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Showing posts from 2010

Is CSC on the verge of better things?

Computer Sciences Corp (CSC) popped up this weekend on one of our screens at Alert HQ Premium. It was on the short list of stocks that had just raised their dividend and that showed value stock characteristics.

CSC just increased their dividend by 33%, going from $0.60 to $0.80. The valuation measures are quite attractive: trailing PE less than 10, PEG = 1.12, Price to Sales less than 0.5, Enterprise Value/EBITDA less than 4.

Better things on the way?

First, the technical picture. CSC appears to be in the process of breaking out. It has pushed above its 200-day moving average. In addition, its 50-DMA has achieved a bullish crossover above the 200-DMA though, truth be told, by only one penny. The chart below shows the situation. Another half a buck and the stock will be breaking above the previous recent high. That higher high would be a confirmation of a bullish trend..

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Looking back at the company's financials over the course of the last year, the results have not shown accelerati…

IT spending to increase in 2011 -- how should you invest?

A big part of overall technology industry profit is driven by spending in the Information Technology sector. Information Week recently released the results of a survey that provides a glimpse into 2011. The following chart summarizes the results of the survey:


The good news is that a total of 55% of of the 552 respondents do expect to see budgets and spending rise next year. Last year the number was 45% so we see continued improvement. Only 19% expect to cut IT budgets compared to 24% of respondents in the previous survey. Finally, 26% expect to keep budgets flat compared to 30% previously. The biggest increase was seen in the group expecting to increase spending to rise 5% to 10% which went from 16% up to 27%. Supporting these budget expectations is the fact that 59% of respondents report growing demand for IT services at their companies.

This next chart shows where IT investments are expected to be made:


In general, every category is expected to see a modest increase. At the top of …

Intevac -- breakout in progress, more room to run?

One of the stocks that popped up on Alert HQ earlier this week is a tech stock that looks a lot like a value stock. I'm talking about Intevac (IVAC).

Intevac is a small cap stock that has broken out in a big way. It's up over 50% from its most recent low in mid-September. The question is, however, is it now over-priced?

First, let's take a look at the weekly chart:


You can see that it's gone from around $9 to almost $15 which is a sizable move. A pull-back seems almost inevitable. Yet, after that potential pull-back runs its course, there could be room for further gains. Here's why:

The basic scenario is that this stock currently looks like a value stock. If it is perceived to be a growth stock, then there is opportunity for its multiple to increase.

Let's take a look at the financials and establish its value qualifications. Here are some valuation characteristics:
Trailing PE is 11.48, which is quite reasonable for a tech stock. Forward PE is 17.61 which is not…

We'd like to hear what you have to say!

For anyone who has tried the Trade-Radar Stock Inspector, I have set up a facility that will allow you to give your opinion. I now have a survey page available.

Basically, I am very interested in hearing what new features users might like as well as anything that users feel really needs improvement.

Even if you are not a user of the software but would consider using it if it could do something you need, go ahead and tell me your ideas. I am open to all suggestions.

The survey page is available on the drop-down menu associated with the "Stock Inspector" menubar item. Or, you can just click on the following link:

Take the survey now!
With the current version of the software fairly stable, it is time to look for improvements. I look forward to hearing your ideas.

ETF Trending Report -- one sector to avoid, one sector to consider

One of the first things I like to check every weekend is the ETF Trend Performance week-over-week report. It gives a great summary of what happened to more than 300 ETFs with respect to change in trend. (It is currently available at the free preview of Alert HQ Premium.)

Some weeks, ETFs in certain sectors dominate the top spots or the bottom spots and in other weeks it's a mix. This week it's pretty clear who the biggest winners and losers were.

