By Larry Gellar
On a day when the markets were relatively flat, we’ve identified 5 NYSE stocks that are seeing very heavy trading. Our list includes two banks, a conglomerate, an auto manufacturer and an electronics retailer:
Bank of America Corporation (BAC) was down over 1% on Tuesday, and news in the banking industry centered on a new deadline in which banks must be explain how they would liquidate if necessary. Essentially, these “living wills” are going to explain what assets would be sold during a bank failure and in what manner. Bank of America is also in the middle of some serious plans to cut costs, and a big part in this has been massive layoffs. In fact, about 30,000 employees will be let go. Important competitors for Bank of America include Citigroup (C), JPMorgan Chase (JPM) and Wells Fargo (WFC). Price to sales for Bank of America is a dead even 1 right now, while those other companies have higher ratios. With a trailing twelve month income of -$16.32 billion, ratios like price to earnings and price/earnings to growth cannot be calculated right now. Additionally, operating margin is merely 1.91%. Cash flows for the company have been mixed, as executives have changed their stance on what the bank will need to do to succeed. $12.912 billion flowed out in 2010, but $11.1 billion flowed in during the first half of 2011. Additionally, Forbes released an interesting slideshow on Bank of America’s numerous lawsuits – that can be found here.
General Electric (GE) was up over 2% on Tuesday, and the big news here is that the company will be buying back the preferred shares that Berkshire Hathaway (BRK-B) currently owns. In fact, with the deal that General Electric is offering, Warren Buffett’s company stands to make $1.2 billion. General Electric has also been in the news for its ambitious plans regarding the German market. There, the company will invest $118 million and hire approximately 450 new employees. In fact, General Electric hopes to double its current business in Germany. General Electric is also involved in research into new ways to create molybdenum-99. In fact, one of GE’s vice presidents, Kevin Walsh, had this to say:
GE’s new isotope production technology could potentially meet approximately 50 percent of the United States’ projected supply needs of this critical isotope, ensuring consistent patient access to vital medical diagnostic procedures.
As for value metrics, General Electric’s are pretty reasonable: price to earnings is 12.12, price/earnings to growth is 0.78, and price to sales is 1.08. Gross margin is 36.32% and operating margin is 11.47%. Furthermore, cash flows for this company have been strong: $6.64 billion came in during 2010 and $12.128 billion came in during the first half of 2011.
JPMorgan Chase (JPM) was about flat on Tuesday. Like B of A (discussed above), JPMorgan will have to submit its emergency liquidation plan to the FDIC. JPMorgan also had some bearish announcements on Tuesday. Specifically, the company’s markets revenue is projected to be down about 30 percent, and other segments aren’t doing so hot either. The investment banking division is seeing reduced M&A activity due to a struggling economy. Asset management and private equity are other segments that have suffered. Regardless, some outsiders still love this stock, and it was recently upgraded by Stifel Nicolaus. That firm noted JPMorgan’s predictable earnings and overall quality. JPMorgan has also been rumored to be investing in the Indian company SKIL Infrastructure. Such a deal would reportedly give JPMorgan a bit less than 20% ownership of the company. Important competitors for JPMorgan include Barclays (BCS) and Citigroup (C). Both of those stocks have higher price to earnings ratios, although JPM has the highest price to sales and price/earnings to growth ratios. A very high operating margin of 39.91% helps to account for this. Cash flows have been strong as well: $1.361 billion came in during 2010 and $2.899 billion came in during the first half of 2011.
Ford Motor Co. (F) was about flat on Wednesday, and the company is in heated labor discussions with United Auto Workers. Workers represented by UAW complain that Ford is favoring its non-union employees too much, and the union is trying to get a rather large signing bonus implemented. For the time being, negotiations are being extended beyond what was the previous deadline. Other news for Ford has included the company’s aggressive attempts to pay down debt. Specifically, the company has announced that it will pay the $1.8 billion remaining on a term loan B. As for news on the company’s cars, the 2014 Mustang will now feature a new design. As discussed here, the Mustang has seen some rather strong competition from GM’s Chevrolet Camaro. This news originated from the Frankfurt Motor Show, and the company also revealed its new concept car Evos at that event. While the Evos won’t be selling at dealerships anytime soon, the idea is that some of the model’s features will appear in other cars. Aside from General Motors (GM), Ford also competes primarily with Toyota Motor (TM). Ford’s price to earnings, price to sales, and price/earnings to growth are all higher than GM, but still significantly lower than Toyota. Ford margins are quite strong: gross margin is 15.23% and operating margin is 6.61%. As for cash flows, $6.089 billion flowed out of the company in 2010 and $2.667 billion flowed in during the first half of 2011.
Best Buy Co. Inc. (BBY) was down over 6% on Tuesday, as the company’s earnings report was a complete disaster. Q2 profit was down 30% from a year ago, and future outlook was poor as well. Best Buy CEO Brian Dunn had this to say:
Results in the second quarter and our outlook reflect continued macro challenges to overall consumer spending and lower consumer electronics industry sales.
Additionally, many customers are making purchases online or at cheaper retailers as they seek lower price in this tough economy. Best Buy is trying to adjust though, including improvements to its web site and changes to its brick-and-mortar stores. As far as specific segments that have hurt the company, mobile products are probably the biggest one. Best Buy CFO James Muehlbauer said;
We anticipate a stronger line up of new handsets in the second half and continue to expect that this business will deliver its top line and profit goals for the year.
We’re not so sure, and those still holding this stock may wish to find greener pastures. Other major electronics sellers include Amazon (AMZN), Apple (AAPL) and Wal-Mart (WMT). These companies all have higher price to earnings and price to sales ratios, although AAPL’s price/earnings to growth ratio is lower than BBY’s. Margins for BBY are a bit below average: gross was 25.06% and operating was 4.58%.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.