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Mixed messages are sweeping stocks on the final trading day of the week. Consumer Sentiment spiked nicely above estimates indicating that the American consumer may restart their buying habits, a strongly bullish sign for stocks. However, business activity contracted along with dropping employment which is a major bearish indication. The stock market is reacting by trading in a very tight range midday Friday. The bulls and bears are battling for supremacy with the final weekly outcome being very uncertain at this time.
The shortened trading week started with the Memorial Day holiday then stocks exploded higher on Tuesday. Increased Consumer Confidence numbers were the prime driver for the rally. Midweek, tanking Treasuries pressured stocks sharply lower erasing much of Tuesday's gains. An improved Treasury market sent shares higher on Thursday despite negative news from General Motors. Although the bulls still seem to be in control overall, the market is chaotic and uncertain still.
Long Term PowerRatings are creeping higher across the board in a variety of stocks. This is indeed a positive sign of an improving situation overall in the stock market. The PowerRatings are based on 13 years of extensive, statistically valid studies across most market conditions. Our studies indicate that stocks earning a 10 Long Term PowerRatings have an 81% chance of being higher one year later. Those with a 9 rating possess a 79.1% chance of trading higher one year later. Conversely, stocks that are awarded low ratings of 1 or 2 have clearly shown to be simply too volatile and risky for prudent, conservative long term investors. You can clearly see the statistical advantage in building a long term portfolio consisting of 9 and 10 rated stocks, while avoiding the lower ratings.
Let's take a look at several of the featured PowerRated stocks this week:
Campbell Soup (CPB | Quote | Chart | News | PowerRating) - The number one listed stock in the index with an 8 Long Term PowerRatings. Unfortunately, the fiscal second quarter lagged a bit due to commodity hedging losses, tax adjustments, and currency issues. However, they gave positive guidance into the rest of 2009 with EPS growth expected to be at the high end of 5-7%. Technically, shares have bounced off of the lows in the $24.50 range and have broken resistance at the 50-day SMA continuing the uptrend.
Wyeth (WYE | Quote | Chart | News | PowerRating) - A global pharmaceutical concern earning an 8 Long Term PowerRatings. The first quarter resulted in a net revenue decrease of 6%. However, if one removes the negative foreign exchange impact, they increased by 2%. Strong sales from core product franchises provided the company a great start into 2009. The charts reflect the optimism with shares being in an uptrend since April 27th. The 50-day SMA is above the 200-day SMA at 42.68 and 38.81 respectively. However, resistance appears at the $45.00/share level with 2 failed attempts at breaking through.
Intel (INTC | Quote | Chart | News | PowerRating) - This leading computer chip maker made the most requested list with a 5 Long Term PowerRatings. They were just fined 1.06 billion euros for anti trust violations in the European Union. This action caused fear in some investors of a dividend cut and other negative impact on the firm. However, the company reiterated that it will not cut dividends and is in line for meeting 2009 goals. In fact, showing supreme confidence for the future, CFO Stacy Smith stated, "There is still plenty of cash to pay the fine, invest in our business, and pay the dividend." The release of the ATOM low cost processor also has caused concern for the company's future as it may place downward pressure on the margins due to the low relative price. The CFO put these fears to rest, in addition, by explaining that the ATOM costs less, therefore will not affect margins. Technically, a 50 and 200-day MA crossover appears ready to begin. Price has been uptrending since March 9th and is currently sitting directly in between the 50 and 200-day SMA's which are 15.38 and 15.52 respectively.
Apple (AAPL | Quote | Chart | News | PowerRating) - Another 5 Long Term PowerRated high tech computer company hitting the most requested list today. The first quarter of 2009 was stellar with record revenues and profits. Over 4 million iPhone's and more than 22 million iPod's were sold in the quarter representing 88% and 3% unit growth respectively. On the charts, price surged above both the 200 and 50-day SMA's, however hitting resistance around $135.00/share. Price dropped back to $120.00 where it found support and has since bounced back toward resistance at $135/share.
Hormel Foods (HRL | Quote | Chart | News | PowerRating) - This giant meat products food company is the highest ranked company on the most requested list earning a 6 Long Term PowerRating. They just reported positive fiscal second quarter results with Diluted EPS up 5%, Segment Operating Profit up 2%, even dollar sales, and slightly down volume of 2%. Technically, a strong uptrend has been in effect since April 27th. Shares are trading above both the 50 and 200-day SMA's, however resistance may have been hit at the $35.00/share range.
Stocks In The News
Here are a few nuggets catching my eye from the news wire this week.
Apple (AAPL | Quote | Chart | News | PowerRating) - Advanced upon being upgraded to overweight by Morgan Stanley.
General Motors (GM | Quote | Chart | News | PowerRating) - Surged over 25% higher intraday on word of massive government assistance despite the imminent bankruptcy.
Palm (PALM | Quote | Chart | News | PowerRating) - Jumped on consumer acceptance of its new phone named “pre”.
First Solar (FSLR | Quote | Chart | News | PowerRating) - Dropped after being downgraded to market perform by FBR Capital.
Monsanto (MON | Quote | Chart | News | PowerRating) - Dropped after the world's largest seed maker stated its profits will be at the low end of estimates.
Wells Fargo (WFC | Quote | Chart | News | PowerRating) - Discouraging words from FDIC chairman, Sheila Bair, sent shares down as well as the entire banking sector lower.
Big Lots (BIG | Quote | Chart | News | PowerRating) - JP Morgan downgraded the closeout retailer to neutral sending shares down.
This Week's Top Performers:
Stein Mart (SMRT | Quote | Chart | News | PowerRating)
Northern CA Bancorp (NRLB | Quote | Chart | News | PowerRating)
Telford Homes (TLFDF | Quote | Chart | News | PowerRating)
This Week's Worst Performers:
Penson (PNSN | Quote | Chart | News | PowerRating)
Community Financial (CFIS | Quote | Chart | News | PowerRating)
Telkom (TKG | Quote | Chart | News | PowerRating)
What to Expect Next Week
Monday: Personal Spending, ISM Index
Tuesday: Auto Sales, Pending Home Sales
Wednesday: Factory Orders, ADP Employment
Thursday: Initial Claims
Friday: Non Farm Payrolls
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David Goodboy is Vice President of Business Development for a New York City based multi-strategy fund.
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