Tag - Cit

Stocks closed up today in trading that dipped downward for most of the trading session only to crawl back up in the afternoon.

The Dow was up 68 points to close at 8,916; the Nasdaq inched up in late trade to post a 7 point gain and close at 1,916; and the S&P 500 close at 955, up just over 3 points.

Contrary to the major indices, the Russell 2000 closed down nearly 2 points to 525.

Small-cap gainers were lead by JDA Software Group (Nasdaq:JDAS) of Scottsdale, Arizona, up 34% today after the company's second quarter earnings beat Wall Street projections handily. JDA makes software that helps retailers manage their inventories and as those retailers have been looking to improve their bottom lines by minimizing stock in inventory they've turned to JDA for help. According to Thomson Reuters the street was looking for profits of 30 cents per share while the firm reported 47 cents per share.

Other small-cap gainers include BioCryst Pharmaceuticals (Nasdaq:BCRX) up 22%; and Akorn (Nasdaq:AKRX) up 17%.

Leading percentage decliners for the day include Headwaters (NYSE:HW) down 23%; CIT Group (NYSE:CIT) down 22%; and LexMark International (NYSE:LXK) down 20%.

*****Caterpillar (NYSE:CAT) is up huge this morning after it blew away analysts' earnings estimates for the 2nd quarter. Caterpillar is an important proxy for global growth because it sells so many machines overseas. So when it reports earnings of $0.72 a share when it's only expected to make $0.22, it seems like a big deal.  
The assumption is that global growth is helping Caterpillar. If only it were that simple. But Caterpillar missed expected revenues by nearly a billion dollars. Analysts wanted to see $8.7 billion in revenues, but they only got $7.9 billion.  

Caterpillar benefited from cost-cutting and a lower tax rate. Since December, it has cut 17,000 full-time jobs and axed another 17,000 in part-time and contract jobs.  
Caterpillar can be commended for cutting back its production to be in line with demand. But there clearly isn't any growth here. 

*****This is a common theme so far this earnings season. Companies are talking about stability, not growth. In other words, things aren't getting worse. But they aren't getting better, either.  

Companies are beating earnings expectations through cost-cutting, which is essentially a one-time event. And in the big picture, those cost-cutting moves help profits, but ultimately remove demand for goods and services because they are adding to unemployment.  

I don't think unemployment has peaked. I also think that we will see high unemployment persist for a few years. And that will mean a long wait for robust growth from the U.S. economy.  

And to complicate things, we can also expect more regulation and higher taxes to stifle growth. I'm calling this situation "Managed America." And investors need to be prepared for how to invest in Managed America.  

I just released my "Managed America" forecast for my Top Stocks Insights advisory service. It's part of my Predictions 2009 Update special report that was just released. In the report, I outline my strategy for investing in Managed America. Click here to get your copy. 

*****Here's some great news from the commercial real estate sector. Convenience store company 7-Eleven is opening 200 new stores this year. Why? Because it's getting leases at a 30% discount form just 6 months ago. And interestingly, it's moving into some of the hardest hit real estate markets - New York and California.  
Now, 200 stores won't turn the commercial real estate market around. But 7-Eleven's move illustrates how commercial real estate, and real estate in general, will recover.  

The first step is the painful part - leases and mortgages go into default and are written off. This is a complicated process as there is usually a trail of financial obligations based on the assumption that whoever leased or purchased the real estate will be paying.   

As we've seen, defaults and foreclosure have far-reaching effects. But once the losses are taken, the property can be leased or sold at a price that makes sense for a business. In other words, a company like 7-Eleven couldn't make money at rents from six months ago. But now that the price is down 30%, suddenly it makes good business sense for 7-Eleven to open stores and hire people.  

There's a lot more pain to go through before this process actually leads to a growing economy. But it will happen, eventually.  

Best Regards,

Ian Wyatt
Editor
SCI Daily

Stocks close up today after most of today's trading was tightly range bound. The Dow soared to 8,730 from 8,607 around 1:30 p.m. eastern to settle on the day up 95 points to 8,711.

