Wednesday November 12, 2008
Navivest

Shares of Goldman Sachs (GS) were all over the map yesterday, on a wild volatile ride. With the stock market opening yesterday on a bearish note, Goldman Sach’s shares which had closed at $71.21 on Monday, opened at $69.36, down $1.85.

The stock then trended mildly to the upside to trade in the $73 area, before turning around again to hit an intra-day low of $66.68.

By 12:20, the stock hit bottom and started moving to the upside, to eventually settle at $74.68, up $3.48 or 4.87%. This was remarkable, considering that all three major indices closed down about 2% on the day.

We would expect that volatility to continue again today and traders looking for intra-day profits could trade Goldman shares today. The trading plan will be to guage direction of the overall market and trade Goldman Sachs shares accordingly.

If in early going, it looks like we will be getting a bullish day, go long the shares and go short on the inverse.

Once in, unless the tone of the market is overwhelming, in which case you stay in, look to take a 2-3% early profit. Traders should monitor the stock to see if it will be moving between positive and negative trading for multiple intra-day trading opportunities.

Trading Idea  Goldman Sachs

Tuesday November 14, 2008
Navivest

Shares of Wynn Resorts (WYNN) climbed over 5% in after hours trading yesterday, after Standard & Poor’s announced that it will add the company to the S&P 500 index. Stocks tend to rally on such news as it is assumed that money managers who try to track the stock market or match the performance of these indices, will buy the shares of the stocks being added.

This may not necessarily be the case that much these days as there are now single instruments money managers can buy that can effectively track the entire indices.

We have had Wynn Resorts (WYNN) on our watch list as a shorting candidate for the past six weeks and from intra-day lows of $41.50 on Friday 11/07, Wynn shares might open up $2.43 to trade at $49.25 today. That creates a great shorting opportunity in this market environment.

There is one caveat. Las Vegas Sands (LVS), which lost half its value last week after the company’s auditor issued a concern about the company’s viability, announced yesterday that it has reached an agreement to raise $2.14 billion and that it will announce the closing of this transaction by the end of the week.

This successful capital raise is good news that could see WYNN tack on a couple points in sympathy, which could mean traders might be entering too early if they entered into a short trade at this point. On the other hand, we are looking for the markets to have a bearish tone this week and WYNN should pull back some before Thursday.

If the stock opens up and the overall market is bearish, then short and look to exit once the stock is down 5%. After the Las Vegas Sands (LVS) announcement, traders can enter into a short position again.

Tags: Wynn  Las Vegas Sands  Trading Idea  Trading Plan  S&P 500

Monday November 13, 2008
Navivest

Standard & Poor’s is making changes to the S&P 500 and the S&P 400 MidCap. Following are details of the changes:

Wynn Resorts Ltd. (WYNN) is replacing Ashland Inc. (ASH) in the S&P 500, Ashland will replace Lear Corp. (LEA) in the S&P MidCap 400, S&P MidCap 400 constituent DENTSPLY International Inc. (XRAY) will replace Hercules Inc. (HPC) in the S&P 500, and Bucyrus International Inc. (BUCY) will replace DENTSPLY in the S&P MidCap 400 after the close of trading on Thursday, November 13.

Ashland will be acquiring Hercules in a transaction that will result in a company with a market value appropriate for the S&P MidCap 400, and which is expected to close on or about that date, pending final approvals. As of today’s close of trading Lear Corp. had a market value of approximately $129 million, ranking 400th in the S&P MidCap 400 index. • Eagle Materials Inc. (EXP) will replace Secure Computing Corp. (SCUR) in the S&P SmallCap 600 after the close of trading on Friday, November 14.

Secure Computing is being acquired by S&P MidCap 400 constituent McAfee Inc. (MFE) in a deal expected to close on or about that date, pending final approvals. Standard & Poor’s will monitor these transactions, and post any relevant updates on its website: www.standardandpoors.com.

Wynn Resorts designs, develops, finances and constructs gaming projects in Las Vegas and Macau. Headquartered in Las Vegas, NV, the company will be added to the S&P 500 GICS (Global Industry Classification Standard) Casinos & Gaming Sub-Industry index.

DENTSPLY produces a broad range of products for the dental market. Headquartered in York, PA, the company will be added to the S&P 500 GICS Health Care Supplies Sub-Industry index. Ashland is a diversified chemicals company. Headquartered in Covington, KY, the company will be added to the S&P MidCap 400 GICS Diversified Chemicals Sub-Industry index.

Bucyrus International manufactures large-scale surface and underground mining equipment used for mining coal, iron ore, copper, oil sands and other minerals. Headquartered in South Milwaukee, WI, the company will be added to the S&P MidCap 400 GICS Construction & Farm Machinery & Heavy Trucks Sub-Industry index.

Eagle Materials manufactures gypsum wallboard and cement. Headquartered in Dallas, TX, the company will be added to the S&P SmallCap 600 GICS Construction Materials Sub-Industry index.

