Buzz Bits: Thursday Nov. 3, 2005
Earnings snak pak
- Computer Sciences (CSC) reported Q2 EPS of $).71 vs $0.68 cons on revs of $3.57 bln vs $3.63 bln cons.
The company guided Q3 EPS to the mid-$0.80s vs $0.85 cons and revs to $3.8 bln vs $3.77 bln cons. CSC took '06 EPS to $3.25-3.30 vs $3.25 cons and revs to $15 bln vs $15.10 bln cons.
- Sanmina (SANM) reported Q4 non-GAAP EPS of $0.06 vs $0.05 cons on revs of $2.77 bln vs $2.73 bln cons.
The company guided Q1non-GAAP EPS to $0.06-0.08 vs $0.07 cons and revs to $2.8-2.9 bln vs $2.92 bln cons.
Mini-Minyan Mailbag: Ouch!- Todd Harrison 2:47 PM
"Toddo, I just went long some DIA. Couldn't wait anymore for a little pullback. Now that I'm long, the indices will go down and I'll get a chance to buy back those SPX Calls I closed on the 3rd attempt at 1200 from recent lows. PAINFUL!!"
I share your mail not to mock--that's simply not our style--but because there's an important lesson here. I spent some time with Pepe earlier today discussing the short side of the homies after I took my eyes off the ball when they tested resistance.
We discussed Toll Brothers--we were both short this puppy 20% higher and covered too soon--and we were eyeing a number of different situations. I said to him as I walked away (and more to myself than anything else) "the worst thing that a trader can do is try to make up for lost profit with fresh pressing."
Emotion is the enemy when trading. I say that a lot but please hear me. I'm not saying that you won't be rewarded but I've found, through the years, that taking the other side of emotion is much more profitable. Just sharin' and carin', bro, and hoping that you make out great.
Arms & Legs - Dick Arms 2:19 PM
"The strength of the last two days has suddenly put both the 5-day and 10-day moving averages of my index into overbought territory. The 10-day has not seen these levels since mid-September. Moreover, the 21-day, which is my intermediate term indicator, and which has a stellar record, offset some high numbers, and is now overbought compared to recent history.
These levels are enough to prompt me to contact you, and let you know I do not want to jump into the markets at this time, in spite of the apparent strength."
Don't Be Fooled - John Succo 1:27 PM
Part of getting investors to take risk, something both Wall Street and Washington must keep investors doing, is accomplished by getting investors to believe in ridiculous notions. Some examples...
"I like big dividends because you get paid to wait for something good to happen." - Joe Kernan CNBC
Dividends are not "extra" or "free" wealth above that which is generated by a company's operations. To illustrate, when a stock pays a dividend, the stock price opens at a price less that dividend. There is no net benefit to the investor... Read the rest of Succo's thoughts.
Mini-Minyan Mailbag: F-16 - Kevin Depew 12:50 PM
If you have time, can you look at the charts of the S&P 100 (OEX) and General Dynamics (GD)? Does it look like GD is churning under resistance? Also, what would the resistance be on the chart of OEX?It looks like it will running into some soon.
The OEX violated multi-year trendline support in September and has since rallied into the teeth of resistance here with 565, then 575 , two important levels looming overhead. (See the chart here, courtesy Dorsey Wright).
I would not characterize General Dynamics as a churning type of action, however (though there are plenty of stocks in the universe exhibiting that type of behavior). The stock has been, and remains, in a long-term uptrend and has simply reversed down on the chart after achieving its long-term price objective (based on the Sep. 2004 breakout) of 119. Support is at 108-110.
Achieving a long-term price objective does not mean the stock is finished. It simply means that the probabilities favor a more complex corrective move which will allow the stock to develop a new objective over time.
This is not advice, but traders and investors will handle these situations in very different ways. A trader is likely out of the stock already since the price objective has been achieved. An investor will likely continue to hold the stock, disregarding the weakness, as long as the relative strength indicates the stock is outpeforming both the peer group and the broad market, which it does.
