Zero interest rates currently works as a relatively strong attraction for investors who are borrowing cheap dollars and turning into purchases of shares and commodities.
What happens on the next FED meeting nobody knows but general expectation is unchanged interest rates until summer 2010. The Federal Reserve may start raising interest rates on June. This comes from the results of the Fed Funds futures. Currently traders give 54% chance to increase the minimum rates by 0.50 basis points. The increase is estimated could take place at the regular meeting, scheduled for 23 June 2010.
The increase in interest rate markets are generally perceived as a strongly negative element, but this time it could be consider differently. That would mean that the Fed feels confident about the economy, as well as the financial system is strong enough to withstand higher interest rates. It would be a positive for equity markets. Australia has recently experienced something similar. Local central bank after a long pause decided to increase the lowest interest rate for the past 49 years from 3% to 3.25%. Australian S & P / ASX 200 responded by the increase of 1.8%.
Showing posts with label US markets. Show all posts
Showing posts with label US markets. Show all posts
Sunday, November 22, 2009
Sunday, November 15, 2009
Warren Buffett investment strategy
Warrenn Buffett is a real investment guru who earned his enormous assets by investing in capital markets and with strict adherence to certain rules which every investor knows but few respects. In fact Warren Buffett investing strategy may have for ordinary investors more negatives than positives and ultimately may lead to the desired profit.
One of the reasons is the size of transactions and volume of funds which most investors have only dreamed of. Buffett can afford to invest billions of dollars, which his company Berkshire Hathaway has which allows him to buy his interest for shares in companies. At the same time it provides a better bargaining position when entering into the company for an interesting price.
Another related significant difference compared with the ordinary investor is that Buffett often buy shares to own that company (or at least significant part). As an example can be Coca Cola (KO), Wells Fargo (WFC), Procter and Gamble (PG), and last but not least mentioned Burlington Northern Santa Fe Corp. (BNI), which make up the majority of its entire portfolio. He often buy preferred stocks selected companies that give quite an interesting advantage over ordinary investors.
It also reflects the basic principles of long-term investment horizon (and its strict compliance), buying stocks of well-established companies whose functioning well understood by the investor at a low price and limited diversification (with Berkshire Hathaway Buffett owns more than 40 titles from various sectors such as consumer goods, finance, energy, industry, health, etc.).
In recent years, the Buffett and his investment company quite significantly deviates from the established rules which brought him his fortune. The first problem is the purchase of shares of companies in terms of fundamental analysis do not meet his criteria of values and eventually some of them had to quickly get rid of. Examples can be expensive buying shares in recent years, like Anheuser Busch (BUD), Wrigley (WWY.BA), Conoco Philips COP) or two Irish banks, which recorded big losses.
Perhaps the biggest disappointment for many investors seeking to invest on the basis Buffett's rules is a relatively large amount of funds that are kept in derivative instruments. Buffett has always been known for his very negative attitude to derivatives. Even though he sold options with a value of 4 billion U.S. dollars. It is also a fairly risky naked put options.
One of the reasons is the size of transactions and volume of funds which most investors have only dreamed of. Buffett can afford to invest billions of dollars, which his company Berkshire Hathaway has which allows him to buy his interest for shares in companies. At the same time it provides a better bargaining position when entering into the company for an interesting price.
Another related significant difference compared with the ordinary investor is that Buffett often buy shares to own that company (or at least significant part). As an example can be Coca Cola (KO), Wells Fargo (WFC), Procter and Gamble (PG), and last but not least mentioned Burlington Northern Santa Fe Corp. (BNI), which make up the majority of its entire portfolio. He often buy preferred stocks selected companies that give quite an interesting advantage over ordinary investors.
It also reflects the basic principles of long-term investment horizon (and its strict compliance), buying stocks of well-established companies whose functioning well understood by the investor at a low price and limited diversification (with Berkshire Hathaway Buffett owns more than 40 titles from various sectors such as consumer goods, finance, energy, industry, health, etc.).
In recent years, the Buffett and his investment company quite significantly deviates from the established rules which brought him his fortune. The first problem is the purchase of shares of companies in terms of fundamental analysis do not meet his criteria of values and eventually some of them had to quickly get rid of. Examples can be expensive buying shares in recent years, like Anheuser Busch (BUD), Wrigley (WWY.BA), Conoco Philips COP) or two Irish banks, which recorded big losses.
Perhaps the biggest disappointment for many investors seeking to invest on the basis Buffett's rules is a relatively large amount of funds that are kept in derivative instruments. Buffett has always been known for his very negative attitude to derivatives. Even though he sold options with a value of 4 billion U.S. dollars. It is also a fairly risky naked put options.
Sunday, September 13, 2009
Insider trading is more bearish.
Directors, owners and top managers, in other words, insiders, have turned to be more bearish. In recent months there is a growing volume of sold shares from insiders. In August, U.S. sales by insiders more than 30 times exceeded the volume of insider purchases (historical average is around 7:1). This ratio is the highest since 2004 and many investors may signal that if their companies do not believe their majority owners and management is probably something wrong.
High proportion of sales by insiders is not itself a clear signal to investors to start selling shares. There are several reasons, such as corporate programs in which the owners could sell large blocks of shares of its securities only in defined time intervals. Another reason may be grounds for a private investors which simply need more money in cash. This year may be the reason also profit taking after many insiders noticed a significant loss in last year.
For this reason, many investors do not take the increasing volumes of insider sales as a relevant reason to start reducing their positions in the markets. Among the experts is much more popular the opposite situation, where shopping is dominated by insiders over the sale, which is generally considered as a very strong signal for buying. This happens very rarely, because insiders receive a majority of the shares as a form of remuneration or the incentive programs.
