Sunday, March 1, 2009

Earnings Week of 3/2

Here's the weeks' earnings spreadsheet:

Spreadsheet Link

From what I saw of last week (admittedly not as much as I would have liked), it would appear that this the market is entering the "Beginning of the End" phase. It would appear that participants are slowly realizing that stocks aren't cheap, EPS forecasts really should be pessimistic, yields are garbage, and the banks are likely still hosed.

As far as the earnings releases, this week there are far fewer (in fact almost zero) big names like DELL or HPQ that can really shift an entire sector. There are, however, far more of the smaller float/high short interest shares that quite often lend themselves to profitable strangle/straddle strategies. Additonally, there are many companies that are hitting new 52-week lows. I'm going to post the spreadsheet up first, and then do the full run-down later this evening as an update to this post.

Monday: CMED, EIX, FCN, OSG and PDLI are all within 5% of their 52-week lows. Several others have short percentages greater than 10%. Unfortunately, the past quarter's performance of most of these has been spotty in terms of magnitude of movement, particularly relative to current IV levels. I will say that it if TWGP doesn't say something pretty great that it could easily be headed for the 52-week low.

Tuesday: High-flying retailer AZO. Interestingly, it hit a 52-week HIGH last week at 148.50. Go figure. I'd guess that 136 would be about the low side if profit taking occurs with an absolute line of 125 in the event of a debacle. Still, the chart of this one is a freakishly bullish in an ugly market. Speculative solar play TSL. It should be mentioned that FSLR was shellacked last week. TSL doesn't have quite the stratospheric PE level that FSLR did and it is also in the single digits.

Wednesday: BJ must have come out with something good last Friday since it spiked hard for a 6% gain. JOYG intrigues me as a potential gamble on the long side, because I don't see the implied low price being hit. PETM has a nice upward channel forming with the 50SMA as the lower bound. The SMA(200) is at 20.88 to provide some resistance and the upper channel line would be around 21.75. SIGM has a nice level set up right at the SMA(200) around 13.75. However, it has a large short interest (which might have been covered and account for the large gap between 12.40 and 13.40). If I were going to lay odds, I'd guess the gap will be closed more solidly. TOL rounds out the bigger names on Wednesday.

Thursday: CIEN has been volatile 3 out of the past 4 quarters but not at the level that the options are pricing. IPI strikes me as a poor-man's POT, but I've heard that potash isn't moving lately and it has little to do with price. Still, the daily chart looks cautiously bullish. URBN has put a small and steady run from it's Dec/Jan lows but it feels to me like they better say something good or else.

Friday: Women's retailer ANN and PBR (not the beer).

One thing that struck me was the considerable variance in the daily charts. There are several that are outright bullish (AZO & PETM for example) and some that have literally no supports left (FCN & OSG as examples). I didn't get to tune in much on Friday and I'm still playing catch up from the weekend. But the fact that SPY never really threatened to overtake Thursday's closing price during Friday's session doesn't exactly engender confidence. Re-iterating my comments above, I think that the horror of what the year holds is finally being realized by investors.

A final note: I find it appalling that Bill Gross is constantly given a platform in the financial media to talk up his book in the guise of "what's best for the US economic system" without anyone calling him out on it. However, his recent statement about equities in the US being dead deserves a little attention. Yes, it's hyperbolic and shrill and it is coming from the kingpin of the bond world. But he is right when he asks why any investor would hold equities with crappy yield and tons of risk when they are the lowest slot on the totem-pole in event of a bankruptcy? About a year back, VZ floated an issue that I believe had a coupon of 8 7/8. Why would you buy the common shares without a guaranteed dividend and a decent chance of further erosion of capital? This is the other side of the coin of my earlier thesis that the equities market is going to emerge from this episode as one in which investors buy shares for dividend yields - big boring companies like KO and JNJ that pay regular dividends and have a solid track record of doing so for many years on end. One play that could be worthwhile is selling puts on these types of stocks in an IRA or some other long-term account - assuming you have the free cash to do so - at a price you'd be comfortable owning. Even if the puts aren't exercised on you, you've generated a little bit of income. And if they do, you have companies that can generate income with some dependability and then you can also sell calls against them each month. Just an idea. Some time this week I'm going to work a bit more on the dividend vs EPS relative changes. So keep an eye out for that.