March 30, 2012
Market Declares Obamacare No Good for the Healthcare Industry
 Though the major market indexes showed lackluster moves throughout the week, the price action of one sector sent a loud and clear message in response to the hearings being held by the U.S. Supreme Court. The Healthcare sector improved, as measured by the SPDR Select Healthcare Index Fund (XLV). In doing so it outperformed all other sectors as shown in the following chart. The healthy 3.5 percent gain capped off a week’s price action that opened near its low and closed near its high for the week. Considering that the rest of the market’s performance was so muted, it is hard to miss the significance of this sector’s action in connection with the Supreme Court hearings on the Affordable Healthcare Act. The message from the markets is clear: without this legislation, companies in the healthcare sector stand a much better (more)…
Equities Sector Coverage: Stocks Close Out Strong First Quarter
 Personal Income rose by just 0.2% in February with Spending up 0.8%. This brings the Savings Rate down to 3.7%, the lowest since August 2009. The year over year PCE Price Index was up 2.3%, above the Federal Reserve target for inflation. Chicago PMI came in slightly below expectations at 62.2 in March with an elevated prices paid index at 70.1. The Employment Component fell to 56.3 from 64.2 in February. The final reading of the Reuters/University of Michigan’s consumer sentiment index hit 76.2 for March from a preliminary reading of 74.3. The Dow Jones Industrial Average traded up to 13,224.49 on Friday afternoon still shy of its 52-week high set at 13,289.08 on March 16th. The NASDAQ’s traded up to 3111.56 then fell to 3079.05 before consolidating. The NASDAQ stayed below its 52-week high at 3134.17 set on Tuesday. (more)…
Airline Consolidation Brings Turbulence to Elite Flight Status
 It’s fair to say the airline industry has taken a battering over the past decade. Rising fuel prices, 9/11, economic crises, constant fare wars, and the emergence of discount carriers like Southwest (LUV) and JetBlue (JBLU) have all taken a toll on the profitability of airlines both domestically and internationally. In a tough adapt-or-die environment, where airlines routinely file for bankruptcy, the industry has witnessed aggressive consolidation to cut costs and increase revenues. Delta (DAL) and Northwest merged in October 2008 to become the largest airline in the world, only to be unseated by United and Continental’s (UAL) announced merger plans in 2010. This leaves American, which filed for bankruptcy last year, and US Airways (LCC) as the only remaining legacy competitors. The implications of airline mergers are vast: Previously competing airlines can now streamline their services, potentially increasing efficiencies. (more)…
Is Best Buy in Trouble?
 Shares in retailer Best Buy (BBY) plunged 6.95 percent Thursday after the company’s revenue fell well short of expectations and the company announced that it would be closing stores. Best Buy’s Business Model Shifting The cuts made by Best Buy, in many ways, represented an acknowledgement that its big box store strategy that has been so successful over the last two decades was no longer functioning. The company reported a $1.7 billion loss of the fourth quarter ending March 3, representing yet another brick-and-mortar retailer that appears to be in trouble as companies like Amazon (AMZN) and eBay (EBAY) cut into their sales. “I am not satisfied with the pace or degree of change we have made up to this point,” Chief Executive Brian Dunn said in a conference call with analysts, adding, “We are evolving our retail store strategy. We are (more)…
Foxconn Audit Uncovers Labor Violations
 An audit of Foxconn (HNHPF) by the Fair Labor Association (FLA) has revealed that the company had “serious and pressing” violations of China’s labor laws. Foxconn, the largest maker of Apple’s (AAPL) iPads as well as electronics for Dell (DELL) and Hewlett Packard (HPQ). Apple joined the Fair Labor Association after worker suicides earlier this year resulted in bad publicity for the company. The FLA assessors discovered that Foxconn workers were working longer hours and in more consecutive days than was permissible under Chinese law. The result has been that Foxconn has promised to reduce hours for its workers without reducing pay, something that may increase the costs of some consumer electronics in the United States. “We appreciate the work the FLA has done to assess conditions at Foxconn and we fully support their recommendations,” Apple said in an e-mailed (more)…
