Not such a good week!

Last week was FANTASTIC. We had 28 winning trades out of 36 with an average gain of 42% on the winners and an average loss of 12% on the losers - now THAT’S A GOOD WEEK. We were stopped out of most of our bearish trades on Monday but we took a lot of new ones, which I’ll get into later... Of course, since we are rangish and play both ends, the good news is we still had our "losers" and puts that we sold on long positions. Those turned into huge winners in just 5 days:

The second quarter reporting period is fast approaching as we enter the month of October. Since the last earnings season ended with Wal-Mart's report on August 13th, the S&P 500 is up 4.73%. From our Interactive Earnings Report Database, we grabbed all stocks that reported last earnings season and calculated their performance since their last earnings report. This performance is calculated from the close on the first trading day following their earnings reports, so it does not include the big initial one-day moves.

As shown below, YRCW is up the most since its last earnings report with a gain of 231%. YRCW is followed by GCI (+161%), UAUA (+147%), BPOP (+146%), and ATPG (+136%). There aren't many big names on the list of winners, but the stocks that did make the list did something to grab investors' attentions. ARRY has done the worst since its last report with a decline of 43.5%.

4:19 PM, Aug 19, 2009 --

• NYSE up 42.2 (0.7%) to 6,479.28.
• DJIA up 61.6 (0.7%) to 9,280.
• S&P 500 up 6.8 (0.7%) to 996.46.
• Nasdaq up 12.2 (0.7%) to 1,969.24.

GLOBAL SENTIMENT

Many of the U.S. banks diversified in the past few years to get into the insurance field. Some started their insurance operations while the majority of them acquired insurance companies or agencies.

Today, large banks such as Well Fargo (WFC) derive a large amount of income from their insurance divisions. The following chart lists the top 50 U.S. bank holding companies ranked by their total Insurance income for year 2008:

The Russell 1,000 is now down 7.19% from its high on June 12th, while the average stock in the index is down 9.11%. For investors wondering which stocks have taken it on the chin the hardest and which ones have held up the best, below is a table of the biggest winners and losers since the 12th.

AIG is down the most at 59.32%, followed by CIT, BPOP, CCO, MBI, VHI, and FST. The sectors represented the most in the loser list are Energy and Financials. Only 14% of the index is up since the 12th, and Oshkosh (OSK) has been the best performing stock with a gain of 39%. Amgen (AMGN) is up the second most at 18.06%, followed by GLG, CI, CLWR, and CPA. Health Care and Consumer Staples stocks make up the bulk of the winners list.

Many of the ten big banks repaid their TARP preferred stock loans on Wednesday, June 17, 2009. This means that they can begin negotiations to repurchase the warrants that they issued to taxpayers. I estimate that the warrants issued by those banks are worth $4.2 billion. That is over one third of the value of the taxpayers' warrants. Yet, if history is any guide, we taxpayers could expect to get 50 cents or less on the dollar. My hope is that the U.S. Treasury will take a hard line in these negotiations and take steps to create markets in the TARP warrants. The best prices will come from taxpayers selling their warrants to third party investors.

One of the problems that plagues the valuation of the TARP warrants is the cancellation provisions. Apparently, to encourage banks to raise equity on their own, the purchase agreements for the TARP capital infusions say that half the taxpayers’ warrants will be cancelled if the bank issues equity in the amount of the U.S. Treasury's investment. Recent valuations by Credit Suisse and Bloomberg have assumed a zero chance of cancellation. These studies systematically overvalue the taxpayer's warrants for this reason. Moreover, they most overvalue the banks which are the most likely to cancel half the TARP warrants. Of the 10 big banks due to pay back TARP yesterday, Morgan Stanley (MS) and Goldman Sachs (GS) have such high share prices and have already issued so much equity that they have a 90 and 80 percent chance respectively of issuing enough equity to cancel half the taxpayer’s warrants by year end, according to my estimates. That means that both Bloomberg and Credit Suisse are overvaluing the taxpayers’ warrants in these companies by 45 to 40 percent, if you believe their estimates of volatility and dividend yield.

Another day, another proposed exchange of Preferred Stock and Trust Preferred Securities into Common Stock.

Today we cast our eye on Popular, Inc. (BPOP) which is a bank holding company in Puerto Rico, the British Virgin Islands, the Dominican Republic and the United States mainland. The bank intends to boost its Tier 1 common equity (a.k.a. Tangible Common Equity) up to $1.2 billion (up to 7.44%).

Fitch Ratings has placed the ratings of the following nine U.S. banking companies and their bank subsidiaries on Rating Watch Negative:

BB&T Corp. (NYSE: BBT)

The bank "stress tests" administered by the Obama administration were controversial even before they were conducted. Critics have complained that the government's worst-case testing is too lenient, the methodology whitewashes the worst problems, and the whole exercise amounts to a phony show of faith in banks that remain deeply troubled.

There are plenty of other stress tests, though—including the one administered in the stock markets every day. So to gauge which of the big bailout recipients seem to be in the best and worst shape, U.S. News ran a kind of poor man's stress test, based on easy-to-understand data that are publicly available.

