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Preview: Fundamental Analysis

Fundamental Analysis

RealMoney's contributors take a look at fundamental issues like valuation that can affect your investment decisions

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Some Materially Strong Stocks

Tue, 19 Aug 2014 18:31 GMT

One of my favorite themes headed into this year was the expected recovery in residential and non-residential construction demand. I keep track of a number of factors within the manufacturing segment: ISMs, PMIs, factory orders, new/existing/pending home sales and the Architectural Billings Index. All of these metrics have shown improvement throughout the year. Both the ISM and PMI reports have been comfortably above the expansionary level mark of 50 for more than a year and the most recent ABI report showed inquiries at the highest level since 2005. But more importantly, I listen to company conference calls and in 2Q there were several companies that indicated the environment was showing signs of life.a Companies like Ingersoll-Rand , Lennox Internationala , Armstrong Worlda , United Technologies and Johnson Controlsa all pointed to green shoots. Even the disappointing quarter from Eatona showed improved bookings in each of its electrical divisions, which was confirmation of the trend.a What’s likely helping the trend is the fact that interest rates have stayed low -- much lower than I expected. In fact, if you ask me what’s the biggest surprise year to date, it's the 10-year bond yield at 2.36%, down from 3% seen at the end of last year. There are a lot of factors weighing on bond yields, such as the geopolitical issues, the continuation of QE by the Federal Reserve, the unknown of tapering back some of these QE efforts and the fact that Europe is teetering on going back into recession as Russian sanctions have put pressure on this region. Japan has decelerated from its recent recovery and China remains a wildcard on whether it can grow at its targeted rates. As a result, Treasuries are seeing a flight to safety and that is bidding up bond prices and pressuring yields. While that is putting pressure on the bottom line of financials (and my bullish bank call from earlier this year), it is leading to higher loan growth and the improvement in the overall economy. That's because low interest rates help affordability for the consumer and U.S. corporations. This trend of low rates could last longer than expected given that Europe isn’t likely to see a quick recovery, Japan remains in a malaise following the BOJ’s decision to raise its consumption tax and the geopolitical issues in the Middle East are likely to remain elevated. China remains a wildcard, but the PBOC’s commitment for its 7.5% GDP target will likely continue to lead to targeted stimulus efforts. Still, it’s pretty clear that this region needs to be watched closely.a So, the United States is the best of the lot, showing better manufacturing data and a pretty resilient consumer, with auto sales at new cycle highs, retail sales mixed-to-improving and housing showing signs of life (today’s housing starts showed a nice ramp higher, up 15.7% y/y to an annual rate of 1.09 million). GDP has seen a snap back in 2Q to a 4% rate from the 2.1% decline in 1Q and consensus is looking at 3% growth in the second half (some are calling for higher, at more like a 4% clip).a Corporate earnings for 2Q were strong, seeing 10% bottom-line growth and 4.5% revenue growth and if the economy continues to progress as I expect, earnings could continue to beat -- and on higher revenue growth, which would be the pleasant surprise.a If you think rates stay lower for longer and the U.S. economy continues to show improvement while the rest of the world muddles along, it’s probably worth looking back at some of the housing plays, especially after hearing what Home Depota had to say today on its conference call. The company reported better-than-expected earnings, revenues, same-store sales, average ticket size and transaction and notable strength in HVAC, tools, appliances and lumber. HD posted an acceleration in all three of its U.S. businesses, including the 10th-consecutive quarter of above-average corporate growth in its professional segment. I’ve recommended Toll Brothersa , Stanley Black & Deckera , Weyerhaeusera , Mascoa , Home Depot and Lowe’[...]

Eddy Elfenbein's Week in Review

Fri, 15 Feb 2013 17:53 GMT

"Individuals who cannot master their emotions are ill-suited to profit from the investment process." - Benjamin Graham

Remember when stock prices used to change each day?

OK, I'm exaggerating...but not by much. Bespoke Investment Group notes that the average daily spread between the high and the low on the Dow Jones is at a 26-year low. Stocks simply ain't moving around very much these days. ...

Click to view a price quote on BBBY.

Click to research the Retail industry.


