Stock to avoid #10 — American Express (AXP)

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American Express stock, AXPShares of American Express (NYSE: AXP) bottomed in early March at just over $10 per share.

Instead of covering, I hedged my bet by keeping the American Express short open. I suppose that is the entire point of absolute return investing, but boy, was I wrong in doing that.

AXP shot up like a rocket over the last three months and now trades above $23 per share. It has been a big gainer this year, returning 25% through the end of the second quarter.

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Stock to avoid #10 -- American Express (AXP) originally appeared on BloggingStocks on Sun, 19 Jul 2009 14:00:00 EST. Please see our terms for use of feeds.

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The week in preview: Earnings crunch expected to reveal lots of lower profits

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The earnings crunch begins in earnest this week, and analysts surveyed by Thomson Reuters are expecting a parade of companies reporting profit declines in the just completed quarter. That includes more financials, such as American Express Co. (NYSE: AXP), Bank of New York Mellon Corp. (NYSE: BK), M&T Bank Corp. (NYSE: MTB), Northern Trust Corp. (NASDAQ: NTRS), State Street Corp. (NYSE: STT), US Bancorp (NYSE: USB), and Wells Fargo & Co. (NYSE: WFC). On the other hand, Capital One Financial Corp. (NYSE: COF), E*Trade Financial Corp. (NASDAQ: ETFC), Regions Financial Corp. (NYSE: RF), and Zions Bancorp. (NASDAQ: ZION) are expected to post losses.

This week's anticipated earnings decliners also include tech companies such as Apple Inc. (NASDAQ: AAPL), Lexmark International Inc. (NYSE: LXK), Microsoft Corp. (NASDAQ: MSFT), Qualcomm Inc. (NASDAQ: QCOM), Texas Instruments Inc. (NYSE: TXN), and Yahoo! Inc. (NASDAQ: YHOO). Advanced Micro Devices Inc. (NYSE: AMD) is expected to post a loss.

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The week in preview: Earnings crunch expected to reveal lots of lower profits originally appeared on BloggingStocks on Sun, 19 Jul 2009 13:00:00 EST. Please see our terms for use of feeds.

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Stock to avoid #9 — Eastman Kodak (EK)

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Eastman Kodak stock, EKInvestors continued to sell Eastman Kodak (NYSE: EK) during the second quarter, and shares bottomed at $2 per share.

Looking forward, I recently added Eastman Kodak to my Penny Stock Winners model portfolio as a buy recommendation.

In my opinion, the carnage at Eastman Kodak has been complete and the upside benefit of the digtal revolution is worth the speculation. The company may never fully recover from the last few years, but a small improvement in operations can result in big gains in the stock.

I would be a buyer of Eastman Kodak at these prices.

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Stock to avoid #9 -- Eastman Kodak (EK) originally appeared on BloggingStocks on Sun, 19 Jul 2009 12:00:00 EST. Please see our terms for use of feeds.

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Stock to avoid #8 — United Technologies (UTX)

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United Technologies stock, UTXDon't be deceived by the short-term performance of United Technologies (NYSE: UTX). The weakness of the dollar in the second quarter helped push shares of this multinational manufacturer higher. But these gains merely allowed the company to recover big losses sustained during the first quarter of the year.

The double whammy here for investors is exposure to the aerospace industry. As described previously, the weakness in the airline industry will negatively impact revenue for those companies providing equipment to the space. In addition, reductions in defense spending will also negatively impact UTX.

We are in the early stages of seeing change in how this company operates in the current environment. There is no catalyst for this stock to go higher, and shares are vulnerable to the extent the dollar strengthens. I would sell UTX.

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Stock to avoid #8 -- United Technologies (UTX) originally appeared on BloggingStocks on Sun, 19 Jul 2009 11:00:00 EST. Please see our terms for use of feeds.

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Stock to avoid #7 — United Airlines (UAUA)

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United Airlines stock, UAUATo get an idea of how poorly United Airlines (NASDAQ: UAUA) has performed, may I suggest viewing this little nugget.

If United is breaking guitars as accused, I would fly another airline. As an avid guitar player myself, such carelessness is unacceptable. The airline industry is struggling, and poor customer service does not help. The above video is now going viral on the Internet - what a PR disaster for United.

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Stock to avoid #7 -- United Airlines (UAUA) originally appeared on BloggingStocks on Sun, 19 Jul 2009 10:00:00 EST. Please see our terms for use of feeds.

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Stock to avoid #6 — Eastman Chemical (EMN)

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Eastman Chemical stock, EMNSimilar to Dupont, I selected Eastman Chemical (NYSE: EMN) as a stock to avoid due to rising input prices and low margins. It is a simple formula that cannot be broken: If a company cannot pass along higher costs, it will make less.

The market has yet to grasp that concept with respect to EMN. The stock has more than doubled since bottoming in March and has skyrocketed during the second quarter. This is in stock contrast to the poor performance at Dupont.