The Nasdaq showed an even greater percentage gain (1.19% v. 1.11%) to close up 22 points and finish the day at 1,885. The S&P 500 closed at 940, up 8 points on the day.

The Russell 2000 was 7 points to close at 523. 

The volume leader in the small-cap space include CIT Group (NYSE:CIT) with 415 million shares traded. Investors dumped the stock upon realizing that the U.S. Treasury Department was not going to bail the firm out.

Small-cap gainers were lead by ARCA biopharma (Nasdaq:ABIO) up 48%; Angiotech Pharmaceuticals (Nasdaq:ANPI) up 31%; and CDC Corporation (Nasdaq:CHINA) up 29%.

That was a terrific rally yesterday. Intel's (Nasdaq:INTC) earnings truly were a surprise. We've now seen the two biggest up days in 6 weeks come on consecutive days. The major indices had been looking weak, but not anymore. 

JP Morgan (NYSE:JPM) is the latest company to beat earnings expectations. But let's not forget that it's widely believed that analysts really low-balled the company earnings estimates across the board for the 2nd Quarter, so companies should be besting them. 

What matters is guidance going forward. That's why Intel's news was so surprising. 

*****China's 2nd Quarter GDP number is out. The country grew at 7.9%, and may hit 10% by the 4th Quarter. Industrial production and fixed asset investment grew strongly. 

Several banks upped their growth forecasts for China today. 

I've seen some concern that lending is getting too loose in China and that a disaster is waiting to happen. But I'm not worried about that right now. China's government has showed in the past that it's pretty good at clamping down on lending standards when the economy gets too hot.

(If you're interested in tapping into the run-up in China stocks, check out my new report. Click here for your copy.)

*****Despite all the good news this morning, the chinks in the armor are clear to see. The number of households facing foreclosure was up 15% in the first half of the year. As many 336,000 homeowners received a foreclosure notice in June.  

Year over year, foreclosure filings were up 33% in June. And they were up 5% just since May.

Foreclosures are on the rise despite the government's $50 billion program to assist loan modifications for troubled mortgage holders.  

This will no doubt weigh heavily on banks that still have outsized exposure to the sub-prime market and reinforces our strategy of looking for investment opportunity outside the housing and financial sectors, JPM and GS notwithstanding.  

Ian Wyatt
Editor

P.S.-Just yesterday I released the updated Predictions Issue for Top Stock Insights readers. Find out which sectors and stocks will be hot over the next six months and which ones to stay far, far away from. Click here for more

Stocks jumped today after consecutively back to back good reports from Goldman Sachs (NYSE:GS) and Intel (Nasdaq:INTC) as well as a surprise from Gannett (NYSE:GCI) that it beat profit estimates by 9 cents, driving shares up 28%.

Good news kept flowing as investors were treated to revisions from the Federal Reserve Open Market Committee that the economy will shrink from 1% to 1.5% in 2009 as opposed to its earlier prognostication of 1.3% to 2%. The committee raised its inflation projection for 2010 to a range of 1.2% to 1.8%.

The Dow was up sharply by 256 points to close at 8,616, the highest its been in a month. The Nasdaq closed up 63 points to 1,863 and the S&P 500 roared to 933, up 27 points from yesterday's close at 906.

Small-cap stocks fared well with the Russell 2000 closing at 509, up 15 points. 
 

Today's volume leaders in the small-cap space include yesterday's leader, CIT Group (NYSE:CIT) with over 74 million shares traded, although trading was halted before the close on impending news concerning discussion with the federal government. Other small-cap volume leaders include Huntington Bancshares (Nasdaq:HBAN), and Sirius XM Radio (Nasdaq:SIRI).

Small-cap gainers were lead by Targacept (Nasdaq:TRGT) up 137% after news broke that its depression treatment drug candidate, currently called TC-5214, was able to significantly outperform a placebo drug in testing on patients with major depression disorders. The company announced that it expects to start late-stage trials of the drug in Q2 2010 and is in talks with several potential partners to help complete the drug's development.

Other small-cap gainers include a one-time holding with SmallCapInvestor PRO, Brigham Exploration (Nasdaq:BEXP) up 23%; Ferro Corporation (NYSE:FOE) up 35%; and beleaguered newspaper giant Gannett (NYSE:GCI) up 30%.