The Federal Reserve will not be releasing the results of its stress tests of the nation's biggest 19 banks until Thursday, and undoubtedly there is some element of folly in daring to beat the Fed to the punch. After all, according to The New York Times, the tests have been in the works for two months and have involved more than 150 regulators who, in addition to poring through voluminous bank data, have had the benefit of the banks' analyses of how various hypothetical situations will affect their loss rates.

Still, one can't help but wonder if there are other tools at hand that can get the job done properly without taking so long. In fact, I introduced such a tool in my last post – a bank’s asset quality (AQ) index. It enlists an engine of analysis that dwarfs even the Fed's 150 regulators -- namely the equity and debt markets. Quite simply, it compares a bank’s share of market capitalization to its share of revenues -- the interest it earns on producing assets plus fees for banking services. This provides a quick insight into how the share of value investors assign to these institutions compares with the share of revenues they earn on assets, which constitutes a direct measure of their investment quality.

By popular demand, here is the latest list of Phoenix candidates:

Brandywine Realty Trust (BDN), CapitalSource Inc (CSE), CBL & Associates Properties Inc (CBL), Century Aluminum Co (CENX), Citizens Republic Bancorp Inc (CRBC), Colonial Properties Trust (CLP), Complete Production Services Inc (CPX), Conseco Inc (CNO), Delta Petroleum Corp (DPTR), Developers Diversified Realty Corp (DDR), Domtar Corp (UFS), First Industrial Realty Trust Inc (FR), First Marblehead Corp/The (FMD), Furniture Brands International Inc (FBN), Gannett Co Inc (GCI), Genworth Financial Inc (GNW), Hercules Offshore Inc (HERO), Hovnanian Enterprises Inc (HOV), Huntsman Corp (HUN), ION Geophysical Corp (IO), iStar Financial Inc (SFI), Liz Claiborne Inc (LIZ), Manitowoc Co Inc/The (MTW), MCG Capital Corp (MCGC), MGIC Investment Corp (MTG), MGM Mirage (MGM), Pacific Sunwear Of California (PSUN), Patriot Coal Corp (PCX), Pennsylvania Real Estate Investment Trus (PEI), Petroquest Energy Inc (PQ), Popular Inc (BPOP), Quiksilver Inc (ZQK), Rex Energy Corp (REXX), Saks Inc (SKS), Sterling Financial Corp/WA (STSA), Sunstone Hotel Investors Inc (SHO), THQ Inc (THQI), Webster Financial Corp (WBS) and Zale Corp (ZLC).

With the US equity market averages either probing or breaking down through their November lows, is it time to buy Phoenix stocks? Others have picked up on that theme, with the latest being a Minyanville article on buying beaten up stocks.

With that in mind, I screened the US market for stocks with the following characteristics:

Bullish Calls:

CVR Energy (CVI): "I like this as a speculative play. As margins go up, they make money. I like it."
Nordic American Tanker (NAT): "I have faith in them. I think it's fine at $29. If you have to own a tanker it's going to be NAT."
Travelers Companies (TRV): “I'm only going to recommend Travelers Companies, which has the single best management."
Goldman Sachs (GS), Morgan Stanley (MS): “I’m only going to recommend Goldman Sachs and Morgan Stanley.”

According to GuruFocus' Data, these are the top insider buys: M&T Bank Corp. (MTB), Wells Fargo & Company (WFC), Avery Dennison Corp. (AVY), Commerce Bancshares Inc. (CBSH), Popular Inc. (BPOP).

M&T Bank Corp. (MTB): Director Stephen G Sheetz Bought 10,000 Shares

Director of M&T Bank Corp., Stephen G Sheetz, bought 10,000 shares on 01/28/2009 at an average price of $38.91.

This is the Third Quarter 2008 edition of our ongoing hedge fund tracking series. Before reading this update, make sure you check out the preface to the series we're doing on Hedge Fund 13F's here.

The other funds we've already covered include:

As those who read my piece "Running Off The Cliff" know, the changes made to the 421a tax abatement program resulted in a perverse rush by developers to begin construction on new condo projects in New York City in the face of a declining Wall Street economy. It's an amazing testament to the distortion of behavior that subsidy programs can have. The chart from that piece was so striking I am reprinting it here (but slightly gussied up).

I thought it would be interesting to take a look at what a Lehman (LEH) take-over would imply for the valuation of financials.

I ran a screen for financials with market caps above $900m that trade in the US and trade below current book value. I then removed some of the more obscure names to narrow down the list and make it more succinct.

We recently gathered analyst buy and sell ratings for stocks in the Russell 1,000. Below we highlight the average percentage of buy and sell ratings for stocks in each sector.

Not surprisingly, the Energy sector has the highest percentage of buy ratings, while Consumer Discretionary and Financials have the lowest. The average Energy stock has 54% buy ratings, while the average Financial stock is well below all other sectors at 33%. Technology, Materials and Health Care are all behind Energy each with 52% buy ratings. Overall, the average stock in the Russell 1,000 has 44% buy ratings and just 8% sell ratings.