Best Performing Stocks on Earnings

The unofficial earnings season comes to an end tomorrow with Wal-Mart's (WMT) earnings report.  Below we provide a list of companies that have had the biggest one-day gains on their earnings report days this season.  These companies all had one-day gains of 20% or more in response to their earnings reports.  For companies that report in the morning, we use that day's change, while we use the following day's change for companies that report after the close.  As shown, IAR was up the most on its report day this quarter with a 45% gain.  IAR was followed by ENER, ALGT, ANAD, AMSC and YRCW.  Google just barely missed the list with a gain of 19.99% following its earnings report.


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Lock Up the Gas Tank!

First it was highway guard rails, then manhole covers, and now gas tanks.  While attending a family wedding in New Jersey this weekend, many of the out of town guests came out to their cars Sunday morning to find that the hotel's parking lot had been hit by gas siphoners.  Apparently, like everything else from the Seventies has done at some point or another, siphoning gas is back in style.  And if this is happening in New Jersey, where gas prices are among the lowest in the nation, you can bet it's a nationwide trend.  Time to buy a gas cap lock.


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Search Analysis for Real Estate and Oil

We recently used Google's Trend analysis to compare the historical search volume of "oil" and "real estate" (click here to access the search).  While "real estate" used to be searched much more than "oil", the spread has narrowed significantly in 2008.  Searches for "oil" have pretty much remained steady over the years, but searches for "real estate" have nearly been cut in half since 2005. 

The bottom chart analyzes news references of the two terms, and that one shows "oil" now significantly outnumbering "real estate."  While the media has steadily increased it's use of "oil", the consumer doesn't seem to be increasing its search for it.  Unlike real estate, where consumers were mostly happy to see the value of their homes go up, rising oil prices are not something that most people like.


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Economist Recession Odds Tick Lower

Bloomberg's monthly survey of economists was released on Friday, and the collective odds for a recession over the next 12 months dropped to 55% from 70% in April.  Below we provide a chart of recession odds from the monthly Bloomberg economist survey versus the Intrade contract for a recession in 2008 going back to the start of the year. 

The Intrade contract most recently traded at 27.3, which is down from a reading of 72.9 last month.  It's noteworthy that the recession has to occur in 2008 for the Intrade contract, while it's over the next 12 months for the economist survey.  But it still highlights that economists and traders have both become more skeptical of an actual recession, with traders more so than economists.



Bespoke's Commodity Snapshot

Energy prices have diverged from the rest of the commodity sector.  As shown in our trading range charts below, both oil and natural gas are once again trading more than two standard deviations above their 50-day moving averages, which is extreme overbought territory.  Gold and silver remain in short-term downtrends, while platinum surprisingly broke out of a sideways trading range last week.  Corn is overbought, while wheat and coffee have settled down after huge runs a couple of months ago.  And don't look now, but orange juice prices are finally starting to pick up.  OJ recently broke out of one downtrend and is now closer to the top of its trading range than the bottom.






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This Week's B.I.G. Tips Reports at Bespoke Premium

Below we provide the titles and thumbnails of the in-depth B.I.G. Tips reports we released this week.  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 reports: Where's the Guidance (an ominous sign this earnings season), Oil and Oil Stock ETFs (technical analysis), EPS Revisions (a look at stocks and sectors with the biggest increases and decreases in earnings estimates this month), Oil Rally Now Bigger Than The Tech Bubble (an interesting comparison between oil and 2 prior bubbles), Dollar Turning (could it be true?), Hedge Fund Holdings (what is our proprietary hedge fund holdings index saying about the market?), Euro/Dollar Analysis (a technical take on two currencies), Decile Analysis (the strategies that are working and not working at the moment), Post Correction Rallies (is the current rally sustainable?), Monthly Dividend Screen (a look at ex dates for companies with strong dividends), Earnings Season Update (movers and shakers this earnings season).

Bigtip1 Bigtip2 Bigtip3 Bigtip4 Bigtip5 Bigtip6 Bigtip7 Bigtip8 Bigtip9

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Fannie Mae Pump Fake

We heard countless times earlier this week that the ability for Fannie Mae (FNM) to go up on such poor earnings news on Tuesday (blue shading) was proof that the worst of the credit crisis was behind us.  As shown in the chart below, the stock's performance on Wednesday, Thursday and Friday suggests that it was probably nothing more than short covering.



