Friday
Apr252008

Bespoke's Sector Snapshot

Below we highlight our trading range charts of the S&P 500 and its ten sectors.  The red area represents between one and two standard deviations above the sector's 50-day moving average.  When the price moves into or above the red zone, it is considered overbought.  After suffering through a nasty downtrend where the price rarely made it out of oversold territory, the S&P 500 and most sectors are now overbought.  Technology, Energy, Materials and Utilities are the most overbought, while Financials, Consumer Discretionary, Consumer Staples and Health Care are the least overbought.  Energy and Materials have pulled back in recent days, but still have a ways to go before they get back into the neutral zone.

Spxte

Finlindu

Inftenrs

Condcons

Hlthmatr

Utiltels

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Friday
Apr252008

Talk About Having Too Much Money

In this morning's Investor's Business Daily, the following blurb caught our attention.  The link to the story from the NPR highlights even more of the mind defying projects going on in Dubai:

Dutch architects are building a string of floating islands off Dubai with hotels, restaurants and a heliport.  The islands will be made of foam and concrete platforms, with flexible pipes bringing in water and electricity and carrying away wastewater, NPR reported.  Each island is in the shape of an Arabic letter, and the chain would spell a piece of Arabic poetry written by the United Arab Emirates prime minister, the ruler of Dubai.

Is the glut of money in the Middle-East so great that they have billions lying around to build a bunch of islands spelling out a poem?  One can only imagine what type of projects will get undertaken if oil were to ever hit $200.

Friday
Apr252008

YRCW Up 30% On Earnings

Yesterday we posted that YRCW may actually be due for an upside earnings surprise since two of their biggest customers -- WMT and HD -- had performed well lately.  While losses for the company were actually worse than expected, investors seem to like the report since shares are up a whopping 30% today.

Yrcw

Friday
Apr252008

Analyst Bear Raid on Ford (F)

Normally, after a stock has its biggest one-day gain in more than five years after reporting stronger than expected earnings, you can expect a parade of upgrades as analysts jump on the bandwagon.  This morning, however, we are seeing the complete opposite in shares of Ford (F).  After rising 11.7% yesterday following the release of a stronger than expected first quarter earnings report, not one, not two, but three different analysts downgraded the stock.  After seeing the stock fall from $9 down to $5 and then rise up to $8 again, analysts at JP Morgan, Merrill Lynch, and Bear Stears don't want to risk taking that ride again.

Ford_042408

Friday
Apr252008

Earnings Beat Rates By International Exposure

As earnings season approaches its mid-point, we looked to see how companies are reporting based on their international revenue exposure.  Using the Russell 1000 as our universe, we grouped companies based on the percentage of revenues each one derives from international sources.  We then calculated the percentage of companies in each group that have reported better than expected earnings.  As shown, it pays to do business outside of the US. 

So far this quarter, of the 450 companies in the Russell 1000 that have reported earnings since March 1st, 57.3% percent of them have beat EPS expectations.  However, of the 95 companies that derive more than half of their revenues outside of the US, the beat rate rises to 68.4%.  This contrasts to the 54.4% beat rate of companies that get less than half of their sales outside of the US.  Even worse is the subgroup of 163 companies that have no international exposure.  The beat rate for these companies is only 46%.

For investors interested in revenue exposure by individual company, our International Revenues Database provides the percentage split between international and domestic revenues for each company in the Russell 1000.  The database is currently available free of charge to all yearly subscribers to Bespoke Premium.

Russell_1000_companies_beating_ea_2

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Thursday
Apr242008

Fox Business News Appearance Friday April 25th

Snap1_2Paul Hickey will be on Fox Business Channel at 9:45 AM ET on April 25th to discuss the markets and oil.

Thursday
Apr242008

Oil Bulls Biggest Nightmare...A Stronger Dollar

While it is way too early to say that today's rally in the dollar is the start of any real change in trend, it did give some insight to what investors can expect in commodities and oil if the dollar were to actually start going up.  In the chart below we charted oil with the US Dollar index (inverted) over the last three years.  While the magnitude of the moves in each asset have differed, the tit for tat relationship between the two has been constant. 

While daily 'reasons' for oil's move are usually attributed to tensions abroad, refinery utilization rates, inventory reports, etc, investors may be better served looking at the direction of the dollar and paying more attention to what the Fed intends to do with interest rates.

Oil_vs_dollar

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Thursday
Apr242008

Current and Historical Sector Weightings of the S&P 500

As we've done in the past, below we have updated the current and historical weightings of the S&P 500's sectors.  As recently as two days ago, Energy had the second biggest weighting in the index.  It currently ranks third, but that's much higher than its 7th place ranking as recently as the end of 2005.  Financials still rank first at 17.1%, followed by Technology at 16.3%.  These weightings change dramatically due to sector rotation over the years.  Back in 1992, Consumer Discretionary had the biggest weighting in the index, but it's now ranked 7th at just 8.5%.  Technology got all the way up to 29.2% back in 2000 during the Internet bubble, but its weighting was cut in half by 2002.

As shown in the individual charts of sector weightings, Energy has really taken share from other sectors in recent years.  Just like the spike in Financials that was seen in 2006, these big rises should flash warning signals for investors.

