26 February 2016
The DJIA was up 200 points Monday; down 180 on Tuesdays; down 260 Wednesday morning before rallying to close up 60; up 212 on Thursday and down 50 on Friday. The week's action (up over 1%) allowed the major measures to move above their respective 50 day moving averages.
Oil rallied a bit and our oil issues are less underwater than they were last week.
During the week we added more Marathon Oil and Hain Celestial to some accounts; we bought Fitbit on Wednesday when it dropped 20% on the day and 70% from its 12 month high ($51) even though it reported much better than revenues and above consensus earnings but a tempered forward forecast. We purchased at $13 which is below the public offering price of $18.80 and first trade of $30 back in June 2015. Our granddaughter suggested the purchase. Fitbit's Financials are good and the shares are not overpriced.
(More info below.)
We remain committed to oil and believe that markets are undervalued.
On to March.
Shares of Fitbit Inc. plunged more than 20 percent after the wearable device maker issued a weak outlook for the first quarter despite reporting better-than-expected earnings for the fourth quarter.
Following the weak forecast, the stock faced a slew of downgrades from various brokerages including Baird, Pacific Crest, and Leerink.
Baird analyst William Power said the weak outlook heightens the risk for the balance of the year. Despite the significant recent weakness and the longer-term digital health opportunities, he expects new product uncertainties and competitive risks to continue to overhang the shares. Power cut his rating to Neutral and price target to $16 from $30.
Pacific Crest's Brad Erickson downgraded Fitbit to Sector Weight due to risk of hardware commoditization, a lack of leverage and poor user metrics. He added that multiple expansion opportunities from corporate wellness are becoming more limited, and despite the sell-off, fundamental downside risk remains, which does not justify the risk/reward.
Steven Wardell of Leerink also downgraded Fitbit to Market Perform and trimmed price target to $18 from $33 stating that the first quarter sales dip means rest of year must be strong with new products whose uptake is uncertain. He noted that heavier marketing and R&D spend, though necessary for sales and innovation, weighs on EPS growth.
Meanwhile, there are some analysts who are still bullish on Fitbit citing the company's market leadership position in wearable devices and strong growth opportunities.
Raymond James analyst Tavis McCourt said although the first quarter guidance was below his expectations due to costs and transitions around two major product launches, full-year guidance supports his view that strong double-digit growth should continue for Fitbit.
"We view the shares as attractively valued, trading at 14.4x our 2016E non-GAAP EPS, a meaningful discount to the S&P 500 despite its strong growth profile and market leadership position," said McCourt who has an Outperform rating on shares.
Oppenheimer's Andrew Uerkwitz said, "We continue to be buyers of stock on the impending digital health revolution and Fitbit's best positioning to capitalize. Our Outperform rating on Fitbit reflects a positive near- to medium-term view of wearable device sales both from the perspective of FIT as clear market leader, and from growth estimates for the overall wearables market."
SunTrust's Bob Peck sees long-term opportunity in Fitbit.
"While investments may be lumpy as FIT focuses on growth of the nascent market globally, we continue to believe there is a significant long-term opportunity for the company to deliver health/fitness solutions to consumers as well as enterprises and health insurers," said Peck, who has a Buy rating on the stock.
Ross Sandler of Deutsche Bank said "Having admittedly been on the wrong side of the stock call since the IPO with our Buy rating, we view the risk/reward as favorable here, especially given the numbers reset and negative sentiment backdrop."
Meanwhile, Sterne Agee's Rob Cihra said the stock stays challenged a bit longer to prove out its second act. He thinks FIT ultimately needs more/new breakthrough sensors, value-added/sticky software, and corporate wellness leverage. Cihra has a Neutral rating and $18 price target on shares.
Salesforce CEO Marc Benioff is a huge fan of Fitbit, the fitness tracking device maker that went public last year. (Salesforce is a major cloud company and loved by Wall Street analysts)
He was an early investor and has been an ardent supporter of the company for many years. In fact, he used to hand out free Fitbits during meetings back in 2008, way before the wearable device became popular.
But Fitbit hasn't been doing particularly well lately. Although it beat its most recent earnings in November, its stock tanked roughly 7% the next day. In January, it dropped more than 10% on the day it revealed a new smartwatch that disappointed many investors. All in all, it lost almost 25% of its share value in the past month alone.
But Benioff remains a strong backer of the company, and on Wednesday, it was revealed that he continues to be a major shareholder of Fitbit. … Benioff owns 5.3% of the company, or 5.3 million of the 99 million outstanding shares. ...
One reason Benioff likes Fitbit so much is because he sees the connected devices market blowing up in the near future. With everything from your watch to refrigerators getting connected to each other, they will generate tons of data that can be used to analyze and predict user behavior, and eventually offer better services.
It's also why Salesforce's most recent products all have to do with data analysis and connected devices. Last year, it revealed IoT Cloud, a platform that helps companies create their service around the data it collects, while the year before, it launched Wave, its first major data analysis software.
Salesforce CEO Marc Benioff believes everything will get densely connected through the internet in the near future, generating a massive influx of data that borders on the creepy line. … Read more at
19 February 2016
The markets gained this week, rallying the first three days and then consolidating the last two when oil pulled back.
