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Good morning! U.S. stock futures today (Tuesday) forecast a 42-point decrease for the DJIA from yesterday's close. Citigroup Inc. (NYSE: C), Best Buy Co. Inc. (NYSE: BBY), and Lumber Liquidators (NYSE: LL) are today's pre-market movers.
What to Watch Today: Investors will be watching a slew of earnings reports from retail companies. Firms reporting this morning include JD.Com Inc. (Nasdaq ADR: JD), Kate Spade & Co. (Nasdaq: KATE), Dick's Sporting Goods Inc. (NYSE: DKS), AutoZone Inc. (NYSE: AZO), TiVo Inc. (Nasdaq: TIVO), and Navistar International Corp. (NYSE: NAV).
The auto sector will also be in focus with the announcement of February vehicle sales. Analysts project monthly sales to increase an adjusted annual rate of 16.7 million versus 16.6 million in January. Rumors are also bubbling over a possible merger in the sector. The CEO of Fiat Chrysler Automobiles NV (NYSE: FCAU) said the company is exploring merger and acquisition opportunities, although it has denied any ties to German rival Volkswagen AG (OTCMKTS ADR: VLKAY).
- Daily Deal: Shares of Citigroup Inc. (NYSE: C) were up more than 1% on news the company will sell its consumer finance arm OneMain Financial Holdings to subprime lender Springleaf Holdings Inc. (NYSE: LEAF). The deal will cost LEAF roughly $4.25 billion in cash. It will also require regulatory approval this year. Meanwhile, Citi is expected to boost its pending earnings report by more than $1 billion through this deal.
- Retail Romp: Shares of Best Buy Co. Inc. (NYSE: BBY) were up more than 4% this morning after the company beat quarterly earnings expectations. The big box retailer reported earnings of $1.48 per share, besting consensus expectations of $1.36. The firm said the holiday season was boosted by sales of big-screen televisions, mobile phones, and other electronic devices. Best Buy also announced plans to hike its dividend by 21% and introduce a $1 billion buyback program over the next three years.
- Flooring Fiasco: Lumber Liquidators (NYSE: LL) is another one of today's pre-market movers. Shares are rebounding slightly this morning after the stock fell more than 45% over concerns raised by "60 Minutes" on Sunday. This morning, investment adviser Janney boosted the stock from "Neutral" to a "Buy" and said that the television report was "overblown." On Sunday, "60 Minutes" reported the company was selling flooring in five states that had high concentrations of a cancer-causing chemical. The news led to a suspension of trading on LL stock Monday.
- Oil Prices Today: Oil prices rebounded this morning as oversupply concerns continue to rattle the markets, particularly in the United States. April 2015 futures for WTI crude jumped nearly 0.5% to $49.82 per barrel. Meanwhile, Brent crude added another 2.1% to hit $60.80 per barrel.
- Murder Mystery: Tensions between the United States and Russia are starting to boil following the alleged murder of Boris Nemtsov, a well-established critic of President Vladimir Putin. On Monday, U.S. President Barack Obama raised concerns about Russia's civil rights and press freedom. This raised already high tensions over the standoff in Ukraine.
Full U.S. Economic Calendar March 3, 2015.
- Consumer Price Index at 8:30 a.m.
- Gallup US ECI at 8:30 a.m.
- Redbook at 8:55 a.m.
- 4-Week Bill Auction at 11:30 a.m.
- 52-Week Bill Auction at 11:30 a.m.
- Federal Reserve Chair Janet Yellen speaks at 8:15 a.m.
Money Morning Tip of the Day: Don't shy away from stocks pushing 52-week highs based on price alone. Instead, use the following metrics to determine if a stock is still a good buy.
Today's tip comes from Money Morning Chief Investment Strategist Keith Fitz-Gerald:
With hundreds of companies at fresh 52-week highs, many investors question the wisdom of putting more money to work. The fear is that a stock tapping new higher prices could be ready for a fall.
But a stock that's near its yearly high can still be a good investment with room to run. Here's what to look for:
- Price/earnings ratio. The P/E ratio is calculated by taking a company's price per share (P) and dividing it by earnings per share (E). The higher the P/E, the more the market is willing to pay for each dollar of annual earnings.
- Forward P/E ratio. This uses forecasted earnings to calculate the relative price appeal of a stock price. If earnings are expected to grow in the future, the forward P/E will be lower than the current P/E - which spells profitable days ahead for a company.
- Price/earnings to growth (PEG) ratio. PEG is calculated by taking a stock's P/E ratio and dividing by its expected percentage earnings growth rate - typically for the next five years. In general, the lower the PEG, the better the value. Companies with PEG ratios of 1 or less are usually bargains.
Let's look at Apple Inc. (Nasdaq: AAPL). The stock has gained 8.77% since early February. Its total market cap is now $745 billion. Is AAPL a good deal at these prices?
Apple's P/E ratio of about 17 today is barely half that of the industry average. When accounting for forecasts up through the 2016 fiscal year, forward P/E is a respectable 14.07. The PEG ratio is 1.17.
So AAPL could still be very much a "Buy" despite its recent surge in price.
Keith Fitz-Gerald is a seasoned market analyst and professional trader with more than 30 years of experience. For more investing tips and stock picks from Fitz-Gerald, go here...
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.