TheStreet.com's Jim Cramer says that bid has kept a floor under equities, but things are dire without it.
Without the futures ramping, don't things seem so expensive? Those consumer nondurables -- uh-oh, they have dollar pressure. The stimulus package of China? Is that why we bought Fluor (NYSE: FLR) (Cramer's Take)? Where are the orders? All those oil stocks looked so inexpensive with oil at $66 going to $70. But we just paid $2.25 at the pump with no line and the futures are at $60. Citigroup (NYSE: C) (Cramer's Take) hit a 52-week low despite talking about an acquisition, and Bank of America (NYSE: BAC) (Cramer's Take) is a smidge above the 52-week low. What happens if it takes it out? What happens if Google (NASDAQ: GOOG) (Cramer's Take) takes out $300? Where is the Nasdaq bid, for heaven's sake? Where did all of those morning buyers go who kept coming back right until the end?
And that's the problem, isn't it? The collective cheapness of equities vs. the overvaluation of stocks. We simply don't get an opportunity to do anything but lose less than the other guy, and we are supposed to like it because stocks only get this inexpensive once or twice in a lifetime.
FLR opened this morning at $38.85. So far today the stock has hit a low of $38.67 and a high of $43.99. As of 12:40, FLR is trading at $42.26, up $8.25 (24.2%). The chart for FLR looks bullish and S&P gives FLR a positive 4 STARS (out of 5) buy ranking.
For a bullish hedged play on this stock, I would consider a December bull-put credit spread below the $25 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 a 5.3% return in just six weeks as long as FLR is above $25 at December expiration. Fluor would have to fall by more than 40% before we would start to lose money. Learn more about this type of trade here.
FLR hasn't been below $28 at all in the past year and has shown support around $33 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 FLR.
The focus of last week's preview was on oil and energy companies, and we saw that big oil had a good week, reporting better-than-expected results and record profits driven by high prices in the third quarter. Energy-related companies are well represented again this week and expectations in general remain high.
Early in the week, analysts surveyed by Thomson Financial anticipate that the big earnings gainers will include EOG Resources Inc. (NYSE: EOG), Anadarko Petroleum Corp. (NYSE: APC), and Cimarex Energy Co. (NYSE: XEC), which are expected to post profits of $2.24 per share (up 64.7% from a year ago), $1.48 per share (up 52.7%) and $2.26 per share (up 61.1%) respectively. All three of them have offered positive surprises in recent quarters, and analysts on average recommend buying EOG and Anadarko. Other expected big earnings gainers early in the week include Forest Oil Corp. (NYSE: FST), Pioneer Natural Resources Co. (NYSE: PXD), Comstock Resources Inc. (NYSE: CRK), and MasterCard Inc. (NYSE: MA). The earnings of phosphates producer Innophos Holdings Inc. (NASDAQ: IPHS) are expected to have risen 92.3% to $3.37 per share. Innophos beat estimates in the previous quarter by a whopping 210%, and analysts have been impressed with Innophos's lack of debt and pricing gains despite the slowing economy, so, on average, they recommend buying IPHS.
Also early in the week, analysts expect Goodyear Tire & Rubber Co. (NYSE: GT), Kaiser Aluminum Corp. (NASDAQ: KALU), and Oshkosh Corp. (NYSE: OSK) to report that their profits fell 52.9% to $0.33 per share, 45.1% to $0.67 per share, and 41.2% to $0.67 per share, respectively. These companies have tended to beat estimates in recent quarters, and the consensus recommendations of analysts are to buy them. However, PMI Group Inc. (NYSE: PMI), one of the largest private mortgage insurance providers in the U.S., is expected to take another hit as the housing slump drags on. The California-based company is expected to have widened its net loss from $1.04 per share a year ago to $2.43 per share in the most recent quarter. Its shares are down 84.5% from a year ago, and have been trading recently near their 52-week low.
