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Better than expected jobless numbers triggered a spike higher in the stock index futures during the pre-open today. Payrolls fell the least in 8 months renewing optimism that the recession is abating. Stocks are mixed midday with a roller coaster ride in the Dow Jones Industrial Average and the other major indexes slightly lower on the day.
It was a topsy turvy positive week with Monday being hit with a wave of positive data lifting shares to a strong close. News of Citibank being removed from the DJIA and General Motors bankruptcy news didn't dampen the positive vibe. Tuesday was a quiet day for stocks with the averages easing higher on the back of surprisingly better than expected Pending Home Sales figure. The dollar however ran into a bit of trouble as the Russian leader called out for an "intranational" currency to replace the greenback. Stocks ended their winning streak on Wednesday on worse than expected Factory Order figures despite semi-optimistic words from the Fed Chief. Shares regained their winning ways on Thursday on the back of bank upgrades and surging commodity prices. Price action strongly suggests that the bulls are back in control of the market.
However, it's important to keep in mind that, even in the best of times, stocks never go straight up and there are pockets of companies that outperform the averages; regardless of market conditions. The dilemma has been, just how can a long term investor locate these winning needles in the haystack of mediocre and downright loser stocks? Tools that reach beyond the standard fundamental and technical analysis are needed to reach the goal of finding these companies.
Our Long Term PowerRatings are one such proven tool. They are built upon 13 years of extensive, statistically valid studies across most market conditions. This research clearly shows 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 high rated stocks, while avoiding the lower ratings.
Let's take a look at several of the featured PowerRated stocks this week:
Hormel Foods (HRL | Quote | Chart | News | PowerRating) - This giant meat products food company was just upgraded from a 6 to a 7 Long Term PowerRatings. 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, resistance at $35.00/share was recently broken.
Laboratory Corp of America (LH | Quote | Chart | News | PowerRating) - Another upgrade from a 6 to a 7 Long Term PowerRatings. This medical diagnostic and testing company had strong results in the first quarter of 2009. Net Earnings, EPS and Revenues showed improvement. CEO David King reiterated 2009 focus of obtaining new customers, maintaining price and controlling costs. He is upbeat about the future prospects of the company. Technically, shares have dropped off a mid May high but have found support at the 50-day SMA now at $61.28/share.
Perot Systems (PER | Quote | Chart | News | PowerRating) - Begun by former Presidential candidate and political raconteur Ross Perot, this firm was just upgraded from a 5 to a 6 Long Term PowerRatings. The company is a worldwide provider of information technology and business solutions headquartered in Plano, Texas. Revenue was down 9% in the first quarter but EPS improved by 4%. The CEO stated that 2009 was started with several strong new contract wins thus he provided positive guidance for the rest of the year. Shares have been channeling between $14.00 and $13.50/share on the chart and just popped above the 200-day SMA at $13.77/share.
Apple (AAPL | Quote | Chart | News | PowerRating) - This 5 Long Term PowerRated personal computer company is the number 1 most popular stock on our screener. Despite potential competition from the "pre" smart phone, Apple's iPhone still rules the smart phone space. They just announced over a billion downloads from the iPhone applications store in the last nine months alone clearing showing the superiority of this category crushing product. 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 breaking above resistance at $135.00/share.
Bristol Myers (BMY | Quote | Chart | News | PowerRating) - Another 5 rated stock hitting our most popular list this week. This drug company reported solid top line growth in the first quarter of 2009. Net Sales advanced by 3% and Diluted EPS surged by 23%. Combined with decreasing marketing and selling expenses lead to a strong performance over this time frame. They have several products moving up the approval pipeline and gave positive guidance into the rest of the year. On the chart, shares are trading above both the 50 and 200-day SMA's with an uptrend in place since March, 9th 2009. However, resistance appears around the $43.00/range.
Bank of America (BAC | Quote | Chart | News | PowerRating) - This 1 rated stock is the second most requested issue on the most requested screener. Its future is very uncertain with the massive issuing of $13.7 billion dollars of new stock to meet the stress test requirements. This firm is truly in the eye of the storm of the U.S. financial situation. An apropos name to hold such a position, in addition! Technically, price surged to $15.00/share but has dropped back appearing to have found support around $11.00/share.
Stocks in the News
Here are a few stocks from the newswires catching my eye this week:
KeyCorp (KEY | Quote | Chart | News | PowerRating) - Ohio's largest bank was upgraded by RBC Capital markets sending shares higher.
Wind River (WIND | Quote | Chart | News | PowerRating) - Surged after Intel agreed to purchase the company.
Teradyne (TER | Quote | Chart | News | PowerRating) - Jumped upon being pumped by Jim Cramer on Mad Money.
Hot Topic (HOTT | Quote | Chart | News | PowerRating) - Fell due to announcing slumping sales to the teen market.
Cisco (CSCO | Quote | Chart | News | PowerRating) - Climbed after getting word it will replace Citigroup in the DJIA.
CB Richard Ellis (CBG | Quote | Chart | News | PowerRating) - The commercial real estate concern advanced on a Goldman upgrade.
Walt Disney (DIS | Quote | Chart | News | PowerRating) - Rose on the box office strength of its "UP" film.
Nordstrom (JWN | Quote | Chart | News | PowerRating) - The high end retailer surged on positive consumer economic data.
Hecla Mining (HL | Quote | Chart | News | PowerRating) - Suffered a downgrade by RBC Capital sending shares down hard.
Frontier Oil (FHO | Quote | Chart | News | PowerRating) - Plummeted on a negative report from Valero.
CF Industries (CF | Quote | Chart | News | PowerRating) - Gave back a bit after Agrium reaffirmed its bid.
Automatic Data Processing (ADP | Quote | Chart | News | PowerRating) - Fell after releasing pessimistic employment data.
This Week's Top Performers
Tivo (TIVO | Quote | Chart | News | PowerRating)
American Uranium (ACUC | Quote | Chart | News | PowerRating)
Remy International (RMYI | Quote | Chart | News | PowerRating)
This Week's Worst Performers
Electric Motors (EMCO | Quote | Chart | News | PowerRating)
Finishmaster (FMST | Quote | Chart | News | PowerRating)
Joint Corp (JOITF | Quote | Chart | News | PowerRating)
What to Expect Next Week
Tuesday: Wholesale Inventories
Wednesday: Trade Balance, Beige Book
Thursday: Retail Sales, Initial Claims
Friday: Sentiment, Import/Export Prices
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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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