Thursday, October 30, 2014

5 Stocks Spiking on Unusual Volume

DELAFIELD, Wis. (Stockpickr) -- Professional traders running mutual funds and hedge funds don't just look at a stock's price moves; they also track big changes in volume activity. Often when above-average volume moves into an equity, it precedes a large spike in volatility.

Must Read: Warren Buffett's Top 10 Dividend Stocks

Major moves in volume can signal unusual activity, such as insider buying or selling -- or buying or selling by "superinvestors."

Unusual volume can also be a major signal that hedge funds and momentum traders are piling into a stock ahead of a catalyst. These types of traders like to get in well before a large spike, so it's always a smart move to monitor unusual volume. That said, remember to combine trend and price action with unusual volume. Put them all together to help you decipher the next big trend for any stock.

With that in mind, let's take a look at several stocks rising on unusual volume recently.

Must Read: 5 Stocks Insiders Love Right Now

Green Plains

Green Plains (GPRE) produces, markets and distributes ethanol in the U.S. This stock closed up 7% at $34.49 in Wednesday's trading session.

Wednesday's Volume: 2.39 million

Three-Month Average Volume: 1.45 million

Volume % Change: 61%

From a technical perspective, GPRE gapped sharply higher here and broke out above some near-term overhead resistance at $33.36 with above-average volume. This move is coming after shares of GPRE have recently formed a V-bottom chart pattern, after the stock hit a recent low of $25.92. Since forming that V-bottom, shares of GPRE have now started to uptrend and move back above its 200-day moving average. Market players should now look for a continuation move to the upside in the short-term if GPRE manages to take out Wednesday's intraday high of $36.19 to its 50-day moving average of $37.43 with high volume.

Traders should now look for long-biased trades in GPRE as long as it's trending above Wednesday's intraday low of $32.99 or above its 200-day at $31.90 and then once it sustains a move or close above $36.19 to $37.43 with volume that this near or above 1.45 million shares. If that move gets started soon, then GPRE will set up to re-test or possibly take out its next major overhead resistance levels at $39.26 to around $42, or even $44.

Must Read: 7 Stocks Warren Buffett Is Selling in 2014

Williams Companies

Williams Companies (WMB) operates as an energy infrastructure company. This stock closed up 3% at $55.70 in Wednesday's trading session.

Wednesday's Volume: 11.54 million

Three-Month Average Volume: 6.49 million

Volume % Change: 72%

From a technical perspective, WMB gapped notably higher here back above its 50-day moving average of $55.34 with above-average volume. This spike to the upside on Wednesday also pushed shares of WMB into breakout territory, since the stock took out some near-term overhead resistance at $55.19. Shares of WMB are now starting to trend within range of triggering another near-term breakout trade. That trade will hit if WMB manages to clear some key near-term overhead resistance levels at $56 to $56.92 with high volume.

Traders should now look for long-biased trades in WMB as long as it's trending above Wednesday's intraday low of $54.68 or above $54 and then once it sustains a move or close above those breakout levels with volume that hits near or above 6.49 million shares. If that breakout develops soon, then WMB will set up to re-test or possibly take out its next major overhead resistance level at its 52-week high of $59.77. Any high-volume move above $59.77 will then give WMB a chance to trend north of $60.

Must Read: 10 Stocks George Soros Is Buying

IPG Photonics

IPG Photonics (IPGP) develops and manufactures fiber lasers, fiber amplifiers and diode lasers that are used in various applications, primarily in materials processing. This stock closed up 1.2% at $70.28 in Wednesday's trading session.

Wednesday's Volume: 1.09 million

Three-Month Average Volume: 352,931

Volume % Change: 250%

From a technical perspective, IPGP spiked modestly higher here with strong upside volume flows. This stock has been uptrending over the last few weeks, with shares moving higher from its low of $60.75 to its intraday high of $71.75. During that uptrend, shares of IPGP have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of IPGP within range of triggering a major breakout trade. That trade will hit if IPGP manages to take out some key overhead resistance levels at $72.15 to $73.29 with high volume.

Traders should now look for long-biased trades in IPGP as long as it's trending above its 50-day moving average of $67.58 and then once it sustains a move or close above those breakout levels with volume that's near or above 352,931 shares. If that breakout develops soon, then IPGP will set up to re-test or possibly take out its next major overhead resistance levels at $75.73 to $75.75, or even its 52-week high at $79.

Must Read: 5 Hated Earnings Stocks You Should Love

Zeltiq Aesthetics

Zeltiq Aesthetics (ZLTQ), a medical technology company, is engaged in developing and commercializing non-invasive products for the selective reduction of fat. This stock closed up 6.5% at $25.92 in Wednesday's trading session.