High proportion of sales by insiders is not itself a clear signal to investors to start selling shares. There are several reasons, such as corporate programs in which the owners could sell large blocks of shares of its securities only in defined time intervals. Another reason may be grounds for a private investors which simply need more money in cash. This year may be the reason also profit taking after many insiders noticed a significant loss in last year.
For this reason, many investors do not take the increasing volumes of insider sales as a relevant reason to start reducing their positions in the markets. Among the experts is much more popular the opposite situation, where shopping is dominated by insiders over the sale, which is generally considered as a very strong signal for buying. This happens very rarely, because insiders receive a majority of the shares as a form of remuneration or the incentive programs.
Monday, August 10, 2009
How to invest in gold and oil.
Today I have two video analysis from Adam Hewison. This time he is analyzing commodities and predicts future movements for crude oil and gold prices.
First is analysis of crude oil and gold based on Fibonacci retracement. Adam chart heading to $1000 for gold as a target level. And for crude oil there is a target $74.
Second short video analysis is focused on outlook for gold prices. Is it new bull trend for gold market? Adam shows long term and short term pictures with some key technical analysis indicators.
First is analysis of crude oil and gold based on Fibonacci retracement. Adam chart heading to $1000 for gold as a target level. And for crude oil there is a target $74.
Second short video analysis is focused on outlook for gold prices. Is it new bull trend for gold market? Adam shows long term and short term pictures with some key technical analysis indicators.
High dividend stocks / ETF
Many investors don't want to worry about the indicators of investment value, and therefore prefer a simpler strategy which is based on high dividend yield and is called dividend strategy. It depends only on high dividend yield if shares will become part of the index portfolio.
For the purpose of dividend investing there are plenty of dividend indexes. The basis is usually taken from the past payment of dividends, and not from the future (or expected). Broadly used in US is Dogs of Dow or DivDax in Germany.
One of the problem of this strategy is that it can not accurately predict with certainty whether the amount of dividends in the future will be the same as last payments. Another significant important point missing in dividend strategy is stock value. Are shares prices undervalued or overvalued? You will not get answer based on dividend yield.
On the market there are now many ETFs which are in the category of High dividend yield ETF. Here are some high dividend paying funds in US.
Claymore/Zacks Yield Hog ETF (CVY)
ELEMENTS Dogs of the Dow ETN (DOD)
First Trust Morningstar Dividend Leaders Index Fund (FDL)
iShares Dow Jones Select Dividend Index Fund (DVY)
SPDR S&P Dividend ETF (SDY)
Vanguard High Dividend Yield ETF (VYM)
And the list of international high dividend yielding funds traded on US markets.
Middle East Dividend Fund (GULF)
SPDR S&P International Dividend ETF (DWX)
WisdomTree Europe High-Yielding Equity Fund (DEW)
WisdomTree International Dividend Top 100 Fund (DOO)
WisdomTree Japan High-Yielding Equity Fund (DNL)
WisdomTree Pacific ex-Japan High-Yielding Equity Fund (DNH)
As I have mentioned in the beginning of the article, dividend strategy itself has some imperfections. During past two years I have compared US high dividend yielding ETFs with broad equity index ETF iShares S&P 500 Index (IVV). And you see the result at the chart above. For almost the whole period IVV has outperformed all high dividend yield ETFs.
For the purpose of dividend investing there are plenty of dividend indexes. The basis is usually taken from the past payment of dividends, and not from the future (or expected). Broadly used in US is Dogs of Dow or DivDax in Germany.
One of the problem of this strategy is that it can not accurately predict with certainty whether the amount of dividends in the future will be the same as last payments. Another significant important point missing in dividend strategy is stock value. Are shares prices undervalued or overvalued? You will not get answer based on dividend yield.
On the market there are now many ETFs which are in the category of High dividend yield ETF. Here are some high dividend paying funds in US.
Claymore/Zacks Yield Hog ETF (CVY)
ELEMENTS Dogs of the Dow ETN (DOD)
First Trust Morningstar Dividend Leaders Index Fund (FDL)
iShares Dow Jones Select Dividend Index Fund (DVY)
SPDR S&P Dividend ETF (SDY)
Vanguard High Dividend Yield ETF (VYM)
And the list of international high dividend yielding funds traded on US markets.
Middle East Dividend Fund (GULF)
SPDR S&P International Dividend ETF (DWX)
WisdomTree Europe High-Yielding Equity Fund (DEW)
WisdomTree International Dividend Top 100 Fund (DOO)
WisdomTree Japan High-Yielding Equity Fund (DNL)
WisdomTree Pacific ex-Japan High-Yielding Equity Fund (DNH)
As I have mentioned in the beginning of the article, dividend strategy itself has some imperfections. During past two years I have compared US high dividend yielding ETFs with broad equity index ETF iShares S&P 500 Index (IVV). And you see the result at the chart above. For almost the whole period IVV has outperformed all high dividend yield ETFs.
Tuesday, July 28, 2009
S&P 500 with P/E 13. Still 26% below 50 years average.
For the first time during last 2 years U.S. analysts raise earnings estimates of companies in the index, Standard and Poor's 500. Last time when analysts were so bullish was on April 2007 - before the outbreaks of largest global recession since the end of the 2nd World War II, and total writedowns due to subprime losses reached 1.5 bil. USD.
