Posted by: Howard Silverblatt on November 06
This was my ninth New York Yankees World Series parade and my sons first. There are no more $5 hats ($35 for the ‘official’ ones and $10 for the ‘others’), most of the windows don’t open, Broadway was closed-off by 11AM (start time), and there is no more tape, just purchased shredded paper. But I’ve waited nine years to pass on the tradition that my mother first taught to me in 1961 (my father had taken me to the last game of the regular season that year, in which Maris hit 61, breaking Ruth’s record). My mother was a Yankee fan, she lived a few blocks from the stadium, and dated her games back to the early 30s. Her parents were both immigrants and there was no better way back then to show your new pride than being a baseball fan, especially if you lived in the Bronx. Her big item was being at the stadium on July 4, 1939, when Lou Gehrig made his final speech; her father brought her a souvenir ball that day with Gehrig’s name on it. Many years ago I stole that ball from my mother, and joked that it would pay for my kids’ first years’ tuition. Two years ago, my son, who attended his first NYY parade today, as well as the first game at the new Yankee Stadium, stole that ball from me. It sits in a case, in his room, on a mantel. However, unknown to him, behind the case there are two notes. The first is from my mother, saying that the ball is now his. The second, I wrote, and is dated July 4, 2039, and addressed to “David’s child”. It says that I stole the ball from my mother, that their father stole it from me, and that today, July 4, 2039, on the 100 year anniversary of Gehrig’s speech, they need to steal it from their farther, my son. I don’t know, or care, if my grandchildren will be Yankee fans, but I sure hope they will understand tradition; it took me a lot of years to get there, thanks mom.
Posted by: Ben Steverman on November 05
Shares of Whole Foods Market (WFMI) took a nosedive on Nov. 5, dropping 15.5% to 27.10.
What scared Whole Foods shareholders should concern all investors, especially those in consumer-focused stocks: The outlook for next year.
Like many other retailers, Whole Foods gets praised for navigating through the recession relatively well. Investors worried about Whole Foods' sales trends and debt load dumped shares in 2008, and shares fell to as low as $7. Since the beginning of 2009, however, Whole Foods' stock is up 187%.
Announced the evening of Nov. 4, last quarter's results didn't contradict the thesis that the food retailer's business has stabilized. In fact, fourth-quarter earnings of 23 cents per share beat Wall Street expectations by 2 cents.
Sales trends weren't bad. Chairman and chief executive John Mackey told analysts: "We believe our sales have stabilized and officially turned the corner."
After five quarters of declines, comparable store sales figures rose 1.6%. Total sales for the quarter rose 2.3% to $1.8 billion.
With results that good, why are investors bailing on the stock? One problem, which I noted back in August, is the high expectations built into Whole Foods' stock price. Because it is a growing firm, investors are willing to pay far more for Whole Foods than other grocery chains. Before earnings were released, on Oct. 30, J.P. Morgan (JPM) analyst Charles Grom noted that Whole Foods traded at 27.6 times his 2010 earnings prediction. Rival supermarket chain Kroger (KR), meanwhile, trades at a price-to-earnings ratio of 11.2. That "seems a bit excessive," he wrote.
But even if you believe Whole Foods deserves a premium stock valuation, you should be worried that 2010 sales and profits will disappoint. And that's the warning investors received from Mackey.
Mackey said he sees "no anticipated positive change in the economy over the short-term." Whole Foods, like many other retailers, has already slashed its expenses, and further cuts will be harder to find. "We will have difficult expense comparisons due to the cost savings realized in 2009," Mackey said.
Credit Suisse (CS) analyst Edward J. Kelly noted:
The company is making progress in addressing some of its issues (slowing growth, downsizing its stores, exiting bad leases in development, and cutting its bloated expense structure), [but] this catalyst seems to be more than price in [its stock.]
The recession forced Whole Foods -- and many other companies -- to become more efficient and make tough choices. However, investors already have reaped most of the benefit of these changes.
In 2010, investors will need robust consumer spending to drive results. And, with the job market weak, that might be too much to hope for.
