Over the past few months, as election rhetoric heated up and the economy has cooled, one of Barack Obama's recurring themes has been that the secret to America's future will be the development of an alternative-energy economy. To a populace that has grown increasingly weary of the lackadaisical government approach to economic disaster, this has been particularly galvanizing, and was undoubtedly a major influence on the election. Now that Obama has won, however, the next question is how he will transform those exciting New Deal-esque words into concrete action.
John Podesta, co-chairman of the Obama/Biden transition team, may provide a useful insight into this question. In his day job, Podesta is president of the Center for American Progress (CAP), a liberal think tank that is based in Washington D.C. CAP has already drafted a green-energy stimulus plan; with several programs that are ready to go, it would create 2 million jobs, and would cost a relatively meager $50 billion. While there is no guarantee that CAP's plan will be adopted, given Podesta's proximity to the presidency, it seems likely that at least part of it will become reality within the next year. For a savvy investor, this could be a blueprint for industries that are, potentially, poised to explode with a massive influx of new funds.
Green Autos: Obama has made it very clear that he intends to directly tie any automotive bailout to the development of green technologies. CAP's plan calls for a 4% per year increase in fuel-efficiency standards, as well as investment in new battery technology for plug-in hybrids. With this in mind, it's worth seriously considering which automakers are best poised to go forth with more fuel-efficient models. Furthermore, programs like CAP's "Cash for Clunkers" could be a major boon for companies that process or deal in recycled metals.
TheStreet.com's Jim Cramer says stocks are too extended to go along for the ride.
Uh oh, where it the persistent bid? Did it disappear? Is it resting? Has it gone away?
Throughout the last three weeks we have seen a persistent bid underneath the market, mostly led by Nasdaq futures, that was relentless and dropped off only once when GE (NYSE: GE) (Cramer's Take) was reported to have guided down.
No one knows who the buyer or buyers were, and because volume has been thin, the buyers had their way at the opening and then again at some exquisite marking up at the end of the day.
Everyone who has tried to fade this phalanx has been chewed up and spit out. It has been there irrespective of news flow. Many of the earnings reports in this period have been extremely disappointing -- in fact, only Apple (NASDAQ: AAPL) (Cramer's Take), 3M (NYSE: MMM) (Cramer's Take), Google (NASDAQ: GOOG) (Cramer's Take) and United Technologies (NYSE: UTX) (Cramer's Take) have really delivered. It has been there irrespective of more bailouts, which surely by this time would have started to produce weakness in the market, not strength.
It's somewhat funny to discuss today's best Dow Jones Industrial Average stocks since none are trading in positive territory, but perhaps seeing which stocks are more defensive and can resist the overall declines better is just as important.
Somewhat surprising, Microsoft Corp. (NASDAQ: MSFT) is the best performing Dow stock. Microsoft reported earnings Thursday after the close. While the software giant beat estimates, it gave a poor outlook and the stock was initially hammered down some 6% at the open. It now (10:56) trades down only 1.12%.
Not surprising, the worst stock of the Dow is General Motors Corp. (NYSE: GM). GM has announced further job cuts Thursday and is still trying to merge with Chrysler. From its end, Chrysler has also announced job cuts and plant closures. Today, there has been some talk regarding GM looking to the government to help with its planned merger. Still, GM's financial health is highly questionable by investors and barring intervention, this company may not survive long. GM shares were down 13.4% as of 10.55 am.
You've got to love 3M (NYSE: MMM). The company, whose colleagues include Johnson & Johnson (NYSE: JNJ) and DuPont (NYSE: DD), reported earnings for the third quarter on Tuesday. The numbers appeared good to me.