Devon and Marathon announced earnings/losses and revenues and their results were terrible but in line. Both are cutting capital expenditures and hunkering down. We added to both positions after earnings. We purposely have a large overweight in oil. It is our theses that the OPEC folks are going to blink before we do.
We own: (all descriptions for educational purposes only and are taken from https://beta.finance.yahoo.com/quote/DVN/profile.)
Morgan Stanley (MS) is a financial holding company, provides various financial products and services to corporations, governments, financial institutions, and individuals worldwide. The company's Institutional Securities segment offers financial advisory services on mergers and acquisitions, divestitures, joint ventures, corporate restructurings, recapitalizations, spin-offs, exchange offers, leveraged buyouts, takeover defenses, and shareholder relations, as well as provides capital raising and corporate lending services. This segment also engages in sales, trading, financing, and market-making activities, including institutional equity, fixed income and commodities, research, and investment activities, as well as offers financing services, such as prime brokerage, consolidated clearance, settlement, custody, financing, and portfolio reporting services. Its Wealth Management segment provides brokerage and investment advisory services covering various types of investments comprising equities, options, futures, foreign currencies, precious metals, fixed income securities, mutual funds, structured products, alternative investments, unit investment trusts, managed futures, separately managed accounts, and mutual fund asset allocation programs. This segment also offers education savings programs, financial and wealth planning services, annuity and other insurance products, cash management services, trust and fiduciary services, individual and corporate retirement solutions, and credit and other lending products, as well as fixed income principal trading services. The company's Investment Management segment provides alternative investment products, such as hedge funds, private equity and real estate funds, and portable alpha strategies to institutional and intermediary channels, and high net worth clients, as well as engages in real estate investing and merchant banking businesses. Morgan Stanley was founded in 1924 and is headquartered in New York, New York.
Fifth Third (FITB) operates as a diversified financial services company in the United States. It operates through four segments: Commercial Banking, Branch Banking, Consumer Lending, and Investment Advisors. The Commercial Banking segment offers credit intermediation, cash management, and financial services; lending and depository products; and foreign exchange and international trade finance, derivatives and capital markets services, asset-based lending, real estate finance, public finance, commercial leasing, and syndicated finance for business, government, and professional customers. The Branch Banking segment provides a range of deposit, loan, and lease products to individuals and small businesses. This segment offers checking and savings accounts, home equity loans and lines of credit, credit cards, and loans for automobiles and personal financing needs, as well as cash management services. The Consumer Lending segment engages in the origination, retention, and servicing of mortgage and home equity loans or lines of credit; and other indirect lending activities, including loans to consumers through correspondent lenders and automobile dealers. The Investment Advisors segment provides various investment alternatives for individuals, companies, and not-for-profit organizations. It offers retail brokerage services to individual clients, and broker dealer services to the institutional marketplace. This segment also provides asset management services; holistic strategies to affluent clients in wealth planning, investing, insurance, and wealth protection; and advisory services for institutional clients comprising states and municipalities. As of December 31, 2014, the company operated 1,302 full-service banking centers, including 101 Bank Mart locations, as well as 2,638 automated teller machines in 12 states throughout the Midwestern and Southeastern regions of the United States. Fifth Third Bancorp was founded in 1862 and is headquartered in Cincinnati, Ohio.
Bank of America (BAC) Corporation operates as a bank holding company which through its subsidiaries, engages in Consumer and Business Banking; Consumer Real Estate Services; Global Wealth and Investment Management; Global Banking; Global Markets; and other segments. Its Consumer and Business Banking segment offers a range of deposits and consumer lending services. The company's deposit offerings include consumer deposits and business banking. Its consumer lending offerings include consumer and small business credit card, debit card, consumer auto lending, and other consumer lending. The company's Consumer Real Estate Services segment offers a range of home loans and legacy assets and servicing services. Its home loans offering includes mortgage loan production and owned home equity loan portfolio. The company's legacy assets and servicing offering includes mortgage loan servicing, owned legacy home equity loan portfolio, and legacy mortgage exposures. Its Global Wealth and Investment Management segment offers wealth management services. Its Global Banking segment offers investment banking, global corporate banking, and global commercial banking services. Its Global Markets segment offers fixed income markets and equity markets services. Its other segment includes asset and liability management, equity investments, international consumer card, liquidating businesses, and other services. The company caters to individual customers, institutional investors, corporations, and governments worldwide. Bank of America Corporation was formerly known as NationsBank Corporation and changed its name to Bank of America Corporation in September 1998. Bank of America Corporation was founded in 1874 and is based in Charlotte, North Carolina.