There have been some positive surprises. Particularly profits in Q2 of firm Goldman Sachs (GS) or tripling sales of raw materials at Freeport-McMoRan Copper and Gold (FCX), which has led to the higher projections for 2010. The estimates of Wall Street firms show earnings for next year at $ 74.55 per share, compared to $ 72.54 in May this year. Shares are now trading at 13.13 times estimated ratio of earnings, which is about 26% below five decades average of 16.54.
Estimates indicate that corporate profits SP 500 index companies will grow by 25% from $59.80 per share, which would be the biggest growth since 1995. Revisions are indeed real and quick view of the fact that people are becoming more or less optimistic. The earnings for Q2 indicate that there may be even faster change. 204 companies of SP 500 have issued its balance and 75% of them were able to overcome the market consensus. So far, the highest number was 72.3% in 1993.
For example estimates for the company Goldman Sachs have evolved significant changes. Profit for the year 2010 may be raised to $16.19 per share, almost three times the minimum $ 5.90 per share in March this year. The bank is trading at 10.17 times the projection of next year. This is approximately 63% discount against the times 37.73 times used in the past 12 months, and even after the shares rose about 95% this year.
Another suitable example is the world's largest semiconductor manufacturer Intel Corp. Company doubled profit for Q2, than was designed, in particular as a result of improved computer demand in Asia. Analysts and increase their profit estimates for 2010 to the level of $1.08 per share, a 21% increase. Shares of Intel, however, reached a 10-month maximum, and increased by 32% this year. Intel traded as a multiple of 17.93 times earnings next year, it is about 36% less than the average of the last decade with number 28.13.
There have been some positive surprises. Particularly profits in Q2 of firm Goldman Sachs (GS) or tripling sales of raw materials at Freeport-McMoRan Copper and Gold (FCX), which has led to the higher projections for 2010. The estimates of Wall Street firms show earnings for next year at $ 74.55 per share, compared to $ 72.54 in May this year. Shares are now trading at 13.13 times estimated ratio of earnings, which is about 26% below five decades average of 16.54.
Estimates indicate that corporate profits SP 500 index companies will grow by 25% from $59.80 per share, which would be the biggest growth since 1995. Revisions are indeed real and quick view of the fact that people are becoming more or less optimistic. The earnings for Q2 indicate that there may be even faster change. 204 companies of SP 500 have issued its balance and 75% of them were able to overcome the market consensus. So far, the highest number was 72.3% in 1993.
For example estimates for the company Goldman Sachs have evolved significant changes. Profit for the year 2010 may be raised to $16.19 per share, almost three times the minimum $ 5.90 per share in March this year. The bank is trading at 10.17 times the projection of next year. This is approximately 63% discount against the times 37.73 times used in the past 12 months, and even after the shares rose about 95% this year.
Another suitable example is the world's largest semiconductor manufacturer Intel Corp. Company doubled profit for Q2, than was designed, in particular as a result of improved computer demand in Asia. Analysts and increase their profit estimates for 2010 to the level of $1.08 per share, a 21% increase. Shares of Intel, however, reached a 10-month maximum, and increased by 32% this year. Intel traded as a multiple of 17.93 times earnings next year, it is about 36% less than the average of the last decade with number 28.13.
Tuesday, June 30, 2009
Buffett, Rogers and Soros portfolios.
Recently Warren Buffett has been interviewed by CNBC where he provided his prediction for economy and stock markets. He can see stabilizing economy but not significant signs of economic recovery. As he mentioned financial crisis is over. He still believes in attractive valuation at the stock markets. In his opinion stocks are definitely better for next 10 years than government bonds. Among the industries he prefers Consumer goods and Financials. His portfolio holdings are Coca Cola (KO), Burlington Northern Santa Fe (BNI) and Wells Fargo (WFC)
Jim Rogers is neutral right now. No short, no long positions. He considers Canadian dollar as currency with good future against British Pound or US dollar due to increasing level of government debt in US and Great Britain. His outlook is positive with soft commodities.
George Soros is bearish with US dollar as well as Jim Rogers. He is exposed mainly at Oil & Gas and Utilities industries. His current portfolio includes companies like Energy Corp (ETR), Plains Exploration & Production Company (PXP) and Walgreen Company (WAL).
For all stocks you can receive free trend analysis. It is enough if you type ticker here.
Jim Rogers is neutral right now. No short, no long positions. He considers Canadian dollar as currency with good future against British Pound or US dollar due to increasing level of government debt in US and Great Britain. His outlook is positive with soft commodities.
George Soros is bearish with US dollar as well as Jim Rogers. He is exposed mainly at Oil & Gas and Utilities industries. His current portfolio includes companies like Energy Corp (ETR), Plains Exploration & Production Company (PXP) and Walgreen Company (WAL).
For all stocks you can receive free trend analysis. It is enough if you type ticker here.
Saturday, June 27, 2009
Trading analysis: S&P500 and USD/CAD.
Adam provides his video update analysis on S&P500. He predicts movements based on MACD and setting timing for buy/sell based on Fibonacci retracement tool and Welles Wilder parabolic SAR. This clip provides very easy explanation how this use analytics and indicators and make simple technical analysis.
Second video is focused on Forex trading. It shows long position in US dollar against Canadian dollar. The best in this video is INO's Triangle method which basically simplifies the whole technical analysis. Based on the calculation of indicators, movements it gives just assessment to go long or short.
Second video is focused on Forex trading. It shows long position in US dollar against Canadian dollar. The best in this video is INO's Triangle method which basically simplifies the whole technical analysis. Based on the calculation of indicators, movements it gives just assessment to go long or short.