Eddy Elfenbein's Week in Review

Fri, 01 Feb 2013 18:45 GMT

"There are two times in a man's life when he shouldn't speculate: when he can afford to and when he can't." - Mark Twain

Remember the panic about the Fiscal Cliff? And the Debt Ceiling? And the Sequester? And about a dozen other things the financial media told us -- insisted -- that we simply had to worry about?

Well, here we are a few weeks later. The Dow Jones Industrial Average just closed out its best January in 19 years. The Wilshire 5000, the broadest measure of the U.S. stock market, is just below its all-time high. ...

Click to view a price quote on F.

Click to research the Automotive industry.


Market Strategist Jeff Saut: Best Stock Ideas For Next 3-5 Years

Mon, 28 Jan 2013 19:56 GMT

Given that markets have been ripping higher, we thought it a prudent time to check in with market strategist Jeff Saut. His latest investment outlook is entitled "For All the Sad Words of Tongue and Pen" where he looks at how market rallies can last longer than one would think.

He highlights how at around the 18th day of a typical 17-25 day buying stampede, certain investors will start to question whether or not they've missed "the bottom." This then leads to a new round of buying from people who don't want to miss the big move, and thus the rally extends.

So when might this rally cease? Saut mentions rallies can typically last up to 30 sessions while today is session 18. He points out some of the cautious signals he is seeing: ...

Click to view a price quote on ALTR.

Click to research the Electronics industry.


Eddy Elfenbein's Buy List Update

Fri, 25 Jan 2013 17:00 GMT

"Most investors want to do today what they should have done yesterday." - Larry Summers

In the CWS Market Review from two months ago, I wrote: "But with the election behind us, the clouds have cleared, and I see a strong year-end rally ahead of us. In fact, I think the S&P 500 can break 1,500 by the early part of 2013." Well, it took the index just 24 days into 2013 to vindicate our prediction.

On Thursday, the S&P 500 indeed broke through the 1,500 barrier for the first time since December 12, 2007. The index has now risen for seven days in a row, which is its longest winning streak since 2006. The Dow is off to its best start in more than a quarter of a century. ...

Click to view a price quote on WFC.

Click to research the Banking industry.


Two OTHER Stocks Dan Loeb Is Buying

Thu, 10 Jan 2013 17:42 GMT

Let the battle begin. Dan Loeb's hedge fund Third Point has started a long position in Herbalife (HLF), he revealed in his Q4 letter to investors. He also filed a 13G with the SEC disclosing that Third Point owns 8.24% of the company as of January 3rd. Loeb Long Herbalife Readers will recall that we recently posted up Bill Ackman's short presentation on HLF where he called it a pyramid scheme. Brian Sullivan tweeted that Andrew Ross Sorkin spoke with Third Point, who believe there's no evidence HLF is a pyramid scheme in their research.

Third Point believes in the compounder thesis that the stock was trading at an attractive discount (after Ackman's short presentation). Third Point writes,

"Applying a modest 10-12x earnings multiple suggests Herbalife's shares are worth $55-68, offering 40-70% upside from here and making the company a compelling long investment ... Given that the company has historically traded more in the 12-14x range (and traded at 16-20x earnings through much of 2011 and early 2012), the opportunity for the company to tell its side of the story tomorrow at its Analyst Day in New York, and the significant short interest, we believe shares could even trade well about our current price target." ...

Click to view a price quote on HLF.

Click to research the Consumer Non-Durables industry.


Real Money Pro Is Now Here

Fri, 19 Aug 2011 11:35 GMT

After several technical problems yesterday, we're happy to announce the launch of Real Money Pro. Starting today, Silver subscribers can access new content being posted to as well as Real Money columns at ...


HPQ Summary: In-Line but Ugly

Thu, 18 Aug 2011 22:23 GMT

To read Ben Thomas' preview of the Hewlett-Packard earnings call, click here.

Hewlett-Packard reported mostly in-line results, but the company's execution and vision are completely off the map.

For the quarter just ended, the company posted third-quarter earnings per share of $1.08 on revenue of $31.2 billion. However, the company is guiding fourth-quarter EPS to a range of $1.12 to $1.16 on revenue of $32.1 billion to $32.5 billion vs. Street estimates of $1.31 in EPS on revenue of $34 billion. ...


