Load Up on Dividend Stocks

It has been a tough month for most investors as the DOW and S&P have fallen almost 2% each. Are there still buying opportunities, or is it time to sell and run? What fascinates me most about this recent sell-off is the significant pull back of large dividend stocks. PNG, PFE, and AEE all dish out more than a 4.5% dividend, but have fallen more than 4x the major indices. Intuitively, these stocks should not sell-off in this environment and buying these companies could quickly become a great hedge in an falling market.

So why are these great buys?
There are two main reasons why these are great buys. The first reason is the failed correlation between the major indices and dividend achievers. The ability for these companies to perform and adhere to their targeted profits has nothing to do with the movement of the DOW during the last couple of weeks. It is very likely that these companies will perform as promised and pay the expected dividend no matter what their investors want their shares to sell for. The second reason to buy is because of the pure increase in the value of the dividend yield with the recent decrease in share price. Dividend yield percentage and stock price share an inverse relationship; so as long as the price drops, the dividend yield grows. If the dividend payments are paid as promised, shareholders will get the same payout for cheaper!

So why did these stock sell-off then?
Predicted volatility showed his face again and scared shareholders. Analysts were big on dividend stocks early in the year when the market was fluctuating and investors had little certainty in the direction of the market. Dividend stocks became every investors go-to, causing these stocks to not only show dividend gains to investors, but capital gains with increased buying pressure. This month, major indices have sold off leaving these dividend holders a reason to take profit on their unwarranted share price gains.

I hope to share some of my favorite dividend buys later in the week.

Performance and New Features on the Way

The performance table on the sidebar was taking too much space so I will simply be sharing my recent trades and their results several times a month. Feel free to check out the Excel or html file detailing my transactions and month-to-month performance. I am happily back atop all of the major indices, which puts me several steps closer to achieving several of my 24 goals!

With that being said, I hope to dedicate the next several posts to individual stock recommendations. I spent about a month getting the personal finance tips off my chest, but it's time to get back to good ole investing!

As a side note, I would like to thank everyone who continues to read and contribute to my blog. I am hoping that this site will not only serve as a motivation tool for myself, but also a source of reference and knowledge for others.

I Like Marvel Going into Earnings

There is nothing wrong with chasing momemtom, so I am chasing Marvel (MVL) going into the company's earnings report on Tuesday. The stock is slightly off its 52 week high and has a slightly higher P/E ratio compared to its competitors, but the potential earnings this new Spiderman movie could bring in is amazing. This weekend Spiderman became the highest grossing opening-weekend movie ever. Marvel not only makes money from the movie, but also from the action figures, clothing and trading cards. All of these outlets translate into Marvel royalities. Earnings Whispers expects a four cent beat, but I can only suspect that Marvel will raise its guidance with the recent success of Spidey.

I am looking beyond the fundamentals and trading on a good feeling. Hope this works out.

I'm Buying CHCG at These Levels

I am currently reading a book that suggests traders follow five to ten stocks and understand how they swing over time. One of the stocks that I have been following and trading since October is China 3C Group (CHCG.OB), an electronics retailer in China. The stock recently had a significant run-up to $7.50 and it appears that several shareholders have been profit taking over the last several weeks. The stock is currently trading around $6.10, still above its 50, 100, 200 day moving averages.

I think I have made almost 15 trades on this stock and I confident that this stock has room to run. I do not pretend to know anything about technical analysis, but I usually buy this stock after three or four consecutive down sessions. I think this strategy has worked because the stock has great fundamentals and growth prospects. The company stated in its last earnings release that they would announce several more store openings sometime in the second quarter. I noticed that anytime a press release comes out on this company more analyst cover the stock and start to appreciate how great the growth prospects are.
There is a good chance that this stock may retreat a bit more from these levels, but I am confident that as soon as the company releases some news, the stock will soar back to the 7s. Good luck!

Buying Companies You Like

I watched an interesting program Monday night on CNBC detailing how four successful entrepreneurs made their money. Phil Town was one of those entrepreneurs and he made his money in stocks. Phil suggests that individuals invest in companies that make products that they like. He reinforced this point by stating that if a particular audience member bought shares in the company that made her purse (Coach) several years go, she would have more than tripled her initial investment.