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Stock to avoid #6 -- Eastman Chemical (EMN) originally appeared on BloggingStocks on Sun, 19 Jul 2009 09:00:00 EST. Please see our terms for use of feeds.

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IBM grows profits and expands margins in second quarter

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International Business Machines (NYSE: IBM) posted an excellent earnings report on Thursday. Yes, the bottom-line results did beat analysts' projections. According to Earnings.com, IBM was supposed to do only $2.02 per share for the second quarter. Big Blue actually did much more than that: try $2.32 per share.

Okay, beating analysts is always great, but it's even better when there's legitimate earnings growth behind the beat. Often during the recession we've witnessed companies go beyond estimates but actually post year-over-year declines in profit. That's always a mixed bag, and you have to dig through the release to figure out exactly what's going on. Well, the cool thing with IBM is that the $2.32 per-share figure represents double-digit growth of 18%.

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IBM grows profits and expands margins in second quarter originally appeared on BloggingStocks on Sat, 18 Jul 2009 16:00:00 EST. Please see our terms for use of feeds.

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Consider Baxter: Its products don’t go out of style

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I'm reiterating my Buy rating for Baxter (NYSE: BAX) first recommended on March 13, 2009 at a price of $51.16.

Baxter's near-recession-proof story remains intact. Baxter, a maker of a variety of medical products across three divisions, including drugs and vaccines, dialysis equipment, and IV supplies, should record a FY2009 revenue increase of 2-4%, led by demand for recombinants, plasma proteins, and antibody therapies in its bioscience unit.

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Consider Baxter: Its products don't go out of style originally appeared on BloggingStocks on Sat, 18 Jul 2009 15:00:00 EST. Please see our terms for use of feeds.

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Stock to avoid #5 — Boeing (BA)

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Boeing stock, BAFor the first two months of the second quarter Boeing (NYSE: BA) was on fire. BA gained significantly during that time, but then the company announced a delay in their much-awaited DreamShip -- a delay that opened the door for the airlines to cancel orders. Speculation based on that scenario slapped the stock back down to the flat line for the second quarter.

Unfortunately, the news does not get better for Boeing. There is too much capacity in the airline space, and new planes are not needed.

I would be a seller of Boeing today.

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Stock to avoid #5 -- Boeing (BA) originally appeared on BloggingStocks on Sat, 18 Jul 2009 13:00:00 EST. Please see our terms for use of feeds.

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Stock to avoid #4 — Capital One (COF)

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Capital One stock, COFSince bottoming in March, Capital One (NYSE: COF) rocketed to $30 by early May. The stock gave back some of those gains, but still trades for approximately more than 100% of the cover price.

The reason for the big gain is directly correlated to TARP and a belief that credit card companies will do better than most expect.

I'm still skeptical.

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Stock to avoid #4 -- Capital One (COF) originally appeared on BloggingStocks on Sat, 18 Jul 2009 12:00:00 EST. Please see our terms for use of feeds.

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Stock to avoid #3 — 3M (MMM)

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3M stock, MMMGiven the economic crisis and global recession, I hypothesized that multinationals may suffer as a result of a strong dollar. The idea being that investors would flock to the dollar in search of safety. Over the last quarter though, the reverse has been true.

The dollar weakened significantly as investors bet against the greenback due to inflationary spending in the U.S. As a result, the multinationals have been big winners in the last quarter.

3M (NYSE: MMM) though was only up slightly in the second quarter as the company's products failed to capture the imagination of buyers across the globe. When the dollar strengthens in the latter half of 2009, look for MMM to stumble.

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Stock to avoid #3 -- 3M (MMM) originally appeared on BloggingStocks on Sat, 18 Jul 2009 11:00:00 EST. Please see our terms for use of feeds.

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Comfort Zone Investing: The power of one number – the P/E ratio

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There's a number almost synonymous with investing. It's the P/E ratio. That's Price to Earnings. It's only one number, but it's a powerful one, one that can tell an investor quite a bit about how other investors value a stock. Never buy a stock based on one number, but a good number to start with is the P/E.

The P/E is calculated just like it's spelled. Take the price of the stock (P) and divide it by the last full year's earnings (E). That's what's called the Trailing P/E. It's the most common P/E ratio, the one most investors ask about when they inquire: "What's the P/E?" of a stock.

A second P/E is the Forward P/E. It's the one that uses the projected earnings for next year as the denominator. If analysts are right in their projections for a stock's earnings, this P/E will give you a reading as to the "cost" of buying a stock based on future results.

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Comfort Zone Investing: The power of one number - the P/E ratio originally appeared on BloggingStocks on Sat, 18 Jul 2009 10:30:00 EST. Please see our terms for use of feeds.

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Stock to avoid #2 — Dupont (DD)

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dupont stock, DDAnother stock leveraged to the oil market is Dupont (NYSE: DD). Because many of the company's products are derived from crude oil, rising oil prices negatively impact profit margins. The only recourse, then, is to raise the price for consumers. But doing so in this environment is unlikely given the weakness in the economy.

As a result, the dynamics of the market are such that profits for DD will be lower in the near term.

