Decker's Outdoors (DECK), Polo Ralph Lauren (RL), Priceline (PCLN), Netflix (NFLX), Whole Foods (WFMI), New York Times (NYT), Gannett (GCI)

With 10 months of 2009 behind us and the holiday season approaching, we decided to highlight some of the companies that have driven the market rebound in 2009. The companies in the list below have earned the largest total returns thus far year-to-date in the S&P 500.

Even though these companies have done well, one should be careful of the stocks that have run up and are now overvalued. Listed below are the top returners in the S&P 500 (excluding financials) and how these companies rank according to The Applied Finance Group’s valuation model.

Return of the Rich: Whole Foods (WFMI), Williams-Sonoma (WSM), Tiffany (TIF), Coach (COH), Ralph Lauren (RL), Safeway (SWY), TJX Stores (TJX), Ross Stores (ROST), Darden (DRI), American Express (AXP)

Interestingly, Ford Motor (F) has been the best performing S&P 500 stock since the 2008 election. With all the troubles that the US auto industry has gone through over the past year, Ford has made it out alive and now appears to be getting stronger. Ford (F) is trailed by Whole Foods (WFMI) with a gain of 191.72%, AN (161.12%), EXPE (136.85%), FCX (135.88%), SNDK (105.72%), and AMZN (100.34%). Goldman Sachs (GS) and Apple (AAPL) are also on the list of the 25 best performing stocks since last year's election day.

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OOK Advisors announced the launch of its second exchange-traded fund on Wednesday as the TXF Large Companies Exchange-Traded Fund (TXF) began trading on the NYSE Arca Exchange. The new fund will track the SPADE Texas Index, a benchmark designed to measure the performance of the largest companies headquartered in the state. The index is up about 30% year-to-date, and has outperformed broader market indexes in recent years.

The Texas Index includes about 85 stocks that represent 90% of the market capitalization of companies headquartered in Texas. Not surprisingly, energy companies have a big allocation in the portfolio, including firms such as ConocoPhillips (COP) (5.5%), Exxon Mobil (XOM) (5.0%), and Schlumberger (SLB) (5.3%). But there is a lot more to the index and the ETF than just energy firms. Other holdings include Southwest Airlines (LUV), Burlington Northern (BNI), Whole Foods (WFMI), AT&T (T), Dell (DELL), and DR Horton (DHI).