Not on my watch, Pal... - Laurie McGuirk 12:45 PM
Just got the call from friends tellin' me gold's in "trouble." I had to leave a "red" table.
My initial reaction was, "on whose time-frame?" I know there are plenty loooking for the $10 move, sorry, wrong cookie to talk with. I try and deal in the 50 or 70 (and getting greater) dollar moves.
I would be very concerned being short metals at these levels. I think the downside is limited to $420 ($390 max) - that's 15% maybe on the downers - how's the upside? Risk-Reward - Don't bet 50 to make 10.
(Position in Gold)
Complexity update - Scott Reamer 11:47 AM
Just an update on what I am seeing with respect to my models. Longer term the odds are now better that we see 1255 SPX, but short term the divergences are still there. And note that bonds have fair extremes in sentiment for commercials (net long) and specs (net short). Commercials (futes) are as long as they have been since 1997... specs are at their 4th most extreme net short position since 1996.
So within a declining liquidity economy (money AMS) the weakness of the bond market is flowing money into stocks as people become more risk-seeking.
Longer term, I believe this sets up a probe to 1255 SPX while bonds languish at lows, and then they both move in opposite directions: stocks down and bond prices up... which corresponds well with our deflationary/credit contraction/decreasing time preferences mantra.
"This is the greatest case of false advertising I've seen since I sued the movie The Never Ending Story." - Adam Warner 11:45 AM
Simpson's Trial Lawyer, Lionel Hutz
Is this Merck (MRK) case as cosmic as Bubblevision leads us to believe? It matters little to the market as a whole, or even Big Pharma in general. It will ultimately mean little to Merck as it gets superseded by the next verdict and the next verdict and.....the ultimate inevitability that they settle somewhere down the pike.
Merck option premium did not spike to an enourmous degree pre-ruling. Implied volatility lifted from the low 30's to the high 30's. Options will clearly revert back down now as we breathlessly await the next court case. Expiration Pin anyone?
(Position in MRK)
Metric Check - Todd Harrison 11:22 AM
While each individual metric has obvious appeal, viewing any one discipline in isolation is inherently flawed in my view.
- Fundamentals, while providing the basis of valuation, boast the best news at the top and puke the worse news at the bottom (the Minx is forward looking).
- Technicals, while offering an awesome framework with which to trade, are "better" higher (after a breakout) and "worse" lower (after a breakdown).
- Psychology, while shaping the perception that is reality, is a contrary indicator at extremes.
- And the structural metric can mechanically support the capital markets until the fragile financial fabric springs a leak.
That's why I've always viewed the dew as an assimilation. The stronger the four legs, the more stable the table will be.
Around the earnings block... - Vitaliy Katsenelson 11:14 AM
Becton Dickenson (BDX) is another darling of mine that reported 3rd quarter numbers today. Revenue grew 8% (excluding currency benefit) and performance was very solid across all segments - a sign of business quality.
BDX's business lends itself to fairly good operational leverage, which was apparent in this quarter's performance as margins expanded, driving 20% EPS growth, INCLUDING stock based compensation EPS up 11.7% - still great performance.
As I mentioned before, BDX is a good way to participate in rising healthcare spending without the risks and volatility that come with owning drug stocks.
On a less upbeat note, BJ Wholesale (BJ) reported mediocre (to say the least) 2.9% same store sales for October; the Street was expecting 5.1%. The company blamed results on a shift of Halloween into its November reporting period and Hurricane Wilma in Florida.
Interestingly, Halloween and Wilma did not have the same impact on Costco (COST), which saw its same store sales up over 8% in the quarter. Were BJ's customers the only ones that shifted their shopping into November? Though the company did not change its guidance and one month does not set a trend, I am putting BJ's on a double secret probation.
(Position in BDX and BJ)
Greenspeak, the full version - MV News 11:08 AM
For the complete text of Alan Greenspan's testimony, follow this link.
