Month: March 2012

As the saying goes, there are many possible reasons for an insider to sell a stock, but only one reason to buy — they expect to make money. So let’s look at two noteworthy recent insider buys.

Source: ForexYard

Following a month long plunge against the dollar, investors, along with Sweden’s central bank official, anticipate an imminent rebound for the Swedish krona versus the USD. The Swedish currency plunged in late October as the Riksbank dampened investors’ expectations for further hikes in the interest rates. The currency dropped from 6.48 versus the dollar to currently trade at 7.05.

Recent economic data, however, brought back expectations of a sooner than expected rise in interest rates, signaling that Sweden’s economy will expand and interest rates will rise faster than in the U.S. or Europe. Recent data showed that consumer and business confidence is soaring with recent GDP data supporting the optimism. Swedish government’s statistics agency said third-quarter gross domestic product expanded by a seasonally-adjusted 2.1% on a quarterly basis and grew 6.9% on an annual basis.

The fundamentals provide strong support for the Swedish krona with the expectation of an interest rate hike in February; however, the recent GDP data and comments by Swedish officials in support of a stronger domestic currency have raised expectations of an interest rate increase as soon as December.

The main obstacle facing the krona is the persistent euro-zone debt crisis as the region accounts for over 60% of its exports and therefore makes is vulnerable to any issues arising from the region. The currency is also very sensitive to overall market mood which is again extremely dampened over the euro-zone crisis, dragging down the krona’s sentiment.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Consumer confidence, measured by the CCI, is the degree of optimism on the state of the economy that consumers make known through saving and spending.

Did you hear that consumer confidence is the highest it’s been in a year? Everyone’s optimistic about jobs, too. Well, that’s what was announced last Tuesday.

The gauge of U.S. consumer confidence rose to 70.8 in February from 61.5 in January. A prior estimate for January pegged the level at 61.1.

Now, depending upon where you live and/or your employment situation, you may have a few choice words for these numbers and this optimism. But before the rant, we need to delve into what all this means and how we can use it.

Measuring Optimism

The first thing we need to do is familiarize ourselves with the Conference Board.

The Conference Board connects some 2,000 companies via forums and peer-to-peer meetings to discuss what matters to companies today: issues such as top-line growth in a shifting economic environment and corporate governance standards. However, the Conference Board is best known for its widely followed economic indicators, particularly the Consumer Confidence Index (CCI).

Consumer confidence, measured by the CCI, is the degree of optimism on the state of the economy that consumers make known through saving and spending.

This value is adjusted monthly on the basis of a household survey of consumers’ opinions on current conditions and future expectations of the economy. Opinions on current conditions make up 40% of the index, with expectations of the future comprising the remaining 60%.

The Consumer Confidence Survey

The Conference Board defines the Consumer Confidence Survey as “a monthly report detailing consumer attitudes and buying intentions, with data available by age, income and region.”

Each month the Conference Board surveys 5,000 U.S. households. The survey consists of five questions that ask the respondents’ opinions about the following:

1. Current business conditions.
2. Business conditions for the next six months.
3. Current employment conditions.
4. Employment conditions for the next six months.
5. Total family income for the next six months.

Survey participants are asked to answer each question as “positive,” “negative,” or “neutral.”

The results from the Consumer Confidence Survey are released on the last Tuesday of each month at 10 AM EST.

Consumers Consume…

Here’s a general rule of thumb: When confidence is trending up, consumers tend to consume. From a healthy level of spending, we then extrapolate that to a healthy economy. When confidence is trending down, consumers are saving more than they’re spending, indicating the economy may be experiencing some bumps in the road.

Consumer spending is the largest portion of the economy, and economists watch confidence readings to get a feel for the direction of spending.

And that confidence can be derived from job stability. The idea is that the more confident people feel about the stability of their incomes, the more likely they are to buy stuff.

“Consumers are considerably less pessimistic about current business and labor market conditions,” said Lynn Franco, Director of the Conference Board’s Consumer Research Center. “Despite further increases in gas prices, they’re more optimistic about the short-term outlook.”

Economists polled by MarketWatch had expected a reading of 64.5 for February on improving employment figures and higher stock prices.

