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Showing posts from February, 2009

Durable Goods report - tough times for tech just got tougher

The Durable Goods report for January 2009 was released by the U.S. Census Bureau today. Everyone anticipated it would be bad but it managed to solidly exceed expectations on the downside.

Headline numbers were as follows: New Orders down 5.2%, Shipments down 3.7%, Unfilled Orders down 1.9%

We'll focus as we usually do on the tech sector. The Durable Goods report bundles a number of technology sub-sectors into the Computers and Electronic Products category. Here are the numbers for that category:
New Orders: down month-over-month 5%, down year-over-year 14.6% (wow!)Shipments: down month-over-month 3.7%, down year-over-year 15.6% (wow again!)Unfilled Orders: down month-over-month 1%, up year-over-year 1.8%
The following chart shows Shipments and New Orders. Note how both are still accelerating downward.


Buried within the Shipments results are some startling numbers. Computer and Related Products shipments down 10.7% month-over-month and down 29.8% year-over-year. Semiconductor shipments …

ProShares ETFs - with volume through the roof, who are the new leaders?

Last summer (June 2008) I wrote a post titled "ProShares ETFs - Why trading volume makes a difference."

Since then, there have been two situations that suggest it might be a good time to look at trading volume again: ProShares has created a half dozen new ETFs that weren't in our previous analysis and market conditions have taken a further turn for the worse with the S&P 500, for example, going from roughly 1325 to under 800.

Below we present a table contrasting average daily volume in the year leading up to June 25, 2008 with average daily volume in the eight months since June 25, 2008. It is sorted in descending order based on the latest volume numbers.

SymbolNameAvg Daily Volume prior to 6-25-08Avg Daily Volume since 6-25-08UYGUltra Financials3,778,258112,176,547SSOUltra S&P5002,368,34756,212,929SDSUltraShort S&P50010,640,28643,730,513QIDUltraShort QQQ20,042,46538,670,681QLDUltra QQQ4,171,17931,438,395SKFUltraShort Financials3,778,87630,151,740DUGUltraShort O…

Could the devastation in the DRAM industry lead to a resurgence?

We have written here before on the problems in the semiconductor sector and especially among manufacturers of memory chips.

IC Insights has come out with a report that contends that the stage is set for strong growth in DRAM.

The way the industry is shrinking could actually be a positive. Several DRAM vendors, including Micron, are eliminating their 200mm wafer fab capacity. Qimonda and possibly other DRAM vendors are filing for bankruptcy. The Taiwanese government is consolidating and bailing out a group of their DRAM manufacturers.

What is the outcome of all this destruction and devastation? IC Insights thinks that DRAM supplies will tighten and more closely align with demand as the year progresses.

After a tough 1Q2009, the company expects demand will increase sharply (see chart below). IC Insights forecasts quarterly growth to $4.9 billion (17%), $5.9 billion (21%), and $6.8 billion (15%) to finish the year.



This sounds good but even if this positive scenario does play out as expected…

Weekly Review - are we left in a new lower trading range now?

Well, this week sure belonged to the bears.

Here's the tally for the major averages: Dow down 6.2% for a new low, the S&P 500 down 6.9%, the NASDAQ down 6.1% and the Russell 2000 down 8.3%. Sheesh! Looking at charts, the averages are all at or below their lower Bollinger Band despite a late day rally on Friday.

Some, in looking on the bright side, have pointed to the fact that the Dow is the only average to have hit a new low and that this divergence may signal a bounce. On the other hand, when looking at weekly charts, it can be seen that the S&P 500 has hit a new low based on weekly closing prices. This is illustrated in our two charts below where we compare some of the TradeRadar statistics to SPY, the S&P 500 SPDR ETF. On a weekly basis, the Russell 2000 is only a few points above its November low while the NASDAQ is really the only index that has not quite broken down to November levels. Bottom line is that all the averages showed a lot of weakness and it remains to…

Free stock alerts, Trend Leaders, Bollinger Band Breakouts and Cash Flow Kings for Feb 20, 2009

This post is to announce that the latest list of free stock alerts is up and available at Alert HQ. Each week we scan over 7400 stocks and ETFs looking for fresh BUY and SELL signals. We apply a combination of proprietary and standard technical analysis techniques to identify those stocks that are beginning to move. Our goal is to identify stocks or ETFs that are undergoing reversals, either to the upside or to the downside.

Wait, there's more...

We also use the Alert HQ process to generate more free lists of stocks and ETFs

The first byproduct of the Alert HQ process is the Trend Leaders list, our collection of stocks in strong up-trends. These stocks are registering strong signals using Aroon analysis, DMI and MACD. They are also at least 1% above their 50-day exponential moving average. This week's list is now available at the TradeRadar site on the Trend Leaders page.

To generate our list of Cash Flow Kings we calculate the free cash flow yield of all the stocks we scan and p…

More gloom for semiconductor industry?

The NASDAQ has been outperforming on a relative basis lately, due to optimism over tech. The last few days has seen a weakening in the NASDAQ but it is still in much better shape than the S&P 500 or the DOW.