ARO Summary: Short on Sales, Cuts Guidance

Thu, 18 Aug 2011 21:56 GMT

Aeropostale reported diluted earnings per share (EPS) of $0.04 per share on net sales of $468.2 million.

Total sales declined 5% year over year, and same-store sales declined 14%. Men's ("guys") sales declined 6%, while girls fell 18%. Units per transaction increased 6%, while total transactions declined 4%, and average ticket declined 16%.

During the period, seven Aeropostale and 10 PS stores opened, while two Aeropostale stores closed. The company ended the quarter with 1,042 stores....

Click to view a price quote on ARO.

Click to research the Retail industry.


GPS Summary: A Beat, but Little Else

Thu, 18 Aug 2011 21:36 GMT

To read Brian Gilmartin's preview of the Gap Stores earnings call, click here.

Gap Stores reported earnings per share of $0.35 (vs. the $0.33 consensus estimate) on $3.38 billion in revenue (vs. the consensus estimate of $3.34 billion) for actual year-over-year growth of -3% in EPS on 1% growth in revenue.

Expectations were pretty poor coming into the earnings report, so even the slight beat was welcome news, particularly on revenue. ...

Click to view a price quote on GPS.

Click to research the Retail industry.


Collins' Content Is Now on the New Real Money

Thu, 18 Aug 2011 21:22 GMT

Tim Collins' content is now being featured on the new Real Money site.


GPS Preview: Same Old Story

Thu, 18 Aug 2011 15:37 GMT

I'd love to wax eloquent on Gap with a pithy missive about the retailer, but the story hasn't changed very much for most of the past decade as the chart below details.

Gap (GPS) - WeeklySource: TeleChart Gold

Since peaking in the year 2000, around the time growth stocks and tech stocks were coming apart, Gap has retooled and become more productive and generated more cash flow, but the company has shown little ability to grow square footage or comps, which has been a problem. ...

Click to view a price quote on GPS.

Click to research the Retail industry.


Real Money Pro Will Be Available for Subscribers Later Today

Thu, 18 Aug 2011 11:26 GMT

We're currently migrating login information for Silver subscribers over to the new Real Money Pro site. The new site will be available later today.

Until then, Silver/Pro subscribers can access the new Real Money site. ...


The New Real Money
and Real Money Pro Are Here!

Thu, 18 Aug 2011 04:00 GMT

We've very excited to announce the relaunch of Real Money and the launch of Real Money Pro. Starting tonight, all new content will be posted to and ...


JDSU Summary: CCOP Segment Is a Killer

Wed, 17 Aug 2011 23:55 GMT

Investors love "beat and raise," but, the story this earnings season for most tech stocks has been "miss and lower". JDS Uniphase continued the pattern, reporting fiscal fourth-quarter results that were basically in line, but offering guidance for the September quarter that is materially below the Street's expectations. Unlike a SodaStream International , a stock that was destroyed on the surprise guide down, JDSU is down only 3% in after-hours trade, as investors had already braced for the worst.

Earnings per share (EPS) of $0.23 was in line with the Street, and revenue of $472 million actually bested the $466 Street view. The Communications Test segment grew 11.6% sequentially, but gross margin was down 160 basis points on mix and inventory write-offs. Growth was driven by typical seasonal demand from U.S. carriers. Despite the decline in gross margin, operating margin was up sequentially to 14.4%, but below the target range as the company spent heavily on R&D for new high growth products.

The Commercial Optical Products (CCOP) segment, in contrast, declined 3.4% sequentially, in line with guidance. Lower demand hit the segment in Europe and the Americas, while demand in Asia grew. Lasers were particularly strong with 12% sequential growth, as the Q series and new fiber laser rolled out. Gross margin was down mainly on less absorption due to slower sales. Finally, the small Advanced Optical Technologies (AOT) segment grew 3.3% on strong transmission card and currency product sales. Gross margin expanded 100 basis points on mix....

Click to view a price quote on JDSU.

Click to research the Telecommunications industry.


