Skip to main content

Posts

Showing posts from October, 2010

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 …

Repatriating overseas profits -- panacea or problem?

I typically don't dwell too much on the Opinion section of the Wall Street Journal. Since Karl Rove became a frequent contributor, this is a page that I generally can't bypass quickly enough.

In Wednesday's paper, however, in the dreaded Karl Rove spot on the page, was a piece by John Chambers and Safra Catz. As a follower of tech stocks, I immediately recognized the names of, respectively, the chairman and CEO of Cisco Systems and the president of Oracle. These are business people with serious credibility who are not usually associated with any extreme political positions. I stopped to read further.

Their article, "The Overseas Profits Elephant in the Room" revisits some territory that has been covered by a number of bloggers recently. Basically, they contend that U.S. companies have a trillion dollars stashed overseas in their foreign operations but U.S. tax policy makes it prohibitively expensive to bring that money back to the U.S. where it could be used prod…

Has the bond bubble burst? ETF trending provides a clue

I have written recently about the ETF Scorecard at Alert HQ Premium (the free preview is still available, so check it out). This report ranks over 300 ETFs according to how strong their trends are. To complete the ETF picture, I have created two reports that shows how the rankings have changed week-over-week. I offer you the ETF Trend Performance report and the ETF Price Performance report.

Let's take a look at the ETF Trend Performance report. The ETF with the worst performance this past week is the iShares Lehman 20 Year Treasury Bond Fund (TLT). This ETF's ranking fell by 3 points. Given that the maximum score is only 6 points, this was a significant drop, indeed.

Also at the bottom of the performance rankings this week there is the Vanguard Long-Term Government Bond ETF (VGLT), score down by 2.75 points, and the Vanguard Long-Term Corporate Bond ETF (VCLT)  and iShares GS iBoxx Investment Grade Corporate Bond Fund (LQD), both down 2.5 points.

Looking at the ETF Price Perf…

Good value and good growth -- would you believe a smallcap Chinese biotech?

I was reviewing the BUY signals on the Ebb and Flow Report (available at the Alert HQ Premium free preview site) and came across a small cap Chinese company called China Biologic Products, Inc. (CBPO)

The fact that it was on the Ebb and Flow Report means that on the weekly chart the company seemed to be undergoing an upside reversal. The report also showed that the company's Price to Free Cash Flow and Cash Flow Yield were both attractive, it's PEG was a mere 0.2 and Price to Sales suggested the stock was somewhat of a bargain at the current price.

Here is the weekly chart upon which the Ebb and Flow Report BUY signal was based. You can see the bounce off the lower Bollinger Band which contributed to the signal.


Fundamentals --

Looking to dig deeper into the financials, I entered the symbol into the Trade-Radar Stock Inspector software and checked the Fundamental Analysis tab on the Dashboard. Every single LED was green except the one for Market Cap. At only $258 million, the d…

Server vendors -- still innovating but the challenges are growing

Information Week just released a paper delving into the results of their of "State of the Server" survey. The magazine surveyed 579 IT professionals at North American companies and editor Alexander Wolfe put together a nice review of the responses and the server environment.

Here are some of the more interesting items that might be of significance for those reading from a financial and investment perspective who follow tech stocks:

Reduction in number of servers --

Most companies are trying hard to maintain or reduce the number of servers in their datacenters. 42% are reducing server count by consolidating old servers to fewer, new more capable systems. 26% are attempting to hold server count fairly constant; replacing servers on only a normal replacement cycle. 5% are in a "freeze" mode, avoiding new purchases and extending the life of existing servers.

There is a continued push toward virtualization. This trend should help the two major players in virtualization…

Comtech Telecom -- a bullish reversal, a new dividend and still a value stock

Here's a stock that keeps showing up on various lists at Alert HQ. It is on the Reversal Alert list based on weekly data, it's on the Total Return Ratio list and on the Value Stocks with Increasing Dividends list. These last two are available during the free preview period at Alert HQ Premium.

The name of the company is Comtech Telecommunications Corp. ($CMTL)

The following chart shows the potential reversal that is underway:


You can see the stock dropped abruptly earlier in July, established a base and has been rallying furiously the last couple of weeks. On this weekly chart, the gains have been sufficient to trigger buy signals on both Williams %R and Slow Stochastics.

In terms of dividends, the company recently announced the initiation of a quarterly dividend. At $0.25 per share per quarter the forward annual rate is $1.00 for a yield of 3.7% which is not too shabby.

In terms of its value characteristics, the company has a PE of 14 which is not excessive but is also not pa…

Unexpected ETFs among top performers

Sometimes widening your outlook yields some surprises. Case in point: evaluating how strongly certain ETFs have been trending lately.

Take a look at the free preview of Alert HQ Premium. There are two reports so far that focus on ETFs. The more limited report, the Style and Sector ETF Scorecard, focuses on the most well known sectors and styles such as large cap, small cap, value, growth, etc. There are a total of 30 ETFs that are representative of these styles and sectors. This report has EEM, the iShares MSCI Emerging Index Fund, as its top performer (with the highest possible score of 6.0) followed by EFA, the iShares MSCI EAFE Index Fund and IWM, the iShares Russell 2000 Index Fund, both ranked at 5.5. This is consistent with what we've been hearing -- first, that foreign stocks are more in favor than U.S. stocks and second, that a simple U.S. stock index is a decent investment.����������������������������������������������������������������������������������������������������…