Archives for July 2012

July 2012 - Page 11 of 17 - Money Morning - Only the News You Can Profit From

JPMorgan (NYSE: JPM) Earnings: What to Watch

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It's fitting the JPMorgan (NYSE: JPM) earnings report will be delivered on Friday the 13th, since this has been a scary quarter for the bank and its stock.

Ever since JPMorgan, the largest U.S. bank by assets, revealed a trade gone bad in London that caused billions of dollars in losses, shares have waned and industry forecasters have grown more bearish on shares.

The consensus estimate heading into Friday's release has dropped over the last three months to 79 cents a share from 91 cents.

Those mean estimates would be a 36.2% drop in earnings from the same period a year ago, when JPMorgan turned in an impressive $1.27 a share amid a struggling U.S. economy. Revenue is predicted to stumble 20% year-over-year to $21.93 billion for the second quarter, coming in at $96.58 billion for the year.

Investors and regulators will be most interested Friday in the bank's update on the full extent of the trading losses incurred in what has now been dubbed the "London whale trade." The losses are predicted to be sustainably larger than previously reported, now somewhere in the range of $4 billion to $6 billion.

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How to Buy Penny Stocks

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Of all the investment vehicles out there, few offer greater potential than penny stocks. Yet penny stocks are not for the faint of heart.

That's why a clear understanding of how to buy penny stocks is essential before diving in to the market.

You see, behind the potential for large gains is the indisputable fact that many of today's most dynamic companies were once little more than penny issues themselves.

That means that at least a few of tomorrow's market leaders are currently lurking among stocks listed on the Over-the-Counter Bulletin Board (OTCBB) or the so-called "Pink Sheets."

Penny Stocks That Hit it Big

As proof, consider just three examples.

These are companies that have risen from true penny status to positions of prominence handing early and enduring investors almost unimaginable profits:

  • Green Valley Coffee Roasters Inc. (Nasdaq: GMCR) – Thanks to four splits, 100 shares purchased in October 1998 at $4.62 a share ($462) is now 2,700 shares priced at $20.45 a share, worth $55,215. But the stock actually hit $107.99 in September 2011, making it then worth $291,573.
  • Bally Technologies Inc. (NYSE: BYI) – Two splits turned 100 shares of this gaming-machine maker purchased at $1.69 a share ($169) in May 2000 into 400 shares, now priced at $45.98 and worth $18,392.
  • Jos. A Bank Clothiers Inc. (Nasdaq: JOSB) – You could have purchased 100 shares of this clothing retailer in November 1999 at $2.78 a share ($278). After four splits, that position has turned into 351 shares now priced at $41.29, worth $14,492.79. At the height in May 2011 those shares were $56.05 each, worth a total of $19,673.

These are just a few of the better-known companies on a long list of stocks that have gone from micro-cap levels to mid- or large-cap valuations.

It doesn't include the many penny mining stocks that exploded upward with skyrocketing resource prices or "fallen angels" like Bank of America (NYSE: BAC). A complete listing of such stocks would go on for pages.

Of course, a listing of stocks that have gone from penny status – defined by the Securities and Exchange Commission (SEC) as "a very small company priced below $5.00 per share" – down to zero would be far, far longer. That's why these stocks are among the riskiest on the board.

That's the challenge for investors – avoiding the big losers in the penny stock market.

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Three Cheap U.S. Stocks with Huge Profit Potential

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Bargain-hunting investors this year have been able to feast from a market buffet of cheap U.S. stocks.

Reports have surfaced in the past few months about how the Standard & Poor's 500 is offering the lowest-priced stocks in years based on price/earnings ratios.

Bloomberg in March reported that companies in the S&P 500 were trading at 14.1 times earnings, the lowest valuation of all 34 peak periods since 1989.

Then in May former U.S. Federal Reserve Chairman Alan Greenspan declared that "stocks are very cheap."

Again just last week Bloomberg noted that the S&P 500 is trading 16% below its average valuation since the 1950s.

Now, after the S&P 500 recorded its best June since 1999, investors want to know if it's still the time to buy or if the party's over. With the Eurozone debt crisis still looming and a spate of recent gloomy U.S. economic reports, market optimism has thinned.

But there are still bargains to buy.

How to Find Cheap U.S. Stocks

First, to determine if a stock is undervalued with high profit potential, and not cheap and going nowhere, investors need to scrutinize the driving factors of why a stock's price has fallen.

For instance, you must look at what's happening to the stock's sector – is there a macroeconomic or cyclical reason for the stocks to slip?

Then look at the company – is it in healthy financial shape? What are its future prospects?

Some stocks like Bank of America (NYSE: BAC) may seem undervalued when looking at tangible value, which tells us BAC is worth almost double what it is trading at now. But the company posted negative earnings per share last quarter. Analysts expect it to post a positive EPS of 16 cents this quarter and give it a forward P/E just above 8, which is cheap – but it's a stock that comes with a lot of volatility, so its low price is risky.