NTAP Summary: Falls Short

Wed, 17 Aug 2011 22:31 GMT

NetApp , one of the leading data storage and management companies reported earnings after the close. Non-GAAP earnings were in line with the consensus estimate, but the company fell short of Wall Street's revenue projections for their first fiscal quarter. The company earned $0.51 a share on total revenues of $1.458 billion. The consensus was for $0.55 earnings per share (EPS) and revenues of $1.52 billion. Although the company fell short of analyst estimates, the results compare favorably to the year-ago results of $0.49 EPS on revenues of %1.14 billion. The in-line profits and revenue miss broke a streak of four positive quarterly earnings and revenue surprises for the company.

The company had solid gains across all of its major business lines. Revenues for product sales rose by 310% year over year and made up 66% of total corporate revenues in the quarter. Software entitlements and maintenance rose by 14% compared to the year-ago period. Service revenues gained 22%. Results were strong across geographical regions, as well. The Americas had sales growth of 27%; Europe Middle East and Africa revenues rose by 16%, while the fastest-growing sales were in Asia Pacific with a 55% year-over-year increase. As many anticipated, profit margins did decline slightly in the quarter due to the business mix with gross margins at 63.2% down from 64.7% last year and 65.5% in the prior fiscal quarter.

NetApp continues to generate substantial free cash flow. For the three months, free cash flow amounted to $142 million, up from $136 million last year. NetApp reported cash and equivalents in the balance sheet at the end of the quarter of $4.7 billion compared to $3.9 billion a year ago. Cash balances declined from the $512 million at the end of last quarter, primarily as a result of the cash purchase of Engenio and stock repurchases. According to management, 51% of the company's cash balances, are held inside the U.S....

Click to view a price quote on NTAP.

Click to research the Computer Hardware industry.


Tech Guidance Crashes the Party

Wed, 17 Aug 2011 21:31 GMT

The earnings reports are coming in, and right now the reactions are ugly. The tone is clearly becoming cautious looking into next quarter. For the most part, the reports for the past quarter have been good, but the outlooks are just not there.

The weight thus far is being felt by the Nasdaq, but how long can equities withstand more and more cautious outlooks before shattering? The technical picture is still cautious, but these earnings outlooks are beyond cautious. The debt situations around the world look like they may be getting into the psychology of businesses. On top of the sovereign debt issues and the lack of job growth, the world economies cannot lose the positive psychology of big business. Perhaps we aren't positive, but if mentality swings to negative, then equities could have a long way down.

Well JDS Uniphase continues the reign of the optical bears. After Fabrinet delivered decent numbers and the stock popped yesterday, it left me a little optimistic for JDS Uniphase. Of course, Fabrinet gave everything back today, and JDSU is now giving back most of the bounce from the August 8 lows. JDS Uniphase reported results in line with EPS estimates and slightly better revenue, but guidance is weak. ...

Click to view a price quote on JDSU.

Click to research the Telecommunications industry.


HPQ Preview: Prepared for the Worst

Wed, 17 Aug 2011 20:07 GMT

Hewlett-Packard is slated to report earnings after the close Thursday with a conference call scheduled for 5:00 p.m. EDT. Current projections call for the company to post EPS of $1.09 on revenue of $31.2 billion. This is basically right in line with what management guided to last quarter.

I would expect Hewlett-Packard to meet these expectations but worry some that the company could take a pretty cautious tone toward (and perhaps guide down) its third-quarter expectations. In light of the global economic challenges and what Hewlett-Packard's closest competitors were saying about demand, I think the market is pricing in the increased likelihood that the quarter won't be fantastic. ...

Click to view a price quote on HPQ.

Click to research the Computer Hardware industry.


Last Licks

Wed, 17 Aug 2011 19:33 GMT

The final hour's spin of the roulette wheel has begun and it's anybody's day for the taking. This is the tight-range premium that sellers look for to close positions heading into the end of the week. There is enough economic data tomorrow before the market opens that this afternoon's action might be the last tight day we see. Friday is often a crapshoot, but I think we might see a much wider range of action tomorrow.