3M's revenues increased over 6%. Operating income went up well over 8% (excluding special items). Operating income margins rose 60 basis points. The bottom line went up 10%, coming in at $1.42 per share on an adjusted basis. Analysts were looking for about $1.38 per share, so management certainly beat the experts on Wall Street. One of the great things about this Dow component is its ability to generate a decent stream of cash flow. For the nine-month period, 3M delivered $3.4 billion in operational cash flow. That represented a 25% increase. Capital expenditures remained about the same, so free cash flow also took a really superb hike. Free cash generated came in at $2.4 billion, a 42% increase.
For the year, 3M expects to earn at least $5.40 to $5.48 per share, excluding special adjustments. If 3M hits even the low end of the range, then the stock has to be considered cheap. The blue-chip company, which operates in many different areas, including health care and transportation, and which produces products as varied as adhesive tape and surgical masks, closed on Tuesday at about $60 per share. It's well off the 52-week high of $88.70 and it's not too near the 52-week low of around $50.
I like the yield and the valuation, but I'd like to wait for a bit of a pullback before taking a look at 3M. We're just not in a decidedly upward-trending market, and guidance could change (as it apparently did since the last time I covered 3M). Buying on pullbacks is always smart strategy.
Disclosure: I don't own any company mentioned; positions can change at any time.
U.S. stock futures were lower Tuesday morning, indicating Wall Street is poised for a tough start after the Dow rallied 413 points Monday. Corporate earnings gave way to signs of a thaw in money markets and a possible second stimulus plan helped sentiment Monday. Today it will be all about earnings as several Dow industrials are due to report as well as other big names.
American Express Co. (NYSE: AXP) reported late Monday, saying its profit fell 24% in the third quarter due to less spending by cardholders and as more are having trouble paying off debt. Still, the drop was less than expected and AXP shares are up 4.7% in pre-market trading.
Pfizer Inc. (NYSE: PFE) shares are also trading higher in pre-market -- 2.3% higher -- after it reported results this morning. The world's biggest drugmaker's profit tripled because of higher sales of the pain pill Lyrica and lower costs from the 11,000 job Pfizer had cut last year. The results beat estimates.
Dupont deNemours & Co. (NYSE: DD) shares, however, are trading 1.9% lower in pre-market trading after the chemicals giant cut its 2008 earnings view after reporting third-quarter profit that beat analyst estimates.
Caterpillar Inc. (NYSE: CAT) and 3M Co. (NYSE: MMM) are two Dow components that have also just reported earnings.
3M (NYSE: MMM - option chain) shares are rising today after the company announced it will buy license plate manufacturer Financiere Burgienne. Financial terms of the deal were not disclosed. I am encouraged by most companies who are willing to make a deal at this point in the market cycle, because they are most likely getting these new assets for much less than the asking price would have been for the same thing a year ago. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on MMM.
MMM opened this morning at $58.75. So far today the stock has hit a low of $56.01 and a high of $58.75. As of 12:20, MMM is trading at $57.43, up $3.17 (5.8%). The chart for MMM looks neutral and S&P gives MMM a 3 STARS (out of 5) hold ranking.
For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $45 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 11.1% return in just three months as long as MMM is above $45 at January expiration. 3M would have to fall by more than 22% before we would start to lose money. Learn more about this type of trade here.
MMM hasn't been below $50 at all in the past year and has shown support around $50 recently.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in MMM.
TheStreet.com's Jim Cramer says without the Paulson plan, every component is in trouble. Let's take a look.
Without the Paulson plan, or if the plan is so watered down and delayed, I have been saying all bets are off and we could be in for a huge swoon. How huge?
I like to sit down and noodle on the actual components of the Dow Jones Industrial Average to give you a real sense of what can go wrong. And there is so much going wrong. The credit markets are vanishing, the earnings are vanishing and the only hope is a plan that ignites credit markets, forces money off the sidelines and gets this economy and the worldwide economy moving again.
Not long ago, I postulated that this market is literally repealing all of the moves since the Brazil-Russia-India-China emergence that gave us better markets to sell into than just the U.S. With the collapse of Chinese growth -- they have simply ceased to be importers since the summer -- the inflation in India, the war in Russia and a U.S.-led slowdown in Brazil (although that remains a robust market) BRIC is more like having a brick around your neck than a wind at your back.
