Tuesday
Feb052008

Sector Earnings Growth in the Fourth Quarter

With earnings season more than halfway completed, below we highlight the actual year over year EPS growth numbers by sector.  As shown, earnings in the Financial sector are down 120% from Q4 '06.  The Consumer Discretionary sector is down 27%, and the Materials sector is down 5%.  As a whole, earnings for the S&P 500 are down 24%.  However, there are plenty of sectors that have showed strength, and when you strip out Financials, year-over-year earnings growth for the S&P 500 is actually 18%.  Telecom earnings are up 57% and Technology earnings are up 31%.

Q408

We went back to the start of the fourth quarter to see what analysts were predicting for earnings back then.  As shown, on October 4th, analysts were expecting Q4 earnings in the Financial sector to actually grow 2%.  They were expecting Consumer Discretionary to grow 17% and the entire S&P 500 to grow 11%.  While they got Financials, Consumer Discretionary and Materials wrong on the downside, they got plenty of sectors wrong on the upside as well.  Energy earnings were only expected to grow 11%, and they are currently at 21%.  Utilities were expected to grow 15%, and they are currently at 26%.  Technology earnings are currently at 31% versus expectations of just 20% last October.   

Q4081 

Looking at these numbers would probably lead an investor to believe that Tech, Energy, Utilities and Telecom would be performing great, while Financials and Consumer Discretionary would be doing terrible.  However, it highlights the predictive mechanism of the market, because Financials and Consumer Discretionary tanked leading up to earnings season.  Over the past few weeks, these beaten down sectors have performed great, indicating that investors are expecting earnings to turn around for them over the next few quarters.  And even though Technology is doing great as far as Q4 earnings are concerned, the sector's recent poor price performance indicates future earnings will probably slow significantly. 

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Monday
Feb042008

What's Up With GOOG?

Google (GOOG) is now down 33% from its closing high of $741.79 reached on November 6th, 2007.  Many investors are saying the stock simply ran too far too fast since IPOing back in August 2004, and that the company is overvalued.  At its peak, GOOG was up 772% from its IPO price of $85.  After 871 trading days, the stock is now up 483%.  We decided to compare Google's performance since its IPO to other technology stocks at this point in their lives as public companies.  Market cap aside, after 871 trading days, MSFT was up 458%, AMZN was up 1,783%, EBAY was up 1,789% and YHOO was up 7,918%. 

Compared to AMZN, EBAY and YHOO at this stage in their lives, GOOG looks like a bargain.  We all know that AMZN, EBAY and YHOO went public during Tech's heyday, but AMZN and EBAY are currently up 3,500% since their IPOs -- nearly double the price that they were at 871 trading days after going public.  YHOO is the only stock in the list that is currently lower than where it was 871 trading days in, but it was also up by far the most at 7,918%.  And even though GOOG likes to think of itself as the anti-MSFT, it is trading most similarly to MSFT at this stage in its career (483% vs 458%).  Twenty years from now, GOOG can only hope that it is up 43,000% from its IPO price like MSFT currently is.

Googipo

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Monday
Feb042008

S&P 500 Growth vs Value

After underperforming value stocks for most of the last five years, it appeared as though the pendulum was finally shifting in favor of growth stocks during the second half of 2007.  However, as the chart below illustrates, the party for growth stocks didn't last long.  Almost in unison with the change of the calendar, the rally in growth stocks has come to a grinding halt this year as value stocks have taken back the reigns of outperformance.

Growth_vs_value

Monday
Feb042008

Shanghai Composite Up 8.13%

China's Shanghai Composite was up 8.13% today, its biggest gain since it went up 8.21% on July 8th, 2005.  We went back 10 years and found all days where the Shanghai Composite went up 5% or more to see how the index reacted on the following day and over the following week.  As shown below, the index has averaged a gain of 0.94% versus an average 1-day gain of 0.07% on all days over the last 10 years.  The Shanghai Composite's average change in the week following a +5% day is a little less muted at 0.44%, but it is still better than the average 1-week change of 0.33%.

