– The Stock Market Companion –

15Minute Market Update

June 28, 2011

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

Published all Market Days
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-Executive Summary-

  • UP again!  Volume is not impressive, but the direction is certainly favorable.
  • Greek legislature votes on “austerity” (budget tightening) measures tomorrow, the end of the quarter lies ahead on Friday, AND investors are heading to summer vacation.  We are cautious.
  • As we mentioned yesterday, activity will pick-up again when earnings results are released – starting officially with Alcoa, Inc. (Ticker: AA) on July 11th – after the close.
  • We analyze Nike, Inc. (Ticker: NKE) earnings, below.
  • Financial stocks are under-performing.  This also makes us cautious.
  • Please click here to send us your feedback.  Let us know how we are doing – We are here to serve you. Support@Stockmarketcompanion.com

– Stock Market Companion – Current Holdings –

Nr. Co. Ticker Action Entry Date Current Gain (Loss)
1 Apple, Inc. AAPL Holding 6/20/2011 +6.1%
1 Research in Motion, Inc. RIMM Holding 6/23/2011 -1.8%
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

1,296.67

Index

UP = +16.57 points

DOW-30

12,188.69

Index

UP= +145.13 points

NASDAQ

2,729.31

Index

UP = +41.03 points

NASDAQ 100

2,285.75

Index

UP = +33.51 points

– Market Trends –

Trend

SP-500

DJ-30

NASDAQ

NASDAQ 100

Short Term

UP

UP

UP

UP

Intermediate

Flat

Flat

Flat

Flat

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 chart in a separate browser window).

– Today’s Highlights –

Uncertainty reigns – BUT – the broader market in the USA, characterized by the S&P 500 has found support at its 200 day moving average.   International news is centered around Greece, with lawmakers deciding whether to commit to an unpopular budget tightening program designed to steer the country towards a more sound fiscal footing – with a priority of meeting International Monetary Fund (IMF) and European Central Bank (ECB) pre-requisites before further international funds are released to help their economy.  We don’t know yet the outcome of this situation.  Failure to pass this legislation could result in eventual default of the country on its debt obligation and put international finance markets in a tailspin.  The U.S. Federal Reserve Chairman, Mr. Ben Bernanke said no less last week.
Today in the USA, the Case-Shiller Index for home prices actually increased modestly over last month, which represents the first increase in prices in 8 months.
In the U.K. (United Kingdom), its GDP (Gross Domestic Product) forecast was ratcheted down to +1.6%, and in Japan – retail sales were reported sluggish (no surprise there, considering the turmoil surround the March earthquake, subsequent tsunami and nuclear meltdown!).
Importantly – Federal Reserve Bank of Dallas President, Mr. Fisher declared that USA GDP growth in the second half of the year may be quite strong – perhaps reaching +4%.  This item caught the imagination of investors.  Crude oil prices reached higher on anticipated stronger demand, AND on today’s pullback in the value of the greenback.
That sum’s it up … Uncertainty with hope for improvement in the 2nd half of the year, in the context of the complete unknown in Greece and reductions in GDP in certain 1st world nations – like the U.K.

– Story-Stock Investing –

Last night we mentioned that Nike, Inc. (Ticker: NKE) had thoroughly beaten earnings expectations after the close.  The stock gapped up to $85/share last night , roared on this morning to over $90/share, and settled in to close at $89.90.  That’s strong performance.  Let’s look “under the hood” of this one and see what we can discern.  Let’s start with this article from Bloomberg on Nike’s results.  Click here for the article.
Total revenue for the 4th quarter reported was $5.77 billion = an increase of 14% over the year ago quarter.  Great.
Net income increased to $594 million or (when dividing by the number of shares outstanding) $1.24/share.  This too is a +14% increase.  Fine.
Notice the direct correlation between increase in revenue to increase in net income.  14% in and out.  Good.  This is a sign of good efficiency in operations.
The Nike CEO (Chief Executive Officer) – Mr. Parker, announced that Nike is ahead of its 5 year plan and believes that sales (total revenue) may reach $30 billion by the end of 2015.  That is 4 years from now.
Looking back the last 4 quarters (including this quarter’s results) gives us this data (most recent data listed first) –

Nr. Total Revenues
($ Millions)		 Actual Earnings Yr/Yr Rev. Change
1 5,766 1.24 13.6%
2 5,079 1.08 7.3%
3 4,842 0.94 9.9%
4 5,175 1.14 7.8%

The table shows good performance and a possible inflection point on revenue, where we begin to see increasing revenue going forward.
When we take the earnings and add them up, we arrive at $4.40/share.
Divide today’s closing share price of $89.90/share / $4.40/share and we arrive at a Price / Earnings Ratio (P/E) of 20.43.  That’s a premium to what the market is paying for earnings currently.  Let’s say that the market is paying on average 16.5 time earnings.   At 20.43,  Nike is currently priced at a +24% premium to the market.

It’s great news that Nike is ahead of its 5 year plan to grow revenues to approx. $30 billion.  That’s a 43% INCREASE of the sum of the past 4 quarters of revenue.  Using the linear relationship of % revenue growth to % earnings growth that Nike posted this quarter, if $20.9 billion resulted in $4.40 earnings, then $30 billion =$6.31 earnings / share (EPS).  If Nike can hold a P/E of 20.42, with a $6.31 EPS, then the share price goes to $128/share in 4 years.   Nike DOES pay a modest dividend of a $1.24/share.  Currently that represents a dividend yield of approx. 1.38%.

 

For long term investors, an investment in Nike with an opportunity of +43% increase in revenue is perhaps a good idea.   But we aren’t going to run after the shares at this point in time.  Click on the chart below to get a clear visual on NKE.


We are keeping our eyes wide open for more investment opportunities.

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 –

Here is a chart of the Stock Market Companion 15Minute Market Update stock performance versus the SP-500.  Click on it to 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

1.4361 USD = 1 Euro

USD / EUR

Dollar = Flat

Gold

$1,502.40

Ounce

Gold = Flat

Oil

$93.24

Barrel (West Texas Crude)

Oil = UP

30 Yr. Fixed Mortgage

4.69%

Percent

Flat

10 Yr. Bond Yield

3.04

Percent

Flat

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.

  • The markets were AGAIN divergent today, just as yesterday revealing further weakness in the technology sector while the broader market (S&P 500) and the DOW (DJ-30) held POSITIVE.
  • Research in Motion (Ticker: RIMM $27.75) reported earnings last night that were a major disappointment.  We go through the details below.  The company received 2 broker upgrades going into earnings.  The stock then lost -21.45% from yesterday’s close into today.  We go through our steps in handling our brief investment in the stock this last week – AND WHY, below.
  • Crude oil continued to descend today, reflecting a drop in value of the U.S. dollar – BUT also  concern of future demand as the global economy slows down.
  • The S&P 500 is finding support at its 200 day exponential moving average.  If the broader market doesn’t find strength here and begins to sink further, the next near point of support is the low it plumbed during the recent nuclear crisis in Japan.  If it fails that point, then the intermediate term trend will be DOWN.
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