Bespoke Investment Group

What Is Getting Hit Hardest?

We broke the S&P 500 into deciles (10 groups of 50 stocks) based on stock performance in 2009 to see if the big winners from last year are the ones getting hit the hardest on the recent pullback.  As shown below, they definitely are.  The 50 best performing S&P 500 stocks in 2009 have averaged a decline of 9.5% since 1/19.  Each successive decile from best to worst in 2009 gets better in terms of performance since 1/19.  The 50 worst performing S&P 500 stocks in 2009 are only down an average of 2.9% since 1/19.  The winners during the bull run are being sold with authority.

Below are the worst performing S&P 500 stocks since the January 19th top.  US Steel (X) is down a whopping 32%, followed by Cliffs Natural Resources (CLF), Massey Energy (MEE), Freeport-McMoRan (FCX), and QUALCOMM (QCOM).  All of the names listed above are down more than 20%.

Best Performing Stocks on Earnings

It's been a great earnings season from a numbers standpoint, but it has been a pretty bad earnings season in terms of stock performance.  But some stocks have done well.  Below we highlight the 25 companies that have gone up the most on their report days this earnings season.  As shown, TSCM has had the best earnings-day peformance with a gain of 28.17%  Cramer had a good day!  PLXT is the only other company that has gone up more than 27.32% on its report day.  Other notables on the list of earnings winners include VMW, CREE, ROK, EDU, and STX.

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S&P 500 Open Interest Put/Call Ratios

Below we highlight a list of S&P 500 stocks with the highest ratio of open put interest to open call interest.  Companies with high put option open interest compared to call option open interest have more bearish than bullish bets.  It's similar to a company with high short interest, and some investors view this as bullish or bearish.  Investors who view a high ratio as bullish tend to think that the negativity is already priced into the stock, meaning upside potential is greater than downside potential.  Investors who view a high ratio as bearish tend to think that it means the smart money is betting against the stock, indicating that more downside is to come.  Typically during market rallies, stocks with high ratios will outperform, while they will go down faster than the market during declines.

For those interested, we also list the S&P 500 stocks with the lowest open interest put to call ratio.

Berkshire Joins List of Ten Largest US Companies

Who said a stock split wasn't good for your stock?  Last week's 50-1 split of shares in Berkshire Hathaways' class B stock (BRK/b) helped set the stage for last night's announcement that S&P would add the stock to the S&P 500.  As a result, the stock is trading up 5% in early trading.  Factoring in today's advance, Berkshire Hathaway now ranks among the ten largest US companies with a market cap of nearly 170 billion dollars. 

Given its size, the addition of Berkshire Hathaway to the S&P 500 is likely to cause some havoc on the index.  With a likely weighting of about 1.1% in the index when it is added in February, index managers will be required to sell about 1.1% of their holdings in each of the index's remaining 498 stocks (BNI will come out of the index with Berkshire's acquisition of the company) in order to make room for Berkshire. As if investors didn't have enough on their plate already!

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Apple Back Above 50-DMA After Hours

Apple (AAPL) had a nice day today, closing up $5.32 to $203.08.  The stock had a strong earnings report after the close, and it closed the after-hours session up another $1.52 to $204.60.  While this is a small gain for Apple compared to what it does sometimes after earnings reports, it is a significant gain because it has put the stock back above its 50-day moving average.  With the speculated release of its tablet coming on Wednesday along with lots of other non-stock related events going on in the market right now, Apple can use as many positive technical forces as it can get.

