Stock Focus: Western Refining (WNR)
Posted on June 17, 2008 in the Stocks category
Western Refining, Inc., through its subsidiaries, operates as an independent crude oil refiner and marketer of refined products. In today’s rising crude market, you would think that all refining stocks would be performing well. Western Refining is the exception.
The problem is debt. WNR debt problems have caused the stock to fall almost 80% from its July 2007 highs and it has not reached bottom yet. At $13+ a share, Western Refining still trades at a significant premium to its peers on 2008 and 2009 EV/EBITA and Wall Street expects that a debt covenant will be broken in the coming weeks.
Stock Focus: DreamWorks Animation
Posted on June 16, 2008 in the Stocks category
DreamWorks Animation summer movie Kung Fu Panda is poised to become the company’s first non-shrek movie to gross over $200 million in domestic box office receipts. Is that good news for investors?
The DWA stock price already has Kung Fu Panda’s box office results built into it , and the next event that will potentially move the stock doesn’t come until November. On November 7th, DWA releases Madagascar 2: Escape 2 Africa and we anticipate that the stock will trade at current levels until then.
Bulls vs Bears: Financial Stocks
Posted on June 9, 2008 in the Investing, Stocks category
There is quite a split opinion in Wall Street on the direction of financial stocks. The S&P Financial Sector exchange traded fund (XLF) is at the lows reached in March when the Bear Sterns fire sale was taking place.
Thomas Brown of bankstocks.com had an interesting piece last week on which he stated that the subprime mortgage losses is simple: most estimates, particularly of losses on loans originated in 2006 and 2007, are significantly too high . The reason why they’re too high is simple, too. They assume that last year’s credit performance will persist far into the future. Only it won’t.
Consumers Heading to Discount Stores
Posted on June 6, 2008 in the Investing category
When times are tough financially, American’s shopping habits change. During good times we shop at apparel and department stores like Limited and Saks. Same-store sales in May fell 6.5% at specialty apparel stores and 3.5% at department stores, said Michael Niemira, chief economist at the International Council of Shopping Centers. “The less discretionary the spending, the better the performance” he said.
When things get tougher we head to value stores like Wal-Mart, Target and Costco. Overall discounters and wholesalers had a a 4.1% same-store gain in May.
Yahoo Board In Trouble
Posted on June 3, 2008 in the Stocks category
Yahoo Inc set plans on Tuesday to hold its annual shareholder meeting on August 1 in the heart of Silicon Valley, setting the stage for a showdown with activist investor Carl Icahn, who is mounting a proxy fight for control of the company.
Earlier, The Wall Street Journal reported that Icahn, a billionaire investor, would seek to remove Jerry Yang as Yahoo chief executive, citing the company’s failure, so far, to reach a merger or partnership deal with Microsoft Corp.
Icahn has proposed an alternate slate of directors for Yahoo’s board, but had not directly targeted Yang over the breakdown in talks early this month for a $47.5 billion deal.
Following The Money
Posted on June 2, 2008 in the Investing, Stocks category
Investors Business Daily had a table over the weekend that showed the ten groups with the highest percent of their stocks at new highs. This is a pretty good indicator for where the action and momentum is in the market. The top ten groups are:
Transportation - Rail 36%
Metal Prds - Distribtr 20%
Household - Appliances 17%
Machinery - Gen Industrial 14%
Elec -Military Systems 13%
Machinery -Cnstr/Mng 13%
Containers 12%
Steel -Producers 11%
Retail/Wholesale - Food 11%
Medical-Hospitals 11%
I was shocked to see Household appliances on the list. With the economic slowdown, people, are not supposed to be buying appliances according to the media!
Learning from Jesse Livermore
Posted on May 28, 2008 in the Investing category
Years ago I asked a friend of mine to recommend a book about investing and the stock market. He recommended “Reminiscences of a Stock Operator” by Edwin Lefevre and it was then that I was introduced to Jesse Livermore.
Livermore was born in 1877, and started trading at age 15. He was a highly visible stock trader and speculator for almost fifty years. Livermore was famous for making and losing several multimillion dollar fortunes during his professional career.
And You Thought You Knew The P/E Ratio
Posted on May 27, 2008 in the Investing category
The Price –Earnings (P/E) ratio is one of the most common measurements investors use to measure the performance of individual stocks or the overall stock market.
The traditional PE ratio is calculated as:
For example, if stock A is trading at $24 and the earnings per share for the most recent 12 month period is $3, then stock A has a P/E ratio of 24/3 or 8.
But today, bulls and bears calculate earnings a little differently. Bulls use what is called operating earnings (operating earnings exclude write-offs) and also use the forward projections of earnings for the next 12 months. Forward or projected earnings are typically higher than trailing earnings.
Google Owner Larry Page Speaks With Forked Tongue
Posted on May 22, 2008 in the Investing category
I had to laugh when I read Google founder Larry Page’s comments about a potential Microsoft takeover of Yahoo, saying it would concentrate too much power in the online communications market, stifling innovation and curbing competition.
But he discounted the idea that an advertising deal between Google Inc. and Yahoo Inc.—one the two companies are now exploring—would present any potential antitrust problems.
Page said a successful Microsoft-Yahoo deal would “close a lot of things that are really important … like instant messaging” and also Web-based e-mail communications.
The Bear Position
Posted on May 21, 2008 in the Commentary category
The stock markets 12% rise in the last two months has the bulls on Wall Street believing that the worst is over, and the market is heading higher the rest of the year. The bears point to the following macro events as to this was simply a bear-market really
- Industrial production fell 0.7% in April as the weak dollar is not helping manufacturing
- S&P reported Q1 earnings of the 500 compnaies were down 25.9% from the same three months last year. This is the 3rd straight quarter of declining profits
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