The winners --

Financial ETFs held the top four spots this week. The following chart is from the report:

Change in Trend Score Symbol Name Current Trend Score Change in Price Percent Change in Price3UYGProShares Ultra Financials ETF 5.54.056.712.25IYGiShares Dow Jones U.S. Financial Services Index Fund 4.252.554.672RKHMerrill Lynch Regional Bank HOLDRS 44.025.051.5XLFSelect Sector SPDR Fund - Financial 4.750.583.82
Given the highest possible trend score is only 6 (denoting a very strong bullish trend), an improvement of between …

How much longer for the semiconductor rally?

Two of the leading ETFs on the Trade-Radar ETF Scorecard report at Alert HQ Premium are semiconductor ETFs, specifically the Merrill Lynch Semiconductor HOLDRS (SMH) and the ProShares Ultra Semiconductors (USD).

Both of these ETFs carry the highest possible score for maintaining a bullish trend. As an example, take a look at the chart of SMH below:


How long can this go on?

KPMG conducted a global survey of semiconductor executives. Most of the results are quite positive. Executives expect mid-single digit improvements in hiring, R&D and profitability in 2011 compared to 2010. That sounds good but in actuality, 2010 was a very strong year and the outlook for 2011, while quite decent, reflects a potential moderation in the pace of growth.

In particular, the surveys indicates only 39% of executives expect revenues to increase by 10% or more whereas 54% expected 10% revenue gains in 2010. Similarly, 37% of respondents anticipate profitability growth in excess of 5% for 2011, while a y…

Labor shortages in the most populous nation on earth?

Earlier this year there were a series of articles in several mainstream newspapers and magazines and on a number of blogs that described labor shortages occurring in China. At the time, I missed all these articles but now I've seen the topic pop up on a couple of tech sites that I visit and I became interested.

Accordingly, this post is not intended to provide a specific piece of investment advice but is more an exploration of a news item that I thought might be worth exploring since many of us are focused on China as the engine of the global economy.

On the DigiTimes web site, an article declares that China's labor shortages are worsening, particularly in the eastern region. Labor shortages are now an annual issue, but the problem has occurred earlier this year and is more severe. The situation is expected to get worse before the Lunar New Year (in February). In particular, the authors quote managers of electronics firms involved in manufacturing flat panels and related compo…

Top trending ETF last week -- PowerShares Dynamic OTC

An ETF I wasn't familiar with showed up on the ETF Trend Performance Report at Alert HQ this weekend. At the top of the list, with an improvement of 2.5 points out of a total of  6 possible points was the PowerShares XTF: Dynamic OTC Portfolio (PWO).

This ETF is not based on the typical market cap weighted passive index. PWO is based on the Dynamic OTC Intellidex. This is an "active" index that selects holdings based on a variety of investment criteria including fundamental growth, stock valuation, investment timeliness and risk factors. In other words, this ETF is an actively managed fund, whether managed by computer or by a human investment committee, the literature does not say. In any case, the goal is provide alpha beyond what the typical ETF would offer.

The following diagram, from the PowerShares Dynamic ETF prospectus shows how the selection process is handled:


The 5-year return of the Dynamic OTC Portfolio ETF may not be especially impressive when compared to th…

7 value stocks that just increased dividends

Now that the Fed has rolled out QE2, many investors are surprised that bonds have been struggling, especially the longer maturities. Those ETFs that hold 20 and 30 year Treasuries and corporate bonds, for example, have been especially weak. While this has resulted in higher yields it is having the unfortunate effect of decreasing the capital gains that investors have enjoyed after a multi-month run-up in prices. This is making life complicated for dividend and income investors.

Among the features of the Alert HQ Premium site there are several stock screens that focus on dividends. In particular, I will be identifying those stocks that just raised their dividend during the previous week and yet are still more or less in the value stock category.

The following list is from this weekend's screen:

SymbolNameLast PriceEV to EBITDAPE RatioPrice to SalesNew Dividend YieldNew Annual DividendOld Annual DividendAFSIAmTrust Financial Services, Inc.16.277.18.131.171.97%0.320.28DDICDDi Corp…

For-profit education stocks -- throwing Lincoln Educational Services out with the bathwater?