Thursday, June 25, 2009
Henry hub natural gas seasonality.
Natural gas usually follows closely crude oil prices. But the evolution of recent weeks argues against this statement. Main reasons for sharp decline in natural gas prices as well as crude oil prices in second half of 2008 were due to the economic slowdown and recession. In case of natural gas producers the output has not been decreased in similar way like for crude oil and increasing inventories caused still falling natural gas prices. But recent numbers shows lower inventory levels of natural gas and with the signs of economic recovery could be right time to become bullish with natural gas. In addition to that seasonality plays important role in price determination. Usually end of summer is start point for price rebound. The picture below shows price trends for natural gas prices in Henry hub from 2004 till 2009
source: Official Nebraska Government website
source: Official Nebraska Government website
Monday, May 25, 2009
Outlook for stock markets.
Financial markets are going through the one of top growing period last years, recorded a sharp increase in risky assets such as shares and commodities. Over the past two months, stock markets rose in the range of 20 - 50% and commodity markets strengthened by 25%. The optimism and increased appetite of investors have several factors. This is essentially a very cheap price of shares and commodities, cheap money and last but not least some signs of stabilizing economies. The question remains whether it is sustainable growth, or just a short break.
Before the beginning of the current growth rally, the ratio of the share price and earnings per share (P / E) is the lowest over the past 10 years (P / E be in the range of values 11), also the rates on the interbank market began to decrease, 3M Libor fell close to the level of 2002. Signs of stabilizing economies supported investors in stocks purchases. Together with some government officials announcing the economy bottom and global recovery.
All these factors caused a significant decrease in the risk aversion. Investors seeking high yield began to beat the risk-adjusted assets and insert your money into commodities and shares. The decline in risk aversion to shows such as the volatility index (Vix) and the TED spread. Volatility Index Vix (given the volatility of the S & P 500 index) dropped to the value of September 08 (before the biggest sell off), similarly with TED spread (difference between the value of 3M LIBOR and yield on three-month Treasury bills).
Before the beginning of the current growth rally, the ratio of the share price and earnings per share (P / E) is the lowest over the past 10 years (P / E be in the range of values 11), also the rates on the interbank market began to decrease, 3M Libor fell close to the level of 2002. Signs of stabilizing economies supported investors in stocks purchases. Together with some government officials announcing the economy bottom and global recovery.
All these factors caused a significant decrease in the risk aversion. Investors seeking high yield began to beat the risk-adjusted assets and insert your money into commodities and shares. The decline in risk aversion to shows such as the volatility index (Vix) and the TED spread. Volatility Index Vix (given the volatility of the S & P 500 index) dropped to the value of September 08 (before the biggest sell off), similarly with TED spread (difference between the value of 3M LIBOR and yield on three-month Treasury bills).
Pic1: TED spread chart
Confidence in markets and the risk aversion is at the similar level, as it was before market sell off on September and October last year. Very optimistic mood in the markets is also improving investor confidence, the German ZEW index rose to its three-year maximum.
Pic 2: P/E for Dow Jones Industrial Average Index
Due to massive growth rally the ratio P/E for Dow Jones is at the value of 21,5 (most since 2003). It is a combination that suggests the possibility of aggressive sale on the stock markets because we are still heading very poor GDP of individual countries and ever-growing unemployment. At present it is not the growth of equity markets supported by the fundamentals of the real economies. What, on the contrary can speak for the continued growth of equity markets, is the price of money - interest rates on the interbank markets are currently at record low levels (in the markets is reflected in the massive pumping of liquidity into the economy).
Monday, May 18, 2009
S&P 500 technical picture.
Index S&P 500 is caught in triangle right now. This is basically neutral pattern in technical analysis. But still as resistance level is longer lasting we can consider breakout as a more difficult.
Shorter support level has been formed since March index lows.
Have a look to the full video analysis of S&P500 index.
Sunday, May 10, 2009
3 trading videos: Bank stress test, Pound, Crude Oil.
Today I am coming to you with 3 new videos published by Adam Hewison. The first is analysis for S&P 500 index and the impact of bank stress test.
The second video is about currency pair GBP/USD. After steep decline in second half of 2008, there are signs of stabilization in last months. Based on Fibonacci retracement first level of 23,6% has been crossed over and British Pound is ready for substantial move up.
The last trading video gives you a little bit insight and update on crude oil prices. Commodity price is analyzed on ETF Crude Oil (USO). Here is the crude oil analysis.
The second video is about currency pair GBP/USD. After steep decline in second half of 2008, there are signs of stabilization in last months. Based on Fibonacci retracement first level of 23,6% has been crossed over and British Pound is ready for substantial move up.
The last trading video gives you a little bit insight and update on crude oil prices. Commodity price is analyzed on ETF Crude Oil (USO). Here is the crude oil analysis.
Saturday, April 25, 2009
Pairs trading.
Pairs trading is suitable investing strategy at the time like right now. Going long with the stock which you consider as a better one in the pair and going short with worse company. Environment of high volatility. You don't really know if market will continue rebound rally or will retest bear market lows.
I have prepared some stocks pair with analysis since 20th Novemeber. More or less 6 month period and most of the stocks have bottomed this day.
1. Amazon (AMZN) vs Ebay (EBAY).
Amazon continues with posting better than expected results even in the tough times of recession. On the other side Ebay's core auction business has been decelerating. Therefore you would gain 135% on Amazon bull run and lost around 43% in Ebay's share price gain. Altogether profit 92%.
Last month Ebay declares strong rally and shares growing double times more than Amazon. It seems like very low valuation attracts more buyers even though there is no fundamental improvement in Ebay strategy.