This post is part of a series in which TheStockAdvisors.com asked financial experts to name their top stock pick if McCain or if Obama wins the election.
"Like a neglectful homeowner who has let their house fall into a dilapidated state of disrepair, the federal government has quite a bit of housekeeping to do; if Obama wins the election, we would look towards infrastructure plays such as Fluor (NYSE: FLR)," says Nathan Slaughter, editor of Half-Priced Stocks.
"You may remember the tragic collapse of a Minneapolis bridge last year that took 13 lives. According to the Federal Highway Administration, this is not a one-time incident but a potential epidemic.
"By their estimates, 152,000 of the nation's 600,000 bridges (1 in 4) either require substantial work or have become obsolete and need to be replaced entirely.
"The overall price tag to bring all these bridges up to date: about $140 billion. And the American Society of Civil Engineers (ASCE) believes that bridges are actually in pretty good shape when compared to other crumbling infrastructure.
"Across the country, we have 3,500 unsafe dams in need of repair and hundreds of locks that must be fixed to allow cargo barges to navigate through inland waterways.
"Sewage treatment facilities are outdated; corroded pipes leak 6 billion gallons of drinking water daily; and maintenance on energy transmission lines has been steadily dwindling for over a decade.
"Throw in aging transit systems, highways, landfills, and ports, and the ASCE has graded America's overall infrastructure a "D" and puts the repair bill at a staggering $1.6 trillion.
"And Obama will not shy away from big government projects. In fact, the senator has gone on record as saying 'it is critically important for the United States to rebuild its national infrastructure.'
"And this isn't just hollow campaign rhetoric. Obama has thrown his support behind the National Infrastructure Bank Act, which would free up tens of billions to support various infrastructure projects.
"By all accounts, a massive amount of cash will be needed to bring our infrastructure into the 21st century, and much of that will find its way into the coffers of heavy construction companies like Fluor.
"The Texas-based company is a global heavyweight in the engineering, procurement, construction and maintenance (EPCM) field with nearly $20 billion in annual revenues.
This post is part of a series in which TheStockAdvisors.com asked financial experts to name their top stock pick if McCain or if Obama wins the election.
Which stocks would benefit from a victory by either Senator John McCain or Senator Barack Obama? To help investors sort through the sectors and stocks best positioned to benefit in a post-election environment, we posed this question to some of the nation's leading financial newsletter advisors.
Importantly, this is not a partisan report; each participating advisor has provided a favorite stock for both candidates, focused not on political preferences but unbiased stock analysis. Below we feature those stocks and ETFs that the advisors believe will be the winners depending on which candidate prevails.
Stanford raised Fluor (NYSE: FLR) to Hold from Sell primarily due to valuation.
Citigroup upgraded Cadence Designs (NASDAQ: CDNS) to Buy from Hold because they think the company's cost restructuring initiative and its new CFO will be catalysts for the shares.
Analyst downgrades:
Stephens dropped Ann Taylor (NYSE: ANN) to Equal Weight from Overweight because they no longer view LOFT as a compelling reason to invest in the company.
Citigroup downgraded Hershey (NYSE: HSY) to Hold from Buy on valuation.
KeyBanc dropped Lennox (NYSE: LII) to Hold from Buy on valuation.
Analyst initiations:
Coverage of Hershey was assumed with a Sell by Stifel, which cited valuation for its rating.
Leerink Swann resumed coverage of Cardionet (NASDAQ: BEAT) with an Outperform, as the firm predicts that the company's technolgoy will enable it to grow substantially.
Fluor Corporation (NYSE: FLR) provides engineering, procurement, construction management and project management services worldwide. Projects involve the design and construction of manufacturing facilities, transportation infrastructure, refineries, healthcare buildings, power plants and telecommunications infrastructure. The company also provides administrative and support services to the U.S. government. The oil and gas sector accounts for about 50% of sales. Commercial clients include Exxon Mobil (NYSE: XOM), General Motors (NYSE: GM) and DuPont (NYSE: DD).
