Thursday
Feb282008

Lucky Leap Year?

If this seems like the longest February you've been through, you're probably not alone.  The reason it seems so long is that there have been five Fridays this February -- the first time this has happened since 1980.  As some food for thought, we found how the Dow Jones Industrial Average has performed historically on leap year days (2/29) since 1900.  As shown below, the day has been negative more than it has been positive, with 1-day gains on 2/29 just 39% of the time.  Oh well.

Leapyearday

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Thursday
Feb282008

Fannie Mae's (FNM) "Awful" Quarter

Citigroup lowered its price target this morning on Fannie Mae (FNM) by 36%.  The analyst said that the company's Q4 "results were ugly and the outlook is worse."  While these comments would seem to suggest that the analyst is bearish on the stock, we would note that even though he lowered his price target from $64 down to $41, he maintained his buy rating which has been in place since last summer.  At a current price of $27.27, the analyst's target implies that he is still expecting a return of over 50%.  Below we highlight Citigroup's historical recommendations for FNM.  As shown, it has been a rough ride since the buy call was made back in June.

Citigroup_fnm_calls

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Thursday
Feb282008

Russell 1,000 Stocks With Highest and Lowest Short Interest

The bi-monthly short interest numbers were recently released, and below we highlight stocks with the biggest one-month increases and decreases in short interest as well as the stocks with the highest and lowest short interest as a percentage of float.  We also provide each stock's year to date percent change to show whether or not the shorts are winning or losing.  Over the last month, DLB, ATO, UNM and FWLT saw the biggest increases in short interest, but none of them currently have a high short interest as a percentage of float.  AIZ, FCS, ABI and GR saw the biggest one-month decreases in short interest.

Increase

Si228

NTRI continues to top the list of stocks with the highest short interest as a percentage of equity float.  Currently, 77.34% of the stock's shares are sold short.  And like ants on an insect, the shorts are winning -- driving the shares down 43.81% year to date.  NTRI is trailed by IMB, ABK, JOE and VMW.

Highsi

Lowsi_2   

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Thursday
Feb282008

Cerberus: The Statue of Liberty for Finance?

                                             New_colossus_3

We're all familiar with the above line from Emma Lazurus's poem, "The New Colossus," that appears at the base of the Statue of Liberty.  However, after yesterday's news that Cerberus Capital Management will be part of any bailout for Ambac (ABK), the passage above may be applicable to them as well. 

Besides its acquisition of Albertson's (ABS), which itself was not a prized commoditity from 2000 on, Cerberus' other major acquisitions of the last two years have consisted of GMAC and Chrysler.  Talk about "wretched refuse"!

Wednesday
Feb272008

Light Bulb Flashes in Wells Fargo's Head

Reuters published an article today highlighting a memo that Wells Fargo sent to its wholesale brokers on February 25th.  Below is an excerpt from the story:

Wells Fargo said it has identified more than 200 U.S. counties with troubled housing markets, showing how falling home prices and rising defaults are no longer concentrated in particular regions.

Wells Fargo is tightening its lending standards in the affected markets effective Feb 29, in many cases by limiting the maximum size of loans as a percentage of home values. In some markets, it will not allow prospective purchasers to borrow more than 75 percent of the value of their homes.

Congrats to the super sleuths at Wells Fargo for realizing that housing markets have declined!  Now that prices are down significantly from their peaks in 2005, they've finally begun tightening lending standards, making it harder for potential buyers to make purchases at much lower prices. 

Even though we are highly respectful of Sam Zell's track record, this news has got to be an even better buy signal than Zell's recent call that real estate is bottoming.  It would be fitting that just when banks FINALLY tighten their lending standards, the real estate market begins to turn around, leaving them stuck on the outside when potential gains are to be had.

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Wednesday
Feb272008

Long-Term Interest Rates Set to Resume Downtrend?

