Stocks in the News — week of July 8, 2013 (July 12 update)


Goodfellow LLC’s “Stocks in the News”

seen on Townhall Finance, heard on Ransom Notes Radio



Glaxo Employees Interrogated & Arrested in China

Thirty or more employees of global healthcare company GlaxoSmithKline PLC (GSK, $52.88 midday) are under house arrest and surveillance, due to Chinese allegations of bribery and tax fraud.  China reports that some employees confessed to crimes under interrogation, but Glaxo’s own four-month investigation found no evidence of wrongoing.

Revenue from China makes up 3.5% of total annual sales.  Earnings are projected to climb 12 and 8 percent for the next two years.  The dividend yield is 4.4%.

Glaxo’s price continues to recover from the 2008 Financial Meltdown, and could  approach the April 2007 high near $60 this year, but the chart is not definitive.  (07/12/13)

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Wells Fargo Beats Quarterly Estimates Again

Bank holding company Wells Fargo & Co. (WFC, $42.79 midday) reported second-quarter profit of 98 cents per share vs. the consensus estimate of 93 cents, “on stronger mortgage banking, trust and investment fees and lower provisions,” reported Morgan Stanley.

Wells Fargo’s earnings growth estimates have ratcheted upward since their first quarter earnings beat, to 10, 5, and 6 percent in the next three years.  Expect another round of upward revisions.

We recommended Wells Fargo on Ransom Notes Radio on April 12 based on very constructive chart patterns.   The stock is up 15% since then, and the chart remains quite bullish.  (07/12/13)

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Priceline and Google Racing Abreast in Stock Price 

Shares in (PCLN, $913.25 midday) and Google Inc. (GOOG, $917.16 midday) are in a neck-and-neck race to a $1000 share price, currently trading in the low $900’s.

Google is expected to grow earnings 16-18% per year for the next three years, with a PE of 20.  The stock is up 15% since we began recommending it on Ransom Notes Radio on April 19.  Priceline is expected to grow earnings 19-23% for the next three years, with a PE of 24.  The stock is up 17% since we began recommending it on Ransom Notes Radio May 13.  

We think that Priceline’s stock will pause for a pullback around $950, and foresee Google steadily rising to $1000 to win the race.  (07/12/13)

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Auto Stocks Continue Bull Run

Auto stock prices are surging to recent highs along with strong demand for U.S. cars and trucks.  “Demand is being fueled by pent-up need, historically low interest rates, and newly competitive compacts and family cars that are winning converts to U.S. automakers,” reports Bloomberg

We recommended shares in Ford Motor Company (F, $16.93 midday) on Ransom Notes Radio in May and June.  Shares are up 26% since then, and still climbing.  Earnings are flat this year, but should climb 18 and 23 percent in the next two years.  The dividend yield is 2.4%.

Ford shares are approaching medium-term resistance at $19.  Investors should expect a pullback at that point.  (07/11/13)

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Barnes & Noble Expected to Report Large First Quarter Loss

Nationwide book retailer Barnes & Noble, Inc. (BKS, $17.05 midday) continues to lose money as it works through management and cash flow difficulties.  CEO William Lynch recently resigned, which could signal an upcoming sale of the problematic Nook division, and a renewed focus on retail business.

Annual net losses are projected to reach from 2011 through 2016 and possibly farther out.

There’s no logical reason for anybody to own the stock, yet it’s trading between $15 and $24.  We would sell in the low $20’s and invest in a profitable company.  (07/11/13)

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Celgene Research Pipeline Continues Flowing to Market

Shares of biopharmaceutical company Celgene Corp. (CELG, $133.44 midday) are breaking through upside resistance today on positive Phase III data on its myeloma cancer drug, REVLIMID.  The company will likely file for global regulatory approval this year.  Standard & Poor’s Research raised its target price  today to $157.

Celgene’s earnings are projected to grow 17%, 21% and 28% over the next three years.  The PE is 23.

The share price is up 25% since we began recommending Celgene on Ransom Notes Radio on March 5.  New investors are encouraged to jump in on today’s breakout.  (07/11/13)

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Family Dollar Cautions Investors After Today’s Earnings Beat

Family Dollar Stores, Inc. (FDO, $68.12) reported third-quarter earnings of $1.05 a share, above the $1.03 estimate, on increased sales and gross margins.  However, the company guided fourth quarter estimates downward as consumer discretionary spending remains hampered by the poor economy.

Family Dollar’s 2013 earnings growth projections have already fallen from 15% down to 4% this year.  The PE is 17.3.  The dividend yield is 1.59%.

The stock continues to recover from a big fall in December.  We think investors should sell as the price reaches the upper $60’s.  (07/10/13)

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New York Times Investment Rating Downgraded

“While we are encouraged by the trajectory of New York Times Co.’s (NYT, $12.48) digital conversion and believe it remains the best positioned of the newspapers in our coverage universe, we believe its valuation has run ahead of its fundamentals,” reports S&P, as it lowers its rating from Hold to Sell.

