Stocks in the News — week of June 24, 2013 (June 28 update)

Goodfellow LLC’s “Stocks in the News”

seen on Townhall Finance, heard on Ransom Notes Radio


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BlackBerry Stock Falls on Quarterly Loss

Research in Motion (BBRY, $10.46), maker of BlackBerry smartphones, reported a first quarter loss on lower than expected unit shipments, service revenues, and gross margins.  The stock is down substantially today, after the Street expected a profitable quarter.

The new BlackBerry 10 sales are doing well, and the company may earn a small profit in fiscal 2014 after losing money in the first two quarters, but is expected to lose money again in 2015.

The stock fell well below support levels today.  On March 25 and June 18, we said SELL, due to projections of falling revenues and net losses.  Investors should sell and reposition capital into a company with growing profits.  (06/28/13)

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Nike Has Another Outperforming Quarter

Nike Inc. (NKE, $63.68) reported fourth quarter sales, earnings, and global futures which beat Wall Street estimates.  Product innovation and sports events are driving top-line growth in most geographic regions.   Citi Research commented on high cash balances, saying “we think management could be ready to accelerate share repurchases and/or dividend increases.”

Earnings are expected to grow another 13-15% in each of the next two years.  The PE is 20.4 and the dividend is 1.4%.

We urged investors to buy NIKE twice in March.  The stock then rose 20%.  The new trading range is $59 to $66.  New investors should try to buy below $62.  (06/28/13)

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Accenture’s Third Quarter Earnings Disappoint Bulls

Accenture PLC (ACN, $71.96), the world’s second-largest technology-consulting company, disappointed Wall Street with flat third quarter sales.  U.S. revenue growth was up 7%, but international was weak.  Earnings were a little higher than expected, driven by good  operating margins.

Bulls can focus on strong increases in new contracts in the recent two quarters; and share buybacks of approximately $1.4 billion are seen in the recent and next quarters.  Annual earnings growth is being revised down to about 9% this year.

The stock lost all of this year’s gains today, and will likely find support in the low $70’s.  It’s too late for fair-weather investors to sell on today’s stock overreaction.  (06/28/13)

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Dish Throws in the Towel on Clearwire and Sprint Purchases

Dish Network Corp. (DISH, $41.44) has dropped out of the bidding war for ownership of Clearwire Corp., leaving Sprint Nextel Corp. as the highest bidder.  “Dish’s decision to move away from Clearwire comes days after the company’s abandonment of its $25.5 billion tender offer for Sprint last week,” reports Bloomberg.

Earnings are expected to rise 45, 10, and 12 percent in the next three years.  The PE is 20, and the dividend is 2.4%.

Dish shares have long-term price resistance at $41.  On May 30, we told investors to Hold DISH shares based on good earnings growth, but cautioned them about the company’s high debt levels.  (06/27/13)

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Winnebago Sales Speed Forward

Motor home-maker Winnebago Industries Inc. (WGO, $20.99) reported third quarter revenues which surprised Wall Street, up 40% year-over-year, and earnings per share doubled.  Shipments in the quarter reached a five-year high.

Earnings are on a strong growth trend, and the PE is 21.

Winnebago shares have been trading between $17 and $22 this year, with some near-term price support at $19.  (06/27/13)

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Toyota Racing Toward a Strong First Quarter

Citi Research anticipates ToyotaMotor Corp.’s (TM, $121.74) first quarter operating profit to be up 84% year-over-year, and says, “it looks as if Toyota has gotten off to a good start” in fiscal 2014.  Revenues are expected to be strong in Japan and the Middle East, but flat overall, adversely affected by inventory shortages for light trucks in the U.S.

Toyota’s earnings are expected to rise 7 and 32 percent in the next two years.  The PE is 15.5, and the dividend is 1.4%.

The stock rose 55% since Thanksgiving, and is now trading between $112 and $130 with a neutral chart.  (06/27/13)

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Deutsche Bank Recommends Buy V.F. Corp.

Deutsche Bank began coverage of V.F. Corp. (VFC, $190.87 midday) yesterday, the maker of Wrangler, Lee, The North Face and Timberland apparel, with a buy rating.  The stock has been rising steadily for over four months and reached new highs today.