There are plenty of earnings to drive us tomorrow, including several tech and retail names. Sina has a huge range this year and could see more action tomorrow. The stock has already come very close to my original downside target of $91, which puts $84 in play if the company disappoints. On the upside, $97 and $106 would be numbers bulls would like to see. I'm on the bearish side, looking at a simple August $92.50-$82.50 put spread around $3.40. My preference though would be a skip-strike butterfly, long the August $92.50 put, short 2x August $85 puts, and long an August $82.50 put for $1.80 looking to play my downside target of $84. This would about maximize my upside while keeping my break even a few quarters over $90.

I am looking at a small long side play on JDS Uniphase . The risk I'll put into play is partial profits from the sale of the stock trade. I am just going with an August $12-$13 call spread for $0.30. This one has risk, though, as I think it will be worth either $0.75 or nothing after the report tonight. I still favor the upside though. ...

Click to view a price quote on SINA.

Click to research the Internet industry.


Make Mr. Market Work for You

Wed, 17 Aug 2011 19:30 GMT

I spent some time last night thinking about the implications of the recent Fed interest rate announcement. To the best of my knowledge, a pledge to keep interest rates low is unprecedented and has serious consequences for investors. The exceptionally low short-term rates have been a burden on those who need income to fund retirement and I am curious as to why more retired folks are not protesting loudly. I am surprised that the Association of American Retired Persons (AARP) and other senior organizations have not organized rallies and marches to beat down the doors demanding higher rates for their savings. Think about those who retired in 2001. Using conventional wisdom, these unlucky individuals mixed up some 10-year Treasuries, maybe a laddered portfolio of certificates of deposit (CDs), some high quality corporate bonds and maybe some index funds to give them exposure to the inflation-protecting nature of equity ownership. They should have been able to earn a blended rate of a little north of 6% on the whole package. Let's say our retirees were pretty thrifty and that each had a combined $1 million to invest for retirement income. They could collect roughly $60,000 a year off the package. Not bad when you add in a little social security check. Today as all this stuff comes due they are reinvesting at ridiculously low rates and would see their income fall by well over half. Worst of all, their equity portion has done absolutely nothing as prices for food, clothing and everything else has skyrocketed over the last decade. It is an ugly picture. For the next two years at least, I am starting to see some solutions for those who need income. I think that low rates on the short end put mortgage real-estate investment trusts (REITs) in the sweet spot. Even if the curve should invert here from future easing programs, making it difficult to invest, new funds the bonds currently hold in the portfolio will soar in value. In the meantime, securities such as Invesco Mortgage and Annaly Capital are trading near or below net asset value (NAV) and offer generous dividend yields. I think a package of several of these including REITs such as Chimera , American Agency Capital and Hatteras Financial would make nice additions to an income-hungry portfolio. ... Click to view a price quote on IVR. Click to research the Real Estate industry. [...]

ARO Preview: Low Expectations

Wed, 17 Aug 2011 18:47 GMT

Aeropostale is the last in a string of 10 'tween/young adult specialty retailers to report earnings for this quarterly cycle. ARO is expected to lose $0.03 on net sales of $490.9 million. In the year-ago quarter ARO earned $0.46 cents on net sales of $494.7 million.

Unfortunately, the consensus estimates have not been adjusted to include the financial update that the company provided two weeks ago. At that time, management disclosed that net sales declined 5% year over year to $468.2 million, as same-store sales declined a whopping 14%. Excluding a nonrecurring tax benefit the company expects to lose $0.03 to $0.04 in the quarter.

I think it was quite clear that Abercrombie & Fitch seems to have hit the nail on the head when it came to merchandising for this group's demographics. Urban Outfitters and ARO are struggling to attract its core customer. Furthermore, unlike ANF, ARO does not have an international expansion strategy to help offset weakness in the U.S....

Click to view a price quote on ARO.

Click to research the Retail industry.


Almost Too Cheap to Be True

Wed, 17 Aug 2011 18:30 GMT

Though last week may have been unsettling for many investors, my value-oriented tendencies are starting to wake up after several months of hibernation. My approach is simple: I like to buy when stock prices of companies I know are falling. It's not an easy thing to do, but it increases my odds of selling at a higher price later.