2. Toyota Motors (TM) vs. General Motors (GM).
Automotive industry has offered quite easy money in terms of pairs trading. Still declining US car makers vs. growing dominance of Toyota accelerated in times of global economic recession. Long position in Toyota grew by 35% and short position in General Motors provided 39%. In total 74%
3. Google (GOOG) vs. Yahoo (YHOO).
To be honest here I would be losing. Still growing market share for Google vs. smaller share for Yahoo. Long position in Google +39% vs. loss of 61% in Yahoo short position. Altogether loss of 22%.
Here I see as an explanation that Yahoo shares were so much punished after no deal with Microsoft (MSFT) that simple they were cheaper than Google.
You can also check out my articles about chip makers pairs trading or trading pairs with ETF.
I have prepared some stocks pair with analysis since 20th Novemeber. More or less 6 month period and most of the stocks have bottomed this day.
1. Amazon (AMZN) vs Ebay (EBAY).
Amazon continues with posting better than expected results even in the tough times of recession. On the other side Ebay's core auction business has been decelerating. Therefore you would gain 135% on Amazon bull run and lost around 43% in Ebay's share price gain. Altogether profit 92%.
Last month Ebay declares strong rally and shares growing double times more than Amazon. It seems like very low valuation attracts more buyers even though there is no fundamental improvement in Ebay strategy.
2. Toyota Motors (TM) vs. General Motors (GM).
Automotive industry has offered quite easy money in terms of pairs trading. Still declining US car makers vs. growing dominance of Toyota accelerated in times of global economic recession. Long position in Toyota grew by 35% and short position in General Motors provided 39%. In total 74%
3. Google (GOOG) vs. Yahoo (YHOO).
To be honest here I would be losing. Still growing market share for Google vs. smaller share for Yahoo. Long position in Google +39% vs. loss of 61% in Yahoo short position. Altogether loss of 22%.
Here I see as an explanation that Yahoo shares were so much punished after no deal with Microsoft (MSFT) that simple they were cheaper than Google.
You can also check out my articles about chip makers pairs trading or trading pairs with ETF.
Monday, April 6, 2009
S&P 500: Day by day analysis.
At the end of March I came to you with the first technical analysis for S&P 500. It was right after very strong rebound rally which brought more than 20% gain. This beats many historic records.
Adam Hewison started to follow closely S&P index and predicted successfully profit taking after index reached almost level of 61% of Fibonacci retracement.
Monday and Tuesday profit takings sent the index lower by 3% at the beginning of last week. But the rest of positive week days sent S&P 500 higher to forth consecutive winning week.
Adam predicts test of March lows. Below you can check his latest video analysis.
S&P analysis - 04/02
S&P analysis - 03/30
S&P analysis - 03/26
Adam Hewison started to follow closely S&P index and predicted successfully profit taking after index reached almost level of 61% of Fibonacci retracement.
Monday and Tuesday profit takings sent the index lower by 3% at the beginning of last week. But the rest of positive week days sent S&P 500 higher to forth consecutive winning week.
Adam predicts test of March lows. Below you can check his latest video analysis.
S&P analysis - 04/02
S&P analysis - 03/30
S&P analysis - 03/26
Sunday, March 29, 2009
S&P 500: Short term overbought
Last two weeks investors have enjoyed nice rebound rally. Actually the best two weeks in 70 years history when S&P 500 gained 20 %. Technically very important line is at level of 804 points. On Monday index crossed this line and stayed above the whole week. 800's level is not only support/resistance point in current bear market market it had been bottom in previous bear market in October 2002.
Next week brings G-20 meeting on Thursday, Auto industry reality check on Tuesday. And also plenty of economic data. Therefore these news should lead investor's sentiment.
Check out also latest analysis from Adam Hewison. Adam analysis S&P 500 with Fibonacci retracement. He calls short term peak at 839 with possible downside correction. Current index level shows a trigger of new bull market somewhere around 943.
Sunday, March 22, 2009
Healthcare isn´t always defense.
GlaxoSmithKline (GSK) has more than 40% of their income from U.S.. The company produces virtually all categories of drugs and can be described as a direct competitor of companies such as Abbott Laboratories (ABT), Pfizer (PFE), Johnson & Johnson (JNJ), Novartis (NVS) and Sanofi Aventis.
The most important segment in terms of sales is Respiratory. A key product is Seredite / Advair. Just this single drug is over 20% of total sales across the company GSK, which is impressive. It's however a big mess for the company GSK. Patent protection expires in the U.S. already for the year. In Europe and in 2013. This is, however, relatively soon.
Antiviral division has a broad portfolio of medicines. However it doesn't have such a commercial success as Respiratory. Here are 4 interesting products. HIV does not make only one product, but a group of drugs to combat this malicious virus. The treatment of this disease through GSK collects £ 1.5 billion a year.
Epzicom (Kivexa) is a solid promise for the future. It makes a turnover approaching £ 0.5 billion and patent will expire in 2016 (2019 in the EU). Combivir is intended to cure, with the exclusivity with GSK will have over 3 years. Trizivir is good potential for growth.
Other medicines relatively soon lose their patent. For the revenue, it is interesting only billions Valtrex, which sells very well in the U.S., where he as well as the patent expires in Europe.
Division of Central Nervous System (CNS) is a portfolio predominantly commercially successful drugs. Lamictal sales is almost at 1 billion GBP. But unfortunately, the wrong signal is limited license close to expiry. Imigran (Imitrex), Seroxat (Paxil), Requip and Wellbutrin constitute about 10% of sales across the company. Unfortunately, all medicines have limited license sales and a radical decline. Treximet is the future of medicine.
