Thursday, 22 July, 2010

market snapshot

Economically sensitive seems to be a good thing this earnings season as the following companies blew through earnings expectations and dwarfed last year's results:

CN Rail: EPS = $1.13 versus $0.76 last year
UPS: EPS = $0.84 versus $0.44 last year
CAT: EPS = $1.09 versus $0.72 last year
3M: EPS = $1.54 versus $1.20 last year

These stocks are about as dependant on the economy as it gets.  There is a strange feeling in the markets lately.  There seems to be a large divide between how main street is looking and how corporations are performing.  Earnings are looking quite good but yet unemployment remains high, housing is still in the toilet, and consumer confidence is weak.  Costs that companies cut during the financial crisis are probably really paying off now as revenues come back to levels above 2009 but below prior years.  The fact that most analysts and onlookers are worried and bearish is probably a sign that markets will rise from here.  Typically in times like this the market climbs the wall of worry as expectations are low and upside surprise is more common.  As usual it is hard to say where the market will go from here but stocks usually trade in line with earnings and for the time being earnings seem fine. 

I will obviously continue to pick away at stocks that are already part of my portfolio but seem to be trading very cheap.  I've noticed the following opportunities lately:

Walgreen (WAG) - I added on June 29 at $26.50.  The stock has since recovered to $29.41.

Sun Life Financial (SLF) - Dividend investors have taken note recently as the shares traded down to under $26 yesterday resulting in a yield of about 5.5%.


The Passive Income Earner said...

It's interesting to see the manufacturing/commercial companies doing well because Amazon (AMZN) got creamed and it's apparently a good company to evaluate consumer spending.

It's definitely mixed out there.

Financial Cents said...

@MG - Those four are decent choices, although CNR is trading at a 52-week high. I like what you're saying about the cheap stuff...

SLF has been diving I think because the (low) equity markets and (low) interest rates have simply caught up to them and other lifecos. That said, my DRIP added 8 shares of SLF last month and probably more to come next quarter with that low price :) I bet you're smiling too.

MG (moneygardener) said...

@FC - I actually don't have SLF in a DRIP but I would readily add to it at these levels if I already didn't own so much.

vishnu said...

i am long term reader of your blog i like MFC better than slf for their quality of business.

I wanted to ask you how do you decide which stock you want to keep in drip.What is your criteria?

MG (moneygardener) said...

Hi Vishnu, I started 4 DRIPS years ago and I haven't started one since. (Telus, Royal Bank, Manulife , J&J). Theoretically I would DRIP every stock in my portfolio I have just realized over the years that I want the freedom to let dividends accumulate and selectively add to cheap stocks. Although I have to admit that I love the way DRIPs increase my dividend income every quarter.

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