The contenders list is down to twelve stocks and three puts. I will not be trimming the list today. Instead, I will be reviewing possibilities among four more stocks of well established companies.
There are the two largest home improvement stores, Home Depot (HD) and Lowe's Cos (LOW) as well as the two largest payroll companies, Automatic Data Processing (ADP) and Paychex Inc. (PAYX). They are all fine, well-managed companies, so this will just be a numbers game along with a sense of whether the economy is going to reward investors in 2010, or if it's too early.
Just call it 'one win, one loss' with these two shorts, first recommended on May 13, 2009. McGraw-Hill Companies (NYSE: MHP). Hold Short, first recommended on May 13, 2009 at a price of $29.89. After flirting with the Buy/Stop Loss at $36, MHP has resumed the predicted path: down. Belt-tightening by states, school districts, and by other education institutions does not bode well for MHP's education publishing wing. Cover Short on a bounce off $20 or $15. Buy/Stop Loss if you were to sell shares in this company: $36.
Investor and trader Mishko Janusevich had a mantra that he used to repeat while outlining the top, new stock shorts that appeared that day, as determined by technical indicators.
He would stand next to the overhead projected stock chart at the front of the trading room and recite, "You see this stock? You see that it's dropped $8 in past two days? You think it can't drop any more? SELL THAT STOCK it's dropping more!!"
Short these shares if you can tolerate high-risk and are an experienced investor that does not remove Buy/Stop Losses:
Yesterday, payroll specialist Paychex (NASDAQ: PAYX) reported that its third-quarter profit dropped 8%. The company saw investment losses offset gains in other areas, resulting in earnings of 36 cents per share.
A year earlier, PAYX raked in 39 cents per share. Quarterly revenue checked in at $528.6 million, 1% lower than a year ago. Analysts expected earnings of 36 cents, but revenue was forecast to total $536.9 million.
Earnings reports continue to dribble in as the quarter winds down. Much of the attention this week will be on homebuilders KB Home (NYSE: KBH) and Lennar Corp. (NYSE: LEN) as investors look for any sign that the housing sector has bottomed (home sales numbers are also due out this week; see below). Analysts surveyed by Thomson Financial anticipate that both companies will report that they narrowed their losses in the most recent quarter.
KB Home's expected $1.25 per share loss, on revenue of $725.5 million, compares to the previous quarter loss of $3.30 and to a year-ago loss of $6.19. However, KB Home's losses in the past few quarters have been deeper than expected. The Los Angeles-based homebuilder's long-range earnings growth forecast is 10.5%, less than the S&P 500. Analysts continue to recommend holding KB Home, and have for at least 120 days. Shares, however, reached a new 52-week high of $31.69 on Friday, and they are up 10.5% year to date.
Lennar is expected to post a loss of 52 cents per share, on revenue of $1.1 billion. That compares to the previous quarter's per-share loss of 76 cents and to a year-ago loss of $3.25. While Lennar also has tended in the past few quarters to miss expectations, the Miami-based company managed a positive surprise in the first quarter of 2008. Lennar's long-range earnings growth forecast is 10.3%, about the same as KB Home's. Analysts also recommend holding Lennar. Friday, shares of Lennar also reached a 52-week high, $27.75, but they are down 6.4% year to date.
"Socially Responsible Investing (SRI) is no longer relegated to a tiny corner of the investment landscape; indeed, according to the Social Investment Forum, SRI now accounts for $2.7 trillion, up more than 18% since 2005," says Chuck Carlson.
Here, the editor of The DRIP Investor offers five stock that both rank high for their social responsibility and also stand out based on more traditional earnings and valuation analysis.
"The Social Investment Forum estimates that more than one in every 10 dollars under professional management in the U.S. is involved in SRI investing. What is driving the growth in SRI?
"One factor is the increasing numbers of women and younger investors among the investor populace have fueled demand for SRI investments.
"In addition, we see an increased focus on environment, social, and corporate governance issues. Further, widely publicized stories concerning global warming as well as various corporate governance issues, have caused many investors to reconsider how they deploy their investment capital.
Since August, the shares of Paychex Inc. (NASDAQ: PAYX) have dropped from $45 to $33.45. For the most part, the company provides a variety of payroll and human resource services for small and medium size businesses. However, with the slowing economy, investors are getting jittery.
Despite this, Paychex had a reasonable Q3. Revenues increased 9.7% to $532.2 million and earnings were up 13% to $142.5 million, or $0.39 per share.
While its customers are experiencing pain, the fact remains that they still need the kinds of services that Paychex provides. Simply put, the company has built a solid recurring revenue generator based on a competitive offering, which has kept up with players like ADP (NYSE: ADP). Keep in mind that Paychex has achieved its 18th consecutive year of record revenue and earnings growth.
Yes, Paychex admits that things are tougher (that is, with the macroeconomic environment). For example, the selling season has been difficult and there's been an uptick in business failures, especially in the construction and mortgage sectors.