Wednesday's Volume: 2.49 million

Three-Month Average Volume: 733,498

Volume % Change: 278%

From a technical perspective, ZLTQ ripped sharply higher here right above its 50-day moving average of $22.78 with strong upside volume flows. This sharp spike to the upside on Wednesday is quickly pushing shares of ZLTQ within range of triggering a big breakout trade. That trade will hit if ZLTQ manages to take out Wednesday's intraday high of $26.52 to its 52-week high at $27.04 with high volume.

Traders should now look for long-biased trades in ZLTQ as long as it's trending above Wednesday's intraday low of $23.81 or above its 50-day at $22.78 and then once it sustains a move or close above those breakout levels with volume that's near or above 733,498 shares. If that breakout materializes soon, then ZLTQ will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $30 to $35.

Must Read: 5 Rocket Stocks to Buy for November Gains

OM Group

OM Group (OMG) operates as a technology-driven industrial company worldwide. This stock closed up 7.6% at $25.05 in Wednesday's trading session.

Wednesday's Volume: 373,000

Three-Month Average Volume: 248,528

Volume % Change: 50%

From a technical perspective, OMG exploded sharply higher here with above-average volume. This strong move to the upside on Wednesday also pushed shares of OMG into breakout territory, since the stock took out some near-term overhead resistance at $23.62. Market players should now look for a continuation move to the upside in the short-term if OMG manages to take out Wednesday's intraday high of $25.15 to its 50-day moving average of $25.69 with high volume.

Traders should now look for long-biased trades in OMG as long as it's trending above $23.62 or above Wednesday's intraday low of $23.34 and then once it sustains a move or close above $25.15 to $25.69 with volume that's near or above 248,528 shares. If that move gets set off soon, then OMG will set up to re-test or possibly take out its next major overhead resistance levels at $27 to $28.60, or even its 200-day moving average of $29.68.

Must Read: 10 Stocks Billionaire John Paulson Loves in 2014

To see more stocks rising on unusual volume, check out the Stocks Rising on Unusual Volume portfolio on Stockpickr.

Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including

CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.


Tuesday, October 28, 2014

Goldman Sachs Takes Steps to Comply with New Regulations

In this article, let's take a look at The Goldman Sachs Group, Inc. (GS), a $81.03 billion market cap company, which is one of the world's leading investment banking and securities companies.

Basel III

We continue to believe Goldman Sachs will remain profitable and will earn above industry average returns on capital. The bank plans to lower its financial leverage to comply with Basel III regulatory capital requirements. As a matter of fact, reallocating capital from lower to higher-return on regulatory capital businesses will be the management´s next actions. Since the 2008 crisis, the bank has cut balance sheet risk by increasing capital so as to absorb losses in case the bank needs it.

Like any other bank, a crisis in the financial system could hurt solvency or liquidity ratios, so Goldman must remain adaptable to adverse scenarios. Cost-cutting policies should improve profitability as well as its business diversification or reduction of some areas such as principal investments and mortgage securitization. This decision may also reduce earnings volatility and improve the balance sheet.

Investment Banking

In the investment banking segment, Goldman differentiates from its peers because of its distribution platform as well as the extensive web of relationships. Further, Goldman has built a good reputation to hire top talent. Moreover, the firm has a solid history of strong growth as well as returns due to advantages, such as technology and risk management.

Dividend Policy

Since 1999, Goldman has a dividend policy showing its commitment to return cash to investors in the form of dividends as it generates healthy cash flow on a regular basis. Although the current dividend yield is not high at 1.2%, it can improve in the future allowing higher shareholder´s returns.

Revenues, Margins and Profitability

Looking at profitability, revenue grew by 16.36%, leading earnings per share to increase in the most recent quarter compared to the same quarter a year ago ($4.57 vs $2.88). During the past fiscal year, the company increased its bottom line by earning $15.47 versus $14.15 in the previous year. This year, Wall Street expects an improvement in earnings ($17.51 versus $15.47).

Finally, let´s compare the best measure of performance for a firm's management: the return on equity. The ROE is useful for comparing the profitability of a company to that of other firms in the same industry.

Ticker

Company

ROE (%)

GS

Goldman Sachs

13.13

JPM

JPMorgan Chase & Co.

10.09

RJF

Raymond James Financial Inc.

12.21

 

Industry Median

7.29

The company has a current ROE of 13.13% which is higher than the one exhibited by its peers JPMorgan Chase (JPM) and Raymond James (RJF). In general, analysts consider ROE ratios in the 15-20% range as representing attractive levels for investment. It is very important to understand this metric before investing and it is important to look at the trend in ROE over time.

1414503692550.png

Relative Valuation

In terms of valuation, the stock sells at a trailing P/E of 11.8x, trading at a discount compared to an average of 22.3x for the industry. To use another metric, its price-to-book ratio of 1.12x indicates a discount versus the industry average of 1.42x while the price-to-sales ratio of 2.63x is below the industry average of 3.21x.