Others have had a long slide and may be at a bottom, such as tech struggler Hewlett Packard (Nasdaq: HPQ). CEO Meg Whitman is trying to turn the company around, but HP has lost more than half of its market value over the past year. With its forward P/E less than 5 it seems like a bargain, but there isn't a strong case for why this stock could rally.

And finally look at General Motors (NYSE: GM) or Ford Motor Co. (NYSE: F). Both currently have P/E ratios below 6 and even though the auto industry has been one of the hardest hit U.S. sectors over the past few years it looks to be on the upswing now.

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Five Winners in the Stock Market Today

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It appears the stock market is headed for its fifth straight negative day as the markets opened lower on continued global concerns.

Any optimistic sentiments from Europe's recent summit and bailouts have passed, as Germany still is not committed to measures in the agreements.

After Spanish Prime Minister Mariano Rajoy announced surprisingly harsher austerity plans for Spain, there were riots in Madrid where more than 70 people were injured.

The stock market wasn't quite as violent, but after the U.S. Federal Reserve's minutes revealed no signs of QE3, the markets took a hit before finishing the day slightly higher. Today the market is still reeling as all three major indexes opened well in the red.

Even news of the lowest number of initial unemployment claims filed since March of 2008 could not lift the market. The Labor Department announced that initial claims seasonally adjusted came in at 350,000, down 26,000 from the previous week. Analysts had expected on average between 355,000 to 395,000 claims to be filed.

Those numbers may not be reliable, as many economists say the claims are lower due to automakers choosing to keep their plants open throughout the summer.

Typically many auto plants close for two weeks in the summer and lay off workers temporarily as the plants are prepped for new models. With higher demand this year many plants have remained open through July.

"It seems like the Labor Department is pretty adamant that this is more of a wonky seasonal adjustment than something we need to put too much stock in," Michael Hanson, U.S. economist at Bank of America-Merrill Lynch told Reuters. "The underlying trend in claims is probably still in the 370,000 range."

Those numbers are also low due to the fact that they are gathered from the holiday-shortened 4th of July week.

Even with the markets' slide today, there are still winners to be found. Here are five of the best performing stocks today:

Merck and Co. Inc. (NYSE: MRK) announced it received favorable results for its latest experimental osteoporosis drug, odancatib, and ended trials early because it worked so well. The drug is supposed to prevent bone fractures in women with osteoporosis and has been in testing since 2007.

Merck stock is up almost 4.5% as of noon.

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How to Buy Gold: Where to Find the Best Gold Bullion, Certificates, Stocks and ETFs Right Now

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During a recent call, we asked our natural resources and commodities expert Peter Krauth the following question:

If you had $100,000, and you had to invest it all in one place right now, where would you put it?"

Peter's response: "That's easy. GOLD."

(And it took him all of half a second to answer… )

As Peter sees it, Europe's sovereign debt and banking crises, America's anemic economy, employment picture, and never-ending debt issues, have all raised the spectre for further significant global economic shocks. (To learn how to play these events, and more, for incredible potential gains, take a look at our latest Private Briefing report right here.)

To deal with these problems, Peter has no doubt that even more massive and growing bailout funds, as well as more Fed quantitative easing, are the "solutions" that will be proposed and then implemented.

And that has placed a shine on the ultimate safe haven investment: Gold.

Some of you may be thinking gold's still near record highs, so how much further could it possibly go?

Well, consider that's what the doubters have argued over and over for the past decade.

Our forecast is for gold to reach $2,200/ounce by the end of the year.

How can we be so sure?

Here are three fundamental reasons why the gold bull market will begin running northward again in no time:

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Wells Fargo Stock: On Verge of Earnings Boost?

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Investors of Wells Fargo stock (NYSE: WFC) may be smiling come Friday afternoon as the company reports its second-quarter earnings before the opening bell tomorrow morning.

Wells Fargo is expected to announce earnings of 81 cents per share on revenue of $21.32 billion.

A good sign is that analysts' earnings per share projections have increased over the last three months from 80 cents, compared to the abundance of companies lowering guidance.

If Wells is able to post a rise in its profits it will be the fourth consecutive quarter in which the bank has posted a profit increase. It should be able to as those expected quarterly profits are almost 16% higher than a year ago and Wells Fargo is starting to stand out more and more in the recently revived financial sector.

From Barclay's (NYSE ADR: BCS) Libor manipulation scandal, to JPMorgan's (NYSE: JPM) "bet" gone wrong and even back to Morgan Stanley's (NSYE: MS) botching of the Facebook IPO, banks have been in the news for all the wrong reasons lately.

But Wells has avoided a lot of the negative news on banks. It's known for playing it safe compared to its Wall Street rivals.

In fact, Jefferies analyst Ken Usdin called Wells "one of the strongest, most respected U.S. banks" when he initiated coverage of the bank Monday with a "Buy" rating.

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This School of "Fish" Could Help Save the World's Oceans

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A new breed of robotic "fish" is on track to play a key role in protecting one of Earth's most precious resources…

The oceans.

This breakthrough is crucial for a simple reason: Without the oceans, there would be no human race. You see, oceans are the source of life on our planet and account for more than 70% of the earth's surface. And the fish that live there rank as the main source of protein for nearly one billion people.