When you consider that consumer spending makes up about two-thirds of the U.S. GDP, this can be interpreted as a pretty bullish indicator. No matter where you live or what your employment predicament is, maybe there’s hope that we – as consumers – are coming around and an economic recovery is taking hold, even with rising costs at the pump.

Good Investing,

Jason Jenkins

Article by Investment U

The Facebook IPO buzz has trickled down to give other tech companies, like Yelp (NYSE: YELP), a boost. But does the Yelp IPO live up to the hype?

Maybe it’s just me, but when you have a history of trading tech funds in the late 1990s and then helped create mortgage-backed securities in the mid 2000s, you tend to side with caution when something seems a little off.

Now, I know there’s a lot of hoopla around the Facebook IPO these days, but go ahead and call me crazy if I don’t want to pay 100 times more for a stock than its valuation.

I also believe that the Facebook buzz has trickled down to other companies in the tech industry to give them a little bounce. The perfect example of this phenomena is probably Yelp.

Yelp’s Landscape Before its IPO

Yelp Inc. (NYSE: YELP) provides information through an online community offering social networking. The company and its users gather to share user reviews, events, and special offers in certain locations and categories. Yelp covers restaurants, shopping, nightlife, financial services, health and a variety of others services.

Before last week’s IPO, here’s where they stood:

• Revenue rose 74% to $83.3 million last year, with local ads accounting for 70% of that and brand advertising making up most of the rest.
• The company hasn’t posted a profit since at least 2007.
• The IPO is set to raise as much as $100 million, which would value Yelp at about $838 million – somewhere around the $12-to-$14-per-share range.
• Yahoo! (Nasdaq: YHOO) already operates a local page that includes reviews in categories also covered by Yelp.
• Google (Nasdaq: GOOG) aims to boost its local appeal with its 2011 purchase of Zagat Survey LLC, the publisher of the burgundy restaurant guides.
• Facebook also poses a threat with more small- and medium- sized businesses setting up fan pages and buying ads to promote themselves on the social-networking site.

What you seem to have here is a company that’s never shown a profit, based on an ad-driven business model, with three industry heavy-hitters intent on infringing on their market share.

On top of all that, your IPO will put you at an expected value of up to 10 times annual sales. There may be some great ideas and energy going on at Yelp, but that’s asking for a true leap of faith to buy right now.

Surprised, But Not Surprised

Yelp’s stock closed 64% higher at $24.58, a day after Yelp priced its IPO at $15 a share – above its indicated range. At Friday’s closing price, the company is worth about $1.47 billion – about 17 times its 2011 revenue.

Go figure… But this should’ve been expected.

Seeking Alpha’s Brian Nichols, who in the last few months has written articles on Yelp and Groupon (Nasdaq: GRPN), has followed nearly all of the high profile internet-based company IPOs over the last year. And except for Zynga (Nasdaq: ZNGA) – which sunk at the beginning – they all follow a very distinct pattern.

They all traded significantly higher at open, but then followed a downward trend. And this is where it gets interesting. Each and every stock that follows this trend reverses to post gains near 50% in a short period of time.

Groupon latter followed suit with a 50% fall from its high – only to see it rise 54% from that low in early December 2011.

Will Yelp Figure in to This Trend?

That remains to be seen. Nichols is the first to admit that there’s no rhyme or reason for this “trend.” You can speculate that some buy in at the beginning just for high initial gains. After a sell-off, you may just have the “true believers” in technology buying in at low prices.

Either way you look at, Yelp could be heading for big losses soon and then a comeback. But this whole idea of buying ideas, not fundamental valuations, looks eerily similar to any company coming out in the late 1990s with “.com” behind their names.

Good Investing,

Jason Jenkins

Article by Investment U

Williams-Sonoma (WSM) reported that it earned $122.6 million, or $1.17 per share for the fiscal quarter ended on January 29 versus $113.4 million, or $1.05 per share, in the same period last year. Revenue for quarter increased by 13 percent to $1.27 billion from $1.12 billion as online sales increased 18.1 percent.

By The Sizemore Letter

After getting off to a slow start in January (see “Sin Stocks Trailing their More Virtuous Peers”), tobacco stocks are making up lost ground in a hurry (see Figure 1).

Of the major American tobacco stocks, all but Reynolds American (NYSE: $RAI) are beating the S&P 500 after dividends are taken into account.  And even Reynolds beat the S&P 500 for the month of February.