As we can see in the next chart, the stock price has an upward trend in the five-year period. If you had invested $10,000 five years ago, today you could have $10,211, which represents a 0.5% compound annual growth rate (CAGR).

1414503671537.png

Final Comment

As outlined in the article, Goldman has a history of successful margins, as well as the ability to change or adapt its business model. In an era where competitors in the U.S. or in Europe were forced to make restructuring operations, Goldman can take advantage of this and gain market share. Moreover, management and other top-talented people are capable of outperform the competition.

Further, the stock's relative valuation and the return on equity that significantly exceeds the industry average make me feel bullish on this stock.

Hedge fund gurus Joel Greenblatt (Trades, Portfolio) and HOTCHKIS & WILEY bought the stock, while Mario Gabelli (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Charles de Vaulx (Trades, Portfolio), Bill Nygren (Trades, Portfolio), John Rogers (Trades, Portfolio), Richard Pzena (Trades, Portfolio), Dodge & Cox, John Buckingham (Trades, Portfolio), Richard Snow (Trades, Portfolio) and Scott Black (Trades, Portfolio) added this stock to their portfolios in the second quarter of 2014.

Disclosure: Omar Venerio holds no position in any stocks mentioned

Also check out: Bill Nygren Undervalued Stocks

Monday, October 27, 2014

Ferrari's invitation-only supercar

Ferrari just got more exclusive   Ferrari just got more exclusive LONDON (CNNMoney) Gather round and get ready to drool at one of the most exclusive vehicles in the world.

The Ferrari Sergio, produced in partnership with Italian design firm Pininfarina, is a car that's so limited and unique you have to be invited by Ferrari to buy it. The automaker is creating only six Sergios and they're estimated to cost millions each.

Ferrari told CNNMoney it pre-sold all six vehicles to deep-pocketed die-hard Ferrari fans in the U.S., Europe and Asia. If you haven't received a call from Ferrari yet, you're out of luck.

Ferrari, which is owned by Fiat (FIADF), has built a world-class name for itself based on its reputation for exclusivity. It capped production at 7,000 cars per year to ensure demand consistently outstrips supply, making its cars all the more desirable.

However, after a recent management shake-up, the company said it will ramp up production by 5% this year to ensure its waiting list doesn't get out of control.

While vehicle output may be increasing, limited production cars like the Sergio help Ferrari keep its exclusive edge.

The automaker also offers a "one-off" program where rich car collectors can buy a completely original car that they help design themselves. Each car costs millions.

"It's as far removed from mass production as you can get," said Ferrari spokesperson Jason Harris.

Ferrari has only created about a dozen of these bespoke cars since the "one-off" program launched a few years ago, but it said the program is gaining traction, which could be helping the company's bottom line.

Ferrari reported record revenue in the first six months of this year, up nearly 15% compared to the same period in the previous year, even as it sold fewer cars. Profits for the period also rose by 10%.

ferrari eric clapton Musician Eric Clapton helped design this original Ferrari. It's one of a kind and estimated to be worth millions.

Clients who signed on to buy the new Sergios have made their commitment before the road-ready car design has even been finalized. Ferrari engineers still haven't figured out how to craft a vehicle that is based on a whimsical concept car that was designed without a! windshield and side mirrors.

The concept car was on show in London this month. Deliveries of the six Sergios are expected in 2015.

Sunday, October 26, 2014

3 Reasons Why Google Glass Will Be Successful

Google (NASDAQ: GOOG  ) (NASDAQ: GOOGL  ) is making its Google Glass available to the public for the first time. The product gives users the ability to easily communicate via pictures. It also provides access to a vast amount of data. The tech company has been hard at work advancing the new product. The enormous prospects in the wearables market, Google's focus on the mass-market audience, and the efforts of third-party app developers should deliver the company a commercial success.

Prospects in the wearable tech market
Though the wearable device market is still in a nascent stage, it is expanding at a fast rate. To benefit from the market, Google has been partnering with other companies. It recently partnered with Luxottica to give a much-needed touch of class to Google Glass. IDC predicted that global shipments of wearable computing devices are expected to triple in 2014 to more than 19 million units. Google's partnerships will enable the company to make a product that can take market share in wearables.

Potential appeal to the mass-market audience
One of the objectives of Google Glass is to provide users with the ability to easily communicate via pictures. Google is doing this to increase the product's appeal to the mass-market audience. All signs continue to indicate that the market is big. IHS Research predicts shipments of smart glasses may rise to as high as 6.6 million units in 2016, up from just 50,000 in 2012. Google will gain an important source of revenue if Google Glass becomes popular with its targeted market.