Tags: S&P 500

Monday November 10, 2008
Navivest

We are looking for the stock market to extend Friday’s gains today and if the market does not open too strongly, traders can look to enter short term trades with the aim of exiting as soon as profit opportunities present themselves.

Traders however, do need to watch for heavy volatility. November 15 is the deadline for investors in hedge funds that allow withdrawals with a 45-day notice, if those investors are looking to close out their accounts by the end of this year.

If hedge funds get those redemption notices, then they will have to sell shares to raise the needed cash, which will put downward pressure on the stock market.

The best course of action might be to wait for stocks to rally and then look to short stocks later in the week.

For those looking to trade today, we would suggest going long the market by buying the Ultra Dow 30 ProShares (DDM).

Remember, we expect volatility this week, so if you have a 2% plus gain in a trade on the day, exit.

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Tags: Trading Plan  Trading Idea

Monday November 10, 2008
Navivest

Troubled by the downturn in the global economy and a slowing of its own economy, from an 11.4% annual growth rate last year to an estimated 10.5% this year, China on Sunday, announced an economic stimulus plan that will have the country spend $586 billion over two years.

The government which just last year was still talking about trying to slow down bank lending to certain sectors of the economy such as real estate so as to avoid over heating, is now planning on removing the credit ceilings of commercial banks so as to stimulate more lending.

The government is still somewhat cautious about over lending, and at the meeting where the removal of the credit ceilings was determined, it was decided that credit expansion must be “rational” and “target spheres that would promote and consolidate the expansion of consumer credit.”

China is planning on spending the $586 billion by the end of 2010 as follows:

Housing: Building more affordable and low-rent housing and speeding the clearing of slums. A pilot program to rebuild rural housing will expand.

Rural infrastructure: Speeding up rural infrastructure construction. Roads and power grids in the countryside will be improved, and efforts will be stepped up to spread the use of methane and to ensure drinking water safety.

Transportation: Accelerating the expansion of the transport network.

Health and education: Beefing up the health and medical service by improving the grass roots medical system.

Environment: Improving environmental protection by enhancing the construction of sewage and rubbish treatment facilities and preventing water pollution in key areas.

Industry: Enhancing innovation and industrial restructuring and supporting the development of the high-tech and service industries.

Disaster rebuilding: Speeding reconstruction in the areas hit by the May 12 earthquake.

Incomes: Raising average incomes in rural and urban areas. Raising next year’s minimum grain purchase and farm subsidies. Increasing subsidies for low-income urban residents.

Taxes: Extending reforms in value-added tax rules to all industries, which could cut the tax corporate burden by 120 billion Yuan (about 17.6 billion U.S. dollars).

Finance: Enhancing financial support to maintain economic growth. Removing loan quotas on commercial lenders. Appropriately increasing bank credit for priority projects, rural areas, smaller enterprises, technical innovation and industrial rationalization through mergers and acquisitions.

Tags: China  Economic Stimulus

Friday November 7, 2008
Navivest

Apparently, even famed investor Warren Buffet isn’t immune from the battering that the stock market has undergone. His Berkshire Hathaway Inc., (BRK.A) today reported that falling profits in its insurance division as well as a $1.05 billion investment loss caused a 77% drop in Q3 2008 profits.

The company reported that net earnings fell to $1.057 billion, from $4.553 in the Q3 period last year while recording investment and derivative losses of $1.012 billion, compared to a gain of $1.992 billion in the same period last year. Operating earnings for the period were $2.069 billion, a 19.2% drop from the $2.561 billion earned in the third quarter of 2007.

With Berkshire Hathaway only having an average of 1,549,226 class A shares outstanding in the period, the company reported operating earnings per share of $1,335 and net earnings per share of $682. The company also has class B shares and the earnings for those are 1/30 those of the class A shares.

Across the company’s major divisions, operating earnings break down as follows: insurance underwriting, $81 million, Insurance investment income, $809 million, Non-insurance businesses, $1.08 billion and other, $99 million. The company has a net worth of $120.15 billion, a slight drop from the $120.73 billion reported last year.

Highlighting the stock market volatility that has exasperated investors all over, at the start of the year, Berkshire Hathaway had an unrealized loss of $1.67 billion derivatives portfolio. By the second quarter, those losses had been cut by $654 million, but then in Q3, losses on the portfolio grew by $1.05 billion, causing a $2.21 billion unrealized loss through the first nine months of the year.

During regular trading on Friday, Berkshire Hathaway’s (BRK.A) shares rose $800, to close at $113,000.

Tags: Berkshire Hathaway

Friday November 7, 2008
Navivest

The Walt Disney Company (DIS) yesterday reported a 13 percent decline in fourth-quarter income. Also, going on slower than average advanced bookings for the Christmas season, the company is now predicting a difficult operating environment going forward as the weakening economy forces consumers to cut back.

According to Robert Iger, Disney CEO, “Consumer confidence is the lowest we’ve seen in over three decades, and even the best product out there is feeling the effect.”

