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Buzz Bits: DOW, Nasdaq Rebound

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Earnings Report - MV News

  • Washington Mutual (WM) is out with earnings a bit early, reporting EPS of $0.98 vs $0.90 cons. The company also declared a dividend of $0.51, up from $0.50 in the previous quarter.
  • Amgen (AMGN) reported $0.91 vs $0.88 cons on revs of $3.22 bln vs $3.32 bln cons.
  • Motorola (MOT) reported EPS of $0.29 (in-line) on revs of $10.0 bln vs $9.56 bln cons. MOT reported handset shipments of 46.1 mln vs 41.625 mln exp.
  • Seagate Technologies (STX) reported EPS of $0.53 vs $0.51 cons on revs of $2.29 bln vs $2.26 bln cons.
  • IBM (IBM) reported EPS of $1.08 vs $1.05 cons on revs of $20.66 bln vs $20.64 bln cons. The company reported Q1 global service revs of $11.6 bln vs $11.45 bln exp.
  • Allstate (ALL) reported EPS of $2.19, not comparable to $1.65 cons, on revs of $9.081 bln vs $8.83 bln cons.
  • Gilead Sciences (GILD) reported Q1 EPS of $0.59 vs $0.53 cons on revs of $692.9 mln vs $617.4 mln cons.
  • Yahoo! (YHOO) reported Q1 EPS of $0.11 (in-line) on revs of $1.09 bln vs $1.08 bln cons.
  • Texas Instruments (TXN) reported Q1 EPS of $0.33 (in-line) on revs of $3.33 bln vs $3.29 bln cons. Gross margin was 50.1% vs 49% exp.



Flashback! - Bill Meehan - 3:21 PM

This day in market history...
  • Closing levels 6 years ago
    • DJIA: 10,767.42
    • Naz: 3,793.57
    • S&P 500: 1441.61
    • Crude: 25.92
    • Gold: 280.00


This day in Minyanville history...


In other news...

  • In 1906, the Great San Francisco Earthquake, responsible for some 3,000 deaths, occurred at 5:13am.


Intel - A Quick Look At Cash Flow - Brian Gilmartin - 2:22 PM

Since the March, 2003 market bottom I stayed away from Intel (INTC), and instead owned Texas Instruments (TXN) for clients, until just this past first quarter '06, when Intel pre-announced negatively and got near $20 per share, when we went long the stock primarily based on the cash-flow valuation.

Using my internal spreadsheets, if Intel tomorrow night reports cash from operations of $1.7 bl, or half of q4 '05's $3.5 bl, and generates $1 bl in free-cash-flow (down from q4 '05's $1.5 bl), that still means Intel will have generated $2.10 per share in 4q trailing cash from ops, and over $1 per share in free-cash-flow, in the trailing 4 quarters, leaving a price to cash flow valuation of 9(x) for a premier large-cap tech company. (In the bubble days, Intel traded at between 20(x) - 30(x) cash flow.)

My guess is we will see a big buyback number tomorrow, in terms of what Intel spent in the quarter to support the stock. (That is just a guess. I have no concrete evidence to support that other than they have a large existing buyback program in place, and the stock is dirt cheap, and they have a bunch of cash.)

Even in 2001 and 2002, Intel generated $9 - $10 bl in cash per year, and as of q4 '05 had $15 bl ($14.6 bl) to be exact in 4q trailing cash from ops, with about half spent on capex and half being "free-cash."

I'll stick my neck out a little here, and say this stock is getting stupidly cheap.

Position in INTC, TXN


Turn around, every now and then I get a little bit restless and I dream of something wild... - Todd Harrison - 1:11 PM

Hoofy's heroes are officially getting jiggy as they test and toy with S&P 1300. Normally, I would offer that tapes that are strong all day tend to end that way. Especially with our primary tells--including breadth, leadership and, now, levels--all pointing higher.

So why is today different from all other days? (sorry, I couldn't help myself)

We've got a dose of reality ready to hit the tape at 2pm in the form of FOMC minutes. It may not matter--given the dollar drippage, liquidity infusion and relative laggage in equities, the writing may already be on the wall. Be that as it may, and given the spate of catalysts coming down the pipe, I'm doing more rotating than chasing.

Having nibbled on some faves down below, I'm chewing on a few new piggy puts up here. I may be spitting in the wind but I figure I can reassess that mess if the XBD or BKX sports fresh acne (both are close). Just going along and getting along until I see the whites of dem eyes.

As always, I hope this finds you well.

R.P.

Position in financials



Minyan Mailbag - Ze pain, ze pain - Fil Zucchi - 11:40 AM

Profs...