GM b warrants (right to buy GM common at $18.33 thru June 2019) General Motors Company designs, builds, and sells cars, crossovers, trucks, and automobile parts worldwide. The company operates through GM North America, GM Europe, GM International Operations, GM South America, and GM Financial segments. It markets its vehicles primarily under the Buick, Cadillac, Chevrolet, GMC, Opel, Holden, Vauxhall, Baojun, Jiefang, and Wuling brand names. The company also sells cars and trucks to dealers for consumer retail sales, as well as to fleet customers, including daily rental car companies, commercial fleet customers, leasing companies, and governments. In addition, it offers connected safety, security and mobility solutions, and information technology services. The company, through its subsidiary, General Motors Financial Company, Inc., provides automotive financing services. General Motors Company was founded in 1897 and is based in Detroit, Michigan
Ascena Retail (ASNA) through its subsidiaries operates as a specialty retailer of clothing, shoes, and accessories for missy, plus-size women, and tween girls in the United States, Canada, and Puerto Rico. It creates, designs, and develops a range of merchandise, including apparel, accessories, footwear, and intimates; lifestyle products comprising bedroom furnishings and electronics; and wear-to-work, casual sportswear, footwear, and social occasion apparel. The company also offers career wear, dressy apparel, and active wear, as well as special occasion and classic apparel. Its principal retail brands comprise Ann Taylor, LOFT, Lou & Grey, Justice, Lane Bryant, Lane Bryant Outlet, Cacique, Right Fit, maurices, dressbarn, Catherines, Catherines Plus Sizes, Maggie Barnes, Liz&Me, Serenada, Dressbarn, 6th & Lane and Maurices In Motion. As of September 16, 2015, the company operated approximately 4,900 stores. It also offers its products online. The company was formerly known as Dress Barn, Inc. and changed its name to Ascena Retail Group, Inc. in January 2011. Ascena Retail Group, Inc. was founded in 1962 and is headquartered in Mahwah, New Jersey.
Alcoa (AA) produces and manages primary aluminum, fabricated aluminum, and alumina worldwide. The company operates through four segments: Alumina, Primary Metals, Global Rolled Products, and Engineered Products and Solutions. The Alumina segment is involved in mining bauxite, which is then refined into alumina. The Primary Metals segment produces primary aluminum. The Global Rolled Products segment produces and sells aluminum plates, sheets, and foils, as well as rigid container sheets for food and beverage packaging markets. The Engineered Products and Solutions segment offers titanium, super alloy investment, and aluminum castings; fasteners; aluminum wheels; integrated aluminum structural systems; architectural extrusions; and forgings and hard alloy extrusions. The company's products are primarily used in the transportation, including aerospace, automotive, truck, trailer, rail, and shipping; packaging; building and construction; oil and gas; defense; consumer electronics; brazing; power generation; and industrial applications. Alcoa Inc. was founded in 1888 and is based in New York, New York.
Micron Technology (MU) provides semiconductor systems worldwide. It operates in four segments: Compute and Networking Business Unit, Mobile Business Unit, Storage Business Unit, and Embedded Business Unit. The company offers DDR4 and DDR3 DRAM products for computers, servers, networking devices, communications equipment, consumer electronics, automotive, and industrial applications; mobile low-power DRAM products for mobile phones, tablets, embedded, computers, and other mobile consumer device applications; DDR2 DRAM, DDR DRAM, GDDR5 DRAM, SDRAM, reduced latency DRAM, and pseudo-static DRAM products for use in networking devices, servers, consumer electronics, communications equipment, computer peripherals, automotive and industrial applications, and computer memory upgrades; and HMC semiconductor memory devices for use in networking and computing applications. It also provides NAND Flash products, which are electrically re-writeable, non-volatile semiconductor memory devices; client solid-state drives (SSDs) for notebooks, desktops, workstations, and other consumer applications; enterprise SSDs for server and storage applications; managed multi-chip package products; digital media products, including flash memory cards and JumpDrive products under the Lexar brand name. In addition, the company manufactures products that are sold under other brand names; and resells flash memory products that are purchased from other NAND Flash suppliers. Further, it provides NOR Flash memory products, which are electrically re-writeable, semiconductor memory devices for wireless and embedded applications. The company markets its products to original equipment manufacturers and retailers through its internal sales force, independent sales representatives, and distributors; and through a Web-based customer direct sales channel, and channel and distribution partners. Micron Technology, Inc. was founded in 1978 and is headquartered in Boise, Idaho.
Juniper Networks (JNPR) designs, develops, and sells high-performance network products and services worldwide. It provides various routing products, including ACX series universal access routers to deploy new high-bandwidth services; MX series Ethernet routers that functions as a universal edge platform; M series edge routers; PTX series packet transport routers; and T series routers. The company also offers various switching products comprising EX series Ethernet switches to address the access, aggregation, and core layer switching requirements of micro branch, branch office, and campus and data center environments; and QFX series for enterprises, high-performance computing systems, and cloud providers. In addition, it provides security products, such as SRX series services gateways for the data centers; and SRX series gateways for the campuses and branches. Further, the company offers Junos OS, a network operating system; Junos Space, a network management platform for creating network management applications that include network director, services activation director, security director, edge services director, service now, and service insight; and cloud networking and service orchestration solutions. Additionally, it provides technical support and professional services, as well as education and training programs. The company sells its products through direct sales, distributors, value-added resellers, and original equipment manufacturer partners to end-users in the service provider and enterprise markets. Juniper Networks, Inc. was founded in 1996 and is headquartered in Sunnyvale, California.