Wall Street projects V.F. Corp to grow earnings 12-13% per year for the next three years.  The PE is 17.6, which is high in its normal range of 10-19.

We recommended V.F. Corp. on Ransom Notes Radio three times since February, and the price is up $34 since then.  Shareholders should consider using stop loss orders to protect profits.  We think that new investors have missed most of this year’s price run-up.  (06/26/13)

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Cargill Trusts Postpone Mosaic’s Buyback Plans 

Mosaic Company (MOS, $54.72 midday), global supplier of phosphate and potash crop nutrients, disappointed Wall Street by announcing a significant delay in upcoming share repurchases from the Cargill trusts.  Investors were expecting the buyback to boost earnings per share.  In addition, weakness in the Indian rupee and other southeast Asian currencies is hurting expected revenues.

Earnings per share are expected to fall about seven percent this year.

Citi Research downgraded the stock from Buy to Neutral, and dropped its price target to $57.  The stock, which has traded between $55 and $64 since December, is flirting with breaking through support levels today.  (06/26/13)

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Monster Beverage Corp. Target of More Litigation 

The American Medical Association is recommending banning the sale of energy drinks to people under age 18.  Monster Beverage Corp. (MNST  $57.57 midday), formerly Hansen Natural Corp., is a leading maker of energy drinks, and a target of two wrongful death suits.

Monster’s earnings are expected to grow 13, 19, and 19% over the next three years.  The PE is high at 27.

The stock is on an uptrend, trading between $55 and $63.  Current shareholders should use stop loss orders to protect against a sudden price drop related to litigation or falling sales.  (o6/26/13)

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S&P 500 Index   6-24-13 three-month chart

S&P 500 Index 6-24-13
three-month chart

The S&P 500 Index closed up today at 1588.03.  (The chart to the right reflect’s yesterday’s closing value.)  We look to be in a normal short-term stock market correction.  If the market spikes down once more on Wednesday or Thursday and closes in the 1570-1575 area, then begins climbing again by Friday, we will very likely have a normal double-bottom chart pattern.  You can see this same pattern on the chart in mid-April and early June.

Dow Jones  Industrial Average three-month chart 06-24-13

Dow Jones
Industrial Average
three-month chart

The Dow Jones Industrial Average closed up today at 14,760.  Watch for one more bounce around 14,660, in sync with the S&P 500 Index, for they often trade in tandem.  If either index average closes materially below these quoted support levels this week, then we will definitely not be experiencing a normal double-bottom chart pattern, and there will be more downside to the market.

Investors are encouraged to always have a “wish list” of stocks at the ready; stocks you would prefer to buy at support levels, so that these market corrections do not go for naught.  In the words of Chicago political mobster Rahm Emanuel, “You never let a serious crisis go to waste. And what I mean by that it’s an opportunity to do things you think you could not do before.”  (06/25/13)

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Lennar’s Quarterly Income Smashes Estimates

Homebuilder Lennar Corp. (LEN, $35.23) reported a surge in second-quarter sales, with pretax income of $162 million blowing away analyst estimates of $111 million.   Year-over-year numbers improved significantly in backlog, home deliveries, cancellations, average selling price, SG&A expenses, and gross margins.

Earnings are expected to rise 40% and 24% in 2014 & ‘15.  The PE is 21.6.

The stock price reached a six-year high in mid-May, then tumbled through price support in recent weeks.  The best-case scenario is that the stock trades between $35 and $44 for several months, but there is still near-term price risk.  This is not an optimal time to buy or sell the stock.  (06/25/13)

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Carnival Makes Little Splash with Small Net Income

After disappointing Wall Street with downward earnings revisions in May, Carnival Corp. (CCL, $34.89) reported an upside second quarter earnings surprise today of 9 cents vs. an expected 6 cents per share.

Advance cruise bookings for the remainder of the year are down vs. last year in both quantity and price.  The company still expects full-year earnings to be down somewhere in the 12 to 23% range.

