Last week, the market posted its worst Thanksgiving week return in history, only to see most of the losses erased following coordinated central bank policy changes on Tuesday.
So far, easing dollar funding has done little to unlock interbank lending markets. The Libor OIS spread, a key measure of banks willingness to lend to one another, made new highs on Wednesday. Similarly, the TED spread moved to new highs, another indication credit markets remain unconvinced Tuesday's action will bring meaningful resolution to the crisis.
But, while interbank markets remain strained, some relief is coming from the debt markets. Soaring sovereign yields have forced banks, which have been furiously downsizing balance sheets already, to unload into an unwilling market. As a result, the ECB has become the only buyer bidding on the front lawn. Following the coordinated efforts, yields saw relief Wednesday. Italy's 10 year moved back under 7% and France's 10 year yields moved back below 3.5%. Any follow through will be welcomed news for banks trying to sure up liquidity.
The markets remain at a crossroads, which suggests now is a good time to put together a list of ideas for both the long and short side.
A quick scan across the large cap universe nets a number of stocks for investor portfolios. On the long side, McDonalds (MCD), Nike (NKE), Philip Morris (PM), Autozone (AZO) and Google (GOOG) should be on investor radar. Each scores highly in E.B. Capital Markets, LLC model, which cuts across fundamental factors such as earnings growth, earnings beats and valuation and technical factors such as money flow and trend analysis.
It's easy to see why these score strong. McDonalds continues to execute its global expansion plan and has boosted comparable store sales heartily through expanding menus to include higher margin beverages. Nike is also growing rapidly overseas, particularly in China. Nike's emerging markets sales, which I discussed in depth back in July, were up 24% in FY2011. Philip Morris (PM) is not only benefiting from emerging markets sales growth but provides investors with a solid 4% dividend. AutoZone (AZO), which I covered in this article back in October, has successfully developed its commercial sales program, which is boosting revenue per store and Google (GOOG) remains the dominate player in search advertising and smartphone and tablet operating software, which has allowed it to grow its top and bottom line better than 20% in each of the past four quarters. All five have beaten analyst estimates in at least three of the past four quarters.
Among the worst scoring large caps, Marvell Technology (MRVL), New York Bancorp (NYB) and Ameritrade (AMTD) score poorly. These names are not only broken technically, but have poor records of over-delivering earnings. All three have seen street estimates for next year drop in the past 90 days.
The following table breaks out the E.B. Capital's best and worst scoring in large cap, providing a starting point for your watch lists.
|Nike (NKE)||Consumer Goods||105|
|Philip Morris (PM)||Consumer Goods||105|
|Continental Resources (CLR)||Basic Materials||95|
|C N H Global (CNH)||Industrial Goods||95|
|Dollar General (DG)||Services||95|
|Duke Energy (DUK)||Utilities||95|
|Marvell Technology (MRVL)||Technology||10|
|New York Community Bancorp (NYB)||Financials||10|
|Bank of America (BAC)||Financials||15|
|EnCana Corp. (ECA)||Basic Materials||15|
|Host Hotels & Resorts (HST)||Financials||15|
|N R G Energy Inc. (NRG)||Utilities||15|
|Companhia Siderurgic (SID)||Basic Materials||15|
|Time Warner Cable (TWC)||Services||15|