Hain Celestial sells organic and natural products in the United States, the United Kingdom, Canada, and Europe. Its grocery products include infant formula; infant, toddler, and kids foods; diapers and wipes; rice and grain-based products; flour and baking mixes; breads, hot and cold cereals, pasta, condiments, cooking and culinary oils, granolas, granola bars, and cereal bars; canned, chilled fresh, aseptic, and instant soups; Greek-style yogurt; chilies and packaged grains; and chocolates and nut butters, as well as plant-based beverages and frozen desserts, such as soy, rice, almond, and coconut. The company's grocery products also comprise juices, hot-eating, chilled and frozen desserts, cookies, crackers, gluten-free frozen entrees and bars, frozen pastas and ethnic meals, frozen fruits and vegetables, cut fresh fruits, refrigerated and frozen soy protein meat-alternative products, tofu, seitan and tempeh products, jams, fruit spreads and jelly, honey, marmalade, and other food products. In addition, it provides snack products, such as potato, root vegetable, and other vegetable chips, as well as straws, tortilla chips, whole grain chips, pita chips, puffs, and popcorn; specialty teas, including herbal, green, black, wellness, rooibos, and chai tea lattes; ready-to-drink beverages comprising organic kombucha and chai tea lattes; personal care products consisting of skin, hair and oral care, deodorants, baby care items, acne treatment, body washes, and sunscreens; and poultry and protein products, such as turkey and chicken products. The company sells its products through specialty and natural food distributors, supermarkets, natural food stores, mass-market and e-commerce retailers, food service channels and club, and drug and convenience stores in approximately 70 countries worldwide. The Hain Celestial Group, Inc. was founded in 1993 and is headquartered in Lake Success, New York.
United Natural Foods (UNFI) together with its subsidiaries distributes and retails natural, organic, and specialty foods and non-food products in the United States and Canada. The company offers grocery and general merchandise, produce, perishables and frozen foods, nutritional supplements and sports nutrition, bulk and foodservice products, and personal care products. It is also involved in importing, roasting, packaging, and distribution of nuts, dried fruit, seeds, trail mixes, granola, natural and organic snack items, and confections. In addition, the company offers Blue Marble Brands products on wholesale basis through third-party distributors in organic, natural, and specialty food brands, as well as directly to retailers. Further, it provides Field Day brand products primarily to customers in its independent natural products retailer channel. The company serves independently owned natural products retailers, supernatural chains, conventional supermarkets, and mass market chains, as well as foodservice and international customers outside Canada. It operates 13 natural products retail stores primarily in Florida. The company was founded in 1976 and is headquartered in Providence, Rhode Island.
Old Second Bancorp (OSBC) operates as a holding company for Old Second National Bank that provides a range of banking services. It offers checking, demand, NOW, money market, savings, time deposit, individual retirement, and Keogh deposit accounts; lines of credit for working capital; lending for capital expenditures on manufacturing equipment; and lending to small business manufactures, service companies, and medical and dental entities, as well as specialty contractors. The company also provides commercial real estate loans; construction loans; residential real estate loans comprising residential first mortgages, second mortgages, and home equity line of credit mortgages; consumer loans, including motor vehicle, home improvement, and signature loans; and installment loans, student loans, agricultural loans, and overdraft checking. In addition, it offers safe deposit services; trust services; wealth management services; and traveler's checks, money orders, cashier's checks, foreign currency, direct deposits, discount brokerage, debit and credit cards, and other special services, as well as acquires the U.S. treasury notes and bonds. Further, the company provides electronic banking services, such as online and mobile banking; corporate cash management products, including remote and mobile deposits capture, investment sweep accounts, zero balance accounts, automated tax payments, automatic teller machines access, telephone banking, lockbox accounts, automated clearing house transactions, account reconciliation, controlled disbursement, detail and general information reporting, wire transfers, and vault services for currency and coin; and investment, agency and custodial services for individual, corporate, and not-for-profit clients. It provides its services through 25 banking locations primarily in Aurora, Illinois and its surrounding communities, as well as in the Chicago metropolitan area. The company was founded in 1982 and is based in Aurora, Illinois.
The Major Domestic Oil ETF (IEO)
||EOG Resources Inc
||Valero Energy Corp
||Marathon Petroleum Corp
||Pioneer Natural Resources Co
||Anadarko Petroleum Corp
||Noble Energy Inc
||Concho Resources Inc
The U.S. Oil and Gas producer ETF (XOP)
SPDR S&P Oil & Gas Exploration & Production ETF contains 50 different 2% holdings
Marathon Oil Corporation (MRO) operates as an energy company. It operates in three segments: North America Exploration and Production, International Exploration and Production, and Oil Sands Mining. The North America Exploration and Production segment explores for, produces, and markets crude oil and condensate, natural gas liquids, and natural gas in North America. The International Exploration and Production segment explores for, produces, and markets crude oil and condensate, natural gas liquids, and natural gas in Equatorial Guinea, Ethiopia, Gabon, Kenya, the Kurdistan Region of Iraq, Libya, and the United Kingdom; and produces and markets products manufactured from natural gas, such as liquefied natural gas and methanol in Equatorial Guinea. The Oil Sands Mining segment mines, extracts, and transports bitumen from oil sands deposits in Alberta and Canada; and upgrades the bitumen to produce and market synthetic crude oil and vacuum gas oil.
Devon Energy (DVN), an independent energy company, primarily engages in the exploration, development, and production of oil, natural gas, and natural gas liquids (NGLs) in the United States and Canada. It operates approximately 19,000 wells. The company also offers midstream energy services, including gathering, transmission, processing, fractionation, and marketing to producers of natural gas, NGLs, crude oil, and condensate through its natural gas pipelines, plants, and treatment facilities. Devon Energy Corporation was founded in 1971 and is headquartered in Oklahoma City, Oklahoma.