Third-party app developers
The real promise of Google Glass lies in the imagination of app developers working in numerous fields. Before Google made the product available to the public, developers had been tapped to test it. Recently, Pristine Eyesight streamed a real-time audio to the device for doctors. The process will allow health professionals to work with simple voice commands. With such developments, Google can make a big impact in health care and other sectors. Juniper Research revealed that global wearable smart glasses shipments will reach 10 million per year by 2018, compared  to an estimated 87,000 in 2014.        

Competitors
Microsoft (NASDAQ: MSFT  ) seems determined to benefit from the coming wearable tech market. The Wall Street Journal reported the company is prototyping an eyeglass technology similar to Google Glass. Though Microsoft hasn't pushed the product to the market, it if most likely it will do so. Another research firm, Deloitte, expects smart glasses to account for more than 66% of wearable tech sales this year.

Samsung (NASDAQOTH: SSNLF  ) is another company that has an eye on driving its revenue growth though wearables. The company released its Galaxy Gear smartwatch and is working on the next version of the product. Samsung sees the wearables market as a dependable source of revenue in the near future. BI Intelligence forecasts a $12 billion market for wearable devices by 2018.

Foolish takeaway
The global market for wearable devices will grow substantially over the next few years. Google hopes to profit in the market through Google Glass and other products. The enormous potential in the market, together with Google's focus on creating a product with mass appeal, and the efforts of third-party developers will enable the company to achieve its objectives. 

Looking for a big winner in wearable tech?
If you thought the iPod, the iPhone, and the iPad were amazing, just wait until you see this. One hundred of Apple's top engineers are busy building one in a secret lab. And an ABI Research report predicts 485 million of them could be sold over the next decade. But you can invest in it right now... for just a fraction of the price of AAPL stock. Click here to get the full story in this eye-opening new report.

 

 

 

Thursday, October 23, 2014

Can CenturyLink Deliver More Upside?

CenturyLink (CTL) has been a great stock to hold for investors in 2014. The stock has appreciated more than 22% YTD and the company is taking many steps to move forward. So the question is, will CenturyLink continue to reward investors or should investors take profits off the table? Let's take a look.

The road ahead

CenturyLink has expanded quickly in the cloud segment by providing low prices and extra cloud capacity. It recently gashed the prices of typical cloud VM by 60%, which helped bring the company in the competition. The company looks forward to stand as a champion in the cloud market. The strategy to sustain and succeed in the cloud market is a larger customer base and lower costs. The recent price cut suggests that the company is able to manage the costs internally and is aiming on a wider customer base. In addition, the company has added elements of customization and differentiation in its service and support options.

It's M&A of Tier3 and Savvis allowed it to gain access to 11 operating cloud focuses, and it plans to include more soon, incorporating one in Canada and an alternate in the United Kingdom. It had procured Savvis, a supplier of worldwide cloud framework and facilitated IT arrangements, to reinforce its offerings in the cloud. This procurement has upgraded Centurylink's overseen facilitating administration that it gives to undertakings. Subsequently, it enlisted 13% development in oversaw facilitating in the past quarter, and anticipates that the development will proceed in the high adolescents.

CenturyLink will be conveying its progressed cloud hub to six of its server farms before the year's over, beefing up its present count of nine Tier 3 cloud hubs. This sending will help the organization keep up its aggressiveness, as Tier 3 cloud hubs will expand operating effectiveness and upgrade IT and cloud enablement administrations.

CenturyLink has also announced the acquisition of Rackspace, which could help its data services sales, own nine extra cloud centers, get access to OpenStack technology, and strengthen itself as big player in the cloud sphere. SinceRackspace's market capitalization is higher than $5 billion, the acquisition would require an estimated $6 billion in financing. While this could lead to a credit downgrade for CenturyLink, it is already well known for making billion-dollar acquisitions. For instance, it bought Savvis for $2.5 billion three years ago.

CenturyLink saw great escalation in products like high-speed Internet, and high bandwidth. High-speed internet and Prism TV were two of the major reasons for growth in earnings and it added about 66,000 high speed Internet clients and over 24,000 Prism TV customers during the first quarter. The company also installed 24,000 new Prism TV connections, with 66,000 new high-speed internet lines. The growth of Prism TV and high-speed internet connections go hand in hand, because in order to have a Prism TV, you also need to have high-speed internet. The company expects to add 300,000 to its Prism TV client base by the end of the year.

