– The Stock Market Companion –

15Minute Market Update

May 18, 2011

—— Stock Market Investing since the 1980’s ——

Published all Market Days
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-Executive Summary-

– Stock Market Companion – Current Holdings –

Nr. Co. Ticker Action Entry Date Current Gain (Loss)
1 Cisco Systems,Inc. CSCO Holding (Reduced size) 5-10-2011 -7%


If the above “Current Holdings” table is empty it means that we are not holding ANY stocks at this time and that we are therefore 100% in cash.

– Markets “At a Glance” –

(Please scroll down to the end of the report to see your favorite benchmarks – Dollar, Oil, Gold … closing prices and daily direction.)

Market

Price (Today’s Close)

Unit of Measure

Today’s Direction

SP-500

1,340.68

Index

UP = +11.70 points

DOW-30

12,560.18

Index

UP = +80.60 points

NASDAQ

2,815.00

Index

UP =+31.79 points

NASDAQ 100

2,362.95

Index

UP = +19.44 points

– Market Trends –

Trend

SP-500

DJ-30

NASDAQ

NASDAQ 100

Short Term

Down

Down

Down

Down

Intermediate

UP

UP

UP

UP

Long Term

Lateral

Lateral

Lateral

Lateral

*Summary of terms from Trader Vic II-Principles of Professional Speculation (pg. 140-141)
*_________* Represents a change in trend rating.

– Market Perspectives –

For your added perspective, we’ve included this chart of the broader market (Successful stock investors develop and start with a minds-eye view of the broader market and keep it clear) –

1. SMC SP-500 ETF Daily Chart (Click to open helpful chart in a separate browser window).

– Today’s Highlights –

DELL!  Last night we reported that Dell, Inc.’s (Ticker: DELL) excellent quarterly earnings report after yesterday’s close would have a favorable impact on the markets – in the absence of any other negative news.   There wasn’t any overwhelmingly negative news this morning and so the market delivered a bounce – albeit on LOW VOLUME.

In fact this early morning, overseas markets were strong, as the U.S. dollar held steady – putting a pause in its rapid move higher.

Commodity based stocks rallied a bit and over-all the market gained a bit of composure – after some days of relatively strong sell-offs.

We’ll see what tomorrow brings.

– Story-Stock Investing –

Successful individual stock investing involves keeping a close eye on the broader market – to the point that you get in step with it.  Since 9 out of 10 stocks move with the broader market, your investment performance will increase as you meld your mind with an understanding of what is moving the broader market.  After that, it’s all about sifting through plenty of data, charts and forecasts – and keeping your eye on what’s happening around you -to find the few stories that may have some power behind them.  That’s what we are all about.

Today, Dell, Inc. (Ticker: DELL) attempted to give the market an “all-clear over here” signal based on their excellent earnings and confirmation that the corporate personal computer (pc) refresh cycle is still strong. Dell also RAISED its fiscal year 2012 operating income guidance.

Here’s a look at the detail behind Dell’s numbers.  We’ve put the numbers in descending order – with the most recent quarter starting at the top. This is our Stock Market Companion table with data about DELL from Briefing.com.

Release Date Fiscal Quarter Actual Earnings ($/share) Actual Revenue ($ Billion)
5/17/2011 1 .55 15.017
2/15/2011 4 .53 15.692
11/18/2010 3 .45 15.394
8/10/2010 2 .32 15.534
5/20/2010 1 .30 14.874

Here’s what is striking about the data and why the shares of Dell – although gapping up higher today – did not gain more ground as the day progressed –

  1. Looking at Actual Earnings, DELL is doing a great job.  DELL has increased its earnings by +83% from their report on last years first quarter.  +83%!!  That’s fantastic.
  2. Looking at the last 12 months (which we call “trailing 12 months”), DELL’S annual earnings were a total of $1.85/share.  In the same period of time, DELL’s share price ranged from $17.50 down to $11.50 and now back to $16.81.  So if an investor had purchased the shares last April, the investor would still be down on his/her investment.  From a Price/Earnings perspective, DELL is selling at 9.1 times earnings!  That’s almost 1/2 the price of the broader market.  1/2 price!!  Still, no one pushed the shares above today’s early morning highs.  Why?
  3. To answer this – Look at the “Actual Revenue” column.  What do you see happening there?  Revenues dropped this last quarter from the previous quarter quite significantly.  No one likes to see that.  A person could say, “Well, that’s because the Christmas season and quarter is always the strongest”.  OK.  But last quarter’s revenue reported today was LESS than the previous 3 quarters.  That’s a red flag.  DELL’S revenue is still higher for this last quarter compared to the same quarter last year, but the revenue contraction compared to the last 3 quarters is a concern.
  4. So – How did DELL increase earnings?  By improving operations and squeezing their suppliers.   DELL can’t do that forever.  They are either going to have to increase revenues or earnings will either stabilize here or retreat.
  5. Where’s the inflation that everyone is talking about?  Either not evident in the PC supply chain (unlikely), or the suppliers are eating it (likely).  Inflation fears may also be a bit out of proportion…  Which is why the price of silver came unglued recently.

