2/27/08

Economics

A look at housing prices nationwide:

http://bespokeinvest.typepad.com/bespoke/2008/02/december-2007-s.html

fiscal profligacy (Government spending as a percent of GDP is too high and the looming explosion in entitlement expenditures will make it worse. There is no good solution save spending discipline.). Progress (?) on the Farm Bill:

http://www.cato.org/pub_display.php?pub_id=9240

Politics

Domestic

Obama’s votes on Supreme Court nominees:

http://www.powerlineblog.com/archives2/2008/02/019879.php

Clinton and Obama on free trade:

http://article.nationalreview.com/?q=MmM0ZmMwNTUwODU4M2MwMWZhYTI4YzUxNjU3OTVkYzA=

Clinton and Obama on curbing the influence of lobbyists:

http://www.usatoday.com/news/politics/election2008/2008-02-25-tax-breaks_N.htm?POE=click-refer

The latest statistics on global warming (er, ah, cooling):

http://www.dailytech.com/Temperature+Monitors+Report+Worldwide+Global+Cooling/article10866.htm

International War Against Radical Islam

More on Iran’s nuclear program:

http://www.powerlineblog.com/archives2/2008/02/019883.php

The Market

Technical

Fundamental

The High Yield Buy List

Company Close 2/26 Buy Value Range

AJ Gallagher 23.80 23-26

Martin Midstream Ptrs 34.59 35-40

Rayonier 41.70 39-45

Reynolds American 65.39 61-70

Company Highlight

Kimco Realty Corp is the largest strip center REIT in the US market. Its properties are geographically diversified with locations in 45 states and foreign countries. This REIT has grown its Funds From Operations and dividend at a 10% and 9% annualized rate respectively since its inception. KIM should be able to continue this performance because:

(1) its portfolio of properties are located in high growth areas and anchored by top mega store tenants such as Home Depot and WalMart,

(2) its properties’ occupancy rates are at all time highs and its releasing spreads are at record levels both domestically and internationally,

(3) the company’s development pipeline continues to grow which is particularly important at this time when yields on acquired properties are low,

(4) KIM is expanding its joint venture operation which will add fees from investment management programs,

(5) It has a growing international asset base which mitigates the downside exposure to the US economy,

(6) finally, the REIT has a diverse array of other affiliated businesses including preferred equity placement, retail restructuring, third party property management and mortgage financing which provides additional revenue and earnings.

KIM is rated B++ by Value Line, has a 60% debt/equity ratio and the stock yields over 5%.

http://finance.yahoo.com/q?s=KIM

Subscriber Alert

The stock price of Mastercard (MA-$195) has declined below the lower boundary of its Buy Value Range. Accordingly, MA is being Added to the Aggressive Growth Buy List. The Aggressive Growth Portfolio already owns this stock; however, it is not a full position. So at the Market open this morning, the Aggressive Growth Portfolio will Buy additional shares of MA (about an additional 1/5 position).

http://finance.yahoo.com/q?s=MA

Pfizer was recently moved from the Dividend Growth Universe to the High Yield Universe and its Valuation Model was altered accordingly. PFE’s stock price is trading in its new Buy Value Range. Therefore it is being Added to the High Yield Buy List. At the Market open this morning, the High Yield Portfolio will Buy a one half position in PFE.

http://finance.yahoo.com/q?s=PFE

At the Market open this morning the Dividend Growth Portfolio will purchase additional shares (about 1/10^th positions) in McGraw Hill (MHP-$44) and Manulife Financial (MFC-$43).

http://finance.yahoo.com/q?s=MHP

http://finance.yahoo.com/q?s=MFC

News on Stocks in Our Portfolios

Why WalMart (Dividend Growth Portfolio) is thriving:

http://mjperry.blogspot.com/2008/02/wal-mart-puzzle-why-is-it-thriving.html

Quaker Chemical (High Yield Portfolio) reported fourth quarter and full year earnings per share of $.46 and $1.53 respectively versus $.30 and $1.18 in the comparable 2006 periods.

http://finance.yahoo.com/q?s=KWR

More Cash in Investors’ Hands

Hellman & Friedman is buying Getty Images for $2 billion in cash.

Electronic Arts has offered to buy Take Two Interactive software for $2 billion in cash.

IBM is buying back $15 billion in stock.

2/26/08

Economics

Politics

Domestic

Obama on NAFTA:

http://article.nationalreview.com/?q=MTc2NDRkOGY5NmUwOGZiMWE3NDEzOGE3YzdiYTAwNGM=

International War Against Radical Islam

This is a bit long but gives a decent view of the Iraqi government’s progress towards reconciliation:

http://www.longwarjournal.org/archives/2008/02/inside_iraqi_politic_3.php

The Market

Technical/ Fundamental

Stock prices performed well yesterday, reacting to news that S&P was holding the AAA ratings of MBIA and Ambac Financial debt, continuing rumors of a capital infusion into Ambac and MBIA eliminating its dividend (as part of the effort to retain cash and its AAA bond rating)--more clarity in the resolution of the sub prime problem.