*****If you've ever wondered what it's like to be Warren Buffett and have more cash than you can spend or invest, just ask China. China just announced that it has over $2 trillion in foreign reserves.  

That is an unbelievable amount of cash to have accumulated. Bloomberg reports that China's reserves doubled in less than 3 years.  

This much money means two things: China can support it's GDP growth as long as it chooses to; and, China will continue to buy Treasuries. 
Sherman Chan, a Moody's economist in Australia said, "China has the strongest prospects out of all major economies, so it is not surprising that hot money is flowing back…China has certainly recovered from the downturn, and it is on a strong footing now." 

That's why we've been loading up on Chinese stocks in SmallCapInvestor Pro. It's not too late to profit from our top Chinese stocks. Click here for details.  

*****Yesterday morning it was Goldman Sachs (NYSE:GS). Then last night, it was Intel (Nasdaq:INTC). The world's biggest chip maker crushed earnings, but then did the unthinkable and offered a 3rd quarter revenue forecast that is as much as 14% higher than what analysts were expecting.  

Between Goldman and Intel, I'll take Intel. Intel is selling a product. And apparently, consumer demand for Intel's product is stronger than anyone imagined. Sure, much of the strength is coming from Asia (back to my China comment above), but, so what? Revenue is revenue. 

Other semiconductor companies were rallying in after hours, including Texas Instruments (NYSE:TXN) and Advanced Micro Devices (NYSE:AMD).   
As for Goldman, I didn't think that stock will stay over $150. Not that it matters. TradeMaster's Jason Cimpl has made money shorting Goldman. But as for me, Goldman is on the "Never Short" list along with Google (Nasdaq:GOOG) and Apple (Nasdaq:AAPL). They may have bad days, their stocks may get a beat-down once in a while, but these are solid companies with a penchant for finding profits no matter what the economy is doing. 

*****Government actions are currently filling in for an actual economy. That's how it is in our new "Managed America." Most expect the heavy hand of government to be temporary, and that Managed America can end sooner than later. We'll see… 

I expect the conditions of Managed America - high unemployment, sluggish growth, more regulations, higher taxes, and inflation to last years instead of months. And I've outlined my expectations for investing under these conditions in my new Special Issue of Top Stock Insights. The article is titled Managed America: The New Economic Reality. It's being released this morning. You can sign up for Top Stock Insights and get my blueprint for profiting in Managed America. Click here for your copy now.  

*****Now, as you know, it's Newsletter Advisors Wednesday. And by coincidence we're going to be speaking with Andy Obermueller about profiting from government-driven investing. It's essentially the flip side of the Managed America. Enjoy.

Best regards,

Ian Wyatt
Chief Investment Strategist
SmallCapInvestor.com

Newsletter Advisors Wednesday

This week's NewsletterAdvisors.com investment expert is Andy Obermueller, Chief Investment Strategist and editor for StreetAuthority's Government-Driven Opportunities.

Andy was a journalist before joining StreetAuthority. He worked for the business desks of the Philadelphia Inquirer and the Star-Ledger, New Jersey's largest paper, before going on to lead business coverage for a Texas daily. Andy briefly left the industry to get an inside look at corporate finance as a commercial lender for Wells Fargo's business banking group. He lives in Austin.

Andy, thanks for joining us today, now let's get started.   

Can you explain your investment process and criteria for investments?

I keep a very close watch on the executive branch of the government, including each cabinet department, as well as Congressional action. This gives me a pretty good sense of what Washington is up to. I study the legislation and regulatory proposals and track all the data I can -- there's a lot of it. I then look at which companies will be affected by government action and what that's likely to mean for them.

For instance, the FDA is part of the Department of Health and Human Services. I have a database of every drug in the approval process. For some giant drugmakers -- a Merck, say, or a Pfizer -- a new drug might not have much impact on the bottom line. But when the government approves a drug for a smaller drugmaker, the effect is huge. Those small drugmakers can be extremely lucrative investments -- all because of a government action.

What do you believe gives the government-driven investment style an edge over other investment styles?

