Monday
Apr142008

US vs Europe EPS Growth Estimates

Below we highlight the bottoms up estimated 2008 earnings growth estimates for the S&P 500 and Europe's Stoxx 600.  As shown, estimates for growth in S&P 500 earnings are expected to be 10.8% in 2008, while estimates for Europe are at -0.1%.  There are some big discrepancies between sectors as well.  Telecom is expected to see the biggest growth in Europe and the smallest growth in the US.  Technology is expected to be the best sector in the US, but estimates for growth are twice as high for Tech in Europe.  Energy stocks rank 2nd for growth in the US at 14%, but earnings are expected to decline 9% in the Oil & Gas sector in Europe.  Finally, while earnings in the US Financial sector are expected to grow by 10.7% in 2008 (a number that many think is unlikely especially given today's news from Wachovia), analysts in Europe are expecting a decline of 8.8%.

Sp500414

Stoxx60041408

 

Monday
Apr142008

Remember Ambac?

While it may seem like years ago, it was only two months ago that the direction of the market seemed to hinge on the daily fluctuations of Ambac (ABK).  Remember that Friday in February when the Dow rallied over 200 points off the low on rumors of a bailout for the company?  Luckily for the market, investors have moved on from watching ABK.  Since the early March capital injection into the company, ABK shares are down 44%.

Abk_change_in_prices_2

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Monday
Apr142008

Global Stock Market Performance

Below we highlight the distance below the 52-week highs of 22 major equity market indices.  As shown, China is trading the furthest below its 52-week high at -46.2%.  China is followed by Japan (-29.4%), Sweden (-28.4%), Hong Kong, India and Switzerland.  The US actually ranks in the better half of the group at 15.4% below its 52-week high.  Canada, Brazil, Mexico and Canada are trading the closest to their 52-week highs.  (We also provide a table of the indices we used for the countries, along with their year to date changes and trailing 12-month P/E ratios.)

52wkhigh

Ytdequity1_2

   

Monday
Apr142008

Last Week's Winners and Losers

The market sold off last week after seeing gains since the March 10th bottom.  We broke the Russell 1,000 into deciles (10 deciles of 100 stocks) based on stock performance from 3/10 to Friday, April 4th and calculated the average stock performance of each decile during last week's selloff (4/4 close to 4/11 close).  As shown below, the stocks that were up the most during the rally were down the most last week, indicating that investors were taking recent gains off the table.

Decile411

Below we highlight the best and worst performing Russell 1,000 stocks last week.  As shown, FMD was down the most at -47.37%, followed by LNG, CIT, CC, GRMN and IMB.  After its negative earnings report on Friday, GE made the losers list by declining 14.67% on the week.

MLNM topped the winners list after rising 50% last week.  Other notables on the list of best performers include DAL, UAUA, WM and HAL.

Worst411

Best411

   

Friday
Apr112008

GE's Earnings Miss -- At Least It Wasn't IBM

While the Dow is trading down nearly 1.5% due to GE's earnings miss, GE itself is having a relatively minor impact on the total decline in the Dow even though it is down 12%.  The reason for this lies in the way the Dow is calculated.  Unlike every other major index, stocks in the Dow are weighted according to their price instead of their market cap.  Therefore, the lower the stock's price, the smaller its weight in the index.  Additionally, when a stock in the index splits, its weighting is automatically cut in half even though nothing has really changed about the company. 

As of last night, GE closed at $36.75, giving it a weight in the index of only 2.4%.  This contrasts to IBM which is the highest priced stock in the Dow with a weight of 7.7%.  Below, we highlight the impact in Dow points of a 12% decline in each of the Dow components.  As shown, GE is only having a direct impact of 36 points.  If IBM traded down 12%, its impact on the index would have been a decline of 117 points!

Dow_impact_in_points_4   

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Friday
Apr112008

S&P 500 Testing 50-Day Moving Average

With today's market declines, the S&P 500 is in danger of breaking its short-term uptrend line as well as its 50-day moving average.  The index is currently trading just a half of a point below its 50-day moving average and will need to close above that level for the uptrend to hold.

Spx50day

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Friday
Apr112008

Bespoke on Bloomberg TV

Bespoke's Justin Walters will appear on Bloomberg TV around 1:30 PM ET and 4:30 PM ET to discuss earnings season and the outlook for stocks.

Friday
Apr112008

Bespoke's Commodity Snapshot

Below we highlight our trading range charts of ten major commodities.  The green shading represents two standard deviations above and below the commodity's 50-day moving average.  Moves above the green shading represent overbought levels and moves below represent oversold levels.  As shown, most commodities found a bottom in recent weeks after sharp declines late in the first quarter.  Oil found support at the $100 level and is looking to break through $110 resistance.  Metals have also staged rallies in recent weeks as the dollar has struggled, but they haven't moved back into overbought territory yet.  Corn is in overbought territory, while wheat, orange juice and coffee are closer to the bottom of their trading ranges than the top.

Oilnatgas

Goldsilver

Platcopp

Cornwheat

Ojcof

    

Friday
Apr112008

General Electric (GE) Q1 Estimates Widely Off The Mark

General Electric (GE) reported earnings of $0.44 per share this morning, 7 cents worse than expected.  The actual number came in 6 cents worse than the low analyst estimate of $0.50 per share.  GE is known for reporting inline with estimates, so it's no surprise that the stock is down more than 10% in the pre-market on this news. 

