Results for the tech stocks in last week's preview were a mixed bag, some beats, some misses, some in line. By and large, expectations for tech companies reporting results this week remain high, though. Here's what analysts surveyed by Thomson Financial are anticipating in the way of earnings, as compared to the same period of the previous year.
Over the past year, we have been hearing a lot of bad news about investment banks and insurers. The slumping housing market, credit crunch and subprime mortgage troubles have been leading the headlines, so many of you are probably shying away from financial stocks as almost all the banks have been getting only bad publicity lately.
In the light of those worries about safe investments, CNNMoney is asking us to reconsider our opinions, claiming that there really are some quality stocks in these challenging financial times.
Berkshire Hathaway tops the list, mainly because of its CEO Warren Buffett, who has the experience of surviving previous recessions. While some investors may have impression that the company has a lot of tough times ahead, CNNMoney sees Berkshire with a lot of capital, which could be enough to steer it through the current economic storm. To support this argument, CNNMoney cites Keppler Asset management CIO Michael Keppler, who is convinced that Berkshire will be able to beat the difficult market.
"Almost untouched by the subprime scandal and the subsequent credit fallout, Canada's banks are strong and their risk of writeoffs are consider by most analysts as minor," notes Genia Turanova and Gregory Dorsey in Leeb's Income Performance Letter.
"Toronto-Dominion and its subsidiaries, collectively known as TD Bank Financial Group, serve more than 14 million customers. The group offers a full range of financial products and services including wholesale banking securities, personal and business banking, wealth management and U.S. personal and commercial banking.
"TD Bank is looking to expand its US presence by acquiring New Jersey-based Commerce Bancorp. After the acquisition is completed, TD's US banking operations will double. As for the hot topic of all financials these days – its subprime exposure – Commerce Bancorp's $16 billion loan portfolio has no subprime exposure.
Royal Bank of Canada (NYSE: RY) is expected to launch the first covered bond from the country next week, the Financial Times reported. The bank is targeting a benchmark-sized issue worth $1.4B-$4.2B.
The Financial Times also reported that Indian conglomerate Tata has concluded an agreement with Virgin Mobile USA Inc (NYSE: VM) to launch a cellular phone brand in India. The brand, called Virgin Mobile in India, would target young Indians under a franchise agreement with Tata Teleservices.
WEB SITES:
Bloomberg reported that former JP Morgan Chase & Co (NYSE: JPM) Vice Chairman Donald Layton is expected to be named E*Trade Financial Corporation's (NASDAQ: ETFC) new CEO. In an interview, Layton said he may consider a sale of the troubled online brokerage if it "made sense" for shareholders.
Consumer confidence in the economy dropped even lower in February 2008, on concerns that job growth will slow and that the U.S. economy may fall into a recession, RBC Bank announced Friday, in its monthly survey.
The RBC Cash Index dropped to 48.5 in February 2008 from 56.3 in January 2008. The February 2008 stat was the index's lowest reading since the bank started the index in 2002, the bank said.
RBC (NYSE: RY) said the February 2008 reading continues a downward trend that has persisted through the last year, with consumer sentiment fell across the board - - with concerns about the U.S. economies health and worries about job security and investing weighing on Americans.
Economist Glen Langan told BloggingStocks Friday this month's RBC survey is consistent with other polled data on the current economic mood of Americans.
Consumer confidence declined to an all-time low in early January 2008, according to one measure, as concerns about jobs, energy prices, and home foreclosures weighed on the public's outlook for the economy and their personal finances, The Associated Press reported Friday.
The RBC Cash Index fell to 56.3 in early January 2008 from 65.9 in December 2007, RBC said in a statement. The January stat is the lowest reading since the index's inception in 2002, RBC announced. One year ago, in January 2007, the idex stood at a healthy 95.3.
Economic headwinds weigh
Economist David H Wang told BloggingStocks Friday the data reflects consumer awareness of sub-par U.S. economic fundamentals, and the uncertain outlook for the nation in 2008.
A former Royal Bank of Canada (NYSE: RY) trader alleged that some employees "miss-marked" bonds to increase profits at the New York office's investment banking unit, the Wall Street Journal reported.
The WSJ also reported that private-equity firm J.C. Flowers & Co is in talks with UK lender Northern Rock, but has not confirmed it will launch a bid for the troubled firm wrapped up in the subprime meltdown.
OTHER PAPERS:
The New York Times reported Merrill Lynch & Co Inc (NYSE: MER) CEO Stanley O'Neal contacted Wachovia Corporation (NYSE: WB) CEO G. Kennedy Thompson last week to discuss the possibility of a merger between the companies, according to inside sources; Merrill's board has reportedly started considering candidates to replace him.
