Stocks To Trade:
Today, we are looking at an earnings trade in Wells Fargo (WFC), longs in Riverbed Technology (RVBD) and Wal-Mart (WMT), and shorts in Ascena Retail (ASNA) and Target (TGT).
For an earnings trade, we are looking at Wells Fargo. The company reports earnings next week on Friday morning, and we believe that the stock may see some upside into that report. First off, the company is expected to see about 20% growth in earnings year/year along with 3.5% growth in revenue. While the sales growth is limited, the stock is very cheap right now with a 10.7 PE. With the addition of about 0.17 EPS, the company should see around 4-5% growth in price in order to properly price in that earnings to maintain the 10.7 PE. On top of that, we believe that the company will benefit greatly from the resolution of a settlement with the government for foreclosure abuses. The settlement is supposed to be around $10B for 14 banks. WFC is one of the largest banks involved, but the settlement is definitely going to lift a burden off the shoulders of the company. Further, the company is the country's #1 residential mortgage provider. The housing market has been on a tear with New Home Sales rising about 10% in 2012. We believe that the company will see a lot of positives from the housing boom of 2012 coming out in this quarter and providing nice catalysts for 2013. We like buying the stock on a break of 35, which is resistance right now, holding into next Thursday, and selling a large portion before earnings.
Trade: WFC, Long
For longs, we like the looks of Riverbed Technology and Wal-Mart.
RVBD took off solidly today after the government agreed to a small deal to avert the