As a matter of fact, I am watching XOM! - Kevin Depew 11:03 AM
XOM has given a new double top break today, its first since September, but remains below trendline resistance in the 61 area. So short-term improvement in an overall negative context; pretty much the theme I've been working on the past week.
Meanwhile, the PHLX Housing Sector Index (HGX) made it through the first level of resistance in the 507 area and now has room to 516-520 before running into more important downtrend line resistance, based on a conventional point and figure trendline. Again, near-term improvement in an overall negative context.
Proceed with caution - William Fleckenstein 10:28 AM
Regarding silver, please be careful with Coeur d'Alene Mines (CDE). It is the worst managed company I have seen and I even owned it 15 years ago, sad to say.
As for the CFTC report, so many people now use it, and think it matters, that it almost has no value. Besides, the lopsided positions haven't stopped the bull market thus far. That's what bull markets are all about. Just my opinion.
Silver bells, 2 - Herb Greenberg 10:18 AM
Heard from Fleck, who said that while there are currently no silver ETFs, there is the Central Fund of Canada (CEF), a closend-end fund that invests in gold and silver. It currently trades at a 2.5% premium to NAV. By way of contrast -- and for what it's worth -- according to ETF Connect, that makes it the 108th out of 131 funds that trade at premiums to their NAV.
OUCH! - Jason Goepfert 10:16 AM
About a month and a half ago, we had some brief buzzes about Cabela's (CAB) and Gander Mountain (GMTN). My feeling, based on local knowledge only, was that CAB would be beating the camouflage pants off of GMTN once their flagship store opened here in Minnesota.
GMTN (the stock) has been absolutely hammered. GMTN (the company) seems to be as well. Cabela's opened their new outlet here in MN last week, and the lines to the parking lot have literally been over a mile long at times - even during the work week.
I went by the local Gander Mountain on Saturday, and there were a smattering of cars, but honestly I think most of those were employees. They've been increasingly using "we'll beat any price!" tactics, which just cannot be good for the bottom line.
I'm about the furthest thing you'll find from a fundamental retail analyst, but I do know this particular market, and I continue to feel that it ain't good for GMTN.
Let's get physical - Laurie McGuirk
Just gonna point out silver here - I think an insane bargain with a year or two time horizon. Anything sub $7.50, in these physical market conditions, is money for old rope.
I'm not one for making "calls" but this nice price won't be around long, IMO. I am talking about real silver, not paper stuff.
Silver has a downside of maybe 15% from my work (physical maybe back to $6.80 if it poops, placing futures at $6.55ish). The upside is phenomenal as the physical demand dictates.
The physical market is groaning under demand pressure. Just sharing vibe from the racetrack in Melbourne- full belly and light wallet. Hmmm.
Silver Resources (SSRI) and Pan American (PAAS) are both must haves in any silver portfolio--just my take and not EVER advice.
(Position in Silver, SSRI, PAAS)
Say What? - Kevin Depew 8:11 AM
Commentary, opinion and analysis from around the world:
The Washington Post's Fred Hiatt writes in the WSJ that the Hu Jintao regime just doesn't believe in democracy. Hmmm. Perhaps that's because... it's China.
John Gapper in the Financial Times offers his take on the Chinese capitalism contradiction.
Afshin Molavi writes in the NYT about the importance of "our allies in Iran" (threats to wipe Israel off the map notwithstanding). Molavi calls the Iranian middle class a "Trojan horse" within the Islamic republic, but a good Trojan horse.
Bloomberg columnist Matthew Lynn says "hedge funds could use self-regulation." To which I say, so could we all, my friend; so could we all.
Robert Reich writes in the LA Times that the White House panel's suggestion to dramatically limit homeowner's tax write-offs is sensible... and therefore likely dead on arrival.
Henry Hazlitt, via the Mises.org blog, writes that, "Any attempt to equalize wealth or income by forced redistribution must only tend to destroy wealth and income."
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