An analysis of Devon's current situation and prospects:
Devon Energy turned in a pretty solid quarter, with its core earnings increasing from the third quarter. That said, the primary factor driving its steady earnings over the past couple of quarters is going away, which is leading to some really big changes for the company in 2016.
Drilling down into the numbers
Devon Energy reported core earnings of $319 million, or $0.77 per share, which was slightly higher than the $316 million, or $0.76 per share, in core earnings the company delivered during the third quarter. Moreover, operating cash flow totaled $1.1 billion during the quarter, which was 12% higher than the fourth quarter of last year, even though the oil price was 42% lower year over year.
Devon Energy achieved this rather remarkable feat thanks to three factors:
Oil hedges added $11.59 per BOE to the company's realized price during the quarter, boosting it from $17.85 per BOE to $29.59 per BOE.
Oil production from core assets grew 26% year over year.
Field-level operating costs dropped 20% year over year to $8.82 per BOE, while G&A costs are down 25% to $3.10 per BOE.
In other words, Devon Energy used a combination of higher volumes, lower costs, and oil and gas hedges to keep its core earnings stable and push its cash flow higher.
Another big stabilizing factor for the company was its investment in EnLink Midstream (NYSE:ENLK), which generated operating profits of $210 million for the quarter. For the full year, EnLink Midstream's operating profits grew by 8% and helped supply Devon Energy with steady cash flow via distributions, as well as a source of cash after Devon sold $761 million worth of EnLink Midstream units last year.
A look at what's ahead
While cost reductions and production growth helped mute some of the impact from lower oil prices in 2015, the company's real saving grace was its oil and gas hedges. If it wasn't for those hedges, the company's cash flow would have been substantially lower. In fact, cash settlements from oil and gas hedges increased the company's revenue by more than $700 million last quarter. However, the company's hedges wound down at the end of the year, which will leave it with much less cash flow in 2016 should oil and gas prices remain at their current levels. As a result, Devon Energy has to make several major changes for the upcoming year.
Topping that list is capital spending, which is expected to drop 75% year over year to a range of $900 million to $1.1 billion. That spending reduction is expected to cause the company's overall production from core assets to drop by 6% at the midpoint of its guidance, while oil production from core assets is expected to drop 3%. That's a huge change from last year, when the company pushed oil production at its core assets higher by 26%.
In addition, Devon Energy is reducing its quarterly dividend by 75% to $0.06 per share, which will free up $320 million in cash flow on an annualized basis. The combination of reducing its dividend and capex spending will enable the company to live within its cash flow next year, should oil and gas prices remain where they are right now. That said, if prices continue to weaken, Devon Energy has the flexibility to reduce both its capex and its dividend to operate within cash flow.
Devon Energy's top priority in 2016 is to protect its balance sheet, and living within cash flow is key piece to that puzzle. However, another important part of that plan is asset sales, with Devon Energy planning to sell $2 billion to $3 billion in non-core oil and gas properties as well as its 50% stake in the Access pipeline. Those asset sales are expected to not only bolster its balance sheet, but also pare Devon's portfolio down to what it's now calling its core assets, which is the foundation of the company going forward and consists of its heavy oil assets in Canada, its Rockies oil assets, the STACK play, the Delaware Basin, the Eagle Ford Shale, and the Barnett Shale. Those are its lowest-cost, highest-return assets, as well as those with the best opportunities to generate strong growth when conditions improve.
Devon Energy ended 2015 on a solid note, delivering steady core earnings and cash flow thanks to higher volumes, lower costs, and strong oil hedges. But those oil hedges are going away and taking with them a big portion of Devon's cash flow and, therefore, its ability to grow its production. As a result, 2016 will be a year focused on protecting the balance sheet so the company can live to fight another day.
Lincoln's Birthday 2016
Monday the DJIA dropped 400 points before rallying to close down 177.
Tuesday morning the DJIA dropped 120 points in the first hour but closed down only 12.
Wednesday was up and down ending off 100 points.
Thursday the DJIA was rolling along down its morning groundhog 200 points until Boeing dropped 8% on news that the SEC is looking into BA profit forecast for the 757. Boeing's drop cost the DJIA another 100 points. Thursday market action made money for the computer jocks as the DJIA dropped 400 points and then rallied 200 points and then dropped 100 points followed by a 100 point rally to close down 200 on the day.
Friday, in an action reminiscent of JP Morgan (the man) walking onto the floor of the NYSE on October 25, 1929 and loudly buying shares of major companies to try and stem a falling stock market (http://www.themoneyalert.com/stockmarketcrashof1929.html), Jamie Dimon the current CEO of JP Morgan announced that he had purchased $25 million (500,000 shares) of JP Morgan stock on Thursday. Actually Dimon did the same in January 2009. http://247wallst.com/banking-finance/2009/01/21/big-bank-ceos-b/
The markets were up all day with the DJIA closing up 312 points. On the week the DJIA closed where it opened on Monday but was down 200 pints for the week.
Monday is Presidents day and markets are closed.
We sold Whole Foods on Wednesday ahead of earnings since markets were under pressure and both Disney and Time Warner had reported better than but both still dropped on Wednesday after their reports. After the close, Whole Foods reported in line earnings and better than but still negative same store comps. The share price reaction was flat.