Meanwhile, the peak in energy and the collapse of the financial system have left both of those groups in disarray with valuations simply too difficult to pin down, so you retreat to worst-case scenarios where you can at least find some terra firma -- mainly where stocks were last time things were this bad.
Stock futures were mixed Thursday morning, indicating a similar start to U.S. stocks. While the S&P 500 showed weakness ahead of housing data to be released at 10:00 a.m. EDT, the Nasdaq composite was slightly positive after Amazon.com reported strong earnings Wednesday. Investors also braced for Ford's earnings, which indeed posted double the estimated loss. The earnings wave continues. Meanwhile, oil prices edged a little higher, but remained around $124 a barrel.
Starting with Ford (NYSE: F) then, the world's third largest automaker posted (after items) a loss of $1.38 billion, or 62 cents. Analysts surveyed by Bloomberg expected Ford to report a loss of 28 cents a share. The headlines scream of a loss of $8.7 billion though, which includes $8 billion in pretax writedowns of North American plants and assets of Ford Motor Credit Co. Ford also said it will convert three truck factories to produce small cars as rising gasoline prices sap U.S. truck sales. Dow Chemical (NYSE: DOW) couldn't manage to offset higher costs of energy and raw materials with the recent price increases it announced, and posted a 27% decrease in profit for the period. Net income was $762 million, or 81 cents a share. Revenue is up 23% to $16.38 billion. Earnings were below analyst expectation according to Thomson Financial of 85 cents per share, but better than the sales estimates of $14.9 billion. DOW shares are dropping some 9.5% in premarket trading as the company said it expects the economy to weaken.
Amazon.com Inc. (NASDAQ: AMZN) posted strong earnings Wednesday after the close, proving its growth days aren't over in this weakened economy hurt by high gas prices. Not only did it beat estimates -- with a 41% climb in revenue to $4.06 billion compared to $3.96 expected, and EPS of 37 cents compared to expectations of 26 cents -- but it also raised its full-year revenue projections. AMZN shares are climbing about 6.5% in premarket trading.
Again this week, in a list of earnings expectations for some prominent companies in a variety of sectors, we see an apparent optimism. That is, analysts are anticipating more earnings growth than earnings declines.
Analysts surveyed by Thomson Financial expect the following companies to report a rise in earnings when compared to the same period of the previous year.
There were a lot of earnings reports this week -- if you weren't setting up some trades before the reports were released, you're probably digesting the numbers now. I had a look at 3M (NYSE: MMM) this morning. The famous Dow component, which competes with Johnson & Johnson (NYSE: JNJ) and DuPont (NYSE: DD), reported this past Thursday. Net sales increased 9%, but diluted earnings per share unfortunately took a whopping decline of 25%. However, you need to take a look at what caused this drop -- there was a gain in last year's quarter from the disposition of a European pharmaceutical business, as well as some other items. Excluding these elements, you'll find that earnings per share grew by 8%.
According to the company's release, 3M did rather well in the free-cash-flow department. Last year at this time, free cash flow came in at $276 million. This past quarter saw free cash flow grow to just under $700 million. I liked that; I also liked that most of the company's divisions reported double-digit profit growth. This is a healthy, blue-chip dividend player -- plus, 3M is comfortable with its previously stated forward guidance of at least $5.47 in adjusted earnings per share for 2008 (or, as the release put it, management believes net income will see an increase of "a minimum of 10% over 2007 earnings-per-share of $4.98"), and it beat the street this past quarter by three pennies, according to Briefing.com.
Here are some things to think about regarding 3M's stock. If it does earn close to $5.47 a share, then the company sports a forward P/E ratio of a little over 14. The yield on the shares is well over 2%. And, as of Friday's close, the price of the stock -- $77.82 -- is well off the 52-week high of $97 and a little ways off from the 52-week low of $72.05. Taken together, this 3M scenario seems like an interesting set-up for a decent trade. The stock looks like it will probably meander for a bit, but it nevertheless should be looked at.