While long term interest rates have risen sharply over the last four weeks, the trend over the last eight months has clearly been down.  As noted in the chart below, even as the yield on ten-year treasuries has fallen from over 5% in June down to under 4% now, there have been three sharp reversals where yields increased by about 40 basis points over a one-month period.  If the current period ends up resembling the prior two periods, investors should expect to see a resumption of the downtrend in the weeks ahead.

Ten_year_yield_2

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Wednesday
Feb272008

Bernanke Testimony and the markets

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Bernanke22708

Wednesday
Feb272008

New ETF Technical Analysis From Bespoke

For those interested, Bespoke has recently begun providing its unique trading range charts with technical analysis for ETFs that stand out on a daily basis.  Each day at Bespoke Premium, we release our ETF Trends report that provides trend and timing analysis for more than 200 ETFs.  Starting this week, we also began providing charts and technical commentary for those ETFs that currently look the most and least attractive.  Please click the image below to view a quick sample of these charts.  If you're interested in viewing a list of the best and worst ETFs based on technicals on a daily basis, subscribe to Bespoke Premium today.

Wednesday
Feb272008

Crazy Commodities

Precious metals have been on a tear since the start of August.  Gold gets the most attention when metals rally, but surprisingly, it has gone up less than both Platinum and Silver since the parabolic rally began.  As shown below, Gold has rallied 44.17% since the start of August, while Silver has rallied 47.63% and Platinum has rallied a whopping 66.52%.  Next time you're at the jewelry store, remember that Gold is actually a bargain comparatively!

Goldplatsilv

Looking at breakfast beverages, consumers are better off sticking with orange juice versus coffee at the moment.  As shown below, orange juice has failed to rally with all the other commodities and is currently trading at the bottom of its trading range.  Coffee, on the other hand, has soared and is currently trading more than 2 standard deviations above its 50-day moving average.

Ojcof

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Wednesday
Feb272008

Best and Worst of the 3-Day Rally

The S&P 500 has rallied 2.89% since the close last Thursday, and below we highlight the 20 best and 20 worst performing stocks in the Russell 1,000 over that time frame.  As shown, the 8 best performing stocks were down significantly on the year leading up to Thursday's close.  ABK is up the most since Thursday at 32%.  Leading up to that point, it was down 64% on the year.  GYI ranks second behind ABK at 31.5%, followed by RSH, MBI, MTG and THC. 

On the downside, ESI, FWLT, FRE and GOOG have performed the worst during this 3-day rally.  One of the worst feelings for an investor is for his or her stocks to go down when everything else is going up.  You can bet that owners of stocks on the worst performer list below have been feeling that pain this week.

Best

Worst

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Wednesday
Feb272008

December 2007 S&P/Case-Shiller Home Price Indices

ShillerThe monthly S&P/Case-Shiller Home Price data was released yesterday, and once again, the results weren't pretty.  As shown in the table at right, 17 out of 20 cities declined year over year, and all 20 cities declined month over month.  Miami saw the biggest year over year declines at -17.5%.  Miami was followed by Las Vegas (-15.34%), Phoenix (-15.27%), San Diego (-14.96%) and Los Angeles (-13.7%).  New York fell just 5.6% over the last year, and Boston fared even better at -3.36%.  Seattle, Portland and Charlotte were the 3 cities that still managed to show year over year growth from 12/06 to 12/07.  The composite index of all 20 cities was down 9.08% year over year.  On a month over month basis, the West Coast cities once again saw the biggest declines, while Chicago, New York, Portland and Charlotte held up the best.

Below we highlight the historical year over year price changes for each of the 20 cities as well as the two composite home price indices.  As shown in the charts, Boston is the only city where levels are currently higher than they were in the previous months.

Shiller1

Shiller2

Shiller3

Shiller4

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Tuesday
Feb262008

Sector Relative Strength

Below we have updated our charts of sector relative strength.  In each chart, rising lines indicate periods where the sector is outperforming the S&P 500.  Charts with red shading indicate that the sector has underperformed over the last year.  Finally, in each chart we have also included red dots that highlight the five Fed rate cuts since August.