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When a War on the Banks Turns into Bigger Bonuses

Right or wrong, there's no denying the fact that many Americans think that people who work on Wall Street are paid too much.  While this view was certainly present before the bailouts, it has bubbled up to the forefront of popular opinion since then.  Those of the view that bonuses should be capped or restricted argue that even banks who have paid back the government benefited from the government's actions.  This is certainly true, but a lot of companies outside of the financial sector also took government assistance or regularly benefit from government programs.  In these cases, there is little outrage towards pay.  Professional athletes make salaries on par or greater than the top bankers, and they play in stadiums that are largely financed by higher sales taxes or through the issuance of tax-free municipal bonds.  And just last week, NBC paid Conan O'Brien over $30 million to walk away and take the Summer off, even though NBC's parent company took advantage of the government's TLGP (Temporary Liquidity Guarantee Program) and issued over $60 billion in government guaranteed commercial paper.

As we all learned during the Financial crisis, however, it is important to remember the law of unintended consequences.  Actions or words that look good at face value could end up with results that run counter to your original intent.  While Wall Street bonuses have been labeled "obscene," all the rhetoric against the banks actually has the potential to benefit some bankers, making their potential paydays even more "obscene."  For example, a Bloomberg story this morning reported that the stock-based portion of bonuses for employees at Goldman Sachs (GS) was priced on Friday when the stock closed at a six-month low and had its worst two-day decline since the March lows.  As a result of the decline in Goldman's stock, though, an employee getting a bonus of $1 million in stock received 6,488 shares, which was 436 more shares than they would have received one week earlier.

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Sector and Stock Performance Since 1/19

The S&P 500 is down 5.08% since last Tuesday, and below we highlight the performance of the ten S&P 500 sectors since then as well.  As shown, the Materials sector is down the most at -7.90%, followed by Financials and Technology both at -6.24%.  Energy is the only other sector that is underperforming the entire index with a decline of 5.80%.  Consumer Staples is down the least at -2.79%, followed by Telecom (-3.38%) and Health Care (-3.86%).

The average stock in the S&P 500 is down 4.91% since last Tuesday, and there are 30 stocks that are down more than 10%.  As shown below, Cliffs Natural Resources (CLF) is down the most of any S&P 500 stock since 1/19 with a decline of 17.82%.  MEE, X, AKS, and AA (all Materials stocks) round out the top five worse performers.  Other notables on the -10% list include Morgan Stanley (MS), Ford (F), Caterpillar (CAT), Wynn Resorts (WYNN), and American Express (AXP).

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Buffett Reconsidering His Views Towards Stock Splits?

In an interview on CNBC yesterday, Warren Buffett said that even though he was splitting the B shares of Berkshire Hathaway (BRK.b) on a 50-1 basis, this should not be interpreted as a sign that he now has a positive view towards stock splits.  However, based on the performance of Berkshire Hathaway that we pointed out yesterday and its follow-up performance today, maybe Buffet is reconsidering his views.  Over the last two trading days, shares of Berkshire have now rallied by 10%, even as the S&P 500 has seen its worst two-day stretch since November.

 
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The Split Heard Round the World

lnvestors have been clamoring for years and years for Berkshire to split its shares, whether it be the $100,000 A shares or the $3500 B shares.  After voting confirmed the split today, BRK/B shares will be divided into 50 smaller shares tomorrow.  This 50 for 1 split will convert shares to roughly $70.  Berkshire B shares were up $85 yesterday and are up another $130 today.  The bulls are clearly favoring the split and eagerly awaiting its arrival.

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PKX: Another Buffett Bluff?

Following today's announced merger between Cadbury (CBY) and Kraft (KFT), some could argue that Kraft's largest shareholder, Warren Buffett, helped to get the deal done when he publicly voiced his concerns about not liking the deal.  Buffett's announcement that he wouldn't vote in favor of issuing more stock to get the deal done served two purposes.  First, it sent the message to CBY that they shouldn't be too greedy and hold out for a much higher bid from KFT.  Second, it helped to boost KFT's stock by close to 10% as investors became less concerned about KFT going out and spending too much to buy CBY.  With KFT shares 10% higher than they were on January 5th, the company could now use 10% less stock in the stock portion of its acquisition.