Analysts were looking for revenues of $9.34 billion, with earnings per share of $0.49. Disney (DIS) reported revenues of $9.45 billion slightly ahead of estimates, but disappointed on the bottom line, with an EPS of $0.43 before factoring out special items.

Including special items, which included a bad debt charge related to the bankruptcy of Lehman Brothers, the company reported earnings per share of $0.43 on net income of $760 million, a penny above the $0.42 reported in the fourth quarter of last year. Net income for the year ago period, was $877 million.

For the full fiscal year 2008 ending September 27, the company reported a 7% jump in revenues to $37.8 billion, compared to $35.5 billion for fiscal 2007. Net profit dropped 5 1/2 % to $4.43 billion, compared to the $4.67 billion earned last year. The net profit translated into earnings per share of $2.28, a 1.3% change from the $2.25 EPS reported last year.

On an operational basis, Disney (DIS) is segmented into four divisions, Media Networks, Parks and Resorts, Studio Entertainment and Consumer Products.

For the full year, revenues for Media Networks came in at $16.116 billion a 7% change from the prior year and operating income was $4.755 billion.

Revenues for Parks and Resorts came in at $11.504 billion, an 8% year over year change, with operating income coming in at $1.897 billion.

At the Studio Entertainment division, revenues came in at $7.348 billion, a 2% decline from the prior year, with operating income coming in at $1.086 billion and the Consumer Products division reported revenues of $2.875 billion, a 26% year over year rise, while operating income came in at $718 million.

Tags: Disney Earnings

Friday November 7, 2008
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The Bureau of Labor Statistics of the U.S. Department of Labor reported today released a report, which showed that non-farm payroll employment decreased by 240,000 in October and the unemployment rate jumped to 6.5%, from 6.1% in September.

Economists had been looking for a job loss of 200,000, with the unemployment rate climbing to 6.5%
For the first ten months of the year, the country has lost an astounding 1.2 million jobs and over fifty percent of that has come in the last three months.

We have seen jobs losses with every successive month this year and so far, not only do we not see an end in sight, the problem is actually accelerating.

According to the Labor Department, we saw continuing job losses in manufacturing, construction and several service-providing industries, while the health care and mining industries add jobs.

With the 0.4% jump to 6.5% in the unemployment rate, the number of those that are unemployed climbed by 603,000 and the 6.5% unemployment rate means there are now 10.1 million people without jobs.

Tags: Unemployment Rate  Economy

Thursday November 6, 2008
Navivest

Shares of Wells Fargo & Company (WFC) are falling in after hours trading, after the bank announced that it priced an $11 billion offering at $27 per share. That equates to 407.5 million shares of WFC common stock.

Wells Fargo (WFC) is raising the funds to shore up its capital base, as well as to help it complete its October 3rd announced acquisition of Wachovia, which it is buying for $12.4 billion.
When that deal is completed, Wells Fargo (WFC) will become the fourth largest U.S. bank, with 6,653 branches and $1.4 trillion in assets.

The $27 pricing was a 6.2% discount to Wells Fargo’s (WFC) 11/05/08 closing price of $28.77.

Wells Fargo (WFC) shares are off $1.55 down to $27.22, a 5.39% fall in after hours trading, after shedding $2.91 or 9.19% in regular trading.

Tags: Wells Fargo
 

Thursday November 6, 2008
Navivest

With the drop in stocks today, the major stock market indices have lost about 10% of their value in just two days.

Today, the Dow fell 443.48 points (4.85%), Nasdaq fell 72.94 points (4.34%) and the S&P 500 fell 47.89 (5.03%).

The losses in the past two trading days in the Dow and the S&P 500 are the largest since October 1987. This erodes more than 50% of the gains that we realized since stocks rebounded from a five-year low that was hit 11 days ago on October 27.

Fueling the drop was news from retailers, which showed that retail sales in October was the worst in 39 years. Walmart was one of the few exceptions. It reported that its sales for October rose 2.4%. This bested even the company’s own internal forecasts. If fuel sales are factored in, sales rose 2.5%, when compared to October 2007.

The good news for traders, is that the big drop in stock sets us up for another near-term bounce, the disastrous unemployment rate numbers that we will be getting tomorrow notwithstanding.

The biggest point decliner in the Dow today was Chevron (CVX), which shed $4.77 (6.37%) to close at $70.11. This was a reflection in the big drop we saw in oil prices today, which continue to fall on concerns that a weakening global economy will lower demand. Crude oil for December delivery dropped $4.53 or 6.9%, to close at $60.77.

Disney lost $1.42 during regular trading to close at $22.81. The shares are further trending lower in after hours trading, after the company reported that its fourth quarter net income fell 13%. Partly to blame was losses attributed to the bankruptcy of Lehman Brothers.

The company is expecting things to worsen consumer spending slows. According to Robert Iger, Disney’s CEO, “Consumer confidence is the lowest we’ve seen in over three decades, and even the best product out there is feeling the effect,”

Tags: Disney Earnings  Economy