Two words: Billion and trillion. These are the dollar terms of the government programs that the newsletter deals with. The U.S. federal government is gargantuan. It's the most powerful financial force on the planet. Every time a public dollar is spent, a private sector profit is realized. That has enormous implications, especially in light of the bailout, the stimulus bill and the administration's willingness to expand the role and reach of government.

Look, I'm passionate about this topic for one reason: it works. I've personally invested using a number of strategies over the years. Like you, I've tried various combinations of value, income and growth strategies. However, I'm not sure I've ever seen anything with as much potential as the government-driven stocks I'm finding.

What sectors do you think offer the most opportunities to profit from government action today?

I like energy and finance. Mr. Obama's move toward a green-collar economy, that is, merging the environmental movement with the gross domestic product, has far-reaching implications for every industry. And the banking system offers vast possibility: Though most large banks have entered a post-bailout phase, many small and midsize financial institutions are still struggling. They will come back -- they are as vital to the national economy as the large banks are too big to fail -- and their stock will follow suit. These two areas are outstanding for investors seeking large returns over the long term.

Ok, let's look at energy. Tell me about a government-driven stock you've dug up in this area.

Well, everyone knows that clean energy is a major part of the Obama agenda.  He hasn't even been in office a year yet and his green initiatives are already playing out.  On June 28th the House passed the "cap-and-trade" bill - which calls for a dramatic reduction in the amount of CO2 that industry can emit. This is historic.

The problem is, 35% of America's carbon emissions come from coal-fired power plants. Why? Because coal is both abundant and cheap in the U.S. -- we're sitting on enough of the stuff to power every home in America for the next 400 years. And at the same time, these coal plants are simply too expensive to replace. It would take $672 billion and several years.

But 'cap and trade' is a major thorn in the side of coal. The only solution I see is to find a way to burn coal without producing CO2. A handful of companies have actually figured out how to do this. Their method, called oxy-coal, is recognized as being perhaps the most promising environmentally-friendly technology on the planet. My favorite pick in this area is Praxair (NYSE:PX). It owns more than 200 patents related to oxy-coal.

What are your top three stock recommendations, and what attracts you to each?
I like Verenium Corporation (Nasdaq:VRNM). It's a small company that has engineered the leading biofuel process. It can make ethanol using cellulose, which is in all plant material found on earth. The government has put a ceiling on corn-based ethanol while at the same time mandating a +15,900% increase in the production of these "advanced biofuels" by 2022. What sets this company apart is that the government just gave it the nod to build the world's first commercial-scale cellulosic ethanol plant. There's no reason the explosive growth in this biofuel won't be mirrored by Verenium's stock.

Next I like Energy Recovery (Nasdaq:ERII). It makes a device that's critical to the efficiency of large desalinization plants, which are typically owned by governments. Without its equipment, desalinization is cost-prohibitive. ERII has 70% of the worldwide market, which is expected to double in the next ten years as water becomes ever scarcer. This issue is a lot closer to home than most people realize: Water supplies aren't just critical in the Middle East, they're increasingly important in places like California.

Finally, I like several players in the digital medical records space. The stimulus bill provides for $19 billion for these companies to upgrade the way the health-case system stores patient information. Storing these files digitally will improve physician access to information and not only improve the quality of care but reduce its cost, such as by eliminating unnecessary and potentially redundant medical tests. Among my recommendations here is Quadramed (NYSE:QDHC), which helped the Veterans Administration develop its VistA Program, the first and most successful large-scale electronic medical records system.  

Andy, thanks for the insights on how to profit from government spending and for the recommendations you're following. I'm sure readers will want to follow-up on those. This is certainly an exciting time to invest in companies making billions off the federal government.

Andy Obermueller is the Chief Investment Strategist for StreetAuthority's Government-Driven Investing newsletter. Andy invites you to follow his Government-Driven Investing blog, where he publishes his investing insights for free, at http://www.Government-DrivenInvesting.com

Stocks moved in a seesaw pattern today as they opened high and then slid during the opening hours only to sharply pick up before noon eastern time.