Baltic Dry Index Almost Back to Record Highs

The Baltic Dry Index is up 82% since bottoming in late January, which might be a sign that the global economic environment is not faring as poorly as many think.  The index was cut in half from its October peak to its January bottom, but it quickly reversed and is now approaching record highs again.

The Baltic Dry Index measures changes in the cost to transport raw materials by sea, and as noted on Investopedia, it "can give investors insight into global supply and demand trends."

"This change is often considered a leading indicator of future economic growth (if the index is rising) or contraction (index is falling) because the goods shipped are raw, pre-production material, which is typically an area with very low levels of speculation."

Below we have plotted the Baltic Dry Index along with a chart of the S&P 500 since the last bull market began in October of 2002.



EPS Beat Rates Tick Slightly Lower

After another 600+ US companies reported earnings this week, the earnings "beat rate" dropped slightly from 57% to 56%.  Currently, 1,163 out of 2,076 companies that have reported since April 7th have announced better than expected earnings per share.  As shown, the "beat rate" has fallen from the mid-60s over the last few quarters, but it's not yet at the low-50 levels seen during the last bear market.


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Oil Up Six Days in a Row

Don't look now, but oil is only up $1.60!  We must have found a new oil reserve the size of China, or finally made peace in the Middle East.  Did President Bush and Mahmoud Ahmadinejad just have high tea in Crawford?  It's silly, but with oil up six days in a row and up $15 since the start of May, up $1.60 seems like welcome relief.  There's still a half hour left of trading for the commodity, however, so $1.60 could easily turn into $3 or $4.  Especially if it's announced that global demand has dropped 40% or something.  Just like February in the Northeast when you ponder whether it will ever get warm again, who knows if oil will ever go down again.

Below we highlight prior times since 1986 that oil has been up six days in a row.  It has now happened 37 times since then, and the commodity has actually gone up on day seven 52% of the time for a median return of 0.18%.  Over the next week, oil has gone up 58% of the time for a median gain of 0.42%.  The last time oil had a six-day winning streak was October 16th of last year.  The commodity did, however, go down on the next day and over the next week following that streak.

Update: Oil only went up another $0.75 in the last half hour of trading to settle at $125.90 or so.  It's a shame we have to wait a couple days for it to go up to $130.



AAPL, GOOG and RIMM Dominate the Nasdaq 100

As of the close yesterday, the Nasdaq 100 index was up 15.19% since the March 10th bottom.  A look at the impact of the stocks that make up the index shows that the gains have largely been concentrated in just three stocks -- Apple, Google and Research in Motion.  As shown below, AAPL has been responsible for 35% of the gains in the index, GOOG 9.87% and RIMM 8.50%.  Collectively, these three names have accounted for more than half of the gains in the index during the post-correction rally.



Default Risk Index Breaks Downtrend

Below we highlight a price chart of the CDX North American Investment Grade Index that tracks the credit default risk of 125 investment grade entities.  After declining 50% from its peak closing price on March 10th, default risk has risen over the past few days, breaking the steep downtrend that formed over the past two months.  Financials have been getting hit hard this week, and AIG's poor earnings report last night didn't help much.  Hopefully this isn't the start of a new uptrend.


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Overbought and Oversold Stocks That Typically Reverse At Similar Levels

In our Daily Morning Lineup available to Bespoke Premium members, we provide a list of the most overbought and oversold stocks that typically reverse when reaching these price levels.  To do this, we look at the price action of stocks in the S&P 1500 over the last three years.  Once we find the stocks that are the most overbought (oversold), we find the average performance over the next week and the percentage of the time the stock has been down (up) when it has been this overbought (oversold) in the past three years. 

In the table below, we highlight the ten stocks in the S&P 1500 that are overbought and typically go lower, along with the ten stocks that are oversold and typically go higher.  As shown, ACS, DOW, and ADBE are the four stocks that are overbought with the weakest performance over the next week when getting this extended in the past.

On the flip side, when KO has been this oversold in the past, it has gone up 85.7% of the time over the next week for an average return of 1.06%.  WFR has averaged a return of 4.22% over the next week when it's this oversold.


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Global Long Term Interest Rates

Long term government bond yields have been on the rise recently, although the degree has varied depending on the country.  In the US, UK, and Japan, bond yields are at or near their highs of the year and have broken downtrends that have been in place since the onset of the credit crisis.  Interest rates in the Euro region and Canada have also risen, but the downtrend in rates for both regions is still mostly intact.  Finally, in Australia, where rates have been in a steady uptrend for the last two years, yields are currently testing the upper end of that range.



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