I thought I would try this strategy myself and bring some of my earnings passion into the mix. The day after the program I bought some shares of Buffalo Wild Wings (BWLD). The Bloomberg printout looked pretty attractive; returning an average gain after the earnings release of 8.63%. While BWLD showed a great Bloomberg report, there were still several stocks that showed a greater string of successes. These stocks, however, were not companies that made products I liked, or even heard of for that matter. So I went with Town’s advice and played the stock that makes tasty-wings.

The company beat the street and raised guidance and I was happy to make more than 14% on my initial investment. I will try to incorporate this strategy a few more times and keep everyone updated on how these plays shake out.

Happy Trading…

EMR and NMX for Monday

I like Emerson Electric (EMR) going into Tuesday morning's report. Like last Friday, I wanted to find a company with a history of earnings success, and Emerson fit this mold. The company has beaten the estimates each of the last six quarters and averaged a next day gain of almost three percent. The company's P/E of 20.46 is only slightly above the industry's standard, giving the stock some downside support should the company miss estimates. Also, Earnings Whispers projects that the company will beat the street by three cents.

It's important to note two dangers of the stock. The first is that the stock is trading a little bit below its 52 week high. I argue that many stocks have hovered around their 52 week highs going into earnings, and these stocks were able to explode past these technical barriers. My second concern is the sell-off going into earnings. Many stocks do sell-off going into earnings and I feel that investors are simply being risk-adverse and are not willing to take on the risk that comes with an earnings announcement.

As I mentioned in an earlier post, I also like NMX today.

Good luck!

BEAV For Friday

I like BE Aerospace (BEAV) going into earnings today. BEAV provides interior services to an array of different types of airplanes. The stock is marginally up after a series of airline stock downgrades, leading me to believe that many are confident this airline services provider will beat the street. I am confident in BEAV because of the run-up in airline producers and the high demand from these companies. Stocks like Boeing (BA) have shown significant capital gains and high dividend payments throughout the last year.

Another attractive aspect of the stock is the recent success in earnings. The company has beat the analyst expectations five out of the last six quarters and shares have advanced the next day after each of those reports. I am a strong believer in prior success translating into excellent future results. The only risk in playing this stock is a relatively high P/E and six month run-up, leaving the stock susceptible to a sharp downturn.

Personally, I am willing to take on the risk given the history of success. Good luck.

The NYMEX

I like the Nymex (NMX) going into the company's first quarter results. Over the last couple of weeks I noticed that significant buying pre-release is usually a great indicator of a potential estimate beat. The intuition beyond this strategy is that risk-adverse investors usually sell the stock before the earnings in case the stock does miss. If there is strong drive up in the price of the stock, supported by high volume, there may be a large number of investor groups that are speculating that the stock is going to report good numbers. Given that many investors are risk-adverse, NMX chart suggests that these investors feel the stock is a sure winner.


Along with a strong chart, NMX should be posed to show great numbers because of the fluctuation and bullish drive in commodity prices. The volume on the exchange was significant last quarter, and with this increased fluctuation it would be safe to say that these volume numbers should have continued this quarter.

I bought in this yesterday, but I still recommend the stock today. Good luck!

I like Allstate for Today

I did not post yesterday because I was not really convinced the market could keep on rolling. I missed out on Intel, but Yahoo and others got killed. Today I am going back to my sweet spot of last week, insurance companies.

One of Progressive's (PGR) biggest competitors is Allstate (ALL), who reports today after the close. Progressive's report was great last week, citing that claims were at reasonably low level. That leads me to believe Allstate will be blessed with the same success. Allstate's P/E is 7.86, a little less than five points lower that PGR's. This means that this stock is inherently cheap and a good report could drive the stock back to a more appropriate price.

Earnings Whispers projects earnings of $1.93, six cents above analysts expectations. The stock is still five points off of its 52 week high, so it faces little resistance to a big up-swing when a good report happens. It appears that many are buying this bad boy today going into earnings, so act quickly!

Good Luck!

Two Strategies for Today's Earnings

I have two potential earnings strategies for today. If you are a risk-adverse investor, consider diversifying your risk across an array of earnings plays. If you can take on a little risk, consider going long in United Community Banks (UCBI).

