Joseph Lazzaro
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Precision Castparts: Ride the Commercial Aviation Recovery
As expected, the shares of Precision Castparts Corp (PCP), which I first discussed on April 20, 2009 at a price of $61.92, corrected earlier this year, in the spring, after rushing through $136, hence if you took some profits off the table at that juncture, it was prudent. But now the correction appears to be over, and PCP, after a test of $100 has moved back above the key, 50-day moving average -- a bullish sign.
Precision's fiscal 2011 revenue should increase more than 10%, with another healthy gain likely in fiscal 2012.
Continue reading Precision Castparts: Ride the Commercial Aviation Recovery
Oil's Uncertain Economic Outlook
The outlook for oil, like Fed Chairman Ben Bernanke's evaluation of U.S. economy's prospects, looks "unusually uncertain."
In the past two months, oil has rallied out of lows near $68 per barrel, only to stall as it neared $80. Moreover, repeated, July probes of $80 have failed -- a technically bearish development.
Oil also recently registered a "death-cross," -- a technical pattern in which the key, 50-day moving average crosses below the 200-day moving average. However, at that point, just when it looked like oil was about to make a return trip to $68, crude held support at $70, and started heading north again.
Continue reading Oil's Uncertain Economic Outlook
AutoZone Benefits from Economic Doubt
A U.S. economic recovery in doubt means new car auto sales forecasts are in doubt, which is good news if you own shares of auto parts chain AutoZone Inc. (AZO). I first discussed AutoZone here on March 30, 2009, at a price of $163.40.
AutoZone is benefiting from a recession-related trend: Adults unable to buy a new car are maintaining their existing used cars; others are purchasing a used car instead of a new one. Each trend is bullish for AutoZone.
As a result, look for AutoZone to post revenue growth of 5% to 7%, boosted by both same-store sales growth and about 200 new stores. Margins should widen.
Continue reading AutoZone Benefits from Economic Doubt
Valero Energy: Stock's Lack of Progress Is a Concern
The shares of independent refiner Valero Energy (VLO), first discussed here on April 20, 2009 at a price of $20.08, continue to frustrate investors.Refinery margins, which were squeezed during 2008-2009, due to the loss of more than 8 million jobs from the U.S. economy -- many of those being vehicle owners -- have started to recover. Even so, the market has not worked this new reality into Valero's stock price yet.
Continue reading Valero Energy: Stock's Lack of Progress Is a Concern
Ray of Light: Risk Appetite Has Increased
Experienced investors know that even the most-sobering economic reports can contain 'gems' or small-but-significant, positive data points. The U.S. Federal Reserve's latest Beige Book report on the economy is a classic example. The Fed confirmed that the U.S. economic recovery had slowed in the second quarter, with regions reporting uneven levels of growth.
The gem? The recovery, although in low gear, nevertheless remains fast enough for commercial borrowers to service their debt, and this is helping to stabilize the commercial debt market.
Continue reading Ray of Light: Risk Appetite Has Increased
Stanley Works: Low-Profile Hardware Gem
Since I first discussed Stanley Works (SWK) here on February 10, 2009, at a price of $32.48, the shares have pulled-back roughly in-sync with the Dow's recent retreat. But they have since found support near $50, and I obviously still like the shares. Here's why.
Look for experienced, battle-tested Stanley Works to post a nearly 100% revenue increase in 2010, mostly on the strength of its Black & Decker acquisition, but also as the tool sector benefits from strong growth in emerging markets. A factor that's up in the air? The status of the U.S. economic expansion in the second half of 2010.
Continue reading Stanley Works: Low-Profile Hardware Gem
U.S. Economic Uncertainty Creates a Range-Bound Dow
If you sense that the U.S. stock market recently seems to trade up one day on a good data point, then trade down the next, when a negative data point is released, you're not the only one. Further, look for the Dow to remain range-bound, with rallies and pull-backs containing little conviction, until the U.S. economic outlook has been clarified.
U.S. Federal Reserve Chairman Ben Bernanke perhaps best summarized the U.S. economic outlook when he termed it "unusually uncertain." Don't misunderstand: The U.S. economy continues to grow, albeit at a slower pace in the second quarter, but conflicting data regarding what's next abounds.
Continue reading U.S. Economic Uncertainty Creates a Range-Bound Dow
MasterCard's Pull-Back: A Correction or Something Worse?
Talk about hair cuts. The shares of MasterCard Inc. (MA), first discussed here on April 13, 2009 at a price of $176.06, plunged 21% in the past three months, amid the Dow's retreat.The drop has turned a once big-winner trade into only a modest gain, but the calculation here is that the price move represents an overcorrection. Here's why:
MasterCard's revenue should increase an impressive 9-12% in 2010 and 10-15% in 2011. MA has emerged from the nation's worst recession in more than 25 years in enviable shape, even amid the 'frugal consumer' era that's likely to restrict U.S. consumer spending. Look for transaction growth to continue, as a result of the U.S./global trend toward increased use of credit cards.