Shares on the Dow closed up 28 points to end the day at 8,359. The Nasdaq finished up 7 points to close at 1,800 and the S&P 500 was up almost 5 points to close at 906.

The Russell 2000, an index of the 2,000 most influential small-cap stocks as determined by Russell Investments, closed the day's trading session at 496, up 3 points.

Small-cap volume leaders today include beleaguered finance firm CIT Group (NYSE:CIT) trading 165 million shares, followed by American International Group (NYSE:AIG), and previous SmallCapInvestor PRO recommendation DryShips (Nasdaq:DRYS). (Find out more here)

Price gainers in the small-cap space were lead by Nevsun Resources (AMEX:NSU) up 32% following news that it had received all approvals for debt facilities totaling $235 million to begin mining copper and gold in Eritrea. The Vancouver-based mining firm expects to be able to repay the entire debt within two and one-half years.

Other small-cap gainers include Noven Pharmaceuticals (Nasdaq:NOVN) up 22% on news that Japan-based Hisamitsu Pharmaceutical plans to increase its U.S. presence in purchasing the company for $16.50 a share; Excel Maritime Carriers (NYSE:EXM) up 21%; and CIT Group (NYSE:CIT) up 20%.

*****The day after the home run derby was held during baseball's All-Star festivities, it's probably appropriate that Goldman Sachs (NYSE:GS) hit it one out of the park.

I'm referring to Goldman's 2nd Quarter earnings blowout. Goldman beat revenue and earnings estimates by better than 30%. Clearly, just like the sluggers in the homerun derby, Goldman had softball pitches thrown right down the center of the plate to hit.

Don't forget that even the bears' best friend, bank analyst Meredith Whitney, turned bullish on Goldman yesterday. It would appear that she could see the writing on the wall - analyst estimates were simply too low.

But why? How could analysts miss Goldman's quarter by such a wide margin? Could it be that they are deliberately low-balling estimates to keep the rally going?

*****Goldman Sachs is up in the early going, but not as much as you might expect. That suggests that the blowout numbers aren't a surprise at all. It was already priced in during Monday's 10% rally.

This type of behavior from analysts puts individual investors in a difficult position. I suspect that buyers above $150 will be showing a loss in the near future. Once again, we are being suckered. And that's business as usual for Wall Street.

*****If you focus on the gain in the Producer Price Index (PPI) from this morning, you're probably thinking that inflation is on its way after prices rose 1.8% in June.

But if you focus on retail sales, you probably see the 0.6% rise in retail sales as a sign of recovery.

So which is it: inflation or recovery? The answer is: both. Inflation is an inevitable by-product of economic expansion.

Now, obviously, the U.S. economy is still playing catch-up. And there's an outside possibility that the economy will grow this quarter. But the most important thing to realize is that both the retail sales number and the PPI number are almost directly related to government actions.

If you exclude auto and gasoline sales, retail sales actually fell for a fourth straight month. Auto sales have been helped by government incentives to trade in a gas guzzling clunker for a new, more efficient vehicle.

The PPI was affected by another government incentive program - the yield on Treasury bills. As the Treasury sells more and more bonds, it has to offer a higher yield to entice buyers. This, along with the sheer amount off Treasuries that are being sold, is driving the value of the U.S. dollar down. That, in turn, is driving oil and gas prices higher. Without food and energy, the PPI only rose 0.5%.

*****Government actions are currently filling in for an actual economy. That's how it is in our new "Managed America." Most expect the heavy hand of government to be temporary, and that Managed America can end sooner than later. We'll see…

I expect the conditions of Managed America - high unemployment, sluggish growth, more regulations, higher taxes, and inflation to last years instead of months. And I've outlined my expectations for investing under these conditions in my new Special Issue of Top Stock Insights. The article is titled Managed America: The New Economic Reality. It will be released tomorrow. You can sign up for Top Stock Insights and get my blueprint for profiting in Managed America when you click here. You'll also be on the list to receive my Predictions 2009 Issue update for the remainder of this year.