Lgupdays1 

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Monday
Feb042008

Russell 1,000 Stocks Furthest Above and Below Their 50-Day Moving Averages

After a sharp rally in Homebuilders and Financial stocks, many of them are now trading well above their 50-day moving averages.  As shown below, IMB, PHM, BPOP, ETFC, WM, DHI, RYL and KBH are all trading more than 25% above their 50-day moving averages.  These stocks have had bounces off of their bottoms of more than 30% in a very short time period.  While they are currently trading well above their 50-days, they still have a long, long way to go to get back to their normal trading ranges over the past 2 years.

50dayabove1

Technology stocks litter the list of Russell 1,000 stocks furthest below their 50-day moving averages.  Key names like AAPL, GOOG, GRMN and FSLR that used to be on the most overbought list are now more than 15% below their 50-days.  Since the start of the year, there has been a clear shift in the direction of the momentum stocks from the past couple of years.

50dayabove

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Monday
Feb042008

Where Do Analysts Think The Dow Is Headed?

Last week we highlighted the various S&P 500 price targets of Wall Street strategists to get a sense as to where they thought the market was headed.  Today, we look at the sentiment of individual analysts by using their price targets for each of the 30 stocks in the Dow.  As shown below, based on the average analyst price target, the Dow is expected to rise by 16% from current levels.  On the positive side, analysts are most bullish on AIG, MRK, HPQ, and MSFT.  For each of these names, they are expecting gains of about 30%.  While none of the Dow thirty stocks are expected to decline, the ones expected to show the smallest gains are JPM, WMT, HD, and C.  While analyst price targets should normally be taken with a grain of salt, it often helps to know what others are expecting.

Targets

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Monday
Feb042008

Bespoke's Country Snapshot

In our last post, we highlighted trading range charts for nine commodities, and below we provide charts of 22 countries that have trackable ETFs.  The top of the red zone is 2 standard deviations above the index's 50-day moving average, while the bottom of the green zone is 2 standard deviations below the 50-day.  The light blue shading represents 1 standard deviation above and below the 50-day moving average.  After trading well below extreme oversold levels, most countries have moved back into neutral territory.

Unfortunately, the recent global market selloff put most country indices in technical downtrends, but Russia, India, Singapore, Brazil and Malaysia managed to hold their long-term uptrends.  For those looking to put money to work, these countries may offer the best opportunities. 

Click here for a list of country ETFs.

Country

Country1

Country2

Country3

Country4

Country5

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Monday
Feb042008

Bespoke's Commodity Snapshot

Below we highlight our trading range charts of nine major commodities.  The green shading represents two standard deviations above and below the commodity's 50-day moving average, and moves above or below this shading indicate overbought or oversold levels. 

Precious metals have taken over as the commodity of choice, with gold, silver and platinum all at the very top end of their trading ranges.  Coffee and corn are also trading near overbought territory, with coffee testing key resistance.  Oil, on the other hand, is stuck in a downtrend and is currently trading closer to the bottom of its range.  Natural gas and orange juice are about in the middle of their trading ranges.

Oilngas

Goldsilv

Platcopp

Ojcof

Corn    

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Friday
Feb012008

Premium Activity

The market had a busy week, and we issued a number of B.I.G. Tips reports over at Bespoke Premium to cover it.  Below we provide the titles and thumbnails of each of the reports, and if any spark your interest, they are all available to our Premium subscribers.  These are anticipatory, ahead-of-the-curve research reports that cover markets, economies, stocks, commodities, housing and anything else related to making people money. 

This week's B.I.G. Tips: Earnings Triple Plays (list of stocks with the best and worst reports), Earnings Season Analysis (sector performance on earnings), Talk About Your Ups and Downs (how the market does after similar volatility levels), February Seasonality (historical February market performance), Tomorrow's Employment Report (sector performance based on a better or worse than expected jobs number), GDP Divergence (a look at the divergence between economists and investors on the economy), Margin Debt (the effect of margin debt levels on equity performance), Fed Days (where we are in the current Rate Cut Cycle), YHOO, GOOG Earnings (typical trading patterns on earnings), Trading Places (a look at the recent performance of China and homebuilders), High Probability Earnings Trades, Earnings Estimate Revisions.