Although, Paychex still has a fairly diversified customer base, which counts about 570,000 clients. And based on prior economic downturns, the company has been able to deal with the problems and grow through them.
MOST NOTEWORTHY: World Wrestling, Novo Nordisk and Nestle were today's noteworthy downgrades:
B. Riley downgraded shares of World Wrestling Entertainment (NYSE: WWE) to Neutral from Buy on valuation with the stock only 1% below their target price. However, B. Riley admits shares may move higher during the next 30-35 days, due to the upcoming WrestleMania event in Orlando, FL.
Novo Nordisk (NYSE: NVO) was downgraded to Neutral from Buy at Merrill on valuation and a lack of near-term catalysts; shares were also lowered to Peer Perform from Outperform at Bear Stearns.
ING lowered Nestle (OTC: NSRGY) to Hold from Buy as they expect organic growth to slow in 2008.
OTHER DOWNGRADES:
Banc of America downgraded Paychex (NASDAQ: PAYX) to Neutral from Buy.
HSBC downgraded Repsol SA (NYSE: REP) to Neutral from Overweight.
Del Monte Foods (NYSE: DLM) was downgraded to Market Perform from Outperform at Wachovia.
MOST NOTEWORTHY: Brocade Communications Systems, Inc (BRCD), AT&T Inc (T), DaimlerChrysler (DCX), AMR Corp (AMR) and Continental Airlines, Inc (CAL) were today's more noteworthy upgrades:
JP Morgan upgrade shares of Brocade Communications Systems, Inc (NASDAQ: BRCD) to Overweight from Neutral, citing positive trends in networked storage; shares were also added to the firm's Focus List.
Matrix believes improving product mix and demand for new products is driving strong fundamental trends in AT&T (NYSE: T). Matrix upgraded T shares to Strong Buy from Buy and sees upside to their intrinsic value of $56.
Bernstein believes the divestiture of Chrysler from DaimlerChrysler AG (NYSE: DCX) is a positive for the company and upgraded shares to Outperform from Market Perform.
Soleil upgraded shares of AMR Corp (NYSE: AMR) to Buy from Hold on valuation and Continental Air Lines Inc (NYSE: CAL) to Hold from Sell based on a more constructive industry outlook...
OTHER UPGRADES:
Morgan Stanley upgraded NTT DoCoMo, Inc (NYSE: DCM) to Overweight from Equal-Weight.
Payroll accounting firm Paychex Inc. (NASDAQ: PAYX) last week released third-quarter earnings of $0.35 per share, exactly what analysts had estimated. Revenue increased 12.7% to $485.3 million, due mainly to a 25% increase in human resource services revenue. Profits rose 11% to over $126 million, or $0.33 per share, as compared to 3Q last year of $114.5 million, or $0.30 per share. Paychex's earnings, to the tune of $0.02 per share, were hit by a $13 million litigation set-aside that the company stated would not need to be repeated.
With earnings coming in around what analysts had expected and HR services forecast to grow by at least double digits, why then are analysts evenly divided about this stock? Why has it lost 4% of its value in the last month? The stock lost even more ground on this earnings report and yesterday it closed at $37.89, down an additional $0.02 per share. Paychex currently has over half a million clients, second only to ADP in payroll processing services.
MOST NOTEWORTHY: Insituform Technologies, Inc (INSU), Ameristar Casinos, Inc (ASCA) and Christopher & Banks Corp (CBK) were some of today's more noteworthy downgrades:
Canaccord Adams downgraded shares of Insituform Technologies (NASDAQ: INSU) to Underweight from Neutral following the company's reduced outlook and announcement to exit the tunneling business.
Prudential downgraded shares of Ameristar Casinos (NASDAQ: ASCA) to Underweight from Neutral on valuation following the recent run-up due to speculation the company will be sold; based on management statements, Prudential believes a company sale is unlikely.
ABN AMRO downgraded shares of British Airways plc (NYSE: BAB) to Sell from Hold as the firm believes profits on trans-Atlantic routes may drop from increased competition due to the "open skies" agreement between the European Union and the U.S.
Bonds Are a 'Safe' Investment: A Big Lie Gets Even Bigger
Walmart's New Health Food Push: Is It Too Hard to Swallow?
Analyst Upgrades
The contenders list is down to twelve stocks and three puts. I will not be trimming the list today. Instead, I will be reviewing possibilities among four more stocks of well established companies.
Just call it 'one win, one loss' with these two shorts, first recommended on May 13, 2009.
Yesterday, payroll specialist 
Earnings reports continue to dribble in as the quarter winds down. Much of the attention this week will be on homebuilders 
Since August, the shares of 
and 
. He also operates .gif){kind=logo}
.gif){kind=logo}
Goldman Earnings Sink After Buffett Dividend
Johnson & Johnson's Income Falls 23%
Burberry Shares Leap on Sales Update