• Fed stays put. The Fed Open Market Committee left target rates unchanged at 0-0.25% by unanimous vote, saying conditions are still "likely to warrant exceptionally low levels of the federal funds rate for an extended period." The Fed acknowledged an ongoing pickup in economic activity, but warned things are likely to remain weak for a while. It noted "substantial" resource slack will continue to dampen cost pressures, and it continues to believe "inflation will remain subdued for some time." It also pared its expectations for buying agency debt and agency MBS to $175B compared to a former maximum of $200B, to wrap up by the end of Q1. Here's a side-by-side comparison of Wednesday's statement with the previous one. Stocks surged after the statement, but a late-day selloff sent major indexes back to breakeven.
Attention Wall Street Breakfast readers: We're looking for a freelance financial journalist to produce WSB and help with our Market Currents blog in Rachael's absence. More details here.
• Dodd's drastic detour on bank regulation. Senate Banking Committee Chairman Christopher Dodd is reportedly readying legislation that would strip the Fed and FDIC of almost all their bank-supervision powers, creating in their place a new agency in charge of supervising all banks and bank-holding companies. Dodd's proposal would also create a council of regulators, overseen by the White House, to monitor systemic risks to the financial system. The suggestion is in stark contrast to approaches taken by the House and favored by the Obama administration, which have pushed to expand the Fed's powers. Dodd's model is likely to face heavy resistance, particularly from the banking industry, which is ironic since Dodd has been criticized for being too cozy with Wall Street bankers.
• Skype deal almost done. The private-equity investors that agreed to buy 65% of Skype from eBay (EBAY) for about $2.1B are on the verge of settling their dispute with Skype's founders in a deal that will give them 10% of Skype and a presence on its board, in exchange for giving up rights to the peer-to-peer technology they control and a significant amount of cash. An official announcement could come as soon as this morning.
• Senate shuffles taxes. The Senate passed legislation Wednesday that would give tax breaks to big companies impacted by the recession; increase taxes on multinational firms; extend and expand the homebuyers tax credit; and lengthen unemployment benefits. The proposed tax increases are aimed at offsetting the cost of the breaks, which business leaders worry may be a harbinger of more tax increases to come.
• Chambers sounds all clear. Cisco's (CSCO) net profit dropped 19% on lower sales (see data below), but CEO John Chambers gave an optimistic outlook on the economy and said businesses were ready to resume spending on technology. On Cisco's Q3 earnings call, Chambers told analysts the recovery "is well underway" and that economic improvements were "gaining momentum" worldwide. He also predicted Cisco's revenue would grow in Q4 after a year of contraction.
• Junk default rate hits post-Depression high. The global speculative-grade default rate rose to 12.4% in October, surpassing the record set in 1991 for the highest proportion of defaults since the Great Depression, Moody's said in a report this morning. Moody's believes the default rate may peak in November at 12.5%, noting the total number of defaults declined to eight in October, the lowest count this year.
• Big bonuses are back. Wall Street incentive pay is set to rise by about 40% according to a closely-watched survey to be released today, as stronger markets collide with the backlash over bonuses. Johnson Associates predicts incentive-based payouts will surge by as much as 60% from 2008, led by employees in rebounding businesses like fixed income and equities. In contrast, the firm predicts declines of 15-30% at hedge funds, private-equity firms and prime-brokerage operations which have seen a marked drop in AUM.
• Consumer bankruptcy strikes new high. Consumer bankruptcy filings hit 135,913 in October, an 8.9% jump from September, and 27.9% higher than a year ago, according to a study by the American Bankruptcy Institute. "The debt overhang from literally a decade or more of really high consumer spending and low savings rates has put families in a particularly vulnerable spot," ABI's Samuel Gerdano said. The rise outpaced a 7% month-on-month increase in business filings.
• Downgrade dominance declines. S&P said it downgraded only one more nonfinancial firm in October than it upgraded (24-23), a marked improvement considering the downgrade/upgrade ratio from Sept. 2008 to Aug. 2009 was 835-115. S&P said the large drop "supports our belief that aggregate credit quality, although weak, is stabilizing," and noted that the number of companies with a negative ratings outlook or on watch for downgrade has declined steadily. Meanwhile, more than $4B in new corporate bonds were offered Wednesday, including a $2B sale by DuPont (DD).
• BOE boosts bond buying: The Bank of England kept its target bank rate at 0.5%, as expected, but raised its bond buying program to £200B from £175B, which it expects to complete in about three months. "Banks’ funding conditions have improved, though financial conditions remain fragile," the Bank said, and noted "a number of indicators of spending and confidence, however, suggest that a pickup in economic activity may soon be evident."
• Private-sector jobs still sliding. ADP's October employment report showed private U.S. payrolls declined by 203,000, while revising September's loss to 227K from 254K - the seventh straight month of declining job losses. ADP's report comes two days before the government's official nonfarm payroll data, and has been reasonably well correlated with NFP data in recent months. Consensus estimates suggest 150–175K job losses in October and an unemployment rate of 9.9%.
• Online job seeking rises slowly. Monster's index of online job advertising inched up to 120, vs. 119 in Sept and 150 a year ago. Healthcare and public administration demonstrated solid growth, but retail and hospitality hiring retracted. "The rise in the October Index, along with an improvement in the annual rate, indicate a mild expansion in the underlying employer demand for workers," Monster said. "While the decline in consumer confidence has likely contributed to reduced job demand in the retail and hospitality sectors, employers are actively recruiting in the healthcare and public sectors, resulting in stability of the overall Index."