I sold shares in Goldman Sachs earlier this year for around $160 a share. Thanks to Mr. Market, I was able to buy them back for about $115 a share. I don't care about the short-term headlines affecting Goldman. What I do care about is that I was able to buy shares of one of the world's most prestigious and profitable investment banks for 85% of book value. Back in the day, Goldman partners would line up to buy shares at book value.

Goldman's management has, rightly so, been quite conservative recently with respect to risk-taking, and that gives Goldman an enviable capital cushion. When the time is right, Goldman will gush profits again. And if the investment bank earns anywhere near the $17 per share in earnings that analysts estimate in 2012, shares could be north of $200. More Bargains ...

Click to view a price quote on GS.

Click to research the Financial Services industry.


Speculative Biotech Is Simmering

Wed, 17 Aug 2011 18:00 GMT

The market has been especially unkind to speculative biotech stocks. Although biotech firms would seem to be fundamentally unaffected by macroeconomic concerns, anything that makes investors feel more risk-averse can be expected to hurt shares in this industry.

Insiders have seen a buying opportunity, however, and have picked up a significant amount of shares at firms such as: BioSante Pharmaceuticals Celsion Halozyme Therapeutics Human Genome Sciences Ligand Pharmaceuticals Novavax Quidel ViroPharma Ziopharm Oncology

I wrote about Ligand Pharmaceuticals last month, and my bullish opinion hasn't changed since then. The stock has since bounced back from the recent turmoil better than most stocks. I still like Ziopharm, as well, although its shares are now below where they were when I wrote about them in March. ...

Click to view a price quote on BPAX.

Click to research the Drugs industry.


Target Hits the Mark

Wed, 17 Aug 2011 17:04 GMT

For Gad's preview heading into the Target conference call, please click here.

Shares in Target are trading higher today as a result of a strong earnings report and outlook for the remainder of 2011. For its second quarter, the company reported a 3.7% increase in net earnings, to $704 million from $679 million in the year-ago quarter. EPS grew by 11.5%, to $1.03 vs. $0.92 a year ago. Analysts were expecting EPS of $0.97. Sales increased by 5.1%, to $15.9 billion. Same-store sales grew by a very impressive 3.9% quarter over quarter. Total sales grew by 4.1% due to a 15% decline in credit revenue, to $345 million vs. $406 million in the 2010 quarter.

The company's credit card segment continued to recover strongly. Bad debt expense during the quarter was $15 million, a sharp reduction from $138 million in the second quarter of 2010. On a sequential basis, bad debt expense has also continued to decline. As a result, credit card segment profit was $171 million during the quarter versus $149 million in the 2010 period. Cost of sales increased by 5.6%, suggesting that Target is holding off a bit on price increases. The gross margin was 33% in the quarter vs. 34% a year ago. The company does see some relief in cost pressures going forward due to more favorable fabric costs for apparel. ...

Click to view a price quote on TGT.

Click to research the Retail industry.


Fishing for Retail Stocks in a Double Dip

Wed, 17 Aug 2011 17:00 GMT

It's more than likely, in my view anyway, that we'll "double dip". We may already be there. You've got to love the imprecise science of economics; you can't get the official confirmation that a recession has started or ended until long after it actually happens. But, does it really matter what the official numbers tell us when the National Bureau of Economic Research (NBER) makes the official declaration? Consumers know; they feel it and react accordingly. Certainly, a double-dip recession scenario would not bode well for retailers.

Year to date, the retail group, at least the bigger players as measured by the S&P Retail Index, is hanging in there, down about 2.5% vs. -5.2% for the S&P 500. However, some of the smaller names are getting punished. I'm not running out to buy any of these at this point, but I'll be ready with some dry powder if an opportunity presents itself in what I consider to be unique situations.

Take Cabela's , a stock that was once hated and very misunderstood. The Street did not like the fact that the company also had an in-house credit card operation, the fact that many customers had to drive several hours to get to a store or that the stores themselves essentially doubled as museums, of sorts. What the Street missed, however, was that Cabela's customers are extremely loyal and they pay their bills. Hunting and fishing are a lifestyle and won't be curtailed to any great extent by a recession. Another fact that was missed is that the company has a thriving catalog business that generated $1 billion in sales or 37.5% of revenue in 2010....

Click to view a price quote on CAB.

Click to research the Specialty Retail industry.


