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Christopher Grosvenor, CMT
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Chris earned the Chartered Market Technician designation. He is earning the Chartered Financial Analyst designation and graduated with honors in Economics. Also, he has managed money as a professional trader and independently, and continues to do so. Chris utilizes Technical, Financial Analysis... More
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Grosvenor Research & Analysis
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Professional Fundamental & Technical Analysis
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  • Equities To Find Bids This Week
    United States equities may decline Monday-Wednesday as investors await economic data later in the week. Equities could find bids Wednesday - Friday on economic news of continued stabilization in the housing market, purchasing manager data out of China and European Union, and signs from unemployment claims of continued improvement in labor market conditions.

    Building Permits
    Building permits issued have increased. Building permits for privately-owned housing units increased 19 percent between January 2011 & 2012. Building permits in the south increased 30 percent over last year and 13.5 percent in the West.

    Tuesday investors will be watching for continued strength in building permits issued in the southern and western regions of the United States.

    Existing-Home Sales
    Existing-home sales rose in January, registering gains in three of the past four months, while inventories continued to improve. Distressed homes - foreclosures and short sales which sell at deep discounts - accounted for roughly one third of January sales; they were 37 percent in January 2011. The median existing single-family home price was $154,400 in January, down 2.6 percent from January 2011.

    Existing-home sales at an annual pace of 4M or more in February is considered bullish; existing single-family home prices are expected to continue to decline moderately.

    China Manufacturing Purchasing Managers' Index
    The pace of decline in manufacturing in China has moderated in recent months. Growth is slowing as domestic demand isn't expected to rebound straightaway. Exports should pick up later in the year should Europe rebound from recession as the ECB expects. China's Manufacturing PMI has increased in recent months and could come in above a reading of 50 signaling growth in manufacturing. Import prices are a key factor to watch for signs of increasing inflation as the People's Bank of China is expected to continue to ease and an increase in import prices could dampen expectations of further rate cutes.

    Signs of a recovery in European demand could appear in European Union PMI figures to be released on Thursday. Look for Germany and France to remain above a reading of 50 and combined European Union PMI data to potential reach the 50 level.

    Unemployment Claims
    Thursday Unemployment claims will be released; watch for the claims number to remain below 400k. A strong claims number would signal a strengthening labor market and economy. As labor market conditions improve, increases in consumption, savings and investment should continue to support economy growth and asset prices.

    Equities With Profit Potential
    Technology continues to be an outperformer with the PowerShares QQQ (NASDAQ:QQQ) advancing. The iShares Dow Industrial Transportation Average (NYSEARCA:IYT) has lagged during the rally from the October lows and is starting to gain ground on the Dow Industrial Average (NYSEARCA:DIA). The SDPR S&P 500 (NYSEARCA:SPY) is also likely to gain this week on continued strong economic data. A decline in share price would be an opportunity to buy these names.

    Disclosure: I am long DIA.

    Tags: SPY, DIA, IYT, QQQ
    Mar 20 3:21 PM | Link | Comment!
  • Entropic Communication
    Entropic Communications is a fabless semiconductor company, designs, develops and markets system solutions to enable connected home entertainment. Its products include integrated circuits and related software associated with home networking solutions based on the Multimedia over Coax Alliance standard; direct broadcast satellite (NYSEARCA:DBS) services; high-speed broadband access; and silicon tuners. The company's products enable the delivery of various streams of high-definition television-quality video, standard-definition television-quality video, and other multimedia content, such as movies, music, games, and photos into and throughout the connected home. It serves telecommunications carriers, cable operators, and DBS service providers, as well as the providers of over-the-top services. Entropic Communications offers its products through its direct sales force, as well as through a network of sales representatives and distributors worldwide. 

    Between the quarter ending March 31, 2011 and the quarter ending September 30, 2011 revenue at Entropic declined by $20 million. While revenue declined cost of goods sold remained relatively constant as a percentage of revenue. Gross income is roughly 55 percent of revenue.

    Research and development spending has increased from $12.4 million or 20 percent of revenue to $15.1 million or almost 30 percent of revenue. Spending on research and development usually results in products with superior technology.

    Net income at Entropic is roughly 15 percent of revenue and the company has a low debt-to-equity ratio. The low debt level makes Entropic a relatively safe investment and net income that is 15 percent of revenue makes Entropic a relatively high margin company. 

    Entropic is trading at a market value of $428 million and has $130 million in cash and short-term securities on the balance sheet. Entropic's enterprise value is $298 million and operating income for the twelve months trailing is $53.1 million. The enterprise value-to-operating income ratio for Entropic is 5.61 and the price-to-earnings ratio is 6.02. The price-to-book value ratio is 1.5.

          

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Dec 19 10:11 AM | Link | Comment!
  • Intel: Cash Flow Statement Analysis
    Intel corporation has seen cash flow from operations increase over the last five quarters. Intel has generated sufficient cash flow from operations to fund financing and investing activities. Net cash flow from operations was higher than net income and indicates high quality earnings.  

    Cash flow from operations is a major source of cash for Intel. Funds from operations September 30, 2010 was $4.2 billion or 38 per cent of net revenue and one year later grew to $5.7 billion or roughly 40 per cent of net revenue, an increase of $1.5 billion or 2 per cent of net revenue.  Funds from operations increased by 35.7 per cent ($4.2 to $5.7 billion). 

    Most of Intel's cash is spent on investing and financing activities. Combined the expenses account for roughly 30 to 50 per cent of net revenue in the quarters from the quarter ending September 30, 2010 to the quarter ending September 30, 2011. Dividends and share repurchases account for the uses of cash within financing activities and within investing activities capital expenditure and purchase/sale of investments account for the use of cash. 

    Net operating cash flow was higher than net income in every quarter. The relationship between net income and operating cash flow is an indicator of earnings quality. For a mature company it is desirable that operating cash flow exceeds net income. Between the quarter ending September 2010 and the quarter ending September 2011 the spread between net income as a percentage of net revenue and net operating cash flow as a percentage of net revenue increased from roughly 600 basis points to over 2000 basis points.

    Net operating cash flow covered capital expenditure in every quarter between the quarter ending September 2010 and the quarter ending September 2011. Intel can easily fund capital expenditure from cash flow from operations. The spread between net operating cash flow as a percentage of net revenue and capital expenditure as a percentage of net revenue was between roughly 1000 and 2000 basis points during the last five quarters.

    Bullish Factors
    Cash flow from operations increased in every quarter and was positive.  Cash flow from operations covered cash outflows for investing including capital expenditure and covered cash outflows to investors. Cash flow from operations was higher than net income. 

    Bearish Factors
    Cash flow from operations increased at a rate of change (35.7 per cent) above Intel's sustainable growth rate of 17.31 per cent.    

             

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Tags: INTC, AMD
    Dec 19 7:35 AM | Link | Comment!
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