If you like to play historical trends when choosing stocks, then you would be a fool to pass on UCBI. From the chart below you can see that the company has beat estimates five out of the last six quarters and has advanced after the report for each of these quarters. I have to rush a bit to get this out before 4pm, but the chart shows that the company is legitimately off its highs and needs a catalyst to get back to these levels.

Since there are so many other great earnings plays available, I suggest buying the stocks listed in the table below. This table simply shows stocks that Earnings Whispers believes will beat the estimates. Many of these stocks will advance, some will decline, but in total, these stocks should advance.


Sorry for the short post, good luck!

DNA is Ready to Climb, RIMM Dangerous

Good news came this morning when investors reacted well to Alcoa's and Progressive's earnings beats. Yesterday, I suggested investors stay away form Alcoa and buy into Progressive. While I wrong about Alcoa, the stock only went up about 1.5%. Progressive, on the other hand, is up 5.2% on its modest beat. Good job to longs on both of these trades.

I like Genentech (DNA) going into earnings today. I have a little bias in this decision because I made a pretty nice profit buying this stock last quarter. What's unique about this play is the fact that the stock is trading near its pre-earnings price of last quarter. What does this mean? The stock has significant room to move back up to the $88.00/share it was trading at after last quarter's release. DNA's P/E is slighty above its peers, but not enough to warrant any significant downside potential if the numbers were to miss. DNA has also beat estimates each of the last four quarters. A history of success at a low price makes DNA my play of the day.


Finally, I want to caution RIMM investors. RIMM has a great history of beating the street, but the price changes the next day to not accurately correlate with the earnings beat. That being said, it appears pointless to speculate on this stock going into earnings, because any accuracy in your earnings derivation will not necessary result profits the next day.

Good Luck All!

Earnings Plays for Tuesday

I like two stocks using two different investing strategies (I will be positing the options strategy tomorrow). Robbins & Myers (RBN) has a strong correlation between earnings surprises and next day price change. This means the stock's performance after the release is highly dependent on the release and only the release. RBN also appears to have limited downside after their releases. The stock has missed the estimates 3 out of the last 5 quarters, but the lowest the stock has dropped after these releases was -1.5%. On the other hand, the two beats amounted to next day gains of 6.9% and 19.6%. The stock does have a higher P/E than its main competitors, but not enough to warrant significant downside pressure on the price. Another bonus is that the stock will pay a dividend to shareholders with ownership on or before April 9th (next Monday).

Playing Global Payments (GPN) Before The Earnings

When evaluating GPN I found several positives given the recent decline in the stock. GPN has a lot of analyst support with mean year-end price target of 50.00. GPN is currently trading at 38.90 and has hovered around that level since their last earnings miss.
This is a good opportunity for investors to cash in on a potential upside catalyst. The recent sell-off has pushed the stock's P/E below the industry's average, reducing a lot of downside pressure on the stock if tomorrow's earnings go bad. Another nice thing about this play is the high correlation between the earning surprises and changes in the stock's price (around .964, with 1 being the highest). With this correlation investors do not have to worry about having a negative stock reaction after a positive release.

The one potential problem with the stock is the third quarter's substantial miss. Buying into a negative stock is always risky and should be noted. While the last report was not encouraging, the prior four quarters beat estimates handily.

I am buying this stock with a limit of 38.98. Due to the recent plunge of the stock, I feel that any beat could yield up to an 8% run-up tomorrow. A miss should result in less than a 4% plunge due to the low P/E ratio.

Three Earnings Plays

Basically there are three potential earnings plays that I like today, but I am only going to act on one. Well start with Paychecks (PAYX). PAYX, quoted at 39.50, is slightly off its 52 week high of 42.50. Earnings Whispers says the company will beat the estimated earnings number of $.35 by a penny. Paychecks has beat the estimate four out of the last five quarters and the one time it missed the stock actually moved up. This appears to be a good play for a safe investor. I do not think the stock will move much more than 2% either way on the news, unless the actual earnings are significantly different.