After considering Whole Foods lackluster results we sold Fresh Market (assuming their report would approximate WFM when they report in early March) for a small loss in the morning and bought an equal amount of GM B warrants using half the cash generated from the sale. And so we were #!*+@^& when Reuters in the afternoon reported that Kroger had joined the bidding process for TFM and the stock rallied $3. Well, no one will ever accuse us of insider trading and we certainly aren't going to win any timer of the year awards.
In many account we bought Hain Celestial and United Natural Foods to keep our hand in the organic foods area without having to pick a store to favor. Both stocks are selling 50% off their 12 month highs. During the week we also purchased shares in Devon Energy which is on 16 year low, and repurchased Juniper on its 18 month low. (See articles below on Juniper, Micron, Devon and Marathon.)
Folks say they aren't buying because they are waiting for a real selloff. Our holdings are not alone in our transitory pain:
Apple high $130 current $94 (-27%);
Disney high 122 current $88 (-27%);
Amazon high $696 current $500 (-28%);
LinkedIn high $276 current $100 (-63%);
Adobe high $96 current $76 (-21%);
Citibank high $61 current $36 (-40%);
UAL high $72 current $45 (-37%);
Merck high $61 current $48 (-21%);
United Tech high $124 current $86 (-30%);
American Express high $86 current $52 (-40%);
Salesforce high $82 current $59 (-28%);
Netflix 133 current $86 (-35%);
Tesla $286 current $150 (-47%);
Regeneron high $605 current $388 (-35%);
Biotechnology ETF high $400 current $250 (-37%);
and so it goes.
In our career there have been serious corrections in 1974; 1982; 1987; 1991; 1998; 2000 (most clients don't remember this one because we managed to avoid it); 2009; 2011; and now 2016. A few clients have been through all of these with us and many have been through most. Corrections are painful but inevitable and we just have to grin or grind- as the spirit moves- and bear the paper losses till we get to the other side of the valley.
An interesting analysis of Marathon Oil:
Goldman Sachs Sees 4 Exploration & Production Winners for $35 Oil Long Term
By Jon C. Ogg February 10, 2016 3:05 pm EST
Now that West Texas Intermediate Crude (WTI) oil has dipped under $30.00 per barrel, investors and industry watchers are even more concerned about the oil and gas stocks in the energy patch than ever. It is becoming almost assured that there will be far more corporate failures, more dividend cuts, more credit rating cuts and more debt defaults.
Goldman Sachs might not have been the first and certainly was not the only of the brokerage firms to sound a warning bell about $30 or $20 oil, but Goldman Sachs remains among the largest of them all, and they cater solely to institutions and to the wealthy individual investors. So, what does one make of the firm naming 4 exploration and production companies that do best in an extreme stress test?
That stress test is one where the price of oil remains around $35.00 for the next three years. Again, this will cause even more failures and implosions, so it is important to find which companies can survive and thrive in that climate.
Using the criteria of debt/liquidity, an ability to actually increase production in such a low price climate, and the potential to excel if oil manages to recover and go back towards $60 per barrel. Over 30 exploration and production companies were screened and only four seemed to make a passing grade.
Hess Corp. (NYSE: HES) was the top play noted and it has the largest market of these four stocks at $12 billion, with Goldman Sachs raising its rating to the prized Conviction Buy list. Hess was selected for its new projects, its flexibility in shale, having ample liquidity and an ability to find additional resources. Goldman Sachs also believes that most of Hess' negative news from the company itself (capex and generating capital) being now behind the company. The firm's $59.00 price target would imply more than 50% upside if the firm is not too aggressive here. Hess was last seen up 1.2% at $39.15, with a $55.26 consensus analyst price target and with a 52-week range of $32.41 to $79.00.
Devon Energy Corp. (NYSE: DVN) was another would-be survivor with a market cap of about $8.6 billion. Interestingly enough, Devon recently hired Jefferies to sell non-core assets and to lower its debt levels. Devon shares were last seen down 4.3% at $21.68, versus a consensus analyst target of $42.18 and a 52-week range of $19.69 to $70.48.
Marathon Oil Corp. (NYSE: MRO) was deemed another $35 oil winner. It does deserve merit to point out that this was last seen down only 0.2%, but at a share price of $7.28. Marathon has a $4.9 billion market cap, a consensus analyst price target of $15.21 and has a 52-week range of $7.01 to $31.53.
RSP Permian Inc. (NYSE: RSPP), which is the smallest of the 4 companies at a $2 billion market cap, was the fourth winner for $35 oil 3-years out. Be advised that RSP Permian is still two weeks away from announcing its formal earnings report. Its shares were last seen up 0.5% at $19.81, versus a consensus analyst price target of $29.66 and versus a 52-week range of $16.74 to $31.15.
Investors should understand that a report of this sort, even with the "Conviction Buy" note, is far from a screaming buy at the bottom signal. This is a climate where investors better just assume that the bad news and how the market will react to such news just hasn't been seen yet. A classic V-Bottom is something that very few analysts, investors and energy industry participants are expecting as of now.
Crude was last seen trading under $28.00 on Wednesday. If that price keeps drifting lower, analysts making more long-term buy calls are going to have to convince wary energy investors that lower and lower stock prices are just a better buying opportunity.