Today, Buffett is in the headlines regarding POSCO (PKX), another company in which he is a large shareholder (4.5%).  This morning Reuters quoted PKX's CEO as saying that Buffett was looking to buy more shares in the company "after missing the opportunity to buy them on dips last year when the global financial crisis depressed equity asset values."  In reaction to the news, the stock is trading 3.5% higher, partially erasing a one-week slide in the company's shares.  The only question for investors is, why would Buffett, or for that matter any other investor, be telegraphing his moves before acually making them.  Does anyone seriously believe that Buffett is going to go out and buy more shares in the company after publicly saying he liked the company?

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The Best Stock of the Last Decade Has a Rough Start to the New One

At the start of the new year, we highlighted the 50 best performing stocks of the 2000s.  At the very top of the list was Medifast (MED), which gained a whopping 16,209% during the decade.  While MED was the best performing stock in the US last decade, it has gotten off to a very poor start this decade.  As shown below, MED is already down 25% in 2010.  Just today the stock was down $4.01 (-14.85%).   

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Chinese Internet Portals and Google (GOOG)

Just as companies have recently tended to trade lower when Google (GOOG) announces that it is moving in on their turf, it should come as no surprise that Chinese internet portals (led by BIDU) have rallied in the last two days following Google's announcement that it may end up exiting the Chinese market over security and censorship concerns.  As shown to the right, the ADRs of all four major Chinese search engine/internet portals have seen gains following Google's announcement Tuesday night.

The most puzzling aspect of the recent situation surrounding GOOG is how its stock has performed.  As expected, the stock opened down nearly 3% on Wednesday.  Since then, however, the stock has not only retraced those losses, but it is actually slightly higher compared to Tuesday's closing price of $590.48.  How can GOOG's announcement be good for everybody?

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Baidu Hits The Resistance Wall Again

Google's (GOOG) announcement that it was considering pulling out of the Chinese market helped boost shares of Baidu (BIDU) by nearly 15% this morning.  As shown in the chart below, today's gap broke a downtrend that had been in place since late November.  While BIDU may have broken its downtrend and moved back above its 50-day moving average, the stock was unable to trade above its 52-week high of $443.25, which is a level that has been acting as resistance for a few months.

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Alcoa (AA) Follows the Script

Prior to Alcoa's (AA) earnings report on Monday after the close, we highlighted that the stock typically trades down during regular trading hours (9:30AM-4PM) on the first day following its earnings reports.  We noted that this pattern of going down from the open to the close had happened on 12 out of Alcoa's last 15 earnings reports.  The action in Alcoa following its earnings report this quarter was no different.  As shown in the chart below, the stock opened down 7.62% yesterday, and then went down an additional 3.72% from the open to the close.

As we mentioned in our post on Monday, there are numerous trends like this to be found for the thousands of stocks in our Interactive Earnings Report Database.  With earnings season here, it's important to arm yourself with as much information as possible so you can stay on top of your positions as they release quarterly results.  The earnings database is available to Bespoke Premium Plus subscribers.  Please click here to subscribe today.

  

Most Overbought and Oversold Stocks

The S&P 1500 is currently trading well above its 50-day moving average, and 84% of the stocks in the index are above their 50-days.  But some stocks are trading at extremely overbought levels.  There are 25 stocks in the index currently trading more than 25% above their 50-days.  As shown below, Patriot Coal (PCX) is the furthest above its 50-day at 47.74%.  PCX is followed by TUES (46.72%), MEI (45.01%), NYT (42.64%), X (37.88%), and CENX (37.09%).  Ford (F) is also on the list at 30.61% above its 50-day, and Sears Holdings (SHLD) isn't far behind at 30.49%. 

Hanmi Financial (HAFC) is trading the furthest below its 50-day moving average at -17.95%.  GY, SONC, TNL, and SRDX round out the five most oversold stocks in the index.  Other notables on the list of stocks below their 50-days include AIG, ANF, GPS, and C.

