yielding 1.6%.
The stock price is up over $8 today, and retracing April highs of $115. Expect it to trade in the $108 – $115 area for a short while prior to any breakout.
Goodfellow LLC Rating: Accumulate, Growth & Income, Value. (08/26/13)
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