You may be a aware of some of the controversy surrounding for-profit schools like Apollo Group's University of Phoenix. The U.S. Department of Education intends to review financial-aid practices at the school.

Many for-profit education companies face federal scrutiny because almost 90 percent of the companies’ revenues derive from funds from the Title IV federal aid program. Many of these funds are disbursed to the schools as government-guaranteed student loans. Essentially, the schools can't lose if students fail to finish their degree programs or default on the loans. The schools have been accused of marketing too aggressively to sign up students and get their hands on the Federal student loan money with little regard for the students or their potential to actually benefit from the programs being offered. The difficulties many students have in obtaining the jobs the schools led them to expect has also led critics to contend that the for-profit schools are simply in business …

Coal and dividends make a good mix

This weekend's report on reasonable value stocks that increased dividends in the last week included two stocks. The one I'd like to focus on is Alliance Resource Partners, L.P. The symbol is ARLP.

The company just raised its dividend from $3.24 to $3.32 which works out to a forward annual dividend rate of 5.5% which, in these days of zero interest rate policy, is not too shabby.

As the title of this post suggests, the company is engaged in the production and marketing of coal for utilities and industrial users. They also provide systems and services for the mining and transportation of coal.

I alluded to the fact that the company qualifies as one of my "reasonable value" stocks. With a PE of 8, a PEG less than 1, Enterprise Value/EBITDA less than 6, Price-to-Sales less than the average for both the sector and the S&P 500, the stock certainly can't be considered particularly over-priced.

In terms of growth, y-o-y revenues increased by 37% and y-o-y earnings do…

Tips for Trade-Radar users - correcting weekly and monthly data

Just a couple of days ago I wrote a post about the newest release of the Trade-Radar Stock Inspector software (read: Trade-Radar Stock Inspector update -- especially important for those who track weekly and monthly data). As the title suggests, that post focused on improvements in the processing for weekly and monthly data.

This post is a follow-on to explain how to correct old price data that may contain errors from back before the latest release. Note that stocks with weekly data in the database have the suffix "-W" tacked onto the symbol in the "Stock Symbol" dropdown. Similarly, stocks with monthly data in the database have the suffix "-M" tacked onto the symbol.

Even if you are not sure if you have erroneous data, it is easy to just get rid of it and get fresh data. Here are the steps to take:
Select the stock or ETF you wish to fix and click the "Search Database" buttonIf the chart is displayed, click the Exit button at the top right corne…

Bulls get a reprieve -- market breadth positive again as stocks move higher

It has sort of been an event driven week. The mid-term elections were held Tuesday and the Republican surge occurred as expected. Since this was not exactly a surprise, market reaction was just modestly positive. On Wednesday, the Federal Open Market Committee finally announced QE2 and provided the details of how it would be implemented - carefully and with restraint. Markets barely budged until Thursday, when stocks finally put on a strong follow-through rally. Friday, the Non-Farm Payroll report was published and surprised everyone with a relatively strong gain in private employment. Perversely, the market reaction was a big "ho hum".

So Thursday provided a big gain and every other day in the week provided just small gains which in total, though, added up to a pretty strong week for the stock market with the S&P 500 up 3.6% and the Russell 2000 up 4.7%. Does that mean we no longer have to worry about the deteriorating breadth that we were seeing for the last two weeks?

Trade-Radar Stock Inspector update -- especially important for those who track weekly and monthly data

This is a quick post to let all of you know that a new version of Trade-Radar Stock Inspector is available.  We are up to version 6.0.10 now.

What has changed --

I received an email from a trial user the other day who said that he was encountering an error when he tried to enter a symbol for a stock on the Bombay stock exchange. It seemed to work fine for daily data but the program blew up when trying to get weekly or monthly data.