Big Tobacco has been one of the few bright spots in recent years.  With investors legitimately fearful about the state of the economy and the on-again / off-again volatility that has been roiling the stock market, stable, defensive sectors have been a popular refuge.  And given that bonds pay so little these days as to be worthless—the 10-year Treasury note currently yields less than 2 percent—the high and growing dividends have made the sector attractive to income investors.

But as the risk of a Eurozone meltdown continue to fade (see “All Quiet on the Western Front”) and investor risk tolerance starting to thaw, are tobacco stocks still an attractive investment?  Or should investors rotate into more aggressive, cyclical sectors?

I know you want a simple “yes/no” answer here, but the truth is a little more complicated.  The attractiveness of Big Tobacco depends on your time horizon.

I love Big Tobacco and “Sin Stocks” in general, and I have made several Sin Stocks—among them Altria (NYSE: $MO, Philip Morris International (NYSE: $PM) and Diageo (NYSE: $DEO) core recommendations of the Sizemore Investment Letter.

Over time, Big Tobacco stocks have massively outperformed virtually all other investments due to the stability of their businesses and the large dividends they typically pay.  As Jeremy Siegel explained in The Future for Investors, the outperformance of tobacco stocks over time is due almost exclusively to the compounding effects of reinvested dividends.

But herein lies the key.  Tobacco stocks are great long-term investments.  A dividend reinvestment strategy takes years to fully realize, the last few years of stellar short-term gains notwithstanding.

But in any given short-term period (say, six months to five years), tobacco stocks are by no means a lock to outperform.  They, like all other stock sectors, fall in and out of favor with changing investor sentiments.

With all of that said, I don’t believe that tobacco stocks will be big outperformers in 2012.  I see 2012 favoring two broad sectors:

1. European stocks that took a beating last year; Europe is full of solid blue chips ripe for the picking, trading at prices we may never see again.
2. More speculative sectors, such as emerging markets, technology, and lower-quality “junky” stocks.

As investors rediscover their risk appetites, I see them chasing the sectors that promise higher immediate returns.

Does this mean I’m selling my Big Tobacco stocks?  Not a chance.

My standing recommendation is that investors build a core portfolio of rock-solid companies that pay high and rising dividends, of which tobacco stocks are a natural fit.  This should be the bedrock of your portfolio for the next 5-7 years, or at least for as long as other income alternatives—such as bonds—are unattractive.  I will not be recommending that my readers sell their tobacco any time soon.

But once the core portfolio is in place, investors can allocate new monies to more speculative areas of the market, such as Europe and emerging markets.  As a rule of thumb, I would put 50-70% of your assets in the core portfolio and use the remainder for shorter-term tactical trades.

In the meantime, sit back and continue to collect those Big Tobacco dividends.

Disclosures: PM, MO, and DEO are recommendations of the Sizemore Investment Letter and are held by Sizemore Capital clients.

By TraderVox.com

Tradervox.com (Dublin) – The rally on the hope of Greek deal during the European session peaked at 1.3273. It is currently trading at 1.3254, up about 0.80% for the day. The resistance may be seen at 1.3260 and above at 1.3310 levels. The support may be seen at 1.3200 and below at 1.3160 levels. ECB kept the interest rate unchanged 1% as expected. ECB president Draghi mentioned the improved sentiment during the press conference.

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Economic conditions in Greece and Japan have scared away many investors, leading to some promising contrarian value plays.

You’d think that I would have a pretty complete understanding of Japan’s stock market…

After all, I studied in Tokyo for a year as an exchange student, went on to study the Japanese language for a year at Harvard, and then went back to Tokyo as a graduate research fellow at Keio University’s School of Commerce. My first two jobs in banking and institutional sales were also centered on Japan.

Still, it puzzles me why Japan’s economy and leading high-quality global stocks have been in a funk for more than two decades.

Treading water would be a polite way to put it…

Japan Lost Its Mojo

Since Japan’s banking crisis and real estate bubble burst in 1989-1990, its economy has barely grown and its market is trading at only 25% of its peak.

Japan has clearly lost its mojo, and investors are tired of trying to guess when Japan will get it back. Many have simply given up on Japanese stocks altogether.