For GSK is apparently inspired by the Pfizer, whose business is mainly in the treatment of cardiovascular diseases. Division Cardiovascular and Urogenital has huge potential for the future. Medicines with expired licenses is only a small proportion of the group. The rest can generate profits at least 15 years.
Division of Metabolic not for subsequent years, the best prospects. In three years, expiring licenses to all existing drugs in this group. The total share of our company is about 6%. In the next 2 years could grow to 10% off. Important for the company is product AVANDIA and its modifications.
Combating bacteria in division Anti-bacterials is not significant. While Augmentin is a medicine in decline, Altabax is in front of the future. Revenues from Augmentinu has absolutely not decline the year, so it's again up to the pressure to earn Altabax began immediately.
Oncology and Emesis is difficult to, because in this sector number one is Genentech. It's seen in the overall share of the sales company. Tykerb is the only promise that could go up this division in the future.
In division Vaccines revolves over £ 2.5 billion a year. Most of the money is not protected by a patent. Those have a very likeable distance expiration. Interesting in this division is that it is commercially successful in the EU than in the U.S., which certainly is related to the health care system in general.
***
There is strong competition in two key markets (U.S. and EU). The potential of emerging markets is undoubtedly greater. Analysts usually predict profit growth of the company below 10% for the next 5 years. It is usually around 6% p. a. Taking into account number and significance of expiring patents, this will be very hard to be achieved.
The most important segment in terms of sales is Respiratory. A key product is Seredite / Advair. Just this single drug is over 20% of total sales across the company GSK, which is impressive. It's however a big mess for the company GSK. Patent protection expires in the U.S. already for the year. In Europe and in 2013. This is, however, relatively soon.
Antiviral division has a broad portfolio of medicines. However it doesn't have such a commercial success as Respiratory. Here are 4 interesting products. HIV does not make only one product, but a group of drugs to combat this malicious virus. The treatment of this disease through GSK collects £ 1.5 billion a year.
Epzicom (Kivexa) is a solid promise for the future. It makes a turnover approaching £ 0.5 billion and patent will expire in 2016 (2019 in the EU). Combivir is intended to cure, with the exclusivity with GSK will have over 3 years. Trizivir is good potential for growth.
Other medicines relatively soon lose their patent. For the revenue, it is interesting only billions Valtrex, which sells very well in the U.S., where he as well as the patent expires in Europe.
Division of Central Nervous System (CNS) is a portfolio predominantly commercially successful drugs. Lamictal sales is almost at 1 billion GBP. But unfortunately, the wrong signal is limited license close to expiry. Imigran (Imitrex), Seroxat (Paxil), Requip and Wellbutrin constitute about 10% of sales across the company. Unfortunately, all medicines have limited license sales and a radical decline. Treximet is the future of medicine.
For GSK is apparently inspired by the Pfizer, whose business is mainly in the treatment of cardiovascular diseases. Division Cardiovascular and Urogenital has huge potential for the future. Medicines with expired licenses is only a small proportion of the group. The rest can generate profits at least 15 years.
Division of Metabolic not for subsequent years, the best prospects. In three years, expiring licenses to all existing drugs in this group. The total share of our company is about 6%. In the next 2 years could grow to 10% off. Important for the company is product AVANDIA and its modifications.
Combating bacteria in division Anti-bacterials is not significant. While Augmentin is a medicine in decline, Altabax is in front of the future. Revenues from Augmentinu has absolutely not decline the year, so it's again up to the pressure to earn Altabax began immediately.
Oncology and Emesis is difficult to, because in this sector number one is Genentech. It's seen in the overall share of the sales company. Tykerb is the only promise that could go up this division in the future.
In division Vaccines revolves over £ 2.5 billion a year. Most of the money is not protected by a patent. Those have a very likeable distance expiration. Interesting in this division is that it is commercially successful in the EU than in the U.S., which certainly is related to the health care system in general.
***
There is strong competition in two key markets (U.S. and EU). The potential of emerging markets is undoubtedly greater. Analysts usually predict profit growth of the company below 10% for the next 5 years. It is usually around 6% p. a. Taking into account number and significance of expiring patents, this will be very hard to be achieved.
Sunday, March 15, 2009
Bullish case for Microsoft.
Microsoft (MSFT) is the largest technology companies around the world. Is it right time for investing? By calculating the intrinsic value of shares clearly yes. On what business the company is and what its profits come in the future?
Let's focus on the structure of the business. Activities are divided into the following divisions:
1) Client
Under Client divisions located operating systems. The operating system Vista, which is now a source of income, there is either the standard version, or in the Premium Edition, such as Vista Business or Vista Ultimate. In 2008 it had been sold 180 million licenses for operating systems of MSFT.
In 2009, MSFT expects greater demand for operating systems within the retail clients than in the business sector. Particularly the growing number of PC users in emerging markets.
