Four Stocks I'm Watching This Week

Stocks that I am watching for the coming week:

Electronic Arts (ERTS) announces earnings today after the bell. The stock has dropped to its 52 week low price of $14.66. I will be interested to see what the company’s earnings were for the past quarter. I still think that the EA franchise has value and if the shares stay around this level, it may be a buying opportunity.

General Electric (GE) set a new 52 week low yesterday at $11.51. I have been accumulating GE shares at $11.87 and below recently. I know that GE Finance is 40% of GE’s earnings and that they are divesting themselves of some of their businesses. But I have a hard time seeing GE as a $12 stock 5 or 10 years from now. I am getting more concerned about the dividend as the stock drops. The shares either need to rise back to $15 or the dividend is gone. A 10% yield just cannot last.

There is a lot of talk about Wells Fargo (WFC) needing to slash its dividend. I honestly don’t know if this is true or not. Banks have such convoluted financial statements and so many off the balance sheet items that they make evaluating their financial position difficult. I have been disappointed by bank stocks before so it wouldn’t shock me. Wells remains a stock that I continue to buy for the long term.

Dow Chemical (DOW) hit the $10 level yesterday. The stock dropped to $10.95. Today is probably the day when Dow will announce at least a 50% dividend cut. Dow is expected to announce earnings between 6 and 7 cents a share. This cannot support a dividend of $1.68 with a 14.5% yield. An interesting side note is that Dow Chemical has a market cap of 10 billion dollars. If Dow is forced to buy Rohm & Haas at the 15.3 billion dollar price, Dow will be buying a company that is worth 50% more than Dow. This deal would potentially bankrupt Dow.

Comments

[malach hamo...:]

it's a bizarre analysis that pegs the div to the price; GE needs to re-establish financial creds. that will only happen if it rebuilds its balance sheet, an impossible fete if its cash flow and earnings are being drained for the div.

the market has concluded that if GE does keep its div this year and next, it will only be at the cost of a growth-towards-recover... strategy

i'd rather a stronger GE with the hopes of a div when it can pay one safely

Feb 03 07:52 AM

[JRMtwo:]

GE should go to Obama and explain to him what GE needs from the government that will:
1. Promote sales growth in both the USA and overseas..
2. Promote long term research into improved and new products.

Obama's policies so far have not helped business. Domestic and overseas sales are going down. Layoffs will follow decreasing sales. Low stock prices result in less research. The best bet for GE would be for the Government to remove corporate tax, cut capital gain tax, allow free trade, and require that a cost-benefit rule apply to all enviromental laws.

Feb 03 08:39 AM

[sewells:]

Why on earth would you be buying WFC for the long term if you can't understand its financials? It might be a good company and it might not. Just saying... As for myself, if I don't understand it I don't buy it.

Feb 03 08:57 AM

[ain't no fo...:]

Too funny... Obama's been in office exactly 2 weeks and you say:

"Obama's policies so far have not helped business."

Give me a break... you RNC sympathizers are hilarious (NOT!)

Feb 03 10:45 AM

[longandshort:]

I think these seeking-A bloggers need to get some basic lessons in stock trading...
The dividend YIELD is a direct percentage of the current stock price. The actual dividend/share paid out is based on the earnings(EPS). People drive the stock price up or down and hence the dividend YIELD moves up or down, but actual business income determines the dividend/share paid out.

So, GE's earnings could double next year, but if panic investors sell and drive the stock price down, the dividend/share goes up, but he YIELD still goes down..so stop the mad panic sellng!!

Feb 03 10:58 AM

[longandshort:]

...I meant
the YIELD sitll goes up to unbelieveable levels..so stop the mad panic selling!!

Feb 03 11:02 AM

[traderyin:]

GE's earnings need to be flat this year for them to keep the dividends without any borrowing or cutting back in business investment (capex). In my opinion, it doesn't look very possible.

Feb 03 03:18 PM

[sr9web:]

GE is a bank


On Feb 03 07:46 AM ED K wrote:

> Interesting observations except GE's dividend.The stock price and
> dividend are driven by earnings, as long as GE can maintain their
> current earnings level the dividend will remain intact.
>
> Buying a bank, at any price, in our current financial crisis could
> prove unwise.

Feb 03 07:29 PM

[unclej0:]

Our current economic system is obviously unstable and no one is sure what will stabilize it. This is great for the market letter industry, which is willing to frighten investors into buying their tip-sheets. Weiss says to beware deflation and collapse while Leeb tells us to beware a dangerous inflation. BOTH OFFER TO MAKE US RICH! Also, both have PhDs so they must be right :-)

OK, enough small talk. My point is that, under present conditions, anything we do (even doing nothing) could prove unwise. Welcome to the human condition.


On Feb 03 07:29 PM sr9web wrote:

> GE is a bank
>
>
> On Feb 03 07:46 AM ED K wrote:

Feb 03 08:23 PM

[bobbobwhite:]

You should have said, "the four stocks I am watching go down this week".

Anyone pumping stocks now is being paid to do it. For shame.

GE is a slowly failing company. It has been artificially propped up for many years now totally by its finance arm. Its shares are at a 13 year low and have been falling for a long time. The latest market debacle only put the icing on the cake.

Feb 04 01:55 PM

[Crank Monkey:]

Gaming stocks are highly leveraged. They might do really well if they can avoid bankruptcy over the next few years.

And who knows what kind of problems GE has. It's partly an industrial and partly a bank. The risk in financials is still high.

Dow might be worth a bet if they didn't have the buyout issue, but the outcome of that may be decided by the courts.

Feb 04 02:11 PM

[tradebum:]

If put feb options at 7.50 and 5.00 have had high volume of late, why buy GE. todays low was 11.19. lowest since 1995. Looks like it could be this low and lower in five years or ten even. I wouldn't touch GE and WFC was a buy at 14.80. looks like we are heading back to that support.

Feb 04 04:13 PM

[MJJP:]

On Feb 03 08:39 AM JRMtwo wrote:

> GE should go to Obama and explain to him what GE needs from the government
> that will:
> 1. Promote sales growth in both the USA and overseas..
> 2. Promote long term research into improved and new products.
>
>
> Obama's policies so far have not helped business. Domestic and overseas
> sales are going down. Layoffs will follow decreasing sales. Low stock
> prices result in less research. The best bet for GE would be for
> the Government to remove corporate tax, cut capital gain tax, allow
> free trade, and require that a cost-benefit rule apply to all enviromental
> laws.
============
Give the Obama bashing a rest. He's been in office two weeks. We have free trade . What we don't have is fair trade. I'm not for removing any tax from business as it now stands. If you don't want taxes and don't like what taxes do then move to South America and see how they live. You might have a change of thinking.

Feb 04 07:32 PM

[Rafael Grillo:]

Interesting comments. It is surprising the see ERTS at this price level. However, I gave up on ERTS long time ago. It seems that creativity has abandoned that company, and they haven;t had a significant blockbuster since Battelfield 2. The re-hashing of old titles that gamers are not ineteresting in anymore is a losing strategy. ERTS lost its nimbleness and with it, its growth stock status. I much prefer ATVI at this pint.

GE is a comatose behemoth that has lost its north. The stock has been bleeding value since Immelt took the helm. The current crisis has only exacerbated the decline. GE needs a new, more focused CEO to recover its mojo. A breakup should be in their strategy, spinning off their financial arm.

WFC: It will lead the return of the Financials. Accumulation at this point is a smart strategy.

Feb 04 08:59 PM