Is the optimism justified? Has tech reached a bottom?

It has been my contention that, with respect to hardware, tech can't make a recovery until the semiconductor industry recovers. The two aspects of the semiconductor industry that really count are the semiconductor manufacturers and the semiconductor equipment manufacturers.

Today the SEMI trade group released the January 2009 Book-to-Bill Report for North America-based manufacturers of semiconductor equipment. Rather than list the numbers in detail, I would just like to draw your attention to the charts below (values in millions of dollars, January numbers are preliminary).

This first chart shows that billings in dollar terms are decreasing and, of course, that is bad. What is worse, however, is that bookings are decreasing…

Bailouts for tech, too?

Thus far in this economic downturn, we have only seen financials and automakers receive bailout funds.

I have been thinking about writing a post on how the technology sector is not begging for bailouts and how that is a sign of better management and more resilient business models.

Now comes word that DRAM producers are asking the Taiwan government to help consolidate the local industry and bailout the major players. It appears Korea is thinking of doing something similar.

Trouble in memory chips --

Things are so bad for the DRAM vendors that Gartner estimates that they lose money on every PC that is shipped. They say it amounts to a $27.40 loss per PC, leading ultimately to a total loss among major vendors on the order of $2.8 billion in the fourth quarter of 2008 alone. According to iSuppli Corp., DRAM vendors lost a combined $7 billion in 2008 and are expecting to see a further 15% revenue decline in 2009.

So it's clear that things are pretty bad in the commodity semiconductor sector…

i2 Technologies - surprise in the software sector

We're always looking for new ways to sort and filter our stock indicators. We executed the usual weekend Alert HQ process (read about this weeks results) and generated several lists of stocks based on our special screens including: Bollinger Band Breakouts, Trend Leaders and Cash Flow Kings (you can download these lists at the Trend Leaders page). It's always interesting to combine the screens and see what stocks are common across the board.

For today's featured stock I combined the following three screens: the Trend Leaders (stocks registering strong signals using Aroon analysis, DMI and MACD and at least 1% above their 50-day exponential moving average), the Cash Flow Kings (stocks exhibiting a cash flow yield of 25% or more) and the Cash Flow to Debt Coverage above 0.7 screen.

One of the stocks that popped out of this combined screen is i2 Technologies (ITWO). The company provides supply chain management software for manufacturing and planning; transportation and distribu…

Weekly Review - hope fades and stocks slide

Last week markets rose on hope - hope that the new Treasury secretary had a plan that would save the banking system and put a floor under stock prices. The plan was announced on Tuesday and the markets gave it the big raspberry. There was a lack of detail, a failure to advance any radically new concepts and, as Barry Ritholtz said, no free gifts for Wall Street. Washington tried to lift markets again on Thursday by leaking word that a new plan was being considered that would subsidize mortgage payments for those in danger of foreclosure. This resulted in a big rally that erased a 3% drop and allowed markets to more or less finish flat. Nevertheless, when all was said and done, stocks lurched lower as major averages fell between 3% to 5% on the week.

On the economic front, there were some mixed messages this week on Thursday. Jobless claims came in above 600,000 again (yikes!) but there was a better than expected retail sales report. There was some debate on just what the retail report …

Free stock alerts, Trend Leaders, Bollinger Band Breakouts and Cash Flow Kings for Feb 13, 2009

This post is to announce that the latest list of free stock alerts is up and available at Alert HQ. Each week we scan over 7400 stocks and ETFs looking for fresh BUY and SELL signals. We apply a combination of proprietary and standard technical analysis techniques to identify those stocks that are beginning to move. Our goal is to identify stocks or ETFs that are undergoing reversals, either to the upside or to the downside.

Wait, there's more...

We also use the Alert HQ process to generate more free lists of stocks and ETFs

The first byproduct of the Alert HQ process is the Trend Leaders list, our collection of stocks in strong up-trends. These stocks are registering strong signals using Aroon analysis, DMI and MACD. They are also at least 1% above their 50-day exponential moving average. This week's list is now available at the TradeRadar site on the Trend Leaders page.

To generate our list of Cash Flow Kings we calculate the free cash flow yield of all the stocks we scan and p…

Why is Cisco moving into servers?

The server business has lost its luster. Sun (JAVA) is in a tailspin. Dell's profits are flagging. IBM and H-P continue to provide industry leadership but the server segments are probably not the profit leaders in these diversified companies.

So why is Cisco moving into servers?

Certainly it's not because the margins are great. Cisco has reported gross profit margins of close to 65 percent. Companies selling basic servers have typical gross margins in the vicinity of 25 percent.

The competition in servers is stiff. The companies mentioned above are not only competitors of Cisco but IBM and H-P have often been partners with Cisco when specifying the architecture and components of data centers and networks for clients. Cisco would provide the networking gear while the other companies would supply the servers, storage and software.

So why is Cisco moving into servers? Because it's the logical next step.