2) Server and Tools
This division focuses primarily on the sale of licensed software for computer servers and networks. It is on Windows Server and Microsoft SQL Server. Under this division are also still activity, which is hiding the title of Microsoft Consulting Services. In 2009 it is expected that sales will increase due to release new versions of Windows Server, Microsoft Visual Studio and Microsoft SQL Server
3) Online Services and Business
This is not for Microsoft as well as others. This division contains operation from portals MSN and Live Search. Mainly unsuccessful acquisition of Yahoo! brought a lot of discussion. The annual report on the potential acquisition has this comment: "After careful consideration we concluded that the price requested by Yahoo! was contrary to the interests of shareholders MSFT. We have offered several other suggestions on how to join the Yahoo! or engage in joint co-operation, but all these proposals have been Yahoo! rejected. After this unsuccessful acquisition still looking for other ways, whether through their own invention, an acquisition or other form of partnership as an important way to enter into this business. "
4) Microsoft Business Division
This division is responsible for Microsoft Office Systems and Microsoft Dynamics Business Solutions. Microsoft Office make up more than 90% of this income group. Microsoft Office 2007 licenses are sold very decently (the year of sales growth of 21%). Slight decrease (-2%) has seen sales of Microsoft Dynamics. At present it is the most critical division of Microsoft.
5) Entertainment and Devices Division
This is again the most dynamic group of all. Development of the Xbox 360 and the development of computer games and video games for Xbox are activities of this group. In recent years, MSFT has invested large sums in this division and the profitability has slowly turned on its side. Competition Playstation is not already as much ahead as in the past. In addition, successes celebrated and sales of computer games from Microsoft, there is very big problem with piracy.
Financial analysis for Microsoft
In view of this table shows that Microsoft, despite the global recession is able to increase its revenue and profit. Profit over 17 billion USD and it is extremely necessary to say that deserves recognition. Little deterrent factor for the shareholders is certainly pay ratio, which currently reaches 24%. This is a little meanness from MSFT, but the segment still can talk about the growing industry. Therefore, I would even MSFT considered a type of so-called growth shares.
The good news is that Microsoft was able to use this five-year period to maintain a faster growth rate of profit to revenue growth. Moreover, the growth rate of profits in terms of the geometric average is interesting to 21%.
Cash by MSFT now holds, is far from such, as had five years ago. Then hold incredible 60 billion USD, which is now something unimaginable. And the 23 billion USD in total gives respect. Business debts are also total in check, so from this perspective seems to be everything allright.
Fundamental analysis for Microsoft
Let's focus on the structure of the business. Activities are divided into the following divisions:
1) Client
Under Client divisions located operating systems. The operating system Vista, which is now a source of income, there is either the standard version, or in the Premium Edition, such as Vista Business or Vista Ultimate. In 2008 it had been sold 180 million licenses for operating systems of MSFT.
In 2009, MSFT expects greater demand for operating systems within the retail clients than in the business sector. Particularly the growing number of PC users in emerging markets.
2) Server and Tools
This division focuses primarily on the sale of licensed software for computer servers and networks. It is on Windows Server and Microsoft SQL Server. Under this division are also still activity, which is hiding the title of Microsoft Consulting Services. In 2009 it is expected that sales will increase due to release new versions of Windows Server, Microsoft Visual Studio and Microsoft SQL Server
3) Online Services and Business
This is not for Microsoft as well as others. This division contains operation from portals MSN and Live Search. Mainly unsuccessful acquisition of Yahoo! brought a lot of discussion. The annual report on the potential acquisition has this comment: "After careful consideration we concluded that the price requested by Yahoo! was contrary to the interests of shareholders MSFT. We have offered several other suggestions on how to join the Yahoo! or engage in joint co-operation, but all these proposals have been Yahoo! rejected. After this unsuccessful acquisition still looking for other ways, whether through their own invention, an acquisition or other form of partnership as an important way to enter into this business. "
4) Microsoft Business Division
This division is responsible for Microsoft Office Systems and Microsoft Dynamics Business Solutions. Microsoft Office make up more than 90% of this income group. Microsoft Office 2007 licenses are sold very decently (the year of sales growth of 21%). Slight decrease (-2%) has seen sales of Microsoft Dynamics. At present it is the most critical division of Microsoft.
5) Entertainment and Devices Division
This is again the most dynamic group of all. Development of the Xbox 360 and the development of computer games and video games for Xbox are activities of this group. In recent years, MSFT has invested large sums in this division and the profitability has slowly turned on its side. Competition Playstation is not already as much ahead as in the past. In addition, successes celebrated and sales of computer games from Microsoft, there is very big problem with piracy.
Financial analysis for Microsoft
In view of this table shows that Microsoft, despite the global recession is able to increase its revenue and profit. Profit over 17 billion USD and it is extremely necessary to say that deserves recognition. Little deterrent factor for the shareholders is certainly pay ratio, which currently reaches 24%. This is a little meanness from MSFT, but the segment still can talk about the growing industry. Therefore, I would even MSFT considered a type of so-called growth shares.
The good news is that Microsoft was able to use this five-year period to maintain a faster growth rate of profit to revenue growth. Moreover, the growth rate of profits in terms of the geometric average is interesting to 21%.
Cash by MSFT now holds, is far from such, as had five years ago. Then hold incredible 60 billion USD, which is now something unimaginable. And the 23 billion USD in total gives respect. Business debts are also total in check, so from this perspective seems to be everything allright.
Fundamental analysis for Microsoft
Sunday, March 8, 2009
Top gurus: The best investment for 2009.
Based on the investor poll, commodities seem to be the most appealing investment for 2009. Followed by stocks, bonds and cash as the worst asset class for the year.
George Soros is one those investors betting on oil price rebound. His major favorite in Brazilian Petrobras (PZE). In February he also upped stake in Best Buy (BBY).
In this post I would like to gather opinions about investing in 2009 from top investor gurus. Let me start with Warren Buffett. Warren called stock market bottom already in mid 2008 and have started to add equity positions to his holding. Last actions show buying interests in railroads companies. He increased stake in Burlington Northern (BNI). Despite of declining volume, earnings have gone up by 19%. Other interesting picks from industry are Union Pacific with 35% earnings growth or CSX Corp (CSX) with 16%.