Technically, as a result of the stock price action, both the DJIA and the S&P (1) broke out of the ‘wedge’ formation that I referred to last week to the upside and (2) closed above their August 2007 intraday lows [which were acting as the resistance level of a trading range]. My habit is to never assume a one day break out is a sure thing, so I think patience is important right now. Furthermore, even if prices remain above the August 2007 lows, that doesn’t mean the trend has changed from a trading range to an uptrend. Indeed, all that may be happening is that the trading range has been widened.

But on the assumption that this latest move is further evidence that stocks bottomed in January, I thought that I would re-run the screen that I did last week comparing a stock’s current price with that of its August 2007 intraday low, the August low close, the January intraday low and the long term trend in place in August 2007--the purpose of which is to focus on (1) stocks that have really strong technical patterns [i.e. are currently trading above all four of those markers] and that are trading near or in their Buy Value Range [potential Buy candidates] or (2) conversely, those that are trading below two or more of the markers [potential candidates for elimination].

On the positive side,

in the Dividend Growth Universe: Manulife Financial, Northern Trust, Genuine Parts, VF Corp, Sysco and Canadian National (Wells Fargo, Brown Forman, and 3M are above three markers),

in the High Yield Universe: Pfizer, Hospitality Properties Trust (Kimco Realty Trust is above three markers)

in the Aggressive Growth Universe: Reliance Steel (American Eagle Outfitters is above three markers)

On the negative side,

in the Dividend Growth Portfolio, McGraw Hill, Clorox and GE are below two markers,

in the High Yield Portfolio, Martin Midstream is below two markers,

in the Aggressive Growth Portfolio, CME Group, Eaton Vance, Luxottica, Medtronics, Quest Diagnostic, Sun Hydraulics, Expeditors Int’l, FactSet, Microsoft, Rockwell Collins and SAP are all below two markers

News on Stocks in Our Portfolios

Donaldson Inc (Aggressive Growth Portfolio) reported its second fiscal quarter earnings per share of $.43 versus expectations of $.42 and $.39 recorded in the comparable 2007 fiscal quarter.

A positive write up on General Electric (Dividend Growth Portfolio):

http://seekingalpha.com/article/66100-ge-nuclear-growth-galore

More Cash in Investors’ Hands

2/25/08

Economics

fiscal profligacy (Government spending as a percent of GDP is too high and the looming explosion in entitlement expenditures will make it worse. There is no good solution save spending discipline.). What’s wrong with the Farm Bill:

http://mjperry.blogspot.com/2008/02/top-ten-reasons-farm-bill-is-bad.html

Politics

Domestic

International War Against Radical Islam

Sadr extends cease fire:

http://www.longwarjournal.org/archives/2008/02/report_sadr_to_exten.php

The Market

Technical

Where the short interest is concentrated:

http://bespokeinvest.typepad.com/bespoke/2008/02/etfs-with-the-h.html

Fundamental

Aggressive Growth Buy List

Company Close 2/22 Buy Value Range

Accenture Ltd $34.03 $32-36

American Eagle Outfit 22.12 22-25

Amphenol 37.87 35-40

Best Buy 44.22 42-48

Fastenal Inc 41.90 36-41

Microsoft 27.68 26-30

SAP Inc 48.05 46-54

Sun Hydraulics 21.49 21-25

Subscriber Alert

The stock price of Quest Diagnostic has fallen below the lower boundary of its Buy Value Range. Accordingly, it is being Removed from the Aggressive Growth Buy List. While the price remains well above its Stop Loss Price, it nonetheless also traded below its January low--not a good sign. On the Market open this morning, the Aggressive Growth Portfolio will Sell one half of its position in DGX.

News on Stocks in Our Portfolios

Northern Trust (Dividend Growth Portfolio) announced that it was setting up a $229 million reserve against losses that mutual funds it advises might take related to their ownership of sub prime paper. In other words, if all the sub prime paper these funds own

is worth $0, the bank would lose $229 million. The reserve equals about 25% of one year’s earnings and 4% of the bank’s equity.

Company Highlight

Sun Hydraulics designs and manufacturers screw-in hydraulic cartridge valves and manifolds which control force, speed and motion as integral components in fluid power systems worldwide. Its products are used in construction, agricultural, industrial and utility equipment. The company has achieved a 20%+ return over the last three years as well as generating earnings and dividend growth in excess of 25% over the last five years. SNHY should be able to continue to expand its business as it increases its marketing penetration into the industrial base of the emerging growth countries. Value Line rates this company B+, it has no debt and its stock yields approximately 1.8%.

http://finance.yahoo.com/q?s=SNHY

More Cash in Investors’ Hands