A more riskier earnings play is Smart Modular Technologies (SMOD). SMOD is well off its 52 week high and has recently had significant trend downward. The stock has beaten estimates three out of the last four quarters, but moved up significantly after the one miss. Earnings Whispers feels that SMOD will beat the estimates by a penny, but if SMOD keeps up is historical trend of beating estimates, one could expect another penny higher. Investors should be cautious of this stock because of the volatility around earnings. SMOD has averaged a 5.05% price fluctuation after the release. Personally, I am going to stay away from this one.

I am going to play CarMax (KMX). This stock is slightly off its 52 week high and needs the proper catalyst to break through that technical barrier. I think an earnings beat could be the answer. CarMax has smoked estimates five quarters in a row, beating the consensus expectations by an average of 25.58%. The stock moves around 4% each earnings release, which I can afford to lose. The Earnings Whisper number is $.47 compared to $.21 cents a share, signifying a potentially mammoth beat.

I set my limit for $27.35; see you at $30 tomorrow!

IPO Plays This Week

I started trading IPO's about a month ago. Statistically, IPO's perform the best during the last quarter of the year, so I thought it was a good time to start looking into this dynamic asset class. I say dynamic because these plays offer strong fluctuations from one day to the next. If you know what to buy, and when exactly to sell it, you can make a lot of money. Since this is one of the most publicized IPO weeks of the year, it is a perfect time to share my IPO picks of the week.

The most mentioned IPOs this week include the rental car company Hertz (HTZ), the Halliburton spin-off KBR (KBR), and the commodity exchange Nymex (NMX). So which one(s) should you play?

Hertz
Hertz rental car may seem like a safe play (steady revenues, incremental growth, and legitimate expansion plan); I am concerned about the scalability of the rental car business as a whole. Thrifty, arguably Hertz' most notable competitor, has seen diminishing profits for several consecutive quarters. I feel that if you are going to play this IPO, get ready to get out in the short run. I look for a maximum of an 8% increase sometime during the first week - get out at that point. A competitive, diminishing market is not a long term play. Decision: Pass.

KBR
While KBR will likely be more volatile that Hertz, I feel that the stock has stronger earnings potential. This company's financials and growth potential are astounding (revenues over 9 billion and demand for oil should increase sometime shortly). One weakness is USA's potential withdrawal from Iraq. KBR has substantial construction business in Iraq and a U.S. withdrawal could pose problems for the company. The answer: play this one short term. The U.S. may remove troops from Iraq, but the country still needs to be repaired, yielding plenty of business for KBR. Decision: Play.

Nymex
This is the big one. Nymex is a commodity exchange with huge growth potential. Many investors have been salivating over this release, but there are some evident flaws. The over-hype and massive participation could push the open price of this IPO up to $150/share. By this time speculative investors could sell their shares and drop the price significantly. While the share price may deter some investors, there are many reasons to invest in NMX. I like the company's strong financials (Almost 120M in profits) and successes from similar IPO exchanges (NYX, CME and BOT). The positives outweigh the negatives, so the question is how to play NXM? While there is potential to make money buying and selling on highs and lows, I feel the best strategy is buy it and never look at it again. Decision: Play.

CNN Article

Earnings Follow-Up

Below are some companies that release their earnings next week. Remember; make your picks soon before the companies are overbought.

AMAT - Techs are hot, the stock is down. Get it now before the stock gets overbought.

TLB - The Company’s core business consists of classic women’s clothing. Similar retailers have show strong earnings. Get in now while the stock is down.

BEAS - Software company. There are a lot of tech plays below. This company may not make your list.

NTAP - Data storage and management services. Related companies are all up, looks pretty solid going into earnings next week.

CLE - Teen retailer. Earnings look pretty good, maybe a potential buyout? Buyouts are always good.

HPQ - Not only a hardware retailer, but also a technical services company. Competitors have done well, may be overbought into earnings.

SBUX - May be at a low end of a peak. Hit it up now before the earnings next week.

MSCC - Semiconductor company. The industry is pretty popular, stock is relatively cheap.

MRVL - Semiconductor company like MSCC. May want to play one or the other.

HIBB - Sporting goods company like Dicks. Sporting good companies like have done well so far this earnings this season.