If you want to know how Bespoke ranks stocks in your portfolio or which stocks are ranked the best and worst based on our Fundamental, Technical and Sentiment measures, you can find out by accessing our Bespoke Stock Scores available to Bespoke Premium subscribers. Each week, we publish our list of Stock Scores (sample) for the S&P 1,500 stocks in an Excel file that can be sorted and analyzed just how you like it. Below we highlight the most recent Bespoke Stock Scores for the 30 stocks in the Dow Jones Industrial Average. Scores highlighted in green are better than average and vice versa for scores highlighted in red. As shown, VZ, XOM, JNJ, T, INTC, HPQ, MMM and GM rank the best in the Dow, while PFE, DD, KO, MSFT and PG currently rank the worst. If you would like to incorporate Bespoke Stock Scores into your strategy, try it out at Bespoke Premium today.
While we still have several key economic reports on the docket today, so far things are going well. Employment and economic growth were stronger than expected, while employment costs came in slightly lower than expected. Maybe Greg Ip was onto something yesterday.
Garmin (GRMN) is trading down nearly 6% in the pre-market after reporting earnings. Below we highlight the historical quarterly reports for GRMN going back to the last quarter of 2001. The stock has opened lower on earnings 8 times out of its last 23 reports. Of these 8 times, the stock has traded lower from the open to the close 5 times for an average loss of another 2.78%.
If you would like this in-depth earnings report information for over 2,700 stocks, check out the Bespoke Earnings Report Database.
From the CME Housing futures, below we highlight the expectations for median home prices in the ten cities that are traded. These contracts trade off of the S&P/Case-Shiller Home Price indices that we highlighted yesterday. We took the prices of the forward contracts going out to November 2011 and tacked them onto the historical Case-Shiller data to paint a picture of what investors are expecting for home prices over the next few years. The blue lines below are actual home price data and the red lines are the prices of the futures. For each city, we highlight the percentage drop from the most recent home price data to the lowest priced futures contract. As shown, home prices are expected to drop sharply from current levels, with San Francisco and Miami taking it the hardest. Chicago is expected to hold up the best, with expectations of only an 8% drop by 2010. The composite index of all ten cities is expected to fall another 13% from now to May 2010 and then finally stabilize. Based on where traders are putting their money, a bottom doesn't seem to be in store until the start of the next decade.
Oil traded down over 3% today following comments by Goldman Sachs that the sector may be due for some short-term profit taking. While today's decline seems major, it is not uncommon. This year alone, the commodity has now had 12 one day declines of a least 3%.
Below we highlight the average S&P 500 performance on the last trading day of October and the first day of November. As the results show, both days are typically positive. Since 1990, the S&P 500 has risen an average of 0.37% on the last trading day of October with gains in ten out of seventeen days. The gains are even better on the first day of November with an average gain of 0.46%.
Since the market closed on 9/18 after the Fed cut rates 50 basis points, the three sectors that needed a boost the most are the only ones that have declined. Financials, Consumer Discretionary and Industrials are down while the S&P 500 is up 1.11%. Technology is up the most with an 8% gain, followed by Materials (5.2%) and Utilities (4.8%).
So which stocks have performed the best and which have declined since the Fed met? Below we highlight the 25 best and worst performing stocks in the Russell 1,000 since 9/18. As shown, key tech names like Google (GOOG) and Apple (AAPL) are on the list of gainers, along with ISRG, VMW, SPWR, FSLR, NYX and CROX. Wellcare (WCG) leads the list on the downside due to legal troubles, but most of the names on the worst performing list are Financials. While many have been expecting and hoping for more rate cuts ever since the last meeting, the performance of stocks that should benefit from easing suggests that another round still won't be enough.
Seven years ago, the S&P 500 was dominated by technology, and the three biggest companies in the sector were Cisco (CSCO), Intel (INTC), and Microsoft (MSFT). Today, all three companies remain among the largest in the sector, and they are all trading near multi-year highs. So far this earnings season, we have heard from INTC and MSFT, both of which issued strong reports and gapped up significantly (5% and 13% respectively). That leaves CSCO, which reports after the close on 11/7. We've already heard John Chambers say that the current environment is one of the best he's ever seen, so will the company's report next Thursday make the former Tech Titans three for three?
The S&P/Case-Shiller Home Price Indices for August were released this morning, and the results were once again not pretty. 17 of the 20 cities that are tracked were down month over month and 15 of 20 were down year over year. Florida struggled mightily, as Miami and Tampa were down the most month over month and Tampa was down more than 10% year over year. Detroit, which fell 9% from August of 2006, got a bit of good news by rising slightly month over month. The only city that saw both month over month and year over year gains was Charlotte, which has held up the best throughout the entire decline over the last two years.
The charts below are the year over year percent changes in median home prices by city on a monthly basis.