Check out the zoom and doom today for Unitedhealth Group (UNH) - they reported above estimates and raised estimates, but the Wall Street Journal online headline says something along the lines of "companies and consumers feels the healthcare pinch while UNH CEO makes a billion."

The stock gapped up a couple percent and is now selling below yesterday's close...

Is this pull the super magnet pull of fantasy island to the 50 strike, or does the market smell a political shift in the winds with our not so humble administration taking it on the chin at every turn and Massachusetts passing health care for all? Inquiring minds want to know!

Have a great day!

Minyan Rosalyn
KC

Hi Rosalyn - looking at the open interest at the $50 strikes relative to United Health average volume, my guess is the "strike pinning" agenda is not the main reason for today's ugly action. At first glance, the only bad piece of data from last quarter looks to be the "medical cost ratio," quite a bit higher in the recently acquired entities than within UNH's older business. If that is the reason for the beating, I think the punishment with the stock already at low teens multiples seems too harsh.

I do think that the "political risk" (Dems running the table in November) raised by Prof. Gilmartin is a big weight on this group. But there too, I kind of doubt anything too scary can actually take shape as long as the GOP controls the White House.

With the 38% retrace of the move since the '02 lows and the '05 lows, both in the $48-50 area I am taking a swing here.

Position in UNH



Update on DirecTV (DTV) - Tom Peterson - 11:25 AM

After only a brief pause around the time of its webcast in late Feb., the stock has plowed further ahead. It is now approaching the upper trendline drawn off the May and October 2004 highs. The resistance from this line should be minimal because there wasn't that much volume traded above $17.00, and I think many of those buyers threw in the towel already. Therefore, DTV should trade more on fundamentals. Check out this article.

The stock has achieved it's 'first phase' point & figure target; counting the second phase yields a target range from $20 to $21. It still looks bullish to me, and will appear even more bullish to the Street if it can jump the resistance from $17 1/2 to $19.

See the chart here.

See more commentary on DTV here and here.

TRP

Position in DTV


Trade your way to quarterly success! - Kevin Depew - 11:25

Merrill (MER) is up a little more than 1% today after reporting results which included their highest quarterly net net revenues ever, $7.96 bln, above consensus expectations of $7.4 bln.

Some headlines have focused on the fact earnings fell 61% from a year ago, due to a charge to cover options accounting, but as Minyan Scott pointed out, the real story is that trading showed a gain of more than 100% and represented the company's largest revenue stream. Last year, it was the company's third largest.



Why Short Intensity Matters- AVID - Phil Erlanger - 9:28 AM

This morning we note the J.P. Morgan is out with some research commenting on stocks with high short interest ratios. Highlighted names include FLIR, KRON, ITRN, AVID and OVTI. We agree that all these stocks have short ratios above 4. However, we note that several have low short intensity levels. Case in point, Avid Technology (AVID) which has a short intensity level of 42%. How do we derive this?

First, we calculate the shares short divided by average volume over the past twelve months. This gives us a different short ratio than all others as the standard is a denominator for a short ratio is average volume over the past twenty days. Then we calculate the range of the short ratio over the past five years. This is weighted more to the near term and is proprietary.

What is even more important than just the short ratio and intensity level is where it ranks technically. In the case of AVID, the rank is poor at 10%. A tech rank of 100% is the strongest and 10% is the weakest (see chart here). Interesting our tech rank dropped to 30% on the first break of the stock from $55 to $50. The stock is now at $36.70.

Although not quite a long squeeze, it is a shortable name in our universe and we have recently been short this name in our Model Short Portfolio. For those that are contemplating the purchase of this name for a potential short squeeze bounce we would respectfully disagree with J.P. Morgan's analysis and would rather focus on a move to the upside in KRON.



A second bite at the apple, Adam? - Rod David - 9:18 AM

"S&Ps spiked up to ESm 1297'50 in reaction to economic data, equating to a 6-point gain in the underlying SPX." Actually, Monday's internal spreads already required Tuesday's market to reward Monday's buyers for their relative productivity. And Monday's recovery from a new low to close back above the prior low gave buyers momentum into Tuesday's open. In short, the Globex gains were already predicted by yesterday's price action.

So, did the Globex price action predict more gains?

The setup is no different than last Monday, which also recovered from a new low to close above the prior low. Last week's setup also signaled that sellers had lost traction, but buyers wouldn't gain traction by default - not unless Tuesday's open had gapped above Monday's high. It didn't, and the balance of the session trended down sharply. So, it's interesting that S&Ps peaked overnight at ESm 1297'50, which was yesterday's bias-up signal, and also stiff resistance. And it's also under yesterday's high.

If today's opening surge doesn't extend above yesterday's highs and maintain the gain through 10:15am ET, the gain since yesterday's last hour could soon be retraced entirely.


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