Cisco has talked about their concept of "Unified Computing." Accordi…

Coverage ratio - what stocks can we uncover in the S&P 500?

Credit markets are still fairly frozen and making it difficult for companies to issue new debt. With earnings estimates seemingly in free fall, I thought it might be interesting to run a screen that identifies those companies who are expected to be well positioned to avoid problems related to carrying their current total debt load.

This screen is based on the Cash Flow to Debt Coverage Ratio. This compares a company's operating cash flow to its total debt, which, for purposes of this ratio, is defined as the sum of short-term borrowings, the current portion of long-term debt and long-term debt. This ratio provides an indication of a company's ability to cover total debt with its yearly cash flow from operations. The higher the percentage ratio, the better the company's ability to carry its total debt.

In our screen, we looked for companies whose debt coverage ratio is 0.75 or more. In scanning 7400 stocks, we came up with a list of 251 companies. We then cross-referenced thi…

'Leadership Screen' - focus on large-cap stocks this week

We executed the usual weekend Alert HQ process (read about this weeks results) and generated several lists of stocks based on our special screens including: Bollinger Band Breakouts, Trend Leaders and Cash Flow Kings (you can download these lists at the Trend Leaders page).

Again I'd like to share the results of the "Leadership Screen". This is where I combine the results of the Cash Flow Kings and the Trend Leaders to find that set of stocks that is common to both screens. The following chart presents this week's results (prices are as of Friday, Feb 9, 2009).

SymbolNameExchangeLast PriceMarket CapCICIGNA CPNYSE21.735.905BCLDXCelldex TherapeutNGM11.16176.2MDITAMCON DISTRIBUTINGAMEX2614.8MDKDELEK US HOLDINGSNYSE7.71413.9MHUMHUMANA INCNYSE44.557.521BMSMORGAN STANLEYNYSE22.8724.574BNVTLNovatel Wireless,NasdaqNM6.79205.9MPDGIPharmaNet DevelopNasdaqNM4.8294.1MSCKTSocket Mobile, InNCM3.2710.6MTNHTERRA NITR CO COMNYSE120.612.254BTRMATrico Marine ServNGM6.5997.7MTSOTESORO COR…

Weekly Review - hopes so high, can stocks still fly?

Hope springs eternal in the hearts of investors and this week hope spread its wings and moved the markets. It didn't hurt that after four down weeks in a row, the market was ready for a bounce. With gains ranging from 3.5% to 7.8%, each of the major averages staged a strong rally this week.

With all eyes on Washington, the news that the Obama stimulus plan was near a vote was all that was needed to raise the hopes of investors that the benefits of the plan would soon turn the economy around. To further elevate everyones hopes there was news that Tim Geithner, the new Treasury secretary, would deliver a speech on Monday, February 9 that would detail the administration's plan to save the banking sector. At last, a plan and the hopes it would resolve credit crisis.

While investors wallowed in hope and bid up stocks giddily, the economy resolutely refused to cooperate with the feel-good mood.

Retail sales were reported by a number of large chain stores and except, of course, for WalM…

Free stock alerts, Trend Leaders, Bollinger Band Breakouts and Cash Flow Kings for Feb 6, 2009

This post is to announce that the latest list of free stock alerts is up and available at Alert HQ. Each week we scan over 7400 stocks and ETFs looking for fresh BUY and SELL signals. We apply a combination of proprietary and standard technical analysis techniques to identify those stocks that are beginning to move. Our goal is to identify stocks or ETFs that are undergoing reversals, either to the upside or to the downside.

Wait, there's more...

We also use the Alert HQ process to generate more free lists of stocks and ETFs

The first byproduct of the Alert HQ process is the Trend Leaders list, our collection of stocks in strong up-trends. These stocks are registering strong signals using Aroon analysis, DMI and MACD. They are also above their 50-day exponential moving average. This week's list is now available at the TradeRadar site on the Trend Leaders page.

As another byproduct of the Alert HQ process we have generated a list of stocks that have broken either above their upper…

Update - Tech Bellwether Earnings Scorecard

It's been about a week and a half since I wrote the first Tech Bellwether Earnings Scorecard post. Since we are still in the midst of a busy earnings season, I thought it was time for an update.

Below I have listed some of the big names in the tech world along with comments on whether they beat expectations, posted losses or gains and whether they provided positive forward guidance.

CompanyEarningsCommentsVMWare (VMW) revs up 42%, earnings beat by $0.10 weak guidanceTexas Instruments (TXN) beats by $0.09 guides well below consensus, announces layoffsEMC profits down 40% year-over-year no guidance offeredAltera (ALTR) down 12% sequentially but beats by $0.01, guidance: next Q earnings down 15-25%Sun (JAVA) beats lowered expectations (non-GAAP positive earnings of $0.10 vs GAAP loss of $0.28) provides no guidanceYahoo (YHOO) posts loss, revenue down a bit y-o-y but beats on non-GAAP basis Q1 guidance light, no full year guidance offeredQualcomm (QCOM) beats on revenues and miss…