The Times also reported that designer Tommy Hilfiger agreed to sell his biggest clothing line exclusively at Macy's Inc (NYSE: M). Under the agreement, Mr. Hilfiger would remove his clothing lines from stores like The Bon-Ton Stores Inc (NASDAQ: BONT) and Dillard's Inc (NYSE: DDS).
However, Ontario is more than just Canada's financial center. Its abundance of resources and location on Great Lakes have made Ontario a manufacturing powerhouse, including steel production and automobile manufacturing in southern Ontario, and mining and forestry in the north. Toronto is Canada's film and media center, as well as an important tourism destination. Niagara Falls is one of world's most popular tourist destinations. Other Ontario companies the Motley Fool liked include Research in Motion Ltd. (NASDAQ: RIMM), Nortel Networks Corp. (NYSE: NT), and IMAX Corp. (NASDAQ: IMAX).
Research in Motion (RIM), Canada's largest public company, is well know for its BlackBerry smart phones, but it also provides software development tools and produces radio-based modems used in portable devices. The consensus recommendation of analysts surveyed by Thomson Financial is to buy RIM, and has been since April. RIM met analysts' earnings per share estimate when it reported second quarter FY2008 earnings in early October, and Wall Street expects EPS of 62 cents in the third quarter, double the 31 cents actual from a year ago. RIM has a five-year EPS growth rate of 73.5%, easily beating the S&P 500 and the technology sector average. RIM's share price has been climbing since a share split in August, to reach a 52-week high of $128.36 on Tuesday; it opened today at $124.75. Also this week, RIM announced plans to sell the BlackBerry in China, and introduced Facebook for the BlackBerry as well. For more on Microsoft Corp.'s (NASDAQ: MSFT) challenge to RIM and other RIM-related news, see Bloggingstocks' RIM coverage.
Its abundance of resources and location on the Great Lakes have made Ontario an economic powerhouse. Canada's capital, Ottawa can be found there, as well as its largest city, Toronto, which is also Canada's financial hub. Seven of Ontario's eight largest companies are financial institutions, and Toronto is also the home of one of the largest stock exchanges in the world. When the Motley Fool took a look at stock investment opportunities in Ontario this past June, three of the companies they focused on were financial institutions: Royal Bank of Canada (NYSE: RY), Manulife Financial Corp. (NYSE: MFC) and Toronto-Dominion Bank (NYSE: TD). Considering the credit crunch and the weakness of the U.S. dollar, I thought it might be interesting to see how those companies are faring now.
The Royal Bank of Canada, also known as RBC Financial Group, is Canada's largest financial institution. It has 1,300 domestic locations and offices in 30 countries. In September, RBC's Gord Nixon won Canada's Outstanding CEO of the Year award for 2007. More recently, RBC announced the acquisition of a Caribbean bank, and it was one of four Canadian banks affected by restructuring at VISA. With RBC's five-year earnings per share growth rate of 26.5% (better than the S&P 500), the consensus recommendation of analysts surveyed by Thomson Financial is to buy RBC, despite missing earnings expectations for the past two quarters. RBC's share price is near an all-time high on the NYSE, closing Thursday at $57.09 on the NYSE. RBC will release its next quarterly report on November 30.
Leverage, the use of borrowed money for investing, goes in and out of favor. When times are good and people are making money, it's great. It amplifies returns (positive or negative) and, particularly in real estate, can lead to mind-bogglingly high return on investment numbers. But the downside is also huge, as anyone who lost a job in the wake of a failed leveraged buyout of the 1980s found out.
My summary of the positives and negatives of leverage is this: Everything that's good about leverage is also bad about leverage.
Having said that, this paragraph from Saturday's New York Times scares the bejesus out of me: Let's say you are very wealthy and have $25 million to invest in a portfolio of hedge funds. Banks like BNP Paribas, Royal Bank of Canada, or Barclays will leverage your investment, say four to one, allowing you to invest $100 million, using derivatives. Barclays estimates that roughly $60 billion to $80 billion in leverage is being put on by investors in hedge funds or funds of hedge funds. Other market players say it is more than double that.
Then you add that leverage to the leverage that the hedge funds are already using. It's like buying stock on the margin, on the margin. And I don't even know what that means. But that's what it's like. Of course, like all leverage, this will be fine as long as the markets are fine, which is kind of like saying driving 120 miles per hour is fine as long as you don't hit anything.
If markets go south, people undoubtedly are going to look back on this leverage on steroids and say "What were we thinking?"
Results for the tech stocks in last week's preview were a mixed bag, some beats, some misses, some in line. By and large, expectations for tech companies reporting results this week remain high, though. Here's what analysts surveyed by Thomson Financial are anticipating in the way of earnings, as compared to the same period of the previous year. 
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