Another two top investors, Donald Coxe and David Winters, like railroads. Companies will benefit from low energy costs. P/E vary in range of 6 - 8 for the top companies in the sector with book value equalling to the current share price. Still amazing growth rate makes attractive PEG ratio.
George Soros is one those investors betting on oil price rebound. His major favorite in Brazilian Petrobras (PZE). In February he also upped stake in Best Buy (BBY).At the end of this post let me give you one tip for the book Guru Investor. You can find out and follow some good tips in past from investors like Peter Lynch, Benjamin Graham, Warren Buffett or others. Now the book is discounted on Amazon by 34%.
Monday, March 2, 2009
Dividend cuts and S&P500 valuation.
The long-term statistics show that the yield of U.S. stocks from 1900 is, exclusive of the impact of inflation, on average at 6%. If the calculation excludes dividend yield falls on the full 70% to just 1.7%, below the long-term average of 2,1-percentage yield on U.S. government bonds. Investors expect long-term growth of dividends by an average of 1.2% per year. In the first half of the 20th century represented a share of dividend yield on the total stock returns, which accounted for 5.3%, almost 100%. Between 1980 - 2000, the proportion of dividends to total income decreased to approximately 25%.
In the 4Q of last year announced 288 companies from the base index of the S & P 500 partial or complete reduction of dividends, the biggest since establishment of index on 1955. The involvement of dividends to the whole equation shows that mentioned index is still about 40% overvalued. Fair value equivalent to the current situation should be at about 526 points.
Only 25 firms from the base of the index last year "saved" at around 17 mld.USD dividends, which exceeds the overall reduction in dividends in the years 2003-2007, when the index has produced an assessment of 83%. On the basis of one share of the company based S & P 500 this year may reduce the dividend by 13%, which would correspond to the largest decrease from 1942.
In a similar perspective, it appears that the titles that have maintained power for the payment of dividends are now very cheap and very attractive. These include mainly companies McDonald's, Procter & Gamble and others.
In the 4Q of last year announced 288 companies from the base index of the S & P 500 partial or complete reduction of dividends, the biggest since establishment of index on 1955. The involvement of dividends to the whole equation shows that mentioned index is still about 40% overvalued. Fair value equivalent to the current situation should be at about 526 points.
Only 25 firms from the base of the index last year "saved" at around 17 mld.USD dividends, which exceeds the overall reduction in dividends in the years 2003-2007, when the index has produced an assessment of 83%. On the basis of one share of the company based S & P 500 this year may reduce the dividend by 13%, which would correspond to the largest decrease from 1942.
In a similar perspective, it appears that the titles that have maintained power for the payment of dividends are now very cheap and very attractive. These include mainly companies McDonald's, Procter & Gamble and others.
Saturday, February 14, 2009
Earnings results and stock market valuation.
Its results for the last three months of last year showed 77.4% of companies, which are included in the index based on the S & P 500. So far the results have shown an average annual decrease in profit for the last quarter of 2008 on 37,7%. If we reflect market capitalization it is 18.7% decline in profit. These different results show that the "well" so far the leading companies with large market capitalization. Simply, it could be said that large multinational organizations has gone through the crisis better than a small regional company.
If we look at individual sectors, we find no big surprises. The worst has the financial sector, which showed a decline in profit on an incredible 4 250%. However, sectors in which the crisis began, is forced to write off worthless investment and the writedown losses. Poor results also shows the basic materials sector, where due to prices fall earnings decreased on average by 78%.
At the other side of sectors still with positive growth there are basic consumer goods (eg food) and health care with 14.3% growth in profits or 9.7% (together with the utilities only three sectors with the year of profit growth). Regarding the industry, here the worst performance for banking institutions, together with car manufacturers. In these sectors decreased profit by 133% or about 1 500%.
Many stock titles seemed to be undervalued. However, in last year's stock index fell the S & P 500 of 38.5% and profit-based companies in this index decreased on 37,7% so far. It is therefore possible to say that the declines in U.S. stock markets are in line with the decline in profitability and many companies are reasonably valued.
It should be noted that the indicator P / E is influenced by falling profits of financial institutions, which show huge losses. However, it is impossible that all stock items are properly valued. Certainly on the stock market it can be found a number of undervalued companies that have suffered declines due to negative sentiment.
If we look at individual sectors, we find no big surprises. The worst has the financial sector, which showed a decline in profit on an incredible 4 250%. However, sectors in which the crisis began, is forced to write off worthless investment and the writedown losses. Poor results also shows the basic materials sector, where due to prices fall earnings decreased on average by 78%.
At the other side of sectors still with positive growth there are basic consumer goods (eg food) and health care with 14.3% growth in profits or 9.7% (together with the utilities only three sectors with the year of profit growth). Regarding the industry, here the worst performance for banking institutions, together with car manufacturers. In these sectors decreased profit by 133% or about 1 500%.
Many stock titles seemed to be undervalued. However, in last year's stock index fell the S & P 500 of 38.5% and profit-based companies in this index decreased on 37,7% so far. It is therefore possible to say that the declines in U.S. stock markets are in line with the decline in profitability and many companies are reasonably valued.
It should be noted that the indicator P / E is influenced by falling profits of financial institutions, which show huge losses. However, it is impossible that all stock items are properly valued. Certainly on the stock market it can be found a number of undervalued companies that have suffered declines due to negative sentiment.
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