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Wall Street Strategies has been providing independent stock market research since 1991 to individual, retail and institutional clients through a balanced approach to investing and trading. Charles Payne, our founder and chief analyst, is routinely sought after for his stock market, political,... More
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  • Take This Jobs Bill And... By: Charles Payne 1 comment
    Mar 18, 2010 2:22 PM | about stocks: GES

    You can feel the angst in the air as the healthcare plan creeps closer to becoming law despite widespread public opposition and massive fear in the business community. It's all just so much baloney. Take the so-called jobs bill that President Obama signed today. It was presented to the public as an $18.0 billion bill but is really a $38.0 billion bill when you add in the $20.0 billion set aside for construction. That amount is going to be offset by taxes on foreign bank accounts. Well, I thought last year's $860.0 billion stimulus bill was a jobs and construction bill; it was certainly sold that way. Today's bill is just a harebrained scheme that has no chance of making a difference to a job market that has lost 8.4 million jobs since December 2007. And like all the plans from the White House designed to help the nation, this one comes with dumb and discriminatory strings attached.

    Employers will be allowed to skip the 6.2% contribution to social security tax and could get a $1,000 bonus if a new hire stays on for more than a year. The catch for the tax break is that the new hire must have been unemployed at least 60 days or longer. Every one of these deals has some kind of stipulation that mitigates potential success and punishes some for being more fortunate than others. As it stands, the best estimate of job growth from this bill is 250,000. As for that $20.0 billion for construction I'm not sure of the application of the funds. Sending it to states is a mistake as they will be hijacked for other uses. I'm not sure of the procedure to hit foreign bank accounts but it stands to reason the money will come from some rich people. It's anti-productive and enforces the notion that this Administration isn't going to stop until radical changes are made.

    Economic View

    Once again there is mixed data on the economy as reflected by the Leading Economic Indicators report this morning. Only four of ten components were positive.

    The Philly Fed came in slightly ahead of consensus and at 18.9, climbed month over month from 17.6. New orders dropped to a reading of 9.3 from 22.7, and shipments decreased to 13.6 from 19.7. The good news is that employment edged up to a reading of 8.4 from 7.4.

    Market bias is still to the upside but needs a catalyst to get through current resistance points.

    How to Spot a Winning Investment
    By: Brian Sozzi, Research Analyst

    This morning we sent out a Hotline profit alert (+12% since our recommendation) on Guess Inc. (GES). Yesterday evening the company had perhaps the most robust holiday quarters relative to other mall-based specialty apparel retailers. The product was on trend with current global preferences, the business is being very efficiently run (company now goes one global line), and there were margin opportunities in each category of product due to the steep contraction in demand that resulted during holiday 2008. As background, I launched coverage for our institutional service on Guess in 2005 with a Buy rating when the stock was hovering around $14.00 and change; currently the stock resides around $47.00. So to say the holiday quarter performance was a surprise would be false. But, let's say one didn't have such intimate exposure to covering the company. Let's say Guess popped on your Bloomberg terminal for stronger than sector average operating margins and cash flow generation, or as a company paying an attractive dividend. Obviously there are reasons these items would pass your selection screen…the trends in the business are quite favorable!

    Take a glimpse of the tables I put together below of Guess' business segment performance dating back to 2008. I will provide a few hints (leaving some out of course) at what I see in the numbers, and you are more than welcome to send me an email (brian.sozzi@wstreet.com) detailing your findings. If you can spot key fundamental trends in the tables below, you are well on your way to properly thinking about companies in terms of would be investments. I reason there at least 10 to 15 observations that can be gleaned from the tables, all of which shed light into an effective operation that is gaining share on a global scale.

    Observations
    * European segment revenue increasing faster than other segments.
    * European segment operating margins the highest among the various lines of business.
    * U.S. retail segment producing sales growth ahead of peer base.
    * U.S. retail segment producing industry leading operating margin rates.




    Disclosure: None
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Comments (1)
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  • How does giving out tax breaks for every new employee create jobs?
    If I have no work as an employer why would I hire another employee?
    Who's the genius that thought this up?
    18 Mar 2010, 03:19 PM Reply Like
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