In solving this problem (the field that contains the symbol had to be made larger in the database), it got me started looking at how the program processes weekly and monthly data. And this led me to fix a few other things.

You may not have noticed that the program attempts to pull in intra-day data when the markets are open and you are retrieving daily data. It does a similar thing when looking at weekly data and monthly data. Where the problem occurred is that a new record was created for mid-week or mid-month data, leading to extra data points that shouldn…

Q3 Earnings Aristocrats -- 30 stocks that delivered the goods

Consistency is tough to achieve.

The following table of stocks comes from a list of those companies that reported during the month or so that comprised earnings seasons in Q1, Q2 and Q3 of this year. The screen uses the following criteria:
The company beat earnings estimates each quarterThere was an increase in year-over-year earnings each quarterThere was an increase in year-over-year revenues each quarterThe company offered upside guidance in Q1 and Q2
SymbolNameSectorALTR Altera TechnologyANAD Anadigics TechnologyAPH Amphenol Capital GoodsAPKT Acme Packet TechnologyBWA Borg Warner Capital GoodsEMN Eastman Chem Basic IndustriesETN Eaton TechnologyFFIV F5 Networks TechnologyHITT Hittite Microwave TechnologyINTC Intel TechnologyIPGP IPG Photonics TechnologyLXK Lexmark TechnologyLZ Lubrizol Basic IndustriesOFIX Orthofix Health CarePII Polaris Inds Capital GoodsPRGO Perrigo Consumer DurablesRADS Radiant Systems TechnologyRCL Royal Caribbean Consumer ServicesRVBD Riverbed Technology Techno…

Power Integrations -- ready to power to new highs?

Do two data points make a trend? Breakouts by power semiconductor companies are starting to establish a pattern. A couple of weeks ago I wrote about ON Semiconductor (ONNN) in a post titled "ON Semiconductor -- on a roll as it breaks out". Today we have a breakout by Power Integrations (POWI) that is worthy of notice.

The stock has appeared on our Trend Busters list based on weekly data. Here is the weekly chart:


Note the breakout above the bearish trend line. If you look at a chart based on daily data, you will see that the stock is challenging its 200-day moving average. A little nudge and a bullish trend could be confirmed.

Background -- 

Power Integrations, Inc. designs, develops, manufactures, and markets proprietary, high-voltage, and analog integrated circuits for use in high-voltage power conversion. Their ICs are used in TV set-top boxes, DVD players, desktop computers, liquid crystal display monitors, and power adapters for notebook computers as well as power supp…

Weekly Market Update -- things get shakier still

Last week I wrote a post titled "Weekly Market Update - cracks in the foundation?". It was the first time in quite a while that I had written one of these posts that presented TradeRadar statistics and reviewed what those statistics might be saying about the state of the market.

Last week I voiced my worry that breadth was was deteriorating and that, sooner or later, this would have a negative impact on the progress of the current rally. Though stocks managed to eke out another gain this past week, the underlying situation has not improved. If anything, it has gotten worse.

The view from Alert HQ --

For those readers who are new to TradeRadar, the data for the following charts is generated from our weekly Alert HQ process. We scan roughly 6200 stocks and ETFs each weekend and gather the statistics presented below.

In this first chart below we count the number of stocks above various moving averages and count the number of moving average crossovers, as well…

Riverbed Technology -- great company but too extended?

Glancing through the Over-Valued Over-Bought Report at the Alert HQ Premium site I noticed that Riverbed Technology (RVBD) was on the list.

The following chart gives you an idea about the over-bought aspect:


In terms of over-valued, consider some of the measures by which we generally evaluate stocks at Trade-Radar:
PE is 242, roughly 8 to 10 times higher than most growth stocks Price to Sales is 7.33 close to triple what we see in many tech stocks with good growth characteristicsPEG is 1.75, high even for a growth stockEnterprise Value to EBITDA is over 67 which is 10 times what you might see in a value stock and at least 6 times what you might see in other good growth stocksGranted, the company is executing extremely well. Riverbed just reported Q3 earnings of $0.34 versus $0.27 estimates. Revenue increased 17% sequentially to $148M vs $135M estimates. Nevertheless, it's hard to see how that justifies the valuation measures described above.