So – what do we do about DELL?

For us – if institutional investors want to push DELL higher, they can and the price move would be very justified based on our price earnings calculation using trailing 12 month earnings.  The stock could really ramp from here.  This P/E of 9  is just another example of the market undervaluing a stock.  Acquired companies have received premiums compared to their stock prices for this same reason.   For DELL however, there just aren’t many companies really BIG enough to buy it – so the company so far simply sits on the market in an under priced state – until big institutional investors start buying the shares.  We are interested in the stock on a move above $17/share.

Tomorrow we hope to report on Soda Stream International (Ticker: SODA).  The stock soared following today’s release of their earnings.  American consumers use SODA products to carbonate and flavor their own water at home.  We’ve been watching this one, but needed to see the earnings.  They are rolling out into more stores like JC Penney.  We are very interested in this stock and have put it on our watchlist.  It closed today at $53.99/share.

Tonight after the close, Linked-In the business networking service announced their upcoming IPO.  Pricing will be perhaps $45/share on $7.84 million shares.  Ticker will be LKND.  Date ?  We’ll keep you posted.

At the Stock Market Companion we do not and cannot give individual investment advice. According to the State of Washington RCW 21.20.005 the Stock Market Companion is not a Registered Financial Advisor and we do not render any advice on the basis of the specific investment situation of a particular individual. This information is for a wide readership and is not intended for any particular individual,  and under no circumstances should our Market Update or Watchlist be considered an investment recommendation or plan for any specific individual.  By accessing this material, you agree that the Stock Market Companion will not be held liable for any actions taken by a subscriber or other parties.  Please seek the counsel of a broker or other licensed investment professional for accurate pricing and concerning the suitability of all investments that you may be considering. Disclosure : You understand that the Stock Market Companion holds positions in the above mentioned securities.  Based on market related or personal events these positions may change without notice.

– Stock Market Companion – Performance –

Please click on this chart to see the Stock Market Companion 15Minute Market Update stock performance versus the SP-500.  It will open in a separate browser window.
* Gains (losses) do not include brokerage fees.   Our returns are very strong … BUT …  WE have to remind everyone just like all other financial sites in America – Past Performance is No Guarantee of Future Returns.  Unlike others however, our objective is to teach you to be able to make these types of strong returns On Your Own.

All of the investments – stocks, entries, and exits are listed on our Stock Market Companion Watchlist at the bottom of the spreadsheet, in the section labelled Former Holdings.

– Benchmarks “At a Glance” –

US Dollar

1.4247 USD = 1 Euro

USD / EUR

Dollar = Flat

Gold

$1,495.80

Ounce

Gold = UP

Oil

$99.80

Barrel (West Texas Crude)

Oil = UP

30 Yr. Fixed Mortgage

4.69%

Percent

Flat

10 Yr. Bond Yield

3.171

Percent

UP

1 Yr. CD

1.16

Percent

Flat

Data Source : Financial Visualizations Inc.

Please help us by sending your valuable feedback to – Support@stockmarketcompanion.com

Signing-Off for Today,

Your -Stock Market Companion

** Stock Market Companion Disclaimer **

The Stock Market Companion (SMC) Market Update and Watchlist are published documents to subscribers that show how we (SMC) are viewing the markets and what we are watching, investing in or selling today.  This information is for a wide readership and is not intended for any particular individual,  and under no circumstances should this Market Update or Watchlist be considered an investment recommendation or plan for any specific individual.  By accessing this material, you agree that the Stock Market Companion will not be held liable for any actions taken by a subscriber or other parties.  You understand that the Stock Market Companion holds positions in the above mentioned securities.  Based on market related or personal events these positions may change without notice.

Furthermore, the Stock Market Companion, Inc. is a content provider and publisher and not a registered broker-dealer or licensed investment professional.  Our intent is to publish very accurate market information for an audience of subscribers (1000+ subscribers).  By accessing the Stock Market Companion website and/or using the Stock Market Companion products and services such as this Market Update and accompanying Watchlist, you understand and agree that the material provided in the Stock Market Companion products and services is for informational and educational purposes only, and that no mention of a particular security in a Stock Market Companion product or service constitutes a recommendation to buy, sell, or hold that or any other security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.  To the extent any of the information contained in any Stock Market Companion product or service may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.  Before selling or buying any stock or other investment you should consult with a qualified broker or other financial professional to verify pricing information and to solicit advice as to the appropriateness of a given transaction or investment.

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