Earnings: Thur. Before Open

• Allied Capital (ALD): Q3 EPS of $0.02 misses by $0.05. Revenue of $M in-line. Shares -1.3% premarket. (PR)
• Biovail (BVF): Q3 EPS of $0.44 beats by $0.04. Revenue of $212M in-line. (PR)
• Cardinal Health (CAH): FQ1 EPS of $0.54 beats by $0.11. Revenue of $24.8B (+5.9%) vs. $24B. (PR)
• Canadian Natural Resource (CNQ): Q3 EPS of C$1.21 misses by C$0.04. Revenue of C$2.82B (+2.7%) vs. C$2.99B. (PR)
• CenturyTel (CTL): Q3 EPS of $0.90 beats by $0.09. Revenue of $1.87B (+188.3%) in-line. (PR)
• CIGNA (CI): Q3 EPS of $1.13 beats by $0.10. Revenue of $4.52B (-6.9%) in-line. (PR)
• CVS Caremark (CVS): Q3 EPS of $0.65 beats by $0.01. Revenue of $24.6B (+17.7%) in-line. Shares +1% premarket. (PR)
• Delta Petroleum (DPTR): Q3 EPS of -$0.35 misses by $0.24. Revenue of $23.9M (-66.8%) vs. $21.9M. "We are extremely disappointed with the results of the Gray well, but exploration drilling carries with it significant risks." Shares -12.8% premarket. (PR)
• DirecTV Group (DTV): Q3 EPS of $0.37 misses by $0.02. Revenue of $5.47B in-line. (PR)
• Dr Pepper Snapple (DPN): Q3 EPS of $0.54 beats by $0.05. Revenue of $1.43B (-4%) in-line. Sees full-year EPS of $1.92-1.96 vs. $1.97. ""While the economy is showing some signs of recovery, it's still too early to see this translate into higher beverage sales. For the quarter, liquid refreshment beverage trends remained negative." Shares +0.7% premarket. (PR)
• Dynegy (DYN): Q3 EPS of -$0.10 misses by $0.13. Revenue of $673M (-61.7%) vs. $877M. (PR)
• Frontier Oil (FTO): Q3 EPS of -$0.26 misses by $0.11. Revenue of $1.1B (-45.4%) in-line. (PR)
• King Pharmaceuticals (KG): Q3 EPS of $0.29 beats by $0.02. Revenue of $463M (+19.3%) vs. $445M. (PR)
• Lamar Advertising (LAMR): Q3 EPS of -$0.05 beats by $0.11. Revenue of $167M (-13%) vs. $164M. (PR)
• Macerich (MAC): Q3 FFO of $0.97 beats by $0.05. Revenue of $201M (+49.8%) in-line. (PR)
• Manulife Financial (MFC): Q3 EPS of C-$0.12 misses by C$0.32. Revenue of C$13.75B. (PR)
• MGM Mirage (MGM): Q3 EPS of $0.02 beats by $0.10. Revenue of $1.71B (-12.7%) vs. $1.47B. Las Vegas Strip RevPAR fell 21%. Amends credit facility to refinance existing debt and provide more debt of up to $1B. Shares +5.7% premarket. (PR)
• MetroPCS Communications (PCS): Q3 EPS of $0.21 beats by $0.12. Revenue of $895M (+30.4%) vs. $869M. (PR)
• MF Global (MF): FQ2 EPS of $0.01 misses by $0.03. Revenue of $493M (-40.9%) vs. $273M. (PR)
• Nasdaq (NDAQ): Q3 EPS of $0.42 in-line. Revenue of $691M (+3.3%) vs. $355M. (PR)
• Petrohawk Energy (HK): Q3 EPS of $0.14 beats by $0.02. Revenue of $238M (-22%) vs. $305M. (PR)
• Plains Exploration & Production (PXP): Q3 EPS of $0.30 misses by $0.23. Revenue of $313M (-56.5%) vs. $376M. Shares -0.6% premarket. (PR)
• Sara Lee (SLE): FQ1 EPS of $0.24 beats by $0.08. Revenue of $2.59B (-7.4%) vs. $3.16B. Shares +0.2% premarket. (PR)
• Sirius XM Radio (SIRI): Q3 EPS of $0.00 beats by $0.02. Revenue of $630M (+2.8%) vs. $609M. Ends quarter with 18,515,730 subscribers, +102,295 from Q2. Shares +3.9% premarket. (PR)
• Spectra Energy (SE): Q3 EPS of $0.30 beats by $0.04. Revenue of $933M (-13.6%) vs. $986M. (PR)
• Teradata (TDC): Q3 EPS of $0.38 beats by $0.09. Revenue of $425M (-3.2%) in-line. (PR)
• Thomson Reuters (TRI): Q3 EPS of $0.43 beats by $0.03. Revenue of $3.21B (-3.6%) in-line. "While the weak year-to-date net sales experienced in recent quarters are now flowing through into revenues, we expect this dip to be shallow and limited to the next few quarters." (PR)
• Time Warner Cable (TWC): Q3 EPS of $0.76 beats by $0.01. Revenue of $4.5B (+3.6%) in-line. (PR)
• Watson Wyatt (WW): FQ1 EPS of $0.84 beats by $0.12. Revenue of $401M (-5.8%) vs. $394M. Sees FQ2 EPS of $0.81-0.86 vs. $0.89 (PR)
• Wendy's Arby's Group (WEN): Q3 EPS of $0.06 in-line. Revenue of $903M vs. $916M. Shares +3.8% premarket. (PR)