Posted by: Ben Levisohn on November 05
When the S&P 500 opened at 1047.30 on Nov. 5 and quickly rallied 1.65% to 1063, investors could be pardoned for feeling a sense of déjà. Just yesterday, the S&P 500 opened at 1047.14 and barreled its way up to 1061. But stocks gave back most of their gains after the FOMC meeting, and closed at 1046.50. Will today's trading end on a happier note?
Technical analysts see some indications that it could. For starters, the market is pushing strongly against its near-term resistance, which is around the 1060 to 1066 level. Yesterday, it hit those levels and fell back. But short term sentiment, as measured by the percentage of stocks trading at 10-day lows, is bearish, says technical analysts at institutional brokerage Concept Capital. That indicates an oversold condition and could point the way higher for stocks.
Still, there are signs that the market is poised to roll over. On Nov. 4, more stocks moved down than up, a bad sign after the S&P 500 spent so much of the day in the green. And despite the oversold conditions, the market hasn't been able to put together any positive momentum, Concept Capital says.
More worrisome is the 60-day average correlation of individual stocks to the S&P 500. Right now, that number is 62% -- it would have to trade above 70% to be problematic. But if it keeps rising, it could be a sign of long-term weakness to come. Says Concept Capital: "A prolonged rise in correlation could indicate that a more significant period of market weakness is starting to develop."
Posted by: Ben Levisohn on November 03
Equities are expensive, says High Frequency Economics chief economist Carl B. Weinberg. But before you start dumping all the stocks in your portfolio, pay heed – it’s Europe, Japan and England – not the U.S. – you need to worry about.
During the past two quarters, U.S. investors have become accustomed to companies beating earnings estimates. Sure, much of that has been done with cost cutting, but a beat is a beat. In Europe and Japan, however, third quarter corporate earnings have been coming in below expectations. That's impacted valuations across the board. The Japanese Nikkei 225 has a trailing p-e of 37.58, the Xetra DAX 100 has a p-e of 43.95 and England's FTSE 100 has a p-e of 21.15. The S&P 500, in contrast, has a p-e of just 21.15.
The difference, Weinberg says, stems from labor market differences. In the U.S., job cuts have been deep and painful, but they've also been quick. Costs have quickly been realigned and that's helped keep price-to-earnings ratios near "historical norms," Weinberg says. European and Japanese lack the flexibility to cut wages or lay workers off to match falling demand. That’s good for workers but bad for valuations. Says Weinberg: “This will be a bad season for [Japanese, Euroland and London] stocks.”
Posted by: Tara Kalwarski on November 02
The first Charles Schwab-branded exchange-traded funds launch tomorrow, Nov. 3, and Schwab is offering free, uncapped trading to its customers who buy in online—essentially creating a platform that enables retail investors to dollar cost average with ETFs.
At a press conference in New York today, Schwab chief executive officer Walter W. Bettinger II described the move as “game-changing.” Previously, investing a fixed dollar amount at regular intervals into ETFs would have incurred steep trading costs: Investors who execute fewer than 120 trades per year pay a hefty $12.95 per trade.
The four ETFs that debut tomorrow are designed to track the following broad indexes: Dow Jones U.S. Broad Stock Market Index, Dow Jones U.S. Large-Cap Total Stock Market Index, Dow Jones U.S. Small-Cap Total Stock Market Index, and FTSE Developed ex-U.S. Index. Schwab also said it will launch four additional ETFs—tracking U.S. large-cap growth and value stocks, international small-cap stocks, and emerging markets stocks—later this year. The stated expense ratios for all but the emerging markets ETF are below those for comparable funds from the three biggest players in the ETF market: Vanguard, Barclays Global Investors, and SSGA.
Vanguard spokesperson John Woerth told BusinessWeek that Vanguard will continue to introduce new ETFs, including seven new bond funds over the coming new weeks, but “has no plans to offer commission-free ETFs.” Woerth did note that investors should evaluate the “all-in” costs of any product, which would include a fund's expense ratio, trading fees, and other expenses.
For more information about the new Scwab ETFs, click here.
