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Editors, Larry E. Lindquist, right and Robert E. Lepic, left, confer with their Market Analyst, Keeter. |
LINDQUIST-
LEPIC Market Letter |
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May
1 , 2008 Issue 335 Monthly
Market Commentary_______________________________________________________________________________________________________________ The Lindquist/Lepic Market Letter - gives buy and sell recommendations on a core portfolio of stocks. Included features are a Stock of the Month, any sells from core portfolio and a three year track record of all selections, and a summary of recent overall market changes. |
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Monthly
Market Commentary
Investment levels
and prices generally reached new all-time highs during
early June 2007. This
rise was followed by a fall to a low on August 16th.
After several investment level
rallies, the August 2007 low was tested on January 22nd
and March 17th. The March low
is the lowest of the three. The recent recovery established
the March low as the base
of the current trading range.
STOCK
MARKET ACTION Investment levels
reached recent highs by June 4th. These levels exceed the June 30, 2003
lows by an average of +401%. Levels fell to August 16th
lows. Recently, the levels then
recovered to October 10th highs, followed
by a fall to new lows on March 17th. The
lows were followed by a recovery of +10.9%. Level changes
by stock group are NYSE
(+22.0%), AMEX (+1.4%), NASDAQ (+10.4%) and DJI (+9.9%).
Stock prices reached recent highs on June 4th, 2007. Those past high prices exceeded the June 30, 2003 lows by an average of +91%. Prices fell to August 16th lows and then increased to October 11th highs. Since then, prices
fell to March 17th lows, followed by a price recovery of +9.4%. Changes by stock groups are: NYSE (+5.5%), AMEX (+8.3%), NASDAQ (+13.5%), DJI (+10.3%).
Institutional activity became accumulative after April 16th.
Quarterly earnings of 46% of 1163 companies reporting during
the 20 trading days ending on March 31, 2008 were higher this quarter VS the same quarter
last year.
How We View The Market
The short-term trend for the US market remains up with a longer
term Bearish bias, and we still may get additional tests of the recent lows. The earnings of
some companies continue to rise. The global economy continues as a positive impact on large
international US based companies and contributes to their price
stability. The international stock markets have showed
some improvement along with the US market. Participation reached a new high on June 4, 2007 followed by
new low on March 17, 2008. This low was followed by a rise +2.3% to date.
Net Investor Activity reached a new high on June 4, 2007 and
a new low on March 17, 2008. This low was followed by a rise of +7.9% to date; and NYSE
mid-cap stocks are being accumulated slowly. ANALYSIS
Investment and stock price levels
recovered from the March 2007 lows, and reached new highs by June 4, 2007. This
advance was followed by a new low on March 17, 2008.
To date, the markets have advanced from the
March lows. RECOMMENDATIONS
Many
stocks that we follow have dropped in price and are
at a buy point. It appears that we have
a market searching for a bottom with some stocks doing
quite well and others in
steep decline. There has been a shift to high quality
mid-cap stocks, away from both small caps and
some of the defensive very large stocks such as GE.
Some of the stocks that we like are geothermal
energy, specialty retailers, paper products, utilities,
railroads, chemicals and cable and internet
providers.
We
would avoid airlines, stock brokers, insurance companies,
home loan companies, bond funds, furniture
retailers, truckers, and homebuilders. We still have
uncertain future long interest rates even
with recent sharp cuts in short term rates by the Federal
Reserve.
STOCK-OF-THE-MONTH
The Stock-of-the-Month
for May 2008 is Comcast Corp. Class A.
This NASDAQ listed stock (Symbol CMCSA)
is a recommended buy at $20.55 per share.
Comcast Corp. is one
of the leading North American providers of cable TV,
high-speed internet services and digital telephone service over their cable/internet
system. They
have been quite successful in getting
households to subscribe to all three services. They
provide a group of additional fee cable
features such as “just out” on-line movies and saved
HBO specials to be viewed at any time for a special
box fee or a one time showing fee. The company has annual
sales of about $33 billion, with net earnings of about
$2.5 billion. We expect sales and earnings growth in excess
+15% for the next three years. They are one of the
large companies that we expect to have above average
growth in 2008 and beyond, even with any further slow down in the US economy. A sign
of the confidence of management in near term
financial strength is that they just started paying
a cash dividend in April 2008. About 4% of the Class
A shares are owned by the current managers and another
30% held by institutional investors.
So, many shares are held by top money managers including
7.9% held By Dodge and Cox funds,
which is one of the highest rated fund managers. The
stock of the company has traded in the range of $16
to $30 over the past five years, Most of the time
the stock has been priced between $17 and $25 per share.
We have set a target price of $30 per share
within two or three years, and $40 per share in the
next longer term Bull Market. This is a large-cap
stock with average risk. It
pays an annual cash dividend of $0.25 per share, which
is about 1.2% at the current
market price. This stock is suitable for most capital
appreciation portfolios. CORE
STOCK MANAGED PORTFOLIO
Our
core portfolio was up +2.2% during the past month, down
-13.4% in the past
twelve months, and up +810.1% since inception on 2/15/91. We recommend the
purchase of 1000 shares of Comcast A at $20.55 per share;
the purchase of 1000
additional shares of Corning Inc. at $26.71 per share;
and the purchase of 1000
shares of Calpine Corp (CPN) at $19.70 per share. We
recommend the sale of
700 shares of GE; the sale of 800 shares of Walgreen
and the sale of 2000 shares
(half position) of Georgia Gulf.
Cash on hand is decreased to $63,028.
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