Furthermore, CenturyLink is also targeting some other segments to make its operations more efficient and profitable. All in all, the company is planning to transform its

Saturday, October 18, 2014

A Radical Cure for the Ills of Payday Lending: Transparency

payday lenders Getty Images There is no force greater than a reasonably free market economy, but it can only exist if: Companies compete for your business. In other words, there is more than one choice. (No monopolies allowed.) Consumers have the ability to compare, ditch and switch. They can, with a little effort, understand the true cost of competing products, make informed decisions, and change suppliers easily. Companies producing products that no one wants to buy can fail. They will go out of business, and the people who invested in the business will lose their investments. When consumers have choice and transparency, and when companies are never too big to fail, amazing things can happen. The market will be brutal to companies without a compelling product or value. And it will disproportionally reward those who create real value for consumers. Unfortunately, the forces of the market usually don't reach consumer financial products. But, when true markets are created, the results can be dramatic. Price Comparison Sites Work Amazingly Well in U.K. In the United Kingdom, price comparison websites have revolutionized financial services, particularly auto insurance. If you want to buy auto insurance, you can visit a website, enter a few pieces of personal information and immediately see real personalized quotes from most major auto insurance companies. These are not estimates based upon public records or reverse-engineered guesses based upon the clever work of a computer scientist. The auto insurance companies share their pricing information with the price comparison websites. Thus, all three conditions of the market are met. Consumers can go to one website and see the cost of the products being offered. It is very easy to compare, ditch and switch online. And no auto insurance company has a handout from the government. If they don't compete for business, they will fail. Most importantly, the price comparison websites show the cheapest products first, not the products that pay the highest commissions. To be the top recommendation, you have to be offering the best price. Auto Insurance Premiums Have Fallen 30 Percent -- Over There And the result? Since 2011, auto insurance premiums have dropped by more than 30 percent. In the last 12 months, auto insurance premiums dropped a staggering 19.3 percent. How can prices keep going down? The pressure of the market is forcing companies to innovate. They are improving their underwriting models. They are investing in better fraud detection and claims handling processes. But they are doing all of this to lower premiums so that they can stay alive, not because they plan on making more money. The market is forcing them to compete. And it is brutal. Compare the U.K. market to the U.S. auto insurance market, where insurance premiums are generally increasing. One website, www.leaky.com, tried to bring transparency to the auto insurance market. Not surprisingly, the auto insurance companies were not interested in transparency. In fact, the company received a cease-and-desist order every two months of its existence from insurance companies trying to stop it. Eventually, fighting the litigation became too much, and the startup had to shut down its product. Think about what that means to you: Big insurance companies sued a tiny company into oblivion solely because they don't want you to know how much their products cost. And the auto insurance companies are still fighting hard to ensure that it remains difficult for consumers to compare, ditch and switch. And Now Consider Payday Loans Thanks to true price comparison websites, the U.K. consumer has enjoyed ever-reducing insurance premiums, ever-increasing low-rate balance-transfer durations (you can now borrow at 0 percent for 34 months in the U.K.) and ever-lower personal loan interest rates (with excellent credit, it is easy to get a 5.1 percent interest rate). Regulators there have taken note and would like to unleash the power of the market on one of the worst corners of financial services: Payday loans. As the Guardian reported last week, the competition regulator is going to force payday lenders to share their pricing information with price comparison websites. Payday lenders offer short-term loans to consumers who have no other options. On average, payday lenders charge between $15 to $20 for every $100 that you borrow for 14 days. But the real money is made when borrowers roll over the loan. When the debt comes due in 14 days, the borrower has two choices. They can pay back the $100 borrowed or pay another $15 to $20 to extend the loan for another 14 days. According the Consumer Finance Protection Bureau, 80 percent of borrowers roll over their loans. Hidden fees can often add up to far more than amount of the loan. Short-term loans turn into long-term loans, loaded with fees, generating annual percentage rates in excess of 1,000 percent. Payday Lenders Scheme Around the Rules Attempts to regulate payday lending have been a complete failure, on both sides of the Atlantic. Payday lenders are clever and find ways of getting around every rule designed to hem them in. In fact, a number of U.S. payday lenders are incorporated on Indian reservations to avoid regulatory oversight completely. The payday loan model remains: Hide the true cost of borrowing. Don't share pricing up-front, making it difficult to compare. Keep people in debt forever, by making it "cheaper" to extend, rather than pay off the loan. But rather than trying to write new rules, which payday lenders will find their way around, we should consider unleashing the power of the market. Imagine if payday lenders had to share all of their pricing model with price comparison websites. Consumers who need cash could go to a single website and see how much it would actually cost to borrow the money until the loan is completely paid off. Remember the most important part of a price comparison website: the person with the lowest price almost always wins. Financial services are a commodity. So, if payday lender A has a 1,000 percent APR, and lender B has a 990 percent APR, then all of the business would shift to lender B. Lender A would see a dramatic drop in business, and would have to respond. Payday lenders could drop their prices by 90 percent and still make great profits. But they don't drop their prices because they don't have to. Forcing transparency on the payday lending market could drive real change. Consumers Would Benefit on Other Products The ability of the price comparison business model to transform financial services inspired me to leave the U.K. and move back to the U.S., where I created MagnifyMoney.com. I believe that complete price transparency quickly rewards companies with the best product, rather than the biggest marketing budget. For example, we have a balance transfer marketplace where PenFed (a credit union that anyone can join) usually takes the top spot. It is there because it has the best product (you can move your debt from other credit cards to PenFed and pay only 4.99 percent for 48 months, with no fee), not because it has the biggest marketing budget. When banks that are too big to fail aren't forced to compete based upon price, consumers lose. We have a lot to learn from the dominance of easy-to-use price comparison websites in the U.K., and I look forward to the day when banks, payday lenders and insurers are racing to drop prices in an effort to survive.