Earnings are projected to fall a total of 28% over the next three years.  The PE is 30.

The stock price is approaching long-term resistance at $14.  We see no reason for investors to own shares in a company with consistently shrinking earnings.  (07/10/13)

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Strong Dollar/Weak Yen Combo Harming Earnings Reports

“The yen has weakened by about 21 percent against the dollar since Oct. 31,” reports Bloomberg.  International companies will be taking a hit in upcoming earnings releases.  Delta Air Lines, Inc. (DAL, $19.29) said that the weak yen reduced unit revenue for a fourth straight month.

Delta’s earnings are projected to grow 42 percent this year, with a PE of 7.2.  The long-term debt ratio is 106%.

The stock is up 38% since we told investors to buy at $14 this year.  The chart remains bullish, and the stock appears to be breaking out on the upside again this week.  We caution investors that market focus could shift from earnings growth and low PE, to weak yen and high debt levels.  Use stop loss orders.  (07/10/13)

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Kroger Co. to Purchase Harris Teeter Retail Chain

Kroger Co.   07-08-13 three-month chart

Kroger Co. 07-08-13
three-month chart

Grocery chain Kroger Co. (KR, $37.11) has agreed to buy fresh food retailer Harris Teeter Supermarkets Inc. in a debt-financed deal totalling $2.5 billion.  Harris shareholders will receive $49.38 per share.  The deal enhances Kroger’s ability to compete in the southeastern U.S.

Kroger’s earnings were previously projected to grow 6, 10, and 10% in the next three years.  The dividend yield is 1.6%.

The stock price broke out of a steady trading range last week and is in the climbing phase.  Earnings growth isn’t wildly attractive, but you can’t beat a bullish chart.  Momentum investors should try to jump in on a pullback to $35.  (07/09/13)

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Alcoa Beats Quarterly Estimate, But Don’t Get All Excited

Alcoa  Inc. (AA, $7.89 midday) reported a second quarter earnings beat on better aluminum pricing and margins.  However, watch for third quarter estimates to ratchet downward with ongoing pricing issues, which are hurting cash flow.  Moody’s cut Alcoa’s credit rating to junk in May.

Earnings per share are projected to rise over 60% for each of the next two years.  The PE is 20.

Alcoa’s stock chart is terrible, and the stock price is reaching four-year lows.  The price probably won’t get much worse, but there are far better investments available for more immediate growth than Alcoa stock.  (07/09/13)

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The Magic of Macy’s

Macy's Inc.   07-08-13 three-month chart

Macy’s Inc. 07-08-13
three-month chart

Nationwide retailer Macy’s, Inc. (M, $50.73 midday) which also owns Bloomingdale’s, is seeing its stock continue to launch upward after 12 straight  quarters of earnings beats.  Morgan Stanley Research says, “we remain convinced Macy’s sales momentum and margin improvement are sustainable.”

Earnings are expected to grow 13-14% per year for the next three years.  The PE is 12.8 and the dividend yield is 2%.

We recommended Macy’s stock on Ransom Notes Radio three times since February, and repeatedly at Goodfellow LLC since April 2011.  The stock is up 28% since February, and appears to be breaking out of a trading range again today.  (07/09/13)

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Petrobras to Take Large Earnings Hit 

Brazil’s oil & gas company, Petrobras (PBR, $12.29) is expected to suffer a large second quarter foreign exchange charge.  “[W]e estimate Petrobras will have higher net debt than market value by the end of the year,” says Citi Research.

Earnings are expected to increase 22, 7 and 9 percent over the next three years.  Dividend payments are irregular, totaling approximately 3% per year.

The stock is actively falling to eight-year lows, with no price support in sight.  (07/08/13)

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Nielsen to be Added to S&P 500 

Information and measurement company Nielsen Holdings NV (NLSN, $35.19) will replace Sprint Nextel Corp. in the Standard & Poor’s 500 Index after the end of trading today.

Nielsen’s earnings are expected to increase 16, 11 and 10 percent over the next three years.  The dividend yield is 1.8%.

The stock broke out of a medium-term trading range in February, and is currently trading between $33 and $37.  The chart pattern is neutral, but constructive.  (07/08/13)

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Wall Street Favors MasterCard

Barclays raised its price target on MasterCard Inc. (MA, $592.57) today to $650, with a new rating of “overweight”.   The stock has risen from $540 to $600 since we recommended it on Ransom Notes Radio on May 1.

MasterCard’s earnings are projected to grow 15-19% per year for the next three years.  The company has $5 billion in cash, no debt, and a $1.7 billion share repurchase program.

After our May 1 recommendation, the stock rose to a new trading range, then broke out again on Friday, reaching over $600 today.  The chart remains bullish.  (07/08/13)

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