This seems odd to me, since, as I’ve written many times, where a company is based isn’t very important. On the other hand, where a company gets its revenue and profits is most important.

Take Japan’s major companies, such as Sony (NYSE: SNE), Toyota (NYSE: TM) and Canon (NYSE: CAJ). These powerhouses get the vast majority of their revenue from outside of Japan. The same goes for Siemens (NYSE: SI) or BMW (OTC: BAMXY.PK) of Germany. Investors need to look to where these companies get their sales and profits, not where their headquarters are located.

Japanese Multinationals At Bargain Prices…

Once you realize this, the opportunities will be clear.

When, say, the Japanese market is down and out… you can move in and scoop up the best Japanese multinationals at bargain prices.

This is exactly what is happening so far in 2012.

What’s fueled this rebound in big Japanese stocks? Value.

The Nikkei was trading close to book value and smaller Japanese stocks, such as the companies within the iShares MSCI Japan Small Cap ETF (NYSE: SCJ), are still trading below book value.

So What’s Next?

Now let’s look at the more extreme situation in Greece. Russell Shorto of The New York Times summarizes the grim situation…

One quarter of all Greek businesses have gone out business since 2009. About half of those under age 25 are unemployed. Greeks pulled one-third of their money out of bank accounts and are stashing it under the mattress. The suicide rate even increased by 40% in the first half of 2011.

It’s not a pretty picture, which is why the Greek market has been pummeled, trading 90% below its 2000 highs.

You might be thinking, “I wouldn’t touch this market with a 10-foot pole.”

But the money masters think the opposite…

What they’re asking is: “What about the big Greek shipping companies not tied to the economy of Greece, but rather to global trade?”

Ah ha!

Take Diana Shipping (NYSE: DSX), the strongest of the Greek shippers. And a leader in dry bulk shipping of bulk cargoes such as iron ore, coal and grain. Diana is trading at about eight times earnings and is a major beneficiary of the rising global trade – 90% of which is transported by sea.

Diana is the best of the breed, with operating margins of 45% and a $395-million cash stockpile. The stock is trading at only 63% of book value and about eight times earnings. I also like that almost 18% of outstanding stock is held by insiders and 43% is owned by institutional investors. As usual, don’t forget to have a trailing sell stop in place.

Were not counting on it, but any Greek debt deal will send the Greek market soaring. Let’s call it an undeserved bonus.

When markets are out of favor for political or economic reasons, consider it an opportunity for a killing, rather than a red flag.

[Editor’s Note: As regular readers of Carl can tell, he’s chock full of great investment ideas in emerging and frontier markets. That’s one of the reasons he’s been sought after as a consultant for high-profile entities such as the U.S. Treasury and the Asian Development Bank.

But there’s only so much valuable information he can give away in a free newsletter. In less than two weeks, Carl will be sharing his most current and profitable investment ideas in a private, closed-door meeting with some of the world’s greatest financial minds. Leading experts such as Alexander Green and Rick Rule.

Luckily, we’ve found a way for you to get in on this privy investment intelligence from any location in the world that has an internet connection. To find out how you can get a sneak peek into this private meeting, click here.]

Article by Investment U

Source: ForexYard

The euro has made reasonable gains against the greenback during Thursday trading. Per usual, the Greek debt crisis is the primary source of concern for investors looking at the euro. However, today saw a brief reprieve for those continually preoccupied with the future of euro zone economies as Greece indicated that it has secured enough private capital to meet its upcoming bond swap. At the moment, the euro is trading hovering at $1.3237, marking a slightly stronger degree of stability compared to yesterday.

Read more forex news on our forex blog.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Southwest Airlines (NYSE:LUV) announced that its February that traffic rose 3.9 year-over-year after two straight months of declines.The airline’s capacity increased 6.2% while number of trips were up 4.5%.On Tuesday, shares of Southwest closed at $8.60.Southwest Airlines (NYSE:LUV) has potential upside of 41.5% based on a current price of $8.6 and an average consensus analyst price target of $12.17.Southwest Airlines is currently below its 50-day moving average (MA) of $9.10 and below its 200-day MA of $9.21.In the last five trading sessions, the 50-day MA has climbed 0.26% while the 200-day MA has slid 0.57%.