We looked at the historical consensus Q1 EPS estimate for GE since last November, and it was surprising to see that estimates barely budged, even though estimates for the S&P 500 as a whole fell from expected EPS growth of 10% to -10%.  Estimates have come down quite a bit for most stocks and sectors (although many think they haven't fallen nearly enough).  They just didn't for GE, and the market is now suffering.

Geepsest

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Thursday
Apr102008

Energy Sector Most Overbought Since July 2006

Tonight as we updated our S&P 500 Sector Snapshot for Bespoke Premium subscribers, we saw that the Energy sector, as measured by the ten-day advance/decline (a/d) line, is at its most overbought levels since July 2006.  Typically, overbought readings imply that the sector is due for some consolidation.  However, when we looked at extreme overbought readings in Energy stocks, we found that while it averages a minor decline in the two weeks following the peak reading, over the next month and three months, the sector has typically traded higher.

Energy_sector

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Thursday
Apr102008

US 2008 GDP Growth Estimate Ranks 177 out of 181 by IMF

The International Monetary Fund recently published their World Economic Outlook.  The IMF has done a great job making their website much more interactive, and they now offer their Data Mapper that maps out their global estimates for a number of economic indicators.  Below is a screenshot of the Data Mapper showing the IMF's estimates for 2008 GDP growth across the globe.  Check out the Mapper here.

Datamapper

As shown in the map, the IMF is expecting the US to be one of the slowest growing countries in 2008.  When we downloaded a full list of their 2008 YoY GDP Growth estimates, we found that the US ranks 177th out of 181 countries.  Below is a chart of the ten countries with the lowest 2008 GDP growth estimates (local currency) based on the IMF's forecasts.

Gdpgrowth

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Thursday
Apr102008

A Tale of Two Coasts

The CME has housing futures that track the S&P/Case-Shiller home price indices.  These futures allow big investors to trade or hedge against real estate prices nationwide.  Since last September, the Composite 10-City futures contract that expires in February 2009 has fallen 12.56%, meaning investors have gotten more bearish on the outlook for real estate prices early next year.  There is a big discrepancy between the outlook for Los Angeles and New York, however.  As shown, the February '09 contract for median home prices in Los Angeles has fallen nearly 28% over the last seven months, while the contract for New York has barely budged.

Feb09homeprices_3

The actual change in home prices from their peaks also shows that the West Coast is struggling much more than the Northeast.  The Composite 10-City index has fallen 13.36% from its peak, while Los Angeles has fallen 18% and New York has fallen 7%.  The current price of the February '09 Composite 10-City contract is forecasting that from current levels, prices will fall by as much as they already have from their peaks.  The contracts for Los Angeles are suggesting another 23.35% decline from current levels, while New York is expected to fall just 5%.

Homepricedeclines_2

 

Thursday
Apr102008

Boxed In Exporters

The way things have been going lately, isn't it fitting that one of the areas that is helping to prop up the US economy (exports) is being hindered by a shortage of containers.  As the WSJ reported this morning, many firms are finding that the only reason they are unable to fill orders is because they cannot locate enough container boxes to ship the goods in.

With that in mind, we looked for pure play companies on the shortage in shipping containers.  Unfortunately, two of the purest plays we found are not very liquid.  The first is Textainer Group (TGH) which owns, manages, and sells dry freight containers.  Another attractive aspect of the stock is that it pays a 5% dividend.  The second company is CAI International (CAP), and they provide container leasing and management services.  As the charts of each company illustrates, both companies have had strong rallies since January following sharp declines during the fourth quarter.

Container_companies

Thursday
Apr102008

Withdrawal Pains

It seems like just last year that individual investors without seven figure incomes were trying with little success to get into hedge funds.  Today, they can't get out of them.  In an article in today's WSJ, Greg Zuckerman highlights that in addition to institutions and the wealthy, smaller investors are finding that requests for withdrawals are being refused as funds institute their lock-up policies.  It's also probably safe to assume that given their large asset pools in the line for the exits, the institutions and the clients with the most assets will be the 'women and children', while the smaller investors will be the most likely to go down with the ship while paying management fees to the bitter end. 

Whether it's the above example of hedge funds, the lock up of the Auction Rate Securities (ARS) market, or the issue we cited with the ETF DCR yesterday, when presented with an investment opportunity, investors should know not only what they are investing in, but also understand what limits they will have on their funds.

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Thursday
Apr102008

Historical S&P 500 P/E Ratio

For those interested, below we highlight the historical trailing 12-month P/E ratio of the S&P 500 since 1942.  The green and red shading represents bull and bear markets of the S&P 500.  Bull markets are rallies of 20% that were preceded by a decline of 20% and vice versa for bear markets.  Generally you see P/E expansion during bull markets and P/E contraction during bear markets.  However, the most recent bull market saw P/Es contract from high levels, and during the recent correction, P/Es have expanded.  The current trailing 12-month P/E of the index is 20.5 versus an average of 15.90 since 1942.

Spxpe410

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