Managed to get that raise or promotion? Fantastic -- now don't go out there and spend it all immediately. In classic "keeping up with the Joneses" fashion, too many of us see an increase in salary or a sudden windfall (like an inheritance) as an excuse to take our lifestyle up a notch. We buy bigger houses than we need, get the latest gadgets even though ours work just fine,and spring for fancy steak dinners just because we can.

Wednesday, October 15, 2014

Bank of America Corp Earnings: Even Better Than They Appear?

Bank of America (NYSE: BAC  ) reported its third quarter earnings this morning, and surprised the market by posting better results than the market was expecting. The company still reported a loss, but it was due to one-time expenses, and wasn't quite as bad as analysts thought it would be.

So, what were the highlights of this quarter? What should shareholders pay special attention to? And, what could it mean to the bank going forward.

The numbers look great
Bank of America's third quarter numbers looked good across the board. Overall, the company was expected to report a loss of $0.09 per share on $21.36 billion in revenue. And, while the bank's revenue actually fell a little short of this figure, the loss was just one cent per share.

In other words, Bank of America was able to absorb $5.3 billion of Justice Department settlement costs and barely lose any money for the quarter.

Bank of America Revenue Growth Q3 2013-Q3 2014 | Create Infographics

Consumer and Business Banking
And the individual business segments did very well. The Consumer and Business Banking (CBB) segment saw a 4% rise in net income, but grew in ways that should translate into more revenue in the future.

For instance, client brokerage assets increased by an impressive 21% year-over-year, and saw positive inflows of money. In other words, the value of the assets didn't just come from the fact that the market had a good year. People are putting new money into their Bank of America brokerage accounts faster than they're taking it out.

Additionally, the company issued 1.2 million new credit cards during the quarter, a 15% annual increase. Now, this is an excellent example of delayed income. Banks generally don't make money when they issue cards. In fact, depending on the introductory offers they use to attract new cardholders they may even lose money at first. However, this should produce a very nice boost in revenue down the road.

Other Segments
The Consumer Real Estate Services (CRES) segment is the only one that saw an annual decrease in net income, and it is mainly due to a massive industrywide drop in mortgage activity.

Even so, the results were somewhat encouraging, with an increase in mortgage and home equity loan originations from the second quarter. And, the majority of the $5.2 billion loss the segment reported was due to a $5 billion year-over-year increase in litigation expense resulting from the DoJ settlement.

Global Wealth and Investment Management (GWIM) posted its highest revenue and earnings ever, on asset management fee growth of 19% and net inflows into client accounts.

And finally, the Global Banking and Global Markets segments saw revenue increase as well, on strong growth in commercial lending and trading activity.

But it might be even better than it looks
There are two things that I think are the most promising statistics in Bank of America's earnings; the improving credit quality and the company's success in cross-selling its products.

First, the company's net charge-offs dropped by 38% since the same quarter last year. And, the charge-off ratio of 0.46% is the company's lowest in a decade.

Source: company

Second, and possibly even more important, is the bank's newfound effectiveness in selling new products to its existing customers. Of the 1.2 million new credit cards the bank issued during the quarter, 64% of them went to the bank's existing customers.

Why is this so important? Well, aside from the fact that it means more business, it also is a much more efficient method of expansion. According to one report, it costs a bank eight to ten times as much to attract a new customer as it does to sell another product to an existing one.

Where do we go from here?
Bank of America is doing very well, and a lot of the positive aspects of this earnings report aren't reflected in the company's profits yet, such as the increased brokerage assets and credit card issuance.

And, I think we'll also see the bank's overhead drop significantly over the coming years. In this quarter alone, the company reported that there are 76 fewer branches than last quarter, and nearly 300 less than a year ago. And, the full-time workforce has dropped by 7% in the past year.

To sum it up, Bank of America is growing and improving in all the right ways, and is taking the necessary steps to operate more efficiently. And now that the biggest legal issues are in the past, the future is looking bright.