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Alcoa (AA) Earnings

Alcoa (AA) reports after the close today, and we used the Bespoke Interactive Earnings Report Database to see how the stock typically trades in reaction to its quarterly release.  Alcoa is a stock that reports after the close, so we use its price change on the following day to track its one-day reaction.  Looking at Alcoa's last fifteen reports, the stock has averaged an opening gap of 0.70% and then an open to close change of -2.05%.  In fact, the stock has traded lower from the open to the close following 12 out of its last 15 earnings reports.  In the case of Alcoa, traders typically bid the stock higher in after-hours and pre-market trading and then sell the stock during regular trading hours from 9:30 to the close. 

There are numerous trends like this to be found for every company in our Earnings Database.  We also release a report (sample PDF) each morning that provides trade ideas using every earnings report from the prior evening and that morning.  The database and morning earnings report are both available only to Premium Plus subscribers.  Click here to subscribe today!

Most and Least Volatile Stocks on Earnings

The fourth quarter earnings season starts on Monday with Alcoa's (AA) report after the close.  Prior to each earnings season, we highlight the stocks that have historically had the biggest and smallest one-day reactions to their earnings reports.  To do this, we grab every earnings report for every company that has reported since 2002 and calculate its average absolute 1-day change on the first day of trading following the earnings release.  For companies that report in the morning, we use its change on that day, and for companies that report after the close, we use its change on the following day.  The absolute change turns negative moves positive, so if a company is up 20% on one earnings report and down 10% on another earnings report, its average absolute change for both reports would be 15%.

Each of the companies listed below has at least 5 earnings report under its belt.  Along with the average abolute change, we also include its current price, expected report date, and the time of day of the report.  As shown, GT Solar (SOLR) has historically been the most volatile stock on earnings in our database with an average absolute one-day change of 17.76%!  SunPower (SPWRA) is not far behind at all with a one-day change of +/-17.47%.  Other notables on the list of most volatile stocks on earnings include Intuitive Surgical (ISRG), NetFlix (NFLX), SanDisk (SNDK), and Amazon.com (AMZN).  Remember, this does not mean the stocks typically go up a lot on their earnings reports -- it means they typically move a lot in either direction on their earnings reports.  To find stocks that have historically gone up a lot or down a lot, we offer plenty of in-depth earnings season reports to Bespoke Premium members throughout the reporting period.  There simply isn't a better place to go to track earnings than Bespoke Premium.

The stocks below have historically been the least volatile stocks on their earnings reports.  Quite a few of the names are in the Utilities sector, whose stocks usually move very little based on quarter to quarter numbers.  Other notables on the list include Atria Group (MO), Johnson & Johnson (JNJ), McDonald's (MCD), and Procter & Gamble (PG).

 

Google Struggling on High Volume

Ever since the release of their Nexus One phone, Google's (GOOG) stock price has really struggled.  And it has struggled on very high volume.  As shown below, the stock is quickly approaching its 50-day moving average, so it will need to hold that support to not break below its uptrend channel.  If it breaks below its 50-day, the stock might have a tough time over the next couple of months.

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Retail Stock Performance

The S&P 500 Retail group is up nicely since both the March 9th lows and the start of the shopping season in November.  Below we highlight the performance of the 30 stocks in the group over both time frames. 

Since the start of November, Sears Holdings (SHLD) is up the most with a gain of 47.44%.  Priceline.com, RadioShack, Nordstrom, Bed Bath & Beyond, and Lowe's are all up more than 20% since the start of November as well.  Only five stocks are down since November 1st -- Macy's, The Gap, Kohl's, GameStop, and JC Penney.  GameStop is the only stock in the group that is down since November and since the start of the bull market on March 9th.

 

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A Billion Dollar Day for Eddie Lampert?

Sears Holdings raised guidance by quite a bit this morning, and the stock is currently up $13.63 in pre-market trading.  As the majority owner of SHLD shares, Eddie Lampert stands to make a fortune today.  As of their last filing, Lampert's firm owned 66,024,366 shares (57.13% of the company).  A gain of $13.63 in the stock translates into a gain of $899,912,109 for Lampert.  For Lampert to have a billion dollar day in SHLD, the stock needs to close up $15.15.