Yet the world's population and economies are growing much faster than the oceans can sustain.

Vast regions of the world are subject to overfishing; studies have shown that the variety of marine species in many parts of the world has dropped by as much as 50% in the past 50 years.

Not only that, but run-off from farms carries high amounts of chemicals that first hit streams and rivers.

Once all that deadly water flows into the seas, it can kill plankton – the tiny floating creatures that serve as the bedrock for much of the world's food chain.

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Commodity Stocks: High Yields and a Hedge Against Inflation

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For years now I've been pounding the table on two big themes…

The first is that income investing is a great way to boost not only your returns but your cash flow. And second, that every investor should have a substantial chunk of their portfolio invested in commodity stocks.

Here's the good news: it is perfectly possible to combine the two strategies, earning the benefits of both worlds.

In fact, in a moment I'll tell you about a few of my favorite high-yielding commodity stocks. Two of them pay safe, hefty yields over 7%!

Compare that to what you can earn with your local bank or with U.S. Treasuries. You'll quickly find there is nothing comparable.

In fact, by investing in income-producing commodity stocks, you get a steady stream of income along with the best possible protection against the ravages of inflation.

That combination is tough to beat. Let me explain…

The Best of Both Worlds: Income and Appreciation

The truth is, income investing is crucial for three reasons.

The first is obvious. No matter how well-off you become, the bills just keep getting worse and worse. I never met anyone that couldn't use more cash.

The next two aren't nearly as evident to most investors– even though both are of the utmost importance to their portfolios.

Stocks that pay steady, consistent dividends add a measure of certainty to share prices. It's why top quality dividend stocks typically do well even in bear markets. Conversely, since earnings are so easily manipulated, companies with fancy bottom lines but no dividend usually turn out to be a scam and end up being priced accordingly when things turn south.

Finally, dividends themselves keep management honest (or fairly honest.) Cash that is paid out to shareholders cannot be used for grandiose expansion plans, or to pump up the stock price to help inflate top management's stock options.

As a result, companies that pay decent dividends are less likely to suffer value-destroying scams than those that don't and are likely to be around longer. For investors, that offers stability — invaluable these days.

As for commodity stocks, I'll be the first to admit they are not a universal panacea. But two long-term factors currently favor them.

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Farnborough Air Show Delivers for Boeing (NYSE: BA)

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There have been some fireworks at the Farnborough Air Show for The Boeing Co. (NYSE: BA) and I'm not talking about the aerobatics displays. Boeing has had major orders on the first two days of the air show, outpacing rival Airbus.

The much anticipated show which runs July 9-15 has given hope to Boeing that it could catch up to Airbus as the world's biggest aircraft producer. Airbus last year dominated the festival, which alternates between Farnborough and Paris, with its "Neo" aircraft, but Boeing is leading the charge this year.

The aircraft industry has been thriving the past few years and Airbus has led Boeing in market share since 2006. Boeing hopes the Farnborough Air Show will be a catalyst for its comeback, fueled by orders of its new 737 Max plane.

U.S. Air Lease Corporation on Monday purchased 75 of the 737 Max jets and founder Steven Udvar-Hazy commemorated the opening of the festival and the deal by ringing Monday's NYSE opening bell via satellite.

That excitement was followed Tuesday by news that GE Capital Aviation, the commercial aircraft leasing and financing arm of General Electric (NYSE: GE), announced it would purchase 75 of the updated 737 Max 8s and 25 of the current 737s.

Airbus has announced smaller orders, one Tuesday from Hong Kong-based airline Cathay Pacific worth up to $4.2 billion and two Wednesday worth about $4.4 billion.

Boeing's orders with GE and ALC are said to be worth up to $9.2 and $7.2 billion, respectively, but it's not known for sure. That's where the mystery of the show and the secretive nature of the industry come into play.

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Spain Squeezed by Eurozone Bailout Deal

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In attempts to ease its mushrooming financial pains, Spain unveiled new austerity measures today (Wednesday) that aim to reduce 65 billion euros ($80 billion) from the public deficit by 2014.

The move is part of an agreement Spain's Prime Minister Mariano Rajoy made when he accepted a Eurozone bailout for his country's ailing banking system. Rajoy surrendered to mounting pressure to at least make an effort to avoid a full state bailout.

"We have very little room to choose. I pledged to cut taxes and now I'm raising them. But the circumstances have changed and I have to accept them," Rajoy told the national parliament.

As protests erupted from anti-austerity crowds that gathered in Madrid, Rajoy explained plans to roll back social welfare protections and immediately raise taxes so that he could secure emergency aid and placate jittery investors.

Rajoy announced higher taxes and cuts to unemployment benefits, union pay, and civil service perks.

Amid boos and heckling, Rajoy told the parliament, "These measures are not pleasant, but they are necessary. Our public spending exceeds our income by tens of billion euros."

The moves highlight how Rajoy and Spain are at the mercy of the EU"s tough bailout provisions if the government hopes to get any more money for its struggling banks.

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