Bank of America + Apple? This device makes it possible.
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its destined to change everything from banking to health care. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here! 

Tuesday, October 14, 2014

China September Auto Sales Review

A few days back, the China Association of Automobile Manufacturing (CAAM) released the September China auto wholesale numbers which were pretty interesting to look at. Quite a bit of analysis is also possible from the declared shipment numbers, mainly with regard to demand for passenger vehicles. The numbers also gave an idea who is ruling the auto industry in China and who are the laggards. While the macro-environmental conditions in China are not too favorable to date, such impressive numbers do suggest that "all is shining" in the Chinese land with respect to the automotive sector. Let's take a sneak peek into the numbers and try to make some analysis on the demand curve.

Mixed demand for passenger vehicles

September passenger vehicle sales remained positive, though it was slightly lower standing at 6.4% from what the consensus had expected. It appears that the reason behind this could probably be the readjustment of inventory by brands such as Volkswagen (VLKAY), Ford (F) and General Motors (GM) – all foreign brands ruling the Chinese soil.

Interestingly, the entire picture has been pretty distorted with Volkswagen and Ford which usually are the market leaders lagging behind in the September sales report, while the usual laggards such as GM and Chevrolet both saw sales grow positively over 20% in the month compared to their usual growth profile.

However, if we were to judge based on individual companies' points of view, the end-demand remains healthy enough to pull the sales up in the subsequent months, which makes me believe that this September weakness of Volkswagen and Ford is a one-time event which will fade off in the consecutive monthly reports.

SUVs on the sales high

China's population has always expressed their love for the SUV vehicles of the various companies selling their models in the nation. Consistent with this long-lasting trend, SUV sales remained robust while sedan sales were soft in September this year. In total, the SUV sales jumped 26%

