Wednesday, December 8, 2010

5 Credit card stocks to buy now

The rules of the game have changed for credit card companies. As of February 22, 2010, new federal legislation went into effect which puts a whole host of constraints on the industry. One of the biggest new rules included in The Credit Card Accountability, Responsibility and Disclosure Act (a.k.a. the CARD Act) include restrictions on imposing so-called “universal default” charges, a practice that had credit card companies going through a client’s financial records and penalizing them with higher interest rates for making late payments even on unrelated bills.

Other changes include a requirement to give clients 45 days written notice before raising credit card interest rates; a virtual ban on retroactive rate hikes; new marketing restrictions; new minimum payment disclosure requirements and no fees for paying your bill online or by telephone. And while this is seemingly bad for credit card companies, there is a flipside to this CARD. (more)


3 Stocks With 30% Sales Growth

As corporate profits race ahead, sales are merely strolling. The median S&P 500 company posted a 20% jump in adjusted earnings per share in its most recent quarter, versus an 8% improvement in revenues. Many companies are combining merely modest sales growth with aggressive cost-cutting, spurring short-term returns but raising questions about long-term ones. Among companies with big sales gains, many have grown through acquisitions rather than rising demand.

The three companies below are genuine fast-growers. Each increased its sales by at least 30% a year over the last several years and did so again in its most recent quarter — without the benefit of major acquisitions. Also, each is expected to increase its sales and earnings per share by 30% in its current fiscal year.

Americans are mostly fat and widely underemployed. That may help explain the rapid growth of Medifast (MED: 29.32, -0.08, -0.27%), a diet company that relies in part on a growing army of independent "health coaches," who share in sales of food products they and their downstream coaches recommend. Sales for the program increased at a compounded average rate of 61% from 2005 to 2009. The company also sells its products directly and has center-based programs. Total sales are expected to swell 57% this year, compared with just a 1% bump for Weight Watchers (WTW: 37.06, +1.54, +4.33%), a 1% decline for NutriSystem (NTRI: 20.11, +0.34, +1.71%) and 25% growth for tiny, profitless (DIET: 0.64, -0.03, -4.47%). Shares of Medifast sell for 20 times forecast 2010 earnings. (more)


Paul Farrell's Top 10 Reasons Not to Buy Stocks

1. American stocks are a high-risk sucker bet

That’s the view of Peter Morici, the former chief economist at the International Trade Commission: that U.S. stocks are a sucker bet. Is Main Street waking up to Wall Street’s con? Maybe. “With corporate profits breaking records, Wall Street anxiously anticipates the return of the individual investors to the stock market. It may be a long wait, because the little guy may have concluded investing in stocks is a sucker bet.”

America’s divided into two stock markets: one for Wall Street’s rich insiders, another for Main Street’s suckers: “Investors, as opposed to traders, buy stocks in companies whose profits they expect to rise. The conventional wisdom says stock prices will follow profits up, but over the last two business cycles, that simply has not happened.”

From 1998 to 2010, profits rose 203%. But the S&P 500 was up just 7%. And still, naive investors buy into Wall Street’s sucker bet. (more)

DryShips: A Hidden Gem

Dryships (DRYS) 3rd quarter earnings:

Consensus: $0.25 a share on revenue of $216.92 million

3rd Quarter Profit was $49 million, or 0.18 a share, up from $31.4 million, or 0.11 a share, a year ago. On an adjusted basis, the company earned 0.38 a share. Revenue was $225.5 million, up from $222.2 million.

Therefore, DRYS beat on earnings and revenue.

But more importantly, the deepwater drilling segment may have just started to pay off. On November 11th, it reported signing its second order. More may be on the way. As oil becomes less abundant on land, oil majors are turning to deepwater oil fields. Petrobras (PBR) found a massive deepwater oil field off the coast of Brazil a few years ago. To drill in deepwater takes special ships and equipment to do. And the ships take a very long time to build. Therefore, Dryship’s deepwater drilling segment has an advantage. As demand grows, more contracts should come. (more)

3 Top Stock Picks for Zooming Auto Sales

O’Reilly Automotive, Inc. (NASDAQ: ORLY) is one of the largest specialty retailers for aftermarket parts, automotive tools and professional service equipment in the U.S. The company has more than 3,400 locations throughout 38 states as well as a lucrative online store.