The consensus economist estimate for tomorrow's Fed Funds Rate decision is for a cut of 25 basis points to 4.50%. Sixty-five percent of the 108 economists surveyed are looking for a 25 basis point cut, 3.7% are looking for a 50 basis point cut, and 28.7% are looking for the Fed to leave rates the same. Economist estimates are about inline with the consensus from Bespoke readers, where 64% are looking for a 25 basis point cut. However, 19% of Bespoke readers are looking for a 50 basis point cut versus the 4% from economists.
While expectations are for a rate cut of 25 basis points, the consensus differs from what Bespoke readers actually want the Fed to do. When asked what they want the Fed to do, 39% of Bespoke readers said leave rates the same, while 33% said cut by 25 basis points. This disconnect between what people think the Fed will do and what they want the Fed to do should make for some interesting price action when the decision is released tomorrow.
We still want to know what our readers think leading up to the 2:15 PM ET decision tomorrow. Please take part in our polls below if you have yet to do so.
Below we highlight the 2007 year-end price targets from the major analysts polled by Bloomberg. As shown, Lehman upped their year-end target from 1600 to 1630 since the last time we posted the numbers,so they are looking for a gain of close to 6% from now to the end of the year. The rest of the analysts left their estimates the same, and the consensus is looking for a further gain of 4% by year's end.
Every year towards the end of April we read how investors should "Sell in May and Go Away", as the market enters what is traditionally its worst six month period of the year. On the flip side though, the corollary to sell in May would be to buy in November when the market enters what is traditionally its best six month period of the year. Below we show the average yearly pattern of the Dow from November 1st through October 31st over a 25-year and 5-year period.
Over the last 25 years, the Dow has risen by an average of nearly 10% from November 1st through May 1st, and then traded sideways from May 1st through Halloween. However, as the Sell in May pattern has become more mainstream, its efficacy has weakened as investors anticipate the pattern. In fact, over the last five years, the average return during the six month period from November through May is nearly equivalent to the average return from May through November.
Below we revisit our comparison between the Nasdaq bubble of the late 90s and the Homebuilder bubble of the 2000s. The chart below highlights the performance of the two from the start of their enormous gains to their eventual peaks, and back down to their lows again. As shown, the S&P 1500 Homebuilder index actually registered more gains than the Nasdaq at its peak, but the comparable time frame (both around 2,000 days) of the two rises is eerily similar. The bursting of the Nasdaq bubble lasted 943 days with declines of 78.29%. The current bursting of the Homebuilder bubble has lasted 831 days with declines of 67%. While the declines have already been severe, for the Homebuilder index to decline to the low levels that the Nasdaq reached, it would have to go down another 34% from here.
Below we provide a list of US Homebuilder stocks. As shown, most are down between 60% and 90% from their peaks reached in July 2005. We also provide their estimated P/E ratios for next year, their current price to book ratios, and their debt to equity ratios. While most have high valuations, some have decent forward P/Es and very low price to book ratios (although any writedowns will negatively impact book values).
Normally when we hear that the VIX is rising, we automatically think that the market has probably been declining. Conversely, a falling VIX usually coincides with a rising market. This year, however, the inverse relationship between the two has not been as evident. In fact, both the S&P and the VIX are on pace to finish the year higher. But a market where both the VIX and the S&P 500 rise in the same year is not as uncommon as one would think. For four years in a row in the mid-1990s (1996-1999), both indices finished the year higher.
After having the best single day stock performance in its company history (+32.36%) on Friday, CFC is down 5% today as investors take profits and question the likelihood that the company's guidance will be accurate. The reason for Friday's sharp gain was attributed to the company forecasting a return to profitability in the fourth quarter. However, a look at prior guidance from the company shows that their forecasts haven't exactly been reliable. For example, on July 24th the company lowered full year guidance, but they were still forecasting a profit of between $2.70-$3.30 per share. On Friday, the company reported a loss for the third quarter of -$2.85 per share, and even if they meet the high end of their Q4 guidance, full year EPS will be a loss of 57 cents per share, which is nowhere near the $2.70 they were predicting back in July. If CFC couldn't accurately predict their short-term results three months ago, what makes investors think they can do so now? While we realize that the last three months were extremely volatile, the market hasn't exactly settled down and become more predictable.
Another area of peculiarity is in the CEOs stock sales. Several months ago, when asked by a CNBC reporter why he has sold so much stock in the company, Angelo Mozilo's response included: “…why am I selling? The reason I’m selling is that it is the majority of my net worth, and I have a big family, nine grandchildren, five children. I have a lot of education to pay for, so I have a lot of obligations…” Education? Now we realize boarding schools, college and graduate schools are getting increasingly expensive, but $132 million in stock sales over the last year to cover education expenses seems a little excessive.