Deere Raises Revenue Outlook

Wed, 17 Aug 2011 16:31 GMT

For Gilmartin's preview heading into the Deere conference call, please click here.

Deere reported fiscal third-quarter 2011 financial results this morning, printing $1.69 in EPS (vs. the $1.67 estimate) on $7.72 billion in revenue (vs. the $7.5 billion estimate), for actual year-over-year growth in EPS of 17% on 42% revenue growth.

A lower effective tax rate added about $0.02 to EPS, so earnings per share were roughly in line with consensus. ...

Click to view a price quote on DE.

Click to research the Industrial industry.


Abercrombie & Fitch Exercises Caution

Wed, 17 Aug 2011 15:49 GMT

For Rothbort's preview heading into the Abercrombie & Fitch conference call, please click here.

Abercrombie & Fitch reported diluted earnings per share of $0.35 on net sales of $916.8 million. Total sales rose 23%, of which foreign-exchange rates contributed 1.6%.

Operating income rose 71% year over year. Strong results were noted for the newly opened Parisian flagship store, the other 19 Hollister stores opened throughout Europe in the past year. The U.S. stores performed well, particularly the Hollister brand. Internationally, the company expects to open 40 Hollister and five A&F flagship stores this year. Tomorrow, the first Asian Hollister store will open in Hong Kong. Japan remains challenged, and the Ginza flagship store comped in negative figures. The Canadian business is also delivering disappointing results. The direct-to-consumer business enjoyed 28% growth on its way to becoming a $1 billion business. The Gilly Hicks concept is still a work in progress. ...

Click to view a price quote on ANF.

Click to research the Retail industry.


Expiration Should Keep Us in a Range

Wed, 17 Aug 2011 15:41 GMT

We tested the upper end of the range pretty early this morning, but we still have options expiration to contend with. Given the current open interest and the high volatility at which many options were opened, there is a lot of incentive for both call and put sellers to keep the indices in a pretty tight range over the next few days. The geopolitical mess makes this is a bit more challenging, but I am not sure we will see a very wide range until some of this open interest is closed.

I know many folks are looking at the banks and almost begging for a rally here. On the surface, only Wells Fargo and MasterCard have appealing charts to me, and MasterCard isn't even a bank. If I wanted to get really aggressive, then I might consider Capital One as well, which is a bit of a cross between the two, but overall the charts are worrisome. A buy-write strategy or September call spread strategy with the Financials Select Sector SPDRs would be another way to try and limit risk here, but overall this is still a tough place to play right now.

I've gone ahead and taken the loss on the Dell play, as the Photronics earnings play more than makes up for the Dell loss. Had I been a little more patient, then PLAB would have gone from a home run to a grand slam, but such is the nature of the earnings plays like PLAB. ...

Click to view a price quote on WFC.

Click to research the Banking industry.


Buffett Seems Bothered

Wed, 17 Aug 2011 15:30 GMT

This commentary originally appeared on RealMoney Silver on Aug. 17 at 8:16 a.m. EDT.

As Jeff Matthews' blog detailed on Monday, it appears that Warren Buffett is getting somewhat more nervous about the U.S. economy.

On the basis of his approximate $50 billion net worth, the Oracle of Omaha has little reason to be nervous. In the main, Warren Buffett is an optimist; it has been his constructive view of the world's economies that has encouraged him in his bold and concentrated investment and acquisition strategies. ...


Don't Rule Out a Rally

Wed, 17 Aug 2011 14:30 GMT

The market continues to get hit from every possible angle.

On Tuesday, the blows came from Europe about slower-than-expected gross domestic product growth in Germany. Meanwhile, a meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy failed to instill much excitement. Both ruled out the eurobond as an option to resolve the debt crisis in Europe. Instead, a new tax was proposed on financial transactions. Exchange operators were hit hard on the news.

When all was said and done, Tuesday's market was another day of distribution for the S&P 500 and the Nasdaq with the declines coming in higher volume than on Monday. There's been plenty of distribution since early August when the market started to pull back. Between July 27 and Aug. 8, the Nasdaq flashed six higher-volume declines....

Click to view a price quote on AAPL.

Click to research the Consumer Durables industry.