Earnings: Wed. After Close

• Allstate (ALL): Q3 EPS of $0.99 misses by $0.02. Revenue of $7.6B (+4%) vs. $8.5B. Shares -2.1% AH. (8-K)
• Amdocs (DOX): FQ4 EPS of $0.53 beats by $0.04. Revenue of $707M (-14%) vs. $679M. Sees Q1 EPS of $0.51-0.55 vs. $0.50, on revenue of $705M-725M vs. $676M. Shares +6.2% AH. (PR)
• Cisco Systems (CSCO): Q3 EPS of $0.36 beats by $0.05. Revenue of $9B (-13%) vs. $8.7B. Shares +2.8% AH. (PR)
• Corrections Corp. of America (CXW): Q3 EPS of $0.39 beats by $0.07. Revenue of $426M (+6%) vs. $423M. Shares -2.7% AH. (PR)
• Eagle Bulk Shipping (EGLE): Q3 EPS of $0.06 beats by $0.03. Revenue of $42M (-19%) in-line. Shares -5.7% AH. (PR)
• Evergreen Solar (ESLR): Q3 EPS of -$0.40 misses by $0.32. Revenue of $78M (+251%) vs. $74M. Shares +2.1% AH. (PR)
• Goldcorp (GG): Q3 EPS of $0.19 beats by $0.03. Revenue of $692M (+25%) vs. $614M. Shares +2.1% AH. (PR)
• Goodrich Petroleum (GDP): Q3 EPS of -$0.87 misses by $0.70. Revenue of $24M (-61%) vs. $52M. Shares -7% AH. (PR)
• Health Care REIT (HCN): Q3 FFO (normalized) of $0.77 in-line. Revenue of $145M (+4%) vs. $143M. Sees full-year EPS of $3.10-3.12 vs. $3.13. Shares +1.6% AH. (PR)
• ION Geophysical (IO): Q3 EPS of -$0.06 misses by $0.03. Revenue of $102.4M (-53%) vs. $102.6M. Shares -8.4% AH. (PR)
• Microchip Technology (MCHP): FQ2 EPS of $0.29 beats by $0.08. Revenue of $227M (-16%) vs. $218M. Sees FQ3 EPS of $0.33-0.35 vs. $0.24, on revenue of $236M-245M vs. $224M. Shares +1.6% AH. (PR)
• Murphy Oil (MUR): Q3 EPS of $0.98 misses by $0.01. Revenue of $5.2B (-37%) vs. $4.4B. Sees Q4 EPS of $0.75-0.90 vs. $1.18. Shares -2% AH. (PR)
• News Corp. (NWS): FQ1 EPS of $0.22 beats by $0.04. Revenue of $7.2B (-4%) in-line. Shares +3% AH. (PR)
• ON Semiconductor (ONNN): Q3 EPS of $0.16 beats by $0.06. Revenue of $473M (-19%) vs. $455M. Shares +4% AH. (PR)
• Prudential Financial (PRU): Q3 EPS of $1.59 beats by $0.26. Revenue of $6.6B (+4%) vs. $6.65B. Shares +0.4% AH. (PR)
• Qualcomm (QCOM): FQ4 EPS of $0.48 misses by $0.04. Revenue of $2.7B (-19%) vs. $2.8B. Sees Q1 revenue of $2.55B-2.75B vs. $2.84B. Shares +1% AH. (PR)
• Sunstone Hotel Investors (SHO): Q3 FFO of $0.14 in-line. Revenue of $176M (-20%) vs. $180M. Shares +2% AH. (PR)
• THQ (THQI): FQ2 EPS of -$0.08 beats by $0.40. Revenue of $101M (-39%) vs. $92M. Shares +11.5% AH. (PR)
• Whole Foods Market (WFMI): FQ4 EPS of $0.20 beats by $0.02. Revenue of $1.8B (-2%) in-line. Same-store sales down 0.9%. Shares -7.7% AH. (PR)

Today's Markets

Asian markets were mixed Thursday. Europe is lower at midday, and futures are flat.

