Rant About It

Archive for the ‘Oil’ Category

Interesting Stories That You Missed

Posted by rantaboutit on March 19, 2007

Over the past few days i came across some interesting news/facts which deserves some limelight.
Basic Material ETFs
ETFs that focus on large-cap companies with exposure to basic materials have had nice returns for the year. Why is that so ? Analyst believe U.S. economy is growing and a growing economy needs materials. Returns on the 2 popular ETFs are
  • Vanguard Materials ETF (VAW) = 8.3%
  • Materials Select Sector SPDR (XLB) = 7.5%
Top companies in both of these ETFs are: Du Pont (DD), Dow Chemical (DOW), Alcoa (AA), Monsanto (MON), and Phelps Dodge (PD).

Tax Efficient ETFs
Many of the newer ETFs are more specialized which could effect their tax efficiency in different ways.
Here are 5 funds that are top-rated for consistent returns and tax efficiency:
  1. iShares MSCI Austria Index (EWO): 5-year return of 36% and over that time lost 0.4% to tax costs.
  2. iShares Russell 2000 Value Index (IWN): 5-year return of 13% and over that time lost 0.5% to tax costs.
  3. Vanguard Small Cap Value Index (VBR): 3-year return of 14% and over that time lost 0.5% to tax costs.
  4. iShares Russell Mid Cap Value Index (IWS): 5-year return of 15% and over that time lost 0.7% to tax costs.
  5. Vanguard Value Index (VTV): 3-year return of 13% and over that time lost 0.5% to tax costs.
China Raise Interest Rates
China’s central bank said it would raise both its lending and deposit rates by 0.27 % points to bring investment and credit growth in check and help balance the economy. The one-year benchmark yuan deposit rate would rise to 2.79% from 2.52%. The one-year benchmark lending rate is to rise to 6.39% from 6.12%.

Energy Market
John Segner, manager of the AIM Energy fund, which has 17% average returns over the last decade said that the energy market will see a temporary improvement in the supply-demand balance in 2007, but will then return to a supply shortage in 2008 and 2009. Demand will continue to rise, driven by India and China, but supply from non-OPEC countries, particularly Venezuela, Nigeria, Iran and Iraq, won’t rise sufficiently.

No Wal-Mart Bank
Wal-Mart Stores Inc. (WMT) is dropping its bid to establish a bank after months of heated debate over whether the world’s largest retailer should be allowed to gain the added financial power of a federally insured bank. Wal-Mart announced that it was withdrawing its application for a bank charter, which aroused widespread opposition from banks, lawmakers and consumer groups, and spurred debate within Congress and before the Federal Deposit Insurance Corp.

Top Subprime Mortgage Lenders With Q4 Originations

  1. HSBC Finance (HSBC) – $12.3 billion
  2. New Century Financial (NEWC.PK) – $12.2 billion
  3. Countrywide Financial (CFC) – $10.1 billion
  4. WMC Mortgage (GE) – $9.0 billion
  5. First Franklin (Merrill Lynch) (ML) – $7.8 billion
  6. Wells Fargo (WFC) – $7.4 billion
  7. Option One (H&R Block) (HRB) – $6.1 billion
  8. Fremont Investment & Loan (FMT) – $6.0 billion
  9. Washington Mutual (WM) – $5.7 billion
  10. CitiFinancial (Citigroup) (C) – $5.0 billion
Life Cycle ETF for Investors
TD Ameritrade (AMTD) plans to offer an ETF that rebalances frequently. The ETF will be a life cycle ETF with a target date for the investor, who will choose a year close to when he plans to retire. Life-cycle funds invest in multiple asset classes and become more conservative as time passes.

Cisco buys WebEx

Cisco (CSCO) bought WebEx (WEBX) for $3.2 billion. WebEx is a specialist on online conferencing and collaboration, and one of the most successful players in the software as a service segment. Buying WebEx creates a new point of competition with Microsoft (MSFT) which offers various collaboration tools of its own.