Investors were pleased last week, when the company reported Q1 EPS of $1.50 and revenues of $4.81 billion. Analysts had been looking for $1.27 and $4.64 billion. Officials said that consolidated backlog rose to $31.5 billion, up 33% from the year ago period. Management also guided FY08 EPS to $6.25-$6.55, versus consensus of $5.63.
This gigantic beat also serves to remind us of the big dichotomy. You are either in the energy and petroleum products game or you are in a lot of games that don't work.
It's not easy for these companies, some of which have lived off the duress of state and local governments, including Shaw (NYSE: SGR) (Cramer's Take) and to a certain extent Aecom (NYSE: ACM) (Cramer's Take) and URS (NYSE: URS) (Cramer's Take), to become oil-and-gas plays.
The only ones that have transcended it beside Fluor are Foster Wheeler (NASDAQ: FWLT) (Cramer's Take) and Jacobs Engineering (NYSE: JEC) (Cramer's Take), and the only reason you would really know that is longevity. I remember in the early 1980s when FLR and then FWC would compete directly for all of the huge projects after the second oil shock.
TheStreet.com's Jim Cramer says three widely held beliefs are just too bullish to be true.
Sometimes it just hits you. You will be reading an article about some fund manager somewhere who sounds perfectly intelligent and you will spot it, the holy grail of the moment -- THE CONSENSUS. I won't mention the fellow's name -- it is unimportant -- because he's good at his job, but the thoughts he is currently expounding sound like many others I hear, to wit:
1. Oil prices will fall to $80 a barrel.
2. The dollar will rise when the Fed stops cutting rates.
3. GDP growth in China will slow.
First, let me just say that those events would be bullish for every domestic company in our universe, including the financials, and we would have a miracle bull market where less than 20% of the market -- ag/mineral/oil and gas/infra --collapses and fully 80% of the market can rally (I am including the health care stocks because, somehow, they have been seen to become hostage to the weak federal government, and in this scenario I don't see the federal government as worried about cutting back spending).
MOST NOTEWORTHY: Fluor, Forward Air and McDermott were today's noteworthy upgrades:
Citigroup upgraded shares of Fluor (NYSE: FLR) to Buy from Hold to reflect the company's strong performance and backlog in Q4 and raised their target to $190.50 from $158.
Baird upgraded Forward Air (NASDAQ: FWRD) to Outperform from Neutral citing near-term growth initiatives that are gaining traction.
Citigroup also upgraded shares of McDermott (NYSE: MDR) to Buy from Hold to reflect the company's strong Q4 performance and rising commodity prices.
Readers of this space know that the investment bias is toward large-cap companies with demonstrated business models and who have a competitive advantage in established markets, preferably with a favorable global trend as a support. And with the above in mind, Fluor is worth a review.
Fluor Corporation (NYSE: FLR) is one of the world's largest engineering, procurement, construction and maintenance companies. The company oversees construction projects for a large range of industrial sectors worldwide, primarily in its core strengths: designing and building manufacturing facilities, refineries, pharmaceutical facilities, healthcare buildings, power plants, and telecommunications and transportation infrastructure.
Analysts see 20-25% revenue growth for F2008, after likely 15-18% revenue growth in F2007, driven by strong demand for oil and natural gas projects.
MOST NOTEWORTHY: BioScrip, Chipotle Mexican Grill and CoStar Group were today's noteworthy upgrades:
BioScrip (NASDAQ: BIOS) was raised to Buy from Neutral at Broadpoint, as they believe the company's specialty business is worth more than the current price implies.
Baird upgraded Chipotle Mexican Grill (NYSE: CMG) to Outperform from Neutral following Q4 results, citing valuation and a positive view on fundamentals.
CoStar Group (NASDAQ: CSGP) was upgraded to Outperform from Market Perform at JMP Securities, as they expect the company to report a solid quarter next Thursday.
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