Continue reading MasterCard's Pull-Back: A Correction or Something Worse?
Colgate-Palmolive: Time to Take Some Profits off the Table?
I first wrote about Colgate-Palmolive (CL), on April 13, 2009, at a price of $58.49. The shares have had an impressive run, and with the stock's recent retest of 2010 highs near $86, now may be good time to take some profits off the table.
However, those investors who can tolerate the risk can maintain their position in CL, in anticipation of even more gains.
Continue reading Colgate-Palmolive: Time to Take Some Profits off the Table?
Windstream: Sideways Action Is Trying Investors' Patience
Rural broadband and telecom provider Windstream Corp. (WIN), first discussed here on January 19, 2010 at a price of $10.92, has exhibited sideways action for six months, but I still view the shares as attractive. Here's why: Look for 16-state-presence Windstream to post a 4-6% revenue gain in 2010 as broadband subscriber increases offset a phone revenue decline. Windstream should also benefit from a rise in business broadband subscription as business formation increases with the U.S. economic recovery. A nice $1 annual dividend adds to the positive story.
Continue reading Windstream: Sideways Action Is Trying Investors' Patience
Senate May Vote This Week on $30 Billion Community Bank Capital Bill
The only question is -- how soon can the Congress get this deal done? The potential 'deal' being $30 billion in new capital for community banks, who would then use it as a base to increase lending to small-sized/medium-sized businesses by up to $300 billion -- credit that's urgently needed and may prove to be a pivotal factor concerning the U.S. economic expansion's sustainability.
"If we can help the big banks, then we should certainly be able to help small-business lending," President Barack Obama said June 30, Bloomberg News reported. The Senate may consider the bill as early as this week; the program, called the Small Business Lending Fund, passed the U.S. House last month
Continue reading Senate May Vote This Week on $30 Billion Community Bank Capital Bill
Does Whirlpool's Recent Pull-Back Represent an Opportunity?
As expected, Whirlpool Corp. (WHR), first discussed here on March 13, 2009, at a price of $34.47 and due for a breather after an impressive one-year run-up, pull-backed this spring. But investors who can tolerate moderate-risk should consider the roughly 28% correction as as a decent time to scoop-up shares. Here's why.
Look for Whirlpool to post a 4% to 6% revenue increase in 2010, then a 5% to 7% rise in 2011, lead by strong demand for kitchen and laundry appliances in emerging markets. Latin America sales should be particularly strong, rising better than 10% in 2010 and 2011.
Continue reading Does Whirlpool's Recent Pull-Back Represent an Opportunity?
Flight-to-Safety Pushes U.S. Interest Rates Lower
Paraphrasing the great Mark Twain, if you don't like the stance of institutional investors, just wait a while.Case in point: Investor sentiment toward the United States' large budget deficit and national debt.
A scant month ago, the talk was of bond vigilantes turning their wrath on the U.S., from Greece, Spain, Portugal and the rest of Europe's debt-plagued nations -- a predicament that would force interest rates up in the world's largest economy.
Continue reading Flight-to-Safety Pushes U.S. Interest Rates Lower
JCPenney Has Seen Recessions Come and Go
The shares of department store chain JCPenney (JCP), first discussed here on April 13, 2009, at a price of $26.52, have misbehaved this spring, forming a bear hug, during a downstairs walk to $20. Moreover, were it not for JCPenney's demonstrated business model, the shares would have been kicked, but JCP's track record gets the benefit of the doubt here.
The shares have fallen roughly in-sync with revised sentiment that sees U.S. consumer spending increasing at a tepid pace in the second half of 2010. However, the calculation here is that JCP's same store sales will increase about 2.5% in 2010, enough to return the shares to healthier levels this year.
Continue reading JCPenney Has Seen Recessions Come and Go
Cardinal Health: Well-Positioned for the Health Care Reform Era
The shares of Cardinal Health (CAH) have meandered the past three months, but investors should view that sideways action as an extended opportunity to scoop-up shares, as the pleasant story continues with CAH.Cardinal Health spun-off 81% of its clinical and medical products segment, CareFusion Corp. (CFN) in August 2009.
First discussed here on April 17, 2009 at a pre-spin-off price of $34.22, Cardinal's outlook is promising, due to a likely 3-5% 2010 revenue rise, after a 2.9% increase in 2009.
Key operation factors working in CAH's favor include increased prescription sales, modest pricing power, better performance of wider-margin generic drugs, lower customer attrition, and more-effective cost controls.
Continue reading Cardinal Health: Well-Positioned for the Health Care Reform Era
Comfort Zone Investing: Unconventional Thinking Needed
BP to Begin Scaling Back Oil Cleanup
Oil's Uncertain Economic Outlook