By Jon C. Ogg
Read more: Goldman Sachs Sees 4 Exploration & Production Winners for $35 Oil Long Term - Hess Corp. (NYSE:HES) - 24/7 Wall St. http://247wallst.com/energy-business/2016/02/10/goldman-sachs-sees-4-exploration-production-winners-for-35-oil-long-term/#ixzz3zsyPucnz
Credit Suisse's John W. Pitzer maintained an Outperform rating for Micron Technology, Inc. MU 3.43% with a price target of $20. The company is scheduled to host its Winter Analyst Day on February 12.
Analyst John Pitzer said that while Micron's Analyst Day would likely be largely in-line with prior commentary, the event could be "modestly positive," in view of the 32.2 percent decline in the company's share price since last earnings, versus a 15.5 percent decline in SOX.
Pitzer expects Micron to:
Indicate that its February quarter is tracking in-line with guidance.
Reiterate the crossover for 20nm in the May quarter. The analyst estimated an improvement of about 10-15 percent in the company's relative cost at 20nm, "even as peers begin to ramp 18nm."
Indicate good progress on 3D NAND with yields tracking ahead of plan, while also reiterating its prior target of 50 percent bits on 3D by the end of year.
Reiterate CapEx at $5.2-5.8bn, with $500m coming from partners.
Reiterate that the Inotera merger is tracking to be completed by mid-2016. The analyst pointed out, however, that given the decline in share price, the share count is likely to increase by 10 percent from the initial expectations for 6 percent when the deal was announced.
Pitzer believes that the risk-reward is attractive at current valuations. He added, "Cost headwinds becoming tailwinds in DRAM, optionality around 3D and XPoint in late CY16/17 and relatively high strategic value (relevant with China initiatives to enter Memory) should all support recovery for the stock from current levels."
Latest Ratings for MU
Read more: http://www.benzinga.com/analyst-ratings/analyst-color/16/02/6248709/micron-set-for-big-analyst-day-stock-could-eventually-do#ixzz3zt20c5Hm
This solid technology stock has been a long roller-coaster ride for investors over the last two years. Juniper Networks Inc. (NYSE: JNPR) is a provider of high-performance network infrastructure to service providers and enterprises. Key products include IP-based routers for service provider core and edge networks, security solutions and high-end enterprise routing equipment. Juniper's products supports converged data, voice, video and wireless applications across extended network.
The stock has taken a big hit since printing highs in November and is back to a very solid support level for investors looking to buy shares. For the fourth quarter, the company posted solid numbers, but the forward guidance left much to be desired, and the stock was hit hard yet again. Much of the lowered guidance was attributed to currency effects, and Deutsche Bank sees the company as another that will benefit from the big data center refresh this year.
Juniper investors receive a 1.82% dividend. The Deutsche Bank price objective is $31. The consensus target is $28.93, and the stock closed Tuesday at $21.99.
Read more: Deutsche Bank's Top Networking Stock Picks Include Cisco Systems (NASDAQ: CSCO) - 24/7 Wall St. http://247wallst.com/technology-3/2016/02/10/despite-horrible-sentiment-top-networking-stocks-could-have-big-2016/2/#ixzz3zyIL9Evj
Follow us: @247wallst on Twitter | 247wallst on Facebook
5 February 2016
Monday was down 170 at the worst and then closed down 20 on the DJIA; pretty good action with oil down on the day. Groundhog Day saw the DJIA down 250 in the first 15 minutes; down 350 at 2pm and closed down 295. Ugh! We are in a real Groundhog market.** Goldman Sachs down $8 ; Boeing down $4; and Chevron down $4 were 150 points of the drop. Wednesday DJIA was up 80 to begin and down 180 by the second hour; then up 115; then down 50; then up a down 50 till 1:30 when the average rallied to up 200 and closed up 183. Thursday was up 140; down 100; then up 100; flat at 1pm and closed up 80. Friday it was down 100 to begin the day after the Employment report said the unemployment rate had dropped to 4.9% with 151,000 jobs added. The DJIA continued lower hitting down 200 at 10:30am and staying lower for the rest of the day closing down 200 points and off 1% for the week.
During the week we traded Gap and Urban (losses) for BankAmerica and more Morgan Stanley. Bank stocks are down on the world is ending news and from watching earnings reactions in retail we don't think meeting expectations will be rewarded. We also sold Symantec for a plus scratch to buy BankAmerica. We sold 1/2 of Alcoa which was up 20% this week but still at a loss and eliminated Caterpillar flat and Union Pacific for a small profit.
A client asked us to comment on the relationship of the dollar, oil and the euro. Our response is yes there is a relationship- at least the big boys and girls who have programmed their computers to do something with that relationship tell us so. Supposedly lower dollar/stronger euro is good for commodities. That is the depth of our knowledge on this subject. Next question.
GM's profit for 2015 rose to $9.7 billion, or $5.91 a share, from $2.8 billion or $1.65 a share, in 2014. Adjusted earnings per share was $5.02 for 2015, up 65% from $3.05 in 2014.
Total revenue for the year was $152.4 billion, down from $155.9 billion in 2014. GM said the revenue decline was primarily due to a foreign currency exchange impact of $9.3 billion.