The company caters to both do-it-yourself customers and professional installers, selling everything from new and remanufactured auto parts (such as alternators and fuel pumps), maintenance items (oil and antifreeze), accessories (floor mats and seat covers) and auto body paint. The company also specializes in locating hard-to-find parts, making them a go-to choice for car enthusiasts.

In the third quarter, the company’s same-store sales rose 11% and overall sales rose 13%. During the same period, earnings rose 30%. The stock posted a 16% earnings surprise!

Thirteen analysts have revised their earnings estimates higher in the past month. This is a great sign for the company, because when the analysts get aggressive with their revisions, we tend to see an even bigger surprise. ORLY is a buy under $64. (more)

State-Run China Securities Journal Says China May Hike Rates Over The Weekend

To all those who are considering buying the futures on the long-ago priced in news of the tax cut extension, we would like to caution that according to the state-run China Securities Journal (which is the same as prophet Jon Hilsenrath telling the great unwashed what the Printing God is about to do with near 99.9% accuracy), China may raise interest rates this weekend. Some additional color from Dow Jones: "Given the central bank set a precedent by raising interest rates right before the release of the consumer price index (previously), there's a 'sensitive policy window' before and after this weekend." If the hike is confirmed (and it is in line with our expectations, that China will hike first before it revalues the CNY any more) look for the greatest marginal credit bubble to promptly collapse, dragging down the US and EU with it, proving that all those who are preaching that Decoupling 2.0 is so different this time, are as always, merely Econ Ph.D.'s. (more)

Jay Taylor: Turning Hard Times Into Good times

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LNG Cheniere Energy (AMEX) North America Liquid Natural Gas Gateway

It sure looks like Natural Gas might be staging a great comeback. LNG – Cheniere Energy (AMEX) is my most recent portfolio addition. In my latest Silver price update I mentioned that I was getting more bullish on Natural Gas. So today’s buy really shouldn’t come as a surprise. If you look at the stocks listed in my Nat Gas sector overview chart LNG – Cheniere Energy clearly stands out. It is the strongest looking chart of all:

The recent thrusting move on the daily chart is nothing short of impressive. That’s both price wise and volume wise. The stock is now in the process of building a very bullish flag testing long-term support. (more)

Smart Money - January 2011

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Dollar Tech

I have found the correlation of a rising U.S. dollar index to that of a falling stock market to be of particular interest to me this year. Shown in the chart below, each rising leg in the U.S. dollar index corresponded to a weak period for the S&P 500. I find it fascinating that such a strong correlation exists. That’s a relationship that can be monitored and evaluated using technical analysis.


In a normal economic environment, we’d expect a rising U.S. dollar to weigh on commodity prices, which in turn would stimulate wider profit margins and higher stock prices. However, these aren’t normal economic times. The Credit crisis in 2008 has now turned into a Sovereign Debt crisis in 2010 in which levered economies are reaping what they’ve sown after years of deficit spending. Debt service burdens have widened as bond investors require a higher interest rate for the risk. In these periods of heightened concern over sovereign debt, money leaves the euro and enters into the U.S. dollar in search of safety and liquidity, ironically, despite our own lofty debt levels. (more)

Stocks give up gains, end mixed

( -- Stocks ended mixed Tuesday, giving back earlier gains, as investor optimism over the extension of Bush-era tax cuts gave way to speculation about a widening federal probe into insider trading and a spike in Treasury yields.

The Dow Jones industrial average (INDU) fell 3 points, or less than 0.1%, to close at 11,359. The S&P 500 (SPX) ended little changed at 1,224, after climbing to a 2-year high during active trading. The tech-heavy Nasdaq (COMP) rose 3 points, or 0.1%, to 2,598.

Stocks held gains for most of the day as investors welcomed news that Obama had reached a deal with Republican lawmakers Monday that would extend Bush-era tax cuts for two years and unemployment benefits for 13 months. It would also lower the payroll tax by two percentage points for a year.

But the momentum faded late in the day after Obama, who had wanted the cuts for high-earning taxpayers to expire, said in a press conference that he would push to have them eliminated after the two-year extension is over. (more)