• For 2008, the Russell is down 29%, while the Dow is off 27% and the S&P 500 is down 31%.
• Within the energy arena, the Energy Select Sector SPDR Fund jumped 6.3%, mirroring a big surge in crude oil prices.
• Crude gushed 10% on talk that Saudi Arabia was slashing production.
• The greenback tumbled more than 300 basis points, or some 2.4% against the euro, triggering a buying spree in all sorts of commodity goods.
• The Commodity Research Bureau Index of 19 physical markets shot 5.3% higher today, with gains seen in everything from gold, sugar, coffee, grains, cattle and copper.

• CIT Group (NYSE:CIT) closed up 36% after closing deal to access $500M credit line.
  
• Nitrogen fertilizer producer Terra Nitrogen (NYSE:TNH) closed up 25% on Cramer recommendation.
• EnergySolutions (NYSE:ES) trading 31% higher as oil prices continue their ascent upward.
• Carrizo Oil and Gas Inc. (Nasdaq:CRZO) rallied 24% on news of a joint venture to pursue growth in Marcellus Shale.

• Animal Health International Inc. (Nasdaq:AHII) gapped lower and tumbled 57% on unusually heavy volume amid earnings news.
  
• Data company TNS, Inc. (NYSE:TNS) closed down 27% after reporting a rise in Q3 earnings, issuing Q4 guidance below Street.
• Tenet Healthcare Corporation (NYSE:THC) swings to 3Q profit on investment sales gain, shares dive 37% at closing.
• Health Net (NYSE:HNT) turns to profit in Q3, slashes FY08 EPS outlook. Shares tumble 18%.

Small-cap stocks slipped 1.89% late Friday, as a bleak report on the housing sector, options expiration volatility and ongoing worries about the economy offset a spate of positive earnings in the tech arena. Today’s small-cap gainers are CIT Group (NYSE:CIT), Universal Stainless & Alloy Products (Nasdaq:USAP) and Ambac Financial Group (NYSE:ABK). Other Market Watch highlights today included:

• BMO Capital's Andy Busch to SCI: "There is a serious need to educate the banking sector participants on the changes in the Treasury programs the Fed programs directed at easing the credit crunch." 
• Outside of the gold market, commodity stocks were doing well today, with coal, steel, gas utilities, oil exploration, gas storage and agriculture products all up. 
• On the downside, anything tied to housing was struggling, including home furnishing stocks and homebuilder shares. Bank stocks and financial shares were also lagging the general market. 
• The expiration of options on stocks today likely played a role in some of the market’s struggles as the directional bias into expiration is clearly toward lower prices. 
• Crude oil jumped some $4 a barrel today as the market anticipates . . .

The Russell 2000 (NYSE:IWM) remained a smidge lower into the midday, but well off the morning lows as gains in the technology arena spilled over into the broad market. Concerns about the economy, a moribund housing market and expiration jitters kept a lid on some buying interest, but the market was trying to spark a rally heading toward the afternoon. Today’s small-cap gainers are UAL Corp. (Nasdaq:UAUA), CIT (NYSE:CIT) and Ambac Financial Group (NYSE:AKT). Other Market Watch highlights today include:

• Light, sweet crude for November delivery is up $1.66 to $71.51 a barrel. On Thursday, it sank to a 14-month low on worries about a deep global recession obliterating fuel demand.
• BMO Capital's Andy Busch to SCI: "There is a serious need to educate the banking sector participants on the changes in the Treasury programs the Fed programs directed at easing the credit crunch." 
• Outside of the gold market, commodity stocks were doing well today, with coal, steel, gas utilities, oil exploration, gas storage and agriculture products all up. 
• On the downside, anything tied to housing was struggling, including home furnishing stocks and homebuilder shares. Bank stocks and financial shares were also lagging the general market. 
• The expiration of options on stocks today likely played a role in some of the market’s struggles as the directional bias into expiration is clearly toward lower prices. 

Small Cap Gainers:

• CIT (NYSE:CIT) loss widens; vendor finance write-down hurts. Shares of the finance company are soaring 47%.
• United Air’s parent UAL Corp. (Nasdaq:UAUA) is up 20% today, extending its rise from Thursday.
• Ambac Financial Group (NYSE:AKT) is soaring nearly 30% on news . . .