That puts the company in a bit of a Catch-22.

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Stock to avoid #2 -- Dupont (DD) originally appeared on BloggingStocks on Sat, 18 Jul 2009 10:00:00 EST. Please see our terms for use of feeds.

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Stock to avoid #1 — Delta Airlines (DAL)

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delta airlines stock, DALI take my absolute return approach to a deeper level by periodically buying and selling positions during the year. In late February, I suggested that investors cover the short position of Delta Airlines (NYSE: DAL) at $6.35 per share.

In my last update of the stocks on this list, I suggested that I would still be a seller of Delta. Shares of Delta did indeed lose value over the last three months. This move coincided with a blast in oil prices. Airlines are already struggling with a weak economy and excess capacity. Rising jet fuel prices make matters worse.

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Stock to avoid #1 -- Delta Airlines (DAL) originally appeared on BloggingStocks on Sat, 18 Jul 2009 09:00:00 EST. Please see our terms for use of feeds.

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Take a pass on these ten stocks

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stocks to avoidWith such uncertainty, following an absolute return strategy continues to offer investors the biggest bang for their buck. There is no sense in guessing where the market will be down the road.

Instead, buy cheap stocks and sell stocks that are expensive. Then blend the two approaches together in one portfolio and chances are you'll make money.

Even with a huge rally in stocks, the S&P 500 ended the second quarter with a year-to-date gain of 1.78%. That is a vast improvement compared to the 11% loss at the end of the first quarter, but it's a minimal return for taking risk in the stock market.

Investors need to do better -- and they can.

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Take a pass on these ten stocks originally appeared on BloggingStocks on Sat, 18 Jul 2009 08:00:00 EST. Please see our terms for use of feeds.

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The decline and fall of Crocs

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crocs stock, croxDoes anyone here remember Crocs, Inc. (NASDAQ: CROX)?

It seems like only yesterday that you'd walk down the street and everywhere you looked, you saw those horribly ugly $30 sandals that were going to change the world.

Well, as it turned out, Crocs didn't change the world. They were just a fad. Crocs are nothing more than this decade's version of the hula hoop, the pet rock, Members Only jackets or the dearly beloved eight-track tape.

The Washington Post recently looked at the decline and fall of Crocs.

The colorful foam clogs appeared in 2002, just as the country was recovering from a recession. Brash and bright, they were a cheap investment (about $30) that felt good and promised to last forever. Former president George W. Bush wore them. Aerosmith lead singer Steven Tyler wore them. Your grandma wore them. They roared along with the economy, mocked by the fashion world but selling 100 million pairs in seven years.

In the space of about 16 months, shares of CROX jumped 600%! The stock did even better than Goldman Sachs (NYSE: GS) -- and no one had to bail them out. Now class, that brings me to today's investing lesson: How to know when you've made the dumbest investing mistake in the world.

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The decline and fall of Crocs originally appeared on BloggingStocks on Fri, 17 Jul 2009 18:30:00 EST. Please see our terms for use of feeds.

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A recession bottom does not guarantee a recovery

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One aspect of the economic cycle investors need to keep at the forefront is the nature of economic change and economic recovery, as promulgated by economist John Maynard Keynes.

First, toss out any notions that market forces, left to their own devices, will always bring about a quick economic recovery.

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A recession bottom does not guarantee a recovery originally appeared on BloggingStocks on Fri, 17 Jul 2009 18:00:00 EST. Please see our terms for use of feeds.

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Mattel up on earnings news, but its Barbie toys need help

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Mattel, Inc. (NYSE: MAT) is all about fun and games, but it doesn't play around when it competes against Hasbro, Inc. (NYSE: HAS) and JAKKS Pacific (NASDAQ: JAKK). In fact, the stock is up over 7% today as of this writing on the toy manufacturer's earnings news. According to Reuters, Mattel made 6 cents per share during the second quarter, beating estimates by a whopping five pennies.

Pretty good news for Mattel, considering it's been having trouble lately with its Barbie line. Mattel has also had problems with its top-line sales. They dropped 19% in Q2. Fluctuations in the value of the dollar helped to hinder the sales picture, but make no mistake -- Mattel has to step things up a couple notches to keep the top line healthy. Toys are a difficult category to sell during a recession. And when toys do sell, even during the Christmas retail period, they might not command top dollar. Hot toys do, of course, but an entire portfolio cannot necessarily be saved by a single fad item.

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Mattel up on earnings news, but its Barbie toys need help originally appeared on BloggingStocks on Fri, 17 Jul 2009 17:40:00 EST. Please see our terms for use of feeds.

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Pepsi remains the choice of a new generation

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Forget the mantra about Pepsi's North American market's beverage and snack revenue being hurt, yada yada.

I'm Reiterating my Buy rating for PepsiCo, Inc. (NYSE: PEP) first recommended on March 13, 2009 at a price of $48.62.

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Pepsi remains the choice of a new generation originally appeared on BloggingStocks on Fri, 17 Jul 2009 17:20:00 EST. Please see our terms for use of feeds.

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