Bulls Still Have the Ball
 Investor’s first read – Brooksie’s edge before the open Friday, March 30, 2012 9:08 a.m. ET DJIA: 13,145.82 S&P 500: 1403.28 Nice rebound, but I would have liked to see more volume. The DJIA closed higher, the S&P 500, Nasdaq Composite, Russell 2000, and SPDR S&P500 ETF didn’t, though they did rebound sharply. TODAY: Look for a positive open. The Chicago PMI and Consumer Sentiment reports will be released within the first 30 minutes of trading. The latter is self explanatory, the former is a regional business report which bulls would wish would reinforce their contention that the economy is gaining traction, the bears hope it doesn’t. If the bulls are happy with the numbers, expect the rally to push up to DJIA 13,235 (S&P 500: 1414). If a ho-hummer, look for volatility with support around DJIA: 13,086 (S&P 500: (more)…
China Stocks Limp to Losses A Second-Straight Week
 China stocks limped through a second week of losses and weak turnover, battered by worries about Chinese and global economic growth. And although investors in Hong Kong will get two days off for holidays next week, it doesn’t look like market sentiment will improve. The Hang Seng Index in Hong Kong slid 0.3% Friday to close at 20,556. It edged 0.05% lower for the week after slumping 3.0% last week. The index of Chinese stocks rose 1.0% Friday to 10,646 and finished the week marginally lower. “Weak corporate results underscored fears that the slowdown in China is hurting profitability,” according to Ben Kwong, chief operating officer at KGI Asia. Arrest of two of Hong Kong’s property tycoons this week on corruption charges added to market unease. On the broader Asian front markets ended mostly lower this week with resources and (more)…
March 29, 2012
Equities Sector Coverage: Stocks Pare Losses with Late Rally
 Final Real GDP came in at 3.0% for the 4th quarter if 2011. There were benchmark revisions to Initial Jobless Claims with the recent reading at 359,000 the lowest since April 2008. What this means is that claims have not been below the 350,000 recessionary threshold since the economic crisis began. The Dow Jones Industrial Average traded down to 13,032.67 then rallied to 13127.61 going into the final half hour of trading, but still well below its 52-week high set at 13,289.08 on March 16th. The NASDAQ’s traded down from 3098.29 to 3069.81 then rebounded back towards the day’s high going into the final half hour of trading. The NASDAQ stayed below its 52-week high at 3134.17 set on Tuesday. Asian stocks declined again on Thursday. The Nikkei 225 ended their session at 10,115 – down 0.67% on the day. (more)…
A History of the Ponzi Scheme
 While the banking industry was in the midst of a horrifying collapse in 2008, a scandal broke that managed to make even the most over-leveraged, sub-prime exposed hedge funds and investment banks look good. Bernard “Bernie” Madoff horrified the public with news that his entire investment company was a giant Ponzi Scheme, defrauding its investors to the tune of $18 billion. Including fabricated gains, the total amounted to $65 billion. It’s difficult to believe that so much money could have been sunk into a scam with a premise so simple, or how Madoff could have kept it going for decades without anyone realizing what was happening. Even as the entire financial industry was being shook to its core by the housing crisis, Madoff’s scam shook things even harder. However, Madoff’s scam was really a continuation of a grand America tradition of sorts. (more)…
Call of the Week: A Niche Player with Value
 Last week, Singular Research initiated coverage on IEC Electronics Corp. (IEC) with a Buy rating. Over the past 5 years, IEC has delivered the best financial performance in contract manufacturing. In 2012, we expect more of the same on double-digit organic sales growth. Bill Jones, Singular’s senior equity analyst covering the stock, has a $7.50 price target on the company. That presents an upside potential of about 45 percent based on where shares are currently trading. Some of the reasons why we like IEC’s prospects include its position as a niche player in electronic manufacturing services (EMS). The company has a unique value proposition of high-end products in the military, aerospace, medical, communications, and industrial sectors. EMS is traditionally a low-margin industry, but IEC’s strategy has helped the company demonstrate what we fill has been the best financial performance in (more)…
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