After today's drop of 3.35% perha…

3Q Earnings Scorecard -- which sectors are outperforming and which ones are most optimistic

We're pretty well along into earnings season and this is a good time to take stock of how the numbers are stacking up.

Below is a table that lists each sector shows the results as of Tuesday's earnings reports:

SectorEarnings BeatsY-o-Y Earnings IncreasesY-o-Y Revenue IncreasesUpside GuidanceTotal Providing GuidanceTotal Number of Stocks ReportingBasic Industries24263551340Capital Goods515151153459Consumer Durables36343892846Consumer Non-Durables26282961434Consumer Services44474963569Energy231822
631Finance80703649106Health Care25253682543Miscellaneous13101111015n/a111
11Public Utilities20182041326Technology95941061972121Transportation1727251327Grand Total45544945978263618
A cursory glance gives the impression this earnings season has been pretty decent. The next table makes things a lot clearer.

This following table converts the numbers above into percentages:

Sector% Upside Guidance% Earnings Beats% Y-o-Y Earnings Increases% Y-o-Y Revenue IncreasesBasic Industries38%60%65%88%Cap…

Good news for dividend investors!

I thought this was a pretty good week for those who like stocks with dividends. According to our Dividend Growers report, there were 50 stocks that increased dividends last week. Unfortunately, there were also 32 stocks that cut their dividends.

It's worth looking at the composition of each list. One thing that jumps out is that of the 50 that increased dividends, 22 were funds, not actual companies. Many of the companies that are on the list, though, were in the energy, financial or REIT sectors.

Similarly, of the 32 stocks that reduced dividends last week, 22 are funds. Interestingly, seven of these dividend cutters are municipal bond funds. With interest rates on government and corporate bonds at historical lows, it is no wonder that bond funds of all types are reducing their payouts rather than chasing yield by going further out on the risk continuum.

What dividend lovers might like, however, is the list of value stocks with increasing dividends, what I call Reasonable Value D…

Weekly Market Update - cracks in the foundation?

It's been over a month since I posted a weekly market update. During that time markets have been moving steadily higher. As of this weekend, however, I am seeing a bit of a turn in our market statistics.

The view from Alert HQ --

The data for the following charts is generated from our weekly Alert HQ process. We scan roughly 6200 stocks and ETFs each weekend and gather the statistics presented below.

In this first chart below we count the number of stocks above various moving averages and count the number of moving average crossovers, as well. We then plot the results against a chart of the SPDR S&P 500 ETF (SPY).

This chart shows that roughly 5 out of 6 stocks closed above their 50-day moving average two weeks ago but that number decreased over the course of this last week. In addition, there has been a negative cross-over where the number of stocks above their 50-DMA has declined below the number of stocks whose 20-DMA is above their 50-DMA. This alway…

Synnex jumps and keeps on running

Today I'd like to feature a stock that appeared in one of the screens at Alert HQ Premium. The screen is titled "Value and Growth Report" and, as the name implies, we look for stocks that embody the best of both worlds: value and growth.

How the screen works --

Using daily and weekly data, we look for stocks that are in up trends or have broken out above their trend lines. Trend lines are constructed using the daily high prices. A stock must rise 5% above the trend line to trigger a BUY signal.

Out of this group of stocks on the move we identify those that have "reasonable value" characteristics according to the following criteria:
PE between 0 and16PEG between 0 and 1.2Price-to-Sales less than 2Debt-to-Equity less than 1EV to EBITDA less than 10We then filter for those stocks with earnings and revenues that have shown improvement both year-over-year and sequentially and whose EBITDA is the same or greater compared to the previous quarter.

Only one stock …