Carnival’s stock has been trading sideways between $30 and $39 for two years, and the chart is bearish.  On May 21 we said that current shareholders are receiving a 3% dividend yield at the expense of price appreciation during a bull market, and suggested avoiding the stock.  (06/25/13)

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Ford F-150 Sales Outpace Toyota Camry

Ford Motor Company’s (F, $14.97)  F-150 pickup resumed its rank as the #1 American-made vehicle, breaking Toyota Camry’s four-year reign, according to  Ford’s total U.S. sales rose 22% this year through May, beating its American competitors.

Earnings are projected to fall 1% this year, as troubled global economies continue to pressure margins; then rise 19% in 2014.  The PE is 10.6 and the dividend yield is 2.7%.

On May 2, we told investors to accumulate Ford shares as the stock approached short-term resistance.  The stock blew past price resistance within days and rose 20%.  The new trading range is between $14.50 and $16.  Investors have a short window to buy below $15.  (06/25/13)

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Subscribe now and read our weekly article, Featured Stocks in Action, to learn which stock I bought for myself today.  (06/24/13)

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When Is It Time to Buy During a Stock Market Correction?

S&P 500 Index   6-21-13 six-month chart

S&P 500 Index 6-21-13
six-month chart

The S&P 500 Index will either bounce around 1582 today, or at more firm support around 1540-1545.  So far this is a very normal summertime market correction.  My advice is to identify stocks you’d love to own, and then buy them as they bounce at support levels.  Conversely, the other type of stock to buy right now is a stock which didn’t go down with the market correction.  For more ideas on which stocks to buy, at which prices, subscribe to Goodfellow LLC and gain access to our buy & sell recommendations, complete with trading range information and suggested purchase prices.  (06/24/13)


6 PM MST Update:  The S&P closed at 1573, so it’s a safe bet that it’s heading to secondary support around 1540-1545.  Your job as an investor with cash to spend is to identify stocks that you would ideally like to own, and be prepared to buy them at support levels.  Send questions to if you’re not up on reading charts, and I’ll tell you whether your favorite stock looks like a wise purchase, and at what price.  (06/24/13)

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Twinkies Gets Sweet Revenge on Union

(APO, $21.36 midday)

Hostess Brands LLC will resume selling its iconic Twinkies on July 15, after emerging from its second bankruptcy in four years.    The return of Twinkies will be heralded by the tagline  “The Sweetest Comeback In The History Of Ever.”

Hostess was crippled financially by the pension and medical costs of unionized workers, compounded by a worker’s strike.  The company closed its doors in November, as 15,000 union workers lost their jobs.  The new Hostess will not employ union workers.

Hostess is now owned by Apollo Global Management LLC and C. Dean Metropoulos & Co.  Apollo is an alternative asset manager with no pattern of rising profits; and attractive, though erratic, dividends.  Its stock trades on the NYSE, currently in a neutral trading pattern.  There’s no compelling reason to buy or sell shares in Apollo Global Management.  (06/24/13)

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Tenet Healthcare to buy Vanguard Health Systems

(THC, $42.60 midday)

Hospital chain Tenet Healthcare Corp. is in agreement to buy Vanguard Health Systems for $21 per share.  Tenet will then operate 236 hospital and outpatient treatment centers.

The buyout should contribute to Tenet’s earnings in the first year, which were already slated to grow 64, 25 and 18 percent in the next three years.  However, Tenet Healthcare’s long-term debt ratio is a very high 80%, and that’s before buying Vanguard and taking on $2.5 billion of the company’s debt.

Tenet’s stock broke out of a long-term trading range this year and ran up 52% before experiencing a pullback.  The chart is neutral, trading between $41 and $50.  Investors could easily find growth stocks with much less debt and better charts.

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JPMorgan Chase Says Sell Deere & Co. 

(DE, $80.19 midday)

JPMorgan Chase & Co. cut its rating on machinery manufacturer Deere & Co. to underweight.  Analysts remarked that “lower crop prices and higher land rent costs may drive profit-per-acre lower.”

We told investors twice this year not to buy Deere stock due to poor construction sales.  Now the USDA compounds that bad news by adding that crop receipts are expected to drop 12% in 2013 & ’14.

A recent trend of good earnings growth is slowing to a crawl, as earnings are expected to rise 12, 2, and 1 percent in the next three years.  The dividend yield is 2.54%.

The stock fell through short-term term support today.  Current shareholders might take this moment to re-think their investment strategies.  (06/24/13)

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