Monday, March 22, 2010

BAGAKOAA; March 22, 2010 Oil and buy on the rumor sell . . .


March 22, 2010 Oil and buy on the rumor sell . . .

OK the market did a little better than expected today. As I mentioned the health bill was factored into the market prices either way. There is an old adage in the market, buy on the rumor sell on the news. Well I think a lot a folk forgot that today. From the opening, monies were pouring into every sector of the health care market. From device makers (sans Boston Medical which has bigger problems than whether a bill got passed or not), to HMOs to actual hospitals all jumped up today. Now the rumor, (when you buy) was that there might be a health care bill. The news (when you sell), was that we have a health care bill. Today would have been the day to take profits. Look for 3-5% adjustments for many of the health care stock to correct over the next few days or weeks. Remember that most of the mechanics of the law or soon to be signed law do not go in effect until 2014.

Now let’s take a look at a couple of my prognostications. WSM William Sonoma reported better than the 73 cents a share estimate and my guess of 75 cents got tossed away as they hit a great 81 cents a share. More importantly, they are bumping their dividend by 8.4%. That means their dividend yield will be about 2%.

Tiffany’s TIF did not hit their estimate, but did not do as poorly as I had anticipated. That is a good sign for luxury goods. They hit 1.09 a share in profit versus the estimate of 1.13 and my bearish call of 95 cents a share was way off, but in the right direction.

While I prognosticated about SCHL, Scholastic, they did not report today. Can’t figure out what happen. They were listed to report. When they do I will let you know if you care. Personally I don’t.

One of the readers was asking about CVX, Chevron, which is in the Salve Lucrum Portfolio. The were talking about BP PLC as another possible play on oil. Quite honestly I don’t like the oil stocks right now. I did some homework on about 35 oil stocks and could not get excited about any of them. I will hold my RIG and CVX, but would not add any right now, Here is why. The two biggest drivers of oil demand right now have ach tapped their economic breaks. China has tried to cool their economy by tightening bank capital reserves and India fooled everybody last Thursday by increasing their prime rate. Both economies are hot and needed to be cooled a bit. Domestically you might take a look at Petro China PTR or China Petroleum (SNP). PTR is selling for 116 but has an intrinsic value of about 200. But again I would wait and see.

My suggestion to them would be, as usual do your homework but take a look at a big industrial like ROC or LMT. Bother are doing very well and positioned for growth in domestic aviation and military sectors. I have done very well with BA in long and call positions of late but feel we are getting to a top end price for the next couple of months.

According to Yahoo Finance, 3Com reports tomorrow, and I think they will beat the 8 cents expected of them. I do not own it. Carnival Cruises reports tomorrow and it should come in as expected at 14 cents a share if they kept their expenses in line. Personally I’d like to see them blow away expectations as it would be a good sign for PADI and the travel industry, but I feel it’s a bit early to count those chickens. Another tell tomorrow about discretionary income is Darden restaurants. You may know them better as Red Lobster or the Olive Garden or one of my favorites The Capital Grille. They are looking for 92 cents a share earnings. My guess is 94, as people are starting to escape out a little more and DRI from all reports have kept their expenses in check. Remember there has been little inflation so their cost of goods, mostly commodities like corn and beef and vegetable oil should have stayed low and their volume should be up. And Walgreen’s reports tomorrow. They are looking for 71 cents a share and while I can’t find anything to think that won’t happen, I feel they will hit and possibly beat the number, but expect some very positive comments from management playing off the big push for generic drugs with the news health care bill and their recent acquisition of a NYC drug chain. It should be a good day for WAG.

Salve Lucrum.


Post a Comment

<< Home