Tip1_3 Tip2 Tip3 Tip4 Tip5 Tip6Tip8 Tip10 Tip7 Tip12 Tip9_2 Tip11_2

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Friday
Feb012008

ISM Commodities Survey

In addition to coming in stronger than expected on the headline number and the prices paid component, Friday's ISM report for January was also higher than expected on another front.  The monthly survey, which measures the number of commodities up and down in price over the month, increased from 15 to 19, bringing the 3-month average up to 16.  This indicator is still well off its highs from 2004 and the levels we saw in early 2007, but any increase is unwelcome and therefore bears watching.

Ism_commodities_0108

Friday
Feb012008

Fourth Quarter EPS Beat and Miss Rates by Sector

With 776 companies reporting since Alcoa (AA) kicked off earnings season on January 9th, we're now more than halfway through the fourth quarter reporting period.  Earlier today, we put out a detailed analysis on how sectors have been performing based on their recent earnings reports in one of our B.I.G. Tips reports.  The report yielded some interesting data for the market going forward. 

Below we highlight a table from the report that shows the EPS beat and miss rates by sector.  As shown, Utilities stocks have beaten estimates the most (just 18 companies have reported though), followed by Materials, Technology and Industrials.  At the bottom of the earnings beat barrel is Financials at 47.3%.  Interestingly, Financial stocks have done exceptionally well this earnings season even though they are beating estimates the least often.  This implies that their beat-downs in the last quarter of 2007 were overdone.

Q4analys

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Friday
Feb012008

Super Bowl Indicator: At Least The Dolphins Are Out of It

With the big game coming up on Sunday, we decided to play with some numbers a little.  While there have been several variations over the years, the Super Bowl Indicator basically says that equities do better when the NFC wins the Super Bowl.  Below we have summarized the average performance of the S&P 500 from the date of the Super Bowl through year end depending on which conference the winner comes from.  As shown, over time, the bias has certainly been in the NFC's favor, with an average gain of 13% and positive returns 86% of the time.

Average_perf_nfc_afc

Turning our attention to individual teams shows that bullish investors should be rooting for the Giants.  The table below shows the average return through year end following the Super Bowl depending on which team won (In order to make the list a team had to win at least two Super Bowls.)  The average return of the S&P 500 following the three Patriots wins (2002, 2004, and 2005) is a decline of 3.6%.  Following Giants wins (1987 and 1991), the average return was a gain of 7.8%.  No matter who wins this year, let's just be thankful that the Dolphins, with their 1-15 record, will be watching from home.  They won the Super Bowl twice (1973 and 1974), and following each victory the S&P 500 declined by 18% and 27%, respectively.

Teams_with_multiple_superbowl_win_2 

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Friday
Feb012008

Magazine Cover Indicator: Is the Housing Bottom In?

We just got our Business Week in, and the cover is pictured below.  We all know the contrarian nature of magazine covers, and with homebuilder stocks already rallying more than 50% off their bottom, it makes the case even stronger that the housing bottom might be in.

Businessweek_3

Spxhome

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Friday
Feb012008

Google Down on Earnings and Yahoo/Microsoft Merger

Google (GOOG) is set to open lower this morning after reporting disappointing earnings and the potential threat from a combination of Microsoft (MSFT) and Yahoo (YHOO).  Below we highlight prior negative gap openings from GOOG from our Bespoke Earnings Database.  As shown, of the three times GOOG has gapped lower, it has finished up from the open twice, and in all three periods the stock closed within two percent of its open.

Goog

Regarding the combination of MSFT and YHOO as a potential threat to GOOG, we think using the Olympic analogy makes sense.  Which would you rather have?  A gold medal, or a silver and a bronze?

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Friday
Feb012008

Best and Worst Performing Russell 3,000 Stocks YTD; IDIX, WCI, IFC and LFG Top The List

Now that we're one month in, below we highlight the best and worst performing stocks in the Russell 3,000 year to date.  We have taken out any stock currently trading below $5 per share.  As shown, IDIX is up the most at 92%, followed by WCI, IFG, LFG and SATS.  So far, 2008's winners are made up mostly of last year's losers - making it the year of the rebound.

Best08

MGI leads the list of worst performers, down 65% on the year already.  MGI is followed by SHOR, CADX, TWIN and ABK.  This list is made up mostly of Technology names.

Worst08

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