Disclosure: I don't own shares in any of the companies mentioned here; positions can change at any time.
Dow Chemical (NYSE: DOW) reported a smaller-than-forecast 3% profit drop Thursday and said it would have a good second quarter. Higher feedstock and energy costs were blamed for the drop. The chemical giant reported earnings of 99 cents per share, beating the 94 cents estimate.
If two weeks ago some hoped we've seen the bottom of the subprime mortgage crisis, since then more problems, especially with European banks seem to pop. Credit Suisse (NYSE: CS) reported a wider-than-forecast loss of $2.1 billion on a $5.3 billion writeoff as the global effects of the U.S. subprime mortgage crisis continued to spread. Share of CS though are rising in premarket trading about 1.8% as the bank may have seen the worst.
Bank of America Corp. (NYSE: BAC) shareholders don't want the bank to proceed with the $4 billion acquision of Courntrywide Financial Corp. (NYSE: CFC), the mortgage lender that has become the poster child for the subprime mortgage problems. The have pleaded on Wednesday with the bank's CEO.
For nervous investors and analysts looking for good news on the earnings front, it's been a week of mixed blessings. However, judging by the expectations for the following ten so-called barometers of the U.S. economy, or important sectors of it, things could be looking up. All these companies are scheduled to report quarterly results next week (April 21 to April 25).
These first six companies are expected by analysts surveyed by Thomson Financial to post growth in profits in the most recent quarter, compared to the same period of last year:
By definition, no. Stocks carry risk. If you don't want risk, put your money in treasury bills or under the mattress. But don't expect much of a return, if any. Having said that, certain stocks do have attributes that make them relatively, and I emphasize this word, relatively, safer investments than others.
First and foremost, they have solid earnings. The best ones increase earnings every year for several years, no matter what the economy does. Examples: Coca-Cola Co. (NYSE: KO), Johnson and Johnson (NYSE: JNJ) Procter & Gamble Co. (NYSE: PG), Colgate-Palmolive Co. (NYSE: CL). If you've watched these stocks during the last 6 months, they've gone down but nowhere near the depths of most others. They have solid earnings investors can count on. Investors pay for that.
Over the past few months, as election rhetoric heated up and the economy has cooled, one of Barack Obama's recurring themes has been that the secret to America's future will be the development of an alternative-energy economy. To a populace that has grown increasingly weary of the lackadaisical government approach to economic disaster, this has been particularly galvanizing, and was undoubtedly a major influence on the election. Now that Obama has won, however, the next question is how he will transform those exciting New Deal-esque words into concrete action.
U.S. stock futures were lower Tuesday morning, indicating Wall Street is poised for a tough start after the Dow rallied 413 points Monday. Corporate earnings gave way to signs of a thaw in money markets and a possible second stimulus plan helped sentiment Monday. Today it will be all about earnings as several Dow industrials are due to report as well as other big names.
Stock futures were mixed Thursday morning, indicating a similar start to U.S. stocks. While the S&P 500 showed weakness ahead of housing data to be released at 10:00 a.m. EDT, the Nasdaq composite was slightly positive after Amazon.com reported strong earnings Wednesday. Investors also braced for Ford's earnings, which indeed posted double the estimated loss. The 
For nervous investors and analysts looking for good news on the earnings front, it's been a week of mixed blessings. However, judging by the expectations for the following ten so-called barometers of the U.S. economy, or important sectors of it, things could be looking up. All these companies are scheduled to report quarterly results next week (April 21 to April 25).
[Update: Find more Comfort Zone Investing 
Cramer on BloggingStocks: A troika of opportunity and trouble 
Before the bell: Wall Street headed higher; automakers, retailers in focus
Waiting for the other shoe to drop: The looming credit crisis