GM reaffirmed its recent guidance for 2016 that adjusted earnings per share would be between $5.25 and $5.75. GM's eligible U.S. hourly workers will receive profit-sharing checks of $11,000 on February 26, the company said.
GM was off 4% to a new 12 month low on the news. Nuts!
Marathon Oil (NYSE: MRO) has fallen to negative earnings along with most of the energy space but has the means to survive the drop in prices and emerge stronger. The company has $2.4 billion in balance sheet cash, nearly 44% of its market cap, and no debt maturities until October 2017. The company has reduced drilling time by half and lowered well costs 30% over the last several years in its Eagle Ford wells. When oil prices stabilize and start to rebound, these efficiency gains will translate to big profits for the E&P major. The company also stands to benefit on the new ability to export its U.S. crude production after Congress lifted the 30-year ban on oil exports.
Marathon Oil Corp. Corporate Credit Rating Lowered to BBB-/Stable/A-3 (lower medium grade). The downgrade reflects our expectation that in the context of lower oil and gas prices, Marathon's credit measures will be consistently below our expectations for the 'BBB' rating. Marathon enters 2016 with ample liquidity, including $1.2 billion in cash and has substantially reduced capital spending and dividends. We estimate that the company will outspend generated cash flow to fund capital spending and dividends this year and that cash flow coverage of debt has declined meaningfully. The stable outlook reflects our projections that credit measures will improve over the next two years. We note that proceeds from assets sales or other external sources of funding could provide an opportunity to improve the company's balance sheet.
Alcoa Inc. On Monday said it would expand its board by three members, gaining the support of activist investor Elliott Management Corp. as the aluminum maker prepares to spin off its aerospace- and automotive-focused unit.
Prices for raw aluminum have fallen sharply since 2011, a decline that was partly behind Alcoa's announcement in late September that it would spin off its more profitable and diverse parts-making units. Meanwhile, its sprawling mining and smelting operation has struggled amid raw aluminum prices that have dropped to six-year lows because of weaker demand and Chinese exports. The company's stock fell almost 40% last year, leading some fund managers to argue the company was undervalued.
Elliott disclosed a 6.4% stake in the company in November, which it bumped up to around 7.4% last week. The fund has supported Alcoa's split under the belief that the various businesses are worth far more apart than together, possibly as much as double the current stock price, according to people familiar with the matter.
Elliott has focused on Alcoa's need to improve margins. One of the new directors, Mr. Schmidt, was until last month on the board of rival Precision Castparts Corp., which had higher margins than Alcoa. While Elliott likes Alcoa's aggressive research and development spending, which it believes helps take market share from Precision Castparts, the activist investor still sees room to cut costs and was encouraged by Alcoa's announcement of comprehensive review on cost structures, the people said.
"As we prepare to separate into two strong companies, we have been actively working to ensure each has a world-class board of directors focused on creating shareholder value," Alcoa Chief Executive Klaus Kleinfeld said in a news release. He said the new directors—which bring the board to 15 directors—will add "valuable skills highly relevant to the markets we serve, including aerospace and automotive."
The real problem with high-frequency trading
There are few complaints about HFT when computers push share markets up, but in the ebbing tide of today's markets, it's blamed both for exaggerating the share market dive as well as for the heightened volatility.
The logic behind the fears is this: algorithms and software do not muse about global economic events; they merely chase mechanical patterns that they are programmed to find, such as movements in trend or momentum. They do not make decisions based on real-world eventualities, such as political events.
Can the algorithms express a view on Chinese consumer confidence? The economic impacts of Middle-Eastern sectarian conflicts? These real world factors aren't taken into account in the programming of algorithms.
Yet the computers hold substantial sway and can execute a barrage of trades that create unprecedented volatility at a rate that human reactions simply cannot match.
What is truly problematic is that the algorithms are not cognizant of when to stop or change a trade and thus can continue to pile money and exaggerate a trade well beyond what the market would consider a correct response. The computers do not have the "affirmative obligation" to keep the markets orderly.
Read more http://www.businessinsider.com/the-real-problem-with-high-frequency-trading-2016-1
**Groundhog Market reminds of the movie Groundhog Day:
When he wakes up the next morning, it's Groundhog Day. Again. Same conditions, same people, same ritual. So it goes the morning after, and the morning after that, and on and on ad (apparently) infinitum. Phil is in a loop, a temporal locked groove. He's stuck.
Italian cheese firm sells Parmesan-backed bond (Reuters)
An Italian dairy cooperative has sold bonds backed by Parmesan cheese, the company said on Tuesday, a rare example of one of the country's plethora of small firms raising funding on capital markets. Three years of recession have choked bank lending and Prime Minister Matteo Renzi's government is trying to encourage firms to raise money elsewhere and take advantage of a tentative economic recovery. Cheese-maker 4 Madonne Caseificio dell'Emilia has done just that, raising 6 million euros ($6.55 million) in mini-bonds guaranteed by wheels of Parmesan. 4 Madonne's chairman said it would use the money raised in the bond issue to improve its facilities and promote the thick-rinded cheese it makes in Italy's northern gastronomic heartland Emilia Romagna.
If Marco Rubio was the winner in Iowa for coming in third; why wasn't Martin O'Malley the winner on the Democratic side for coming in third?
For those clients of LY& Co and other
interested persons the Quarterly Report on the routing of customer orders under