Sunday, October 12, 2014

Guru Stocks at 52-Week Lows: GE, BHP, TOT, BP, GSK

According to GuruFocus list of 52-week lows, these Guru stocks have reached their 52-week lows.General Electric Co (GE) Reached the 52-Week Low of $24.27The prices of General Electric Co (GE) shares have declined to close to the 52-week low of $24.27, which is 15.2% off the 52-week high of $28.09. General Electric Co is owned by 31 Gurus we are tracking. Among them, 11 have added to their positions during the past quarter. 15 reduced their positions.General Electric Co, a New York corporation was incorporated in 1892. General Electric Co has a market cap of $243.52 billion; its shares were traded at around $24.27 with a P/E ratio of 19.00 and P/S ratio of 1.69. The dividend yield of General Electric Co stocks is 3.63%.General Electric recently reported its Q2 2014 financial results. GE announced second-quarter 2014 operating earnings of $3.9 billion, with operating earnings per share of $0.39, up 8% from the second quarter of 2013.Ray Dalio (Trades, Portfolio) owns 941,100 shares as of 06/30/2014, an increase of 824.46% from the previous quarter. This position accounts for 0.19% of the $13.34 billion portfolio of Bridgewater Associates. T Boone Pickens (Trades, Portfolio) sold out his holdings in the quarter that ended on 09/30/2013.Director William G Beattie bought 10,000 shares of GE stock on 07/23/2014 at the average price of 26.01. William G Beattie owns at least 9,052 shares after this. The price of the stock has decreased by 6.69% since.BHP Billiton Ltd (BHP) Reached the 52-Week Low of $55.73The prices of BHP Billiton Ltd (BHP) shares have declined to close to the 52-week low of $55.73, which is 24.8% off the 52-week high of $73.91. BHP Billiton Ltd is owned by 6 Gurus we are tracking. Among them, 4 have added to their positions during the past quarter. 3 reduced their positions.BHP Billiton was formed through the merger of two mining companies, BHP and Billiton which were founded in the mid-1800s. Bhp Billiton Ltd has a market cap of $148.35 billion; its shares were traded at around $55.73 wit! h a P/E ratio of 11.70 and P/S ratio of 2.41. The dividend yield of Bhp Billiton Ltd stocks is 4.34%. Bhp Billiton Ltd had an annual average earnings growth of 8.10% over the past 10 years. GuruFocus rated Bhp Billiton Ltd the business predictability rank of 2.5-star.BHP recently announced its financial results for year ended June 30, 2014. The company reported revenues were 1.9%, to $67.2 million. Profit attributable to members of the BHP Billiton Group were up 23.2%, to $13.8 million.Ken Fisher (Trades, Portfolio) owns 3,273,093 shares as of 06/30/2014, which accounts for 0.47% of the $47.56 billion portfolio of Fisher Asset Management, LLC. Ray Dalio (Trades, Portfolio) owns 171,811 shares as of 06/30/2014, which accounts for 0.088% of the $13.34 billion portfolio of Bridgewater Associates. David Dreman (Trades, Portfolio) owns 114,180 shares as of 06/30/2014, which accounts for 0.59% of the $1.33 billion portfolio of Dreman Value Management. T Boone Pickens (Trades, Portfolio) sold out his holdings in the quarter that ended on 09/30/2013.Total SA (TOT) Reached the 52-Week Low of $56.45The prices of Total SA (TOT) shares have declined to close to the 52-week low of $56.45, which is 24.5% off the 52-week high of $74.22. Total SA is owned by 11 Gurus we are tracking. Among them, 2 have added to their positions during the past quarter. 9 reduced their positions.TOTAL S.A. was incorporated in France on March 28, 1924. Total Sa has a market cap of $134.58 billion; its shares were traded at around $56.45 with a P/E ratio of 11.20 and P/S ratio of 0.61. The dividend yield of Total Sa stocks is 5.78%. Total Sa had an annual average earnings growth of 1.70% over the past 10 years. GuruFocus rated Total Sa the business predictability rank of 2-star.NWQ Managers (Trades, Portfolio) owns 94,050 shares as of 06/30/2014, which accounts for 0.068% of the $9.94 billion portfolio of NWQ Investment Management Co. Tweedy Browne (Trades, Portfolio) owns 400,578 shares as of 06/30/2014, which accounts for 0.62% of the $4! .68 billi! on portfolio of Tweedy Browne (Trades, Portfolio) CO LLC. Charles Brandes (Trades, Portfolio) sold out his holdings in the quarter that ended on 06/30/2014.Issuer Energy Services Inc Total bought 14,600 shares of TOT stock on 10/10/2014 at the average price of 19.19. Energy Services Inc Total owns at least 62,300 shares after this.BP PLC (BP) Reached the 52-Week Low of $41.54The prices of BP PLC (BP) shares have declined to close to the 52-week low of $41.54, which is 22.8% off the 52-week high of $53.48. BP PLC is owned by 24 Gurus we are tracking. Among them, 7 have added to their positions during the past quarter. 11 reduced their positions.BP PLC operates as an integrated oil and gas company and is the parent company of the BP group of companies. Bp Plc has a market cap of $126.79 billion; its shares were traded at around $41.54 with a P/E ratio of 13.20 and P/S ratio of 0.35. The dividend yield of Bp Plc stocks is 5.56%. Bp Plc had an annual average earnings growth of 1.70% over the past 10 years.BP recently announced its financial results for the second quarter of 2014. Underlying replacement cost profit1 for the quarter of 2014 was $3.6 billion, 34% higher than the $2.7 billion reported for the same period in 2013 and 13% higher than the $3.2 billion result for the first quarter of 2014.John Hussman (Trades, Portfolio) owns 402,600 shares as of 06/30/2014, an increase of 15384.6% from the previous quarter. This position accounts for 1.6% of the $1.3 billion portfolio of Hussman Strategic Advisors, inc. David Dreman (Trades, Portfolio) owns 130,172 shares as of 06/30/2014, a decrease of 29.93% of from the previous quarter. This position accounts for 0.52% of the $1.33 billion portfolio of Dreman Value Management. T Boone Pickens (Trades, Portfolio) sold out his holdings in the quarter that ended on 09/30/2013.GlaxoSmithKline PLC (GSK) Reached the 52-Week Low of $44.12The prices of GlaxoSmithKline PLC (GSK) shares have declined to close to the 52-week low of $44.12, which is 22.3% off the 52-week h! igh of $5! 6.73. GlaxoSmithKline PLC is owned by 25 Gurus we are tracking. Among them, 13 have added to their positions during the past quarter. 8 reduced their positions.GlaxoSmithKline PLC incorporated in United Kingdom. Glaxosmithkline Plc has a market cap of $105.98 billion; its shares were traded at around $44.12 with a P/E ratio of 14.10 and P/S ratio of 2.74. The dividend yield of Glaxosmithkline Plc stocks is 6.02%. Glaxosmithkline Plc had an annual average earnings growth of 3.20% over the past 10 years. GuruFocus rated Glaxosmithkline Plc the business predictability rank of 2-star.James Barrow (Trades, Portfolio) bought 270,900 shares in the quarter that ended on 06/30/2014, which is 0.019% of the $74.42 billion portfolio of Barrow, Hanley, Mewhinney & Strauss. Charles Brandes (Trades, Portfolio) owns 2,500,048 shares as of 06/30/2014, an increase of 15.52% from the previous quarter. This position accounts for 1.6% of the $8.27 billion portfolio of Brandes Investment.Also check out: T Boone Pickens Undervalued Stocks T Boone Pickens Top Growth Companies T Boone Pickens High Yield stocks, and Stocks that T Boone Pickens keeps buying