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GOOG Largest Negative Reversal Since June

After hitting a new 52-week high in the early minutes of trading, shares of GOOG have been under pressure over concerns regarding lower margins due to the Nexus One phone launch as well as Baidu's (BIDU) announcement that it will create an online video company.  The stock is currently trading down nearly 3.5% from its morning high, which would mark the largest negative intraday reversal in the stock since June 22nd.  As a result of today's sell-off, GOOG is now trading right above its 20-day moving average (DMA) of $609.  This level has acted as support in the past, so traders will we be watching to see if this holds.  If the 20-DMA level fails to hold, the next point of interest becomes the 50-DMA which currently sits at $586. 

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Best and Worst Starts to the New Year

After three days of trading to start the new year, the average stock in the S&P 500 is up 2.14%.  Below we highlight the 30 best and worst performing stocks in the index so far in 2010.  As shown, WYNN is up the most with a gain of 15.15%, followed by GNW, NBR, TIE, DOW, F, and S.  There are 17 stocks up more than 10% already, while just one stock in the index is down more than 5% -- ICE (-5.54%).  There's a long year ahead, but the bulls can't complain about the start to 2010.

Goldman Sachs (GS) Breaks Free From the "Whitney Effect"

For much of the last two years, the last three words that a CEO of a financial firm could stand to hear in reference to their stock was, "Whitney lowers forecasts."  Today, it appeared to be more of the same when Whitney's firm lowered Q4 EPS forecasts for Goldman Sachs (GS).  However, while GS saw a short term drop following the initial headlines, the stock not only recovered but it finished at its highs of the day.

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Apple vs Google Rivalry to Heat Up in 2010

It's been well known that the longstanding corporate friendship that once existed between Apple (AAPL) and Google (GOOG) began to fray in 2009 after GOOG CEO Eric Schmidt resigned from AAPL's board in August citing conflicts of interest.  As we enter a new decade, however, fray is looking more and more like a huge understatement.

For starters, the growing press regarding the company's self made Nexus One phone has generated a ton of buzz that the company is gunning for a war with AAPL over dominance in the cellphone market.  While this may be true, one review suggested that the Nexus One is "not really very different than the [Motorola] Droid in any substantial way."   If the Droid's lackluster reception is an accurate indication, Apple may not have a tough time beating Google in the smartphone market.

But there's more to the growing AAPL/GOOG competition than smartphones.  GOOG has also been gunning for AAPL on other fronts.  While browser wars no longer get the front page headlines that they did back during the Netscape/Microsoft days, reports now show that Google's Chrome has moved ahead of AAPL's Safari after only 15 months in existence.  Granted, MSFT and Firefox still command the bulk of market share in the browser space, but in recent years AAPL has been gaining share in most of the spaces it enters.  In addition to browsers, there are now rumors that GOOG is working on a competitor to AAPL's yet to be unveiled tablet PC.

So what does the market think about GOOG setting its sights on AAPL?  While AAPL outperformed GOOG in 2009, investors have increasingly been gravitating towards GOOG since the relationship began to 'fray' on August 3rd.  Since Schmidt resigned from the AAPL board, GOOG has actually outperformed AAPL by a margin of 37.1% to 26.9%.

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The Best of the 2000s

Of the 2,971 stocks currently in the Russell 3,000, 1,997 of them were around at the start of the 2000s.  The average price change of these 1,997 stocks during the 2000s was 182%, so this shows you the impact of survivorship bias, given that the index itself was down for the decade.

There are 80 stocks currently in the Russell 3,000 that were up 1,000% or more last decade.  Below we highlight the 50 best performers in the index during the 2000s.  To anyone who bought MED on 12/31/99 and held it throughout the entire decade -- we salute you!

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