Archive for January, 2008
Friday, January 18th, 2008
Market bellwether General Electric (NYSE: GE) reported a 4% rise in Q4 earnings today, citing strong profit growth in its infrastructure business (26%). The company’s energy (38%), oil & gas (50%), aviation (27%), and transportation (21%) portfolios were responsible for infrastructure net margin growth . Further, GE’s NBC Universal, finance, and industrial units showed reasonable margin growth as well (Healthcare profit was down 4%).
Over half of the company’s revenue is now derived overseas - which is a good thing given the falling dollar and the possibility of a recession in the US. In addition, the stock has promise with a P/E of 15x Trailing Twelve Month (TTM) earnings, strong gross margins (43%), high Return On Equity (20%) and a 4% dividend. However, GE is significantly leveraged with a Debt / Equity ratio of over 4x. As a result, its Return On Invested Capital (ROIC) is a tepid 4%.
In sum, we’ll watch this one for now. The stock is already down 10% this year, but could definitely suffer further from the psychological impact of a recession moving forward.
Posted in Large Cap Stocks | No Comments »
Thursday, January 17th, 2008
Unfortunately, the US economy continues to look like it is on the verge of a recession. The US Commerce Department announced today that new home construction fell a staggering 25% in 2007 vs. the prior year. Unfortunately, we haven’t seen a dip that severe since the dark days of 1980 (when new construction fell 26%). With unemployment at around 5% in December and continued problems with credit liquidity, the stock market could be in for some serious pain moving forward.
Related Links:
New Residential Construction - Jan. 17th, 2008 Press Release
Posted in Economic Indicators, Stock Market News | No Comments »
Saturday, January 12th, 2008
With the US economy looking more and more like it is headed for a recession, investors will likely take positions in more defensive sectors such as consumer staples, health care, and utilities. In my opinion, this makes stocks like Mirant Corp. (NYSE: MIR) look attractive at current valuations.
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Posted in Mid Cap Stocks | No Comments »
Friday, January 11th, 2008
The Wall Street Journal announced today that Bank of America (NYSE: BAC) will indeed purchase troubled lender Countrywide Financial (NYSE: CFC) for $4 billion in stock. CFC shareholders will receive around 0.1822 shares of BAC for each share of CFC they own (which is actually a discount to yesterday’s closing price). The deal is expected to close in Q3 of this year.
Related Links:
Reuters.com Article
Posted in Investing, Large Cap Stocks, Stock Market News | No Comments »
Thursday, January 10th, 2008
Per the Wall Street Journal, Bank of America (NYSE: BAC) is in talks to finally acquire ailing mortgage giant Countrywide Financial (NYSE: CFC). After buying a 16% stake in CFC last year, Bank of America has returned to the table to buy the rest of the company outright. It’s a good strategic move, as they’ll be buying at a significant discount in the wake of the subprime collapse.
Further, since a subsidiary of the company is technically a federal “thrift”, BAC may slip through a loophole in the law that normally prevents a bank from owning over 10% of US national deposits after an acquisition. Even so, given the current state of financial stocks and the overall economy, it looks like it will be a long road to recovery for both of these firms.
Posted in Large Cap Stocks, Stock Market News | No Comments »
