Thursday, May 13, 2010

BAGAKOAA May 13, 2010 Wanna Play the Whisper Game


May 13, 2010 Wanna Play the Whisper Game

A week or so ago I was explaining to someone the relationship between the Euro, the dollar, gold and other commodities. Today was a great example of that so I sent them a note. You might find it helpful.

“The market is a little sideways today but I am looking for bargains. I just wanted to explain that today is a good example of looking at the US dollar, Euro, Pound, Gold, Silver (commodity not coins) relationship. Because of the still slightly squishy Euro economy, the new government concerns in the UK, but overall fairly stable geopolitical issues (except the social unrest in Thailand and Greece), the dollar is rising so commodities are dropping as we see those commodities priced in US dollars. Our dollars are worth more so the commodities are cheaper. When the dollar drops as it did for most of 2009, we saw gold, silver, oil go up somewhat because of demand issues, but mostly because of the devalued dollar. In the last couple of week, prior to today, you saw the dollar going up and oil going up and precious metals going up. When you see that that means that global investor saw the US dollar and commodities as a safe haven. Keep in mind that the Euro is the only political currency in the world. It is not back by a single government or well defined assets. There are rumors that the Euro maybe abandoned in the next few years which will make the Dollar and commodities very attractive.

In a nutshell, today would be a good day to buy more GLD and SLV on the dip. And I will.”

Obviously by the end of the day the market did a little more than go sideways. There was an over reaction (my opinion) to the less than expected job numbers. If you remember on Sunday night I expected the number to be stronger than anticipated. Got that one wrong. The downer today has me bargain shopping tonight. In checking all the after hour pricing, there does not seem to be any bargains.

Besides GLD and SLV I did add to CVX, BA, SBUX, IDSA, CRUS, and FLS.

Now I get invited to play a game every couple weeks from the folks at Remember when a company reports their quarterly earnings, there are three number that matter. The first is the consensus number or analysts estimates, the next number is the key or senior analyst aka the AX, number called the Whisper Number, and of course there is the actual earnings number. Well I get invited to take a shot at the companies that are reporting the next couple of weeks every month or so. It is challenging and it is fun, but remember I have no life. Anyway if you want to play along, send me your guesses on the following companies that are reporting soon. It takes a while to do the homework so get back to me by Monday am.

INTU, Intuit, provides business and financial management solutions for small and medium sized businesses, consumers, accounting professionals, and financial institutions in the United States, Canada, and the United Kingdom. Analysts say $1.82 a share earnings and the current whisper Number is $1.95 a share.

HPQ, Hewlett-Packard Company offers various products, technologies, software, solutions, and services worldwide. Consensus is $1.05 a share, and the whisper number is $1.11.

CSC, Computer Sciences Corporation (CSC) provides information technology (IT) and business process outsourcing, and IT and professional services to the commercial and government markets. There is no whisper number on this but the consensus number is 1.43 a share.

HRL, Hormel Foods together with its subsidiaries, produces and markets various meat and food products in the United States and Internationally. There is no whisper number and the analysts estimate is 61 cents a share.

So why would anyone do this exercise? I do it because it makes me do homework where I discover new stocks and every once in a while I actually find enough accurate data to indicate that a stock is going to blow away analysts estimates and even rarer the earnings will blow away the whisper number. If you can do that, you get in the stock and or call option and the games begin.  For those of you that play, the person with the most accurate earnings guesses will get a copy of Active Value Investing. Good luck.

Salve Lucrum


Post a Comment

<< Home