Microsoft buys Tellme Networks
Microsoft (MSFT) will buy privately held voice-recognition software company Tellme Networks for a estimated price of $800 million. The purchase will give Microsoft several promising new capabilities, particularly in mobile search. Tellme Networks already does more mobile search support than Google and Yahoo combined. Microsoft already offers a product that combines e-mail, instant messaging and VoIP into one voice-activated client; but the Tellme acquisition gives it advanced, enterprise-class speech recognition technology.

Wal-Mart Movies
Wal-Mart Stores (WMT) will team up with Fox Broadcasting to offer movies and television shows on its new online download service, and the collaboration between Amazon (AMZN) and TiVo (TIVO) to offer recordable content for download. This is bad news for competitors Netflix (NFLX) and Blockbuster (BBI).

Emerging markets ETFs
During the recent meltdown emerging markets ETFs were hit bad, but Russia seemed to be one of the hardest hit. The Russian RTS index is now down 9.6% for the year. This makes Russia the worst performer year-to-date among major global benchmarks. Falling commodity prices, particularly oils and metal puts more pressure on the Russian market as well as other emerging markets which tend to have a commodity-driven economy.

Posted in Asia, China, Exchange Trade Funds, Oil, Walmart | 2 Comments »

Highest Rated Sectors: Did Analyst Get It Right ?

Posted by rantaboutit on March 13, 2007

What are we looking at here ?
The most popular S&P 1500 groups. The table is self explanatory, so i will just point out few interesting things. The first column is the list of sectors most recommended by the Wall Street Analyst. The sixth column gives the overall percentage of buy recommendation. The last column is the stock that is most favored in that particular sector. As you can see Contruction Materials topped the table with 61.1% buy recommendation. Analyst are most bullish on Vulcan Materials Company VMC.

Construction Material Sector
Vulcan Materials Company VMC is currently trading at $116.01

  • P/E = 24.76 (ranked #2 in the construction materials sector)
  • EPS = 4.69
  • PEG =2.31 (ranked #2)
  • Dividend = 1.50% (ranked #9)
  • Market Capital = $11.02 billion (ranked #2)
  • Analyst recommendation of 1.4/5.0

All in all, pretty impressive record. Add to that their 1-year return was whooping +49.75%. No wonder analyst love it. Construction Raw Materials sector performance ? Last one year returns was +25%. Pretty neat…Analyst got it right.

Consumer Finance Sector
Second best is Consumer Finance according to all the analyst. Highest rated in that group is American Express Company AXP which is priced at $54.75.

  • P/E = 18.29 (ranked #11 in the consumer finance sector)
  • EPS = 2.99
  • PEG =1.28 (ranked #9)
  • Dividend = 1.00% (ranked #14)
  • Market Capital = $65.28 billion (ranked #1)
  • Analyst recommendation of 2.0/5.0

AXP has a huge market capital and ranked #1 in their sector. P/E and PEG all look good. But what matters the most for the investors is returns. Their 1-year return was a lousy +0.96%.
Consumer Finance sector performance ?
Last one year returns was -1.65%. Pretty lousy…Analyst got it wrong.

What did we prove here ? Analyst do not get it right all the time. However at times they do not get the credit they deserve. Predicting stock markets is no easy task, especially with multiple factors affecting the stock movement. I checked out 1-year returns for all the listed sectors in the table above. 8 out of 10 were positive. Noteworthy were Water Utility with +25.94% returns, Aero & Defense with +23.01% and Energy Services with +15.21% returns.

Conclusion: Bashing the analyst for getting is wrong is always one of the favorite things to do for all kinds of investors. You and me need to understand that analyst do not get it right all the time. Obviously they wont. Otherwise they would have made billions and billions of dollars at the stock market. Analyst opinions & recommendations can be a good guide for investors to dig deep into the company stock. But it should not be used as an indicator to trade stocks. That brings us to the million dollar question. Are you going to trust the analysts and buy the stock/sector they are most bullish on ?

Recommended Books:

(Source: TickerSense)

Posted in Construction Material, Consumer Finance, Energy, Health Care, Oil, Sector, Water | Leave a Comment »

Bad News: Recent Tech stock slump….

Posted by rantaboutit on February 9, 2007

Barron’s Associate Editor Michael Santoli discusses the continued tech stock slump and the impact of the cold weather in the East on the market.

Posted in Oil, Technology | Leave a Comment »