Tuesday, October 13, 2009

BAGAKOAA Oct 13, Market update am


Oct 13, Market Update AM.

JCI is reporting as I write this, and accounting changes has a lot to do with them meeting expectations which is why the stock is trading south east.  Sales in the automotive sector was a strong 13%, but auto margins are in the toilette at 1.2-1.5%.  They cooling and HVAC sector is getting back on track.  I am sure Cramer will do 10 minutes on the details on tonight’s show.  I don’t have this stock though I have looked at it closely several times.  Cramer has been pushing this since late last year in the 12-14 dollar range.  He got another double.

AAII, the American Association of Individual Investors survey has shown a shift south with 41% of its member now having a bearish outlook.  Only 35% see it going up.  As I mentioned, watch your stops close.  With that said, its worth noting that the overall market (S&P 500) peaked at 1561 in October 2007.  We are now at 1075.  The September October 2008 drop from 1255 to 899 was only a year ago.  There is a lot of technical resistance at 1200.  Even ignoring that, from a fundamental standpoint, values (PE ratios) are creeping up.  “Cheap” stocks are getting harder to discover.  Please protect you gains.

Last week I mentioned the ICSC-Goldman Store Sales and this week we have that as well as The Redbook Retail Sales report.  They reported this morning and both are trending up and the trend seems to be strong.

Tomorrow the Mortgage Bankers Association reports mortgage applications.  That will tell us if more homes are selling but not about the value of the deals.  I am guessing the number should rise.  The Department of Commerce also reports retail sales tomorrow, for the month of September.  There should be a drop as a result of the end of cash for clunkers.  The question will be how big a drop.  Import and export prices report tomorrow as well.  Look for import prices to be up and export prices to be down as the value of dollar continues to slide.  And august business inventories report tomorrow as well.  Look for inventories levels to continue to drop.  Retails are managing their inventories very tightly.

I have been watching earning reporters close this week and am disappointed I missed a good one.  ADTN, is engaged in designing, manufacturing, marketing and servicing network access solutions for communications networks.  Their fundamentals look very strong and I have a feeling their report tomorrow will be healthy.  The bad news is I should have seen this last week.  Friday we could have gotten in at 24.  Now its at 25.05.  The current PE ratio is 21 which is a bit rich.  Their fundamentals are attractive.  If they can surprise to the 32-43 cents a share earnings tomorrow you could squeeze another 1buck a share out of this stock.  I am putting a limit buy at 25.00.  I am looking for a 30-31 dollar stock by Q1 2010. 

ABT also report tomorrow but will need something better than the 90 cents a share expected.  I do not own ABT.

HDB, and Indian banking concern reports tomorrow.  It could be a nice pop.  Do your homework.  Its PE is 35 and the price is 119 a share.  It could be an interesting play in the Bombay financial market.

GWW is reporting tomorrow.  There are a couple of my portfolios that have this.  What can we expect tomorrow.  If you remember, Grainger bought a Japanese distributor earlier in the year.  That should through another 30-40 cents a share to the bottom line this quarter, but I believe that has been built into the current share price.  The stock has gone from 88 to 94 over the last 5 days.  If you got it set your stops.  I am not sure I’d buy at this level.  Most of my ins were in the $75-$77 range.  It is a good dividend thrower as well.

WDFC, aka WD-40 is reporting tomorrow as well.  What a nice little stock.  Do your homework.  You might like what you find.

Hopes this helps.  A couple of you have asked me about specific stocks.  I really enjoy kicking the tires on your ideas. 

Salve Lucrum



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