Sunday, October 17, 2010

17 October 2010 I am sick of pharmaceuticals.


17 October 2010 I am sick of pharmaceuticals.

I lied. I have not finished the list of pharms as promised. If you look at the post from Saturday about the 5% guarantee, it would be hypocritical of me to write that post and then do a half assed job of finding some decent pharms. So be patient.

Last year I had the pleasure of reading “Snowball”, the official biography of Warren Buffet. When you boil the book down to what makes him such a success as an accumulator of wealth, it really comes down to patience and focus. So please be patient with me.

We were anxious to read this weeks Barron’s after the fairly good week in the market. We were not disappointed, except for Abelson’s column. It seemed more aimless than most of my blogs. Other than that it was a great issue. Santoli’s article about buying on the dips is sound advice. We might have heard that hear few times and almost every night on Cramer. Eric J. Savitz wrote a very bullish article about AAPL, and I must say it was well researched and made a lot of sense. Most of the target prices for AAPL are at $350 and I think Cramer is North of there. At 314, I am a little concerned about our margin of safety, but they report on Monday and should beat the aggressive 4.06 a share. (My guess later). If they don’t beat we could see a 3-5% adjustment, which would be a buy on the dip opportunity. Keep in mind AAPL was up 7% for the week. In another article by Jacqueline Doherty, she suggests that all the bad foreclosure news is built into the prices of the banks we just dumped. I am thinking we are still smelling methane waiting for the explosion, but what do I know. All of our trades in BOH and ZION did execute on Friday. Randal Forsyth did a great article on QE II bond prices and what unintentional adverse effect might come out of QE II. If you want a fairly technical explanation of the QE strategy and possible outcomes, get ahld of his article “Did QE 2 Sink Bonds”.

The week ahead.

Industrial Production reports tomorrow and we kinda cheated and looked at the rail report and their intermodal figures are up significantly. That implies stuff is being shipped and when stuff gets shipped it is either being sent to market or being sent to factories to be built or assembles. 8.8% is a good size jump for intermodal rail traffic. Look for the industrial production number to beat estimates of ,2% and factory utilization estimates of 74.8% Our guess is .4% and 75.1% The homebuilders survey comes out on Monday and while there are no estimates out, we feel it will be a positive number. (Barron’s agrees). Keep your ear to the ground as Dennis Lockhart, Atlanta’s Fed Chief will be talking to the press and the press and I assume the market will be interested in his comments.

As far as earnings reports, Monday will expose the AAPL phenomena most recent success. The analysts are looking for 4.06 and I am seeing a big beat. Now remember that AAPL has about 1 Billion Shares outstanding so even a couple of pennies a share is a big number. I am thinking they will see 4.31 a share in earnings. I think 4.25-4.30 is built into the price. A meet will cause the stock some problems. The Verizon announcement was probably the catalyst for more than half of the 7% gain last week.

IBM also reports on Monday and they to should beat the 2.75 a share. Their run from 122 to 141 over the last month has my margin of safety squeezed as most target prices are in the 143-145 range. Look for a small beat of 2.81 and little move in the stock price. Any miss on this will cause a 3-5% drop.

That will get us through Monday and we will have more for you tomorrow.

Salve Lucrum.


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