Once again, while recession seems to be the theme of the day, most of the sectors that one would consider defensive in nature have recently been coming under pressure.  After breaking its uptrend a few weeks ago, the Consumer Staples sector attempted but failed to rally back above the trendline, which is now acting as resistance.  In the last few days, continued pressure in the Health Care sector has also caused a break of that sector's uptrend.  Telecom Service stocks, which historically have had the cushion of high dividend yields, have been extremely weak, causing their relative strength to decline sharply.  Finally, Utilities that have typically been considered the safest of the safe are sitting right at important support.

Outside of the defensive sectors, relative strength has been mixed but more positive.  While Consumer Discretionary and Financials are in long-term downtrends, both sectors have been outperforming the market in the short term.  Relative strength is breaking out to new highs in Energy and Materials since these sectors benefit from inflation and the weak dollar.  Not every cyclical sector is showing strength though.  In the Industrials sector, relative strength turned lower after failing to break out to new highs, while tech stocks, even after today's news from IBM, have been a disaster.

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Relative_strength_022608b

Relative_strength_022608c   

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Tuesday
Feb262008

Commodities Remain Overbought

From our daily ETF Trends report available to Bespoke Premium members, below we highlight our list of commodity ETFs.  As shown, all of the ETFs are currently well above their 50-day moving averages and up over the last five days.  The ETFs become overbought when they move more than one standard deviation above their 50-day moving averages.  DBA, an agriculture ETF, is currently the most overbought at 10.09% above the top of its historical trading range.  DBA is followed by the silver ETFs (SLV and DBS) and natural gas (UNG).  While these ETFs are in strong uptrends, their current price levels suggest that a short-term pullback is probably in the cards.

Commodetfs_3

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Tuesday
Feb262008

Looking For Some Action? Most Volatile Stocks

For traders with a more short-term time horizon, we have compiled a list of the S&P 1500 stocks that have the largest intraday high-low ranges (based on the average percent spread between the intraday high and low over the last fifty days). We then grouped the stocks based on whether they have a rising or falling 50-day moving average. Stocks highlighted in gray are new to the list this month.

Overall, the two most volatile stocks in the S&P 1500 are ABK and MBI.  Over the last fifty days, these two names have had average intraday ranges of 20.24% and 16.94% respectively (imagine the mint you could make if you were able to successfully trade these stocks!).  While most of the volatile stocks still have declining 50-day moving averages, the number of stocks with rising 50-days continues to expand.  Even more surprising is that many of the names with rising 50-days are the same housing related names that led the market lower last year.

Looking_for_action022608

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Tuesday
Feb262008

Bill and Melinda Gates Foundation: No Tech Allowed?

We recently pulled the most recent 13-F of the Bill and Melinda Gates Foundation to track its holdings and recent performance.  Due to Warren Buffett's generous donation, the Foundation is loaded with Berkshire shares.  At the end of 2007, BRK/B made up 46% of the Foundation's equity holdings.  Because of Berkshire, the Foundation is heavily overweight the Financials sector at 46.93% (vs 17.58% for the S&P 500).  It is also overweight Health Care, Consumer Staples and Industrials.  The Foundation is underweight Telecom, Consumer Discretionary and Energy, and it has a 0% weight in Technology, Utilities and Materials.  We're guessing that the majority shareholder in MSFT doesn't need anymore Tech stocks in the Foundation, but it's still surprising to see that the fund has no other Technology holdings.  What does that say about the struggling sector?

Gatessector

Below we highlight the holdings of the Bill and Melinda Gates Foundation from its Q4 '07 13-F.  We provide the current portfolio weighting of each stock and its estimated P/E ratio for next year, but the list is sorted by year to date percent change.  Based on its holdings at the end of the year, the equity portion of the portfolio is down just 3% year to date (pretty good compared to the S&P 500's return of -6.79%).  As shown, CNI is up the most at 15%, followed by CMCSK, CLHB, TSCO, KOF and HD.  RDNT, MRK and SGP are down the most this year, and the Foundation's biggest holding (BRK/B) is down 2.24%.

Gatesholdings

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