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Thursday
Apr242008

YRCW: The Anti-Transport

This morning's "Ahead of the Tape" column in the Wall Street Journal questioned the rally in the Transports, and whether or not it is really an indication of a stronger economy down the road.  One stock mentioned in the article is YRC Worldwide (YRCW).  Last year we wrote about YRCW and highlighted how for several quarters now the stock has been a serial underperformer.  Additionally, since WMT and HD are two of the companies biggest customers, we noted that YRCW's underperformance was more likely due to troubles at those two companies than what was happening in the economy. 

YRCW reports earnings after the close today, and analysts aren't expecting much (out of the 12 analysts covering it, 7 have it rated a hold and 5 have it as a sell).  But just as the stock suffered as a result of its exposure to WMT and HD, the recent performance of these two names suggests that things may not be as bad for YRCW as the analysts think. 

Yrcw_hd_wmt_last_two_years_2

Finally, in our post last Fall we noted that, "...there isn't a day that goes by lately where the CEO of YRC Worldwide (YRCW) isn't interviewed on TV talking about how bad the economy is right now."  Maybe it's just us, but we can't remember the last time Zollars was on TV complaining about the economy.  Hopefully it means things have picked up.

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Thursday
Apr242008

Energy ETFs Down But Still Overbought

On Tuesday evening, we posted that energy stock ETFs had reached extreme overbought territory.  Today the ETFs are showing their first signs of a pullback, with all of them down 2% or more.  As shown in the charts below, however, the ETFs remain in overbought territory and still have more room to go on the downside before they even test their first real levels of support.

Energyetfs

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Thursday
Apr242008

Disastrous New Home Sales

We highlighted historical charts of Existing Home Sales on Tuesday, and following today's report, we highlight them for New Home Sales.  Economists were looking for New Home Sales to come in at 580,000. The actual number came in at 526,000, which was a huge miss. 

In the first chart below, we provide historical monthly New Home Sales going back to 1964.  As shown, the declines have been sharp and severe following the parabolic rise that ended in 2005.  Monthly sales are now well below the historical average of 697,000.

We also provide a chart of the historical month-over-month and year-over-year changes for New Home Sales.  As shown, the year-over-year declines have now gotten close to prior lows in '66, '80, '81 and '91.  New Home Sales were still coming in at 700k to 800k as recently as last Fall, so even if sales stay at the same levels for the next couple of months, the year-over-year declines will still be more than -30% for awhile. 

Newhomesales424081

Newhomesales424082

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Thursday
Apr242008

Gold Price Chart Not Looking Good

Unlike oil, the price of gold failed to even get close to taking out its March highs recently.  After failing to break through resistance last week, the price of gold is once again pulling back, and it is now trading below the $900/ounce level.  The price has recently formed a head and shoulders pattern, so based on its technicals, gold doesn't look good.

Goldte

Thursday
Apr242008

Bespoke Reader Poll -- Oil and Fuel Prices

With oil close to $120, the average US consumer is without question spending a good chunk of his/her after-tax income on energy costs.  There is definitely a tipping point in which consumers will dramatically change their energy consumption habits.  We're not at the tipping point yet, but we don't think it's too far off.

We want to know what Bespoke readers think about oil prices going forward and how it will impact their spending habits.  Please answer the two poll questions below, and we'll report back with the results in a couple of days.


Are you currently bullish or bearish on the price of oil?
Bullish
Bearish
  
Free polls from Pollhost.com


What fuel price will cause you to change your driving habits?
>$3.50/gallon (already have)
>$4.00/gallon
>$5.00/gallon
>$6.00/gallon
Will never change
  
Free polls from Pollhost.com

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Wednesday
Apr232008

US Sector P/E Ratios

Below we highlight one-year charts of trailing 12-month P/E ratios for the S&P 500 and its ten sectors.  The red dots highlight where the P/Es stood when the market peaked on October 10th.  Since the market is down significantly since October 10th, it's not good to see its P/E higher than it was back then, as that means earnings are declining faster than the price.

Remember when everyone was saying Financials were cheap in late 2007 based on its P/E ratio?  That argument didn't hold for too long.  Materials and Energy have also seen their P/Es rise, but prices have also risen for these sectors.  And unfortunately, we didn't include Consumer Discretionary or Telecom because Discretionary's P/E is in the 100s and Telecom's is negative.  Industrials, Health Care, Consumer Staples and Utilities have fortunately seen their P/Es decline slightly, and Technology's valuations have fallen significantly since earnings have held up well for that sector. 

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Wednesday
Apr232008

Recent Key ETF Performance

Below we highlight the recent performance of key ETFs across a number of asset classes.  The best performers over the last month have been international ETFs and commodity ETFs.  The oil-tracking ETF (USO) is up 18.6% over the last 30 days, while the BRIC emerging market ETF is up 18.55%.  US sector ETF performance is varied.  Energy (XLE), Materials (XLB), Technology (XLK) and Utilities (XLU) are up over the last month, while Consumer Discretionary (XLY) and Financials (XLF) are down.  Fixed income ETFs have all been seeing declines recently as bond yields rise.

Etfperf423

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