Japan continues to face headwinds with volatility remaining high after the election. China has been taking a lot of negative press lately but we suspect that the most recent infrastructure plans should add to growth and pave the way for better data to be coming out of the country in the next few quarters. The banks have probably learned their lesson for the time being and rather than continue to teach the hard lessons at this time, China will probably delay those lessons until another day as they move to shore up growth.
Earnings season has been dominated by solid beats by U.S. financial firms, but we are starting to see industrial names post solid results as well, especially within the chemicals and manufacturing subsectors. Those two industries usually point the way higher during a recovery and although natural gas is serving as a strong tailwind for the chemicals business we still see this as further evidence to our bullish thesis.
Chart of the Day:
We have Chicago PMI numbers out today and although not the most important data due out, we thought it's still worthwhile to highlight today. We have seen numbers between 50 and 60 as of late and so long as we remain above 50 we are good, as that is the level which denotes at least some sort of growth.
We have economic news due out today and it is as follows:
- MBA Mortgage Index (7:00 a.m. ET): N/A
- ADP Employment Change (8:15 a.m. ET): 175k
- GDP - Adv (8:30 a.m. ET): 1.1%
- Chain Deflator - Adv (8:30 a.m. ET): 1.2%
- Employment Cost Index (8:30 a.m. ET): 0.4%
- Chicago PMI (9:45 a.m. ET): 51.5
- Crude Inventories (10:30 a.m. ET): N/A
- FOMC Rate Decisions (2:00 p.m. ET): 0.25%
Asian markets finished lower today:
- All Ordinaries -- up 0.19%
- Shanghai Composite -- up 0.19%
- Nikkei 225 -- down 1.45%
- NZSE 50 -- down 0.28%
- Seoul Composite -- down 0.16%
In Europe, markets are trading mixed this morning:
- CAC 40 -- down 0.39%
- DAX -- down 0.37%
- FTSE 100 -- up 0.65%
- OSE -- up 0.40%
We went bullish of Coach (COH) shares during their last disappointing quarter, which was then followed by a good quarter, which then led to their latest disappointment. The recurring theme here is that the company is facing stiff competition from new entrants into the market and losing market share. The good news for the company is that their margins are holding steady and they simply need to focus on how to maintain market share in the women's handbag and accessories business. Although we are disappointed with how the latest quarter went, we are inclined to ride this one out until we have more data indicating which direction the company's business is headed in. The management shuffle and focus on outlet retailing might be enough to jumpstart Coach's efforts, and if so then the company's shares can go much higher as the company will see improving metrics as the broader economy also sees improving metrics.
When investing in growth stocks it is sometimes easy to lose sight of what it takes to quickly grow a business and service clients. It appears that investors in 3D Systems (DDD) have lost sight of the costs of building a market leading franchise and sold shares off yesterday a bit prematurely after what we think were solid results. Yes the EPS numbers were a bit soft, but that was due to the company choosing to spend money now in order to build their business and earn more money over the next few quarters as they work through their solid backlog of orders. We have stated time and again that this is not a situation where one is to buy and hold, but rather a trade. It has worked quite well for readers thus far and it is our opinion that if held through this illogical sell-off that the upside will be quite rewarding.
One of our favorite names in chemicals is hitting new all-time highs after announcing results, which beat expectations, and we see little, which can change this trajectory right now. We are of course talking about Eastman Chemical (EMN), which saw shares finish the session at $79.75/share after rising $4.72 (6.29%) on volume of 3.5 million shares. The stock traded as high as $81.30/share during the session before backing off. The company held a conference call yesterday and for those interested in what was said the transcript is available here. The stock is in bull market mode as the company once again raised its FY outlook, this time moving the low range of its guidance to what analysts were expecting as the upper range. This is a solid name to own right now and one can expect to see the company take these record profits and reinvest them into the business as well as distribute excess capital to shareholders.
We saw the shares breakout yesterday from the $75/share level. With the strong results and higher future payouts, one has to wonder how high we can go on this next leg up.
Source: Yahoo Finance
We were surprised to see the numbers from Boyd Gaming (BYD) come in as strong as they did for the off-strip Las Vegas segment, and so too was the market as shares rose over 18% to close at $12.85/share on the session. Yes growth was essentially nonexistent, but considering the local market that in itself is a strong showing and management's comments indicate to U.S. that they expect to see an uptick in business through the end of the year. Stories are already being told of 'flippers' showing up in the Las Vegas market as the housing market rises from the ashes and as the local economy begins to regain its footing it should also benefit the gambling establishments both on and off of the strip. There are much better ways to gain exposure to the gaming industry, but we highlight Boyd because it is a very good barometer for how the local Las Vegas market is performing.
Looks like Vanda shares might retest recent highs if the bullishness in pre-market holds.
Source: Yahoo Finance
Yesterday saw Vanda Pharmaceuticals (VNDA) shares rise over 44% after the company announced that their drug, tasimelteon, had received fast track approval from the Food & Drug Administration. Tasimelteon treats blind people who suffer from the sleeping disorder Non-24-Hour Disorder. This is caused when those who are blind cannot get their internal sleep functions to align with normal sleeping functions that would take place over a 24-hour period. The shares were already a top performer for the year before yesterday's move and this morning also announced their quarterly results, which have the shares indicated to open higher when trading starts. The press release can be found here and according to Briefing the company beat by $0.11/share on their EPS figures but missed on revenues.