What a crazy month we had!

The Dow began the month of October at 9,712 and finished the month of October at EXACTLY 9,712. Now I don’t want to say the market is manipulated but… No, I’ve got nothing, there are no buts - the market is totally manipulated! Either that or you believe that the random outcome of tens of millions of traders around the globe trading hundreds of billions of shares of stock would just so happen to begin and end the month within .50 after going as low as 9,378.77 (on the 5th) and as high as 10,157.94 (on the 21st). So that is literally a 1 out of the 779-point swing coincidence to hit that 9,712 nail on the head.

U.S. organic food production has more than doubled since the late 1990s; however, the consumer appetite has grown even faster, with organic food sales increasing from $3.6 billion in 1997 to $21.1 billion in 2008, and now accounting for 3 percent of total U.S. food sales. Despite this doubling, organic food production only represents 0.5 percent of all U.S. crop land and pasture, leaving plenty of room for growth in this burgeoning food product niche business. We believe that U.S. organic food sales will surpass $100 million by 2020.

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by Chris McKhann

Whole Foods Market (WFMI) climbed to another new 52-week high Monday morning, but the options trading is positioned for the downside.

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:

KR reported second quarter results that were stellar. Sales were up 3.5% (excluding fuel sales), earnings of 39 cents beat expectations by two cents and gross profit margin increased 59 basis points to 23.11%. In addition, debt was pared down $200 million and nearly 3 million shares were repurchased in the open market (there are still 425 million shares remaining for purchase.)

The trouble was, KR ratcheted down its fiscal 2009 guidance to the $1.90 to $2.00 range which spooked the Street -sending the shares down as much as 10%. I expect management is playing the conservative side on guidance and is certainly posturing a under promise-over deliver mentality.

With 3 Quarters of 2009 now in the books, we thought it would be timely to provide a list of the top 20 performers in the S&P 500 so far this year to give investors an idea of which stocks have been doing well. Along with the list of top 20 performing companies, we have also provided a breakdown of the average return by sector as defined by AFG vs. the entire S&P 500 index to show which sectors have been leading the way.

Also by using The Applied Finance Group’s (AFG's) research and valuation model we have provided further analysis on 4 of the top performing companies, 2 that we find attractive going forward and 2 that we find unattractive, based on valuation attractiveness, expected improvement in economic profitability and the overall investment attractiveness, which is based on various criteria AFG uses when identifying long/short opportunities.

Bullish Calls:

Bank of Ireland (IRE), Allied Irish Banks (AIB): "I've been doing some work on these and I'll recommend them"

The average year to date change of stocks in the S&P 500 is 33.27%, even though the index itself is up just 16.54% YTD. The average estimated P/E ratio for next year for stocks that actually have earnings in the index is 19.47. Twenty-six stocks in the S&P 500 are expected to lose money over the next year.

Below we provide a list of S&P 500 stocks that are up more than 100% year to date along with their estimated P/E ratios. As shown, there is a pretty wide variation in valuations of the best performing stocks year to date, with some having low P/Es and some having high or negative P/Es. Micron (MU), Advanced Micro (AMD), Sun Micro (JAVA), Sprint (S), and Office Depot (ODP) are the five stocks up more than 100% in 2009 with negative estimated P/Es. Other strong performing stocks with high valuations include THC, F, SNDK, MOT, and MWV. XL Capital has the lowest P/E estimate of the stocks listed below at 7.40. It is up 370% year to date. Genworth (GNW) is up 325% with a P/E estimate of 11.06, and WDC is up 218% with a P/E estimate of 9.76. Other stocks on the list with a ratio below 20 include FCX, GT, EXPE, WYN, MEE, JWN, GS, CTSH, and LIFE.

With the one-year anniversary of Lehman's bankruptcy now behind us, we updated our list of best performing stocks over the last year. Since the Friday before that weekend when Lehman went down and Merrill was taken over, the S&P 500 has declined by 16.2%. Over that same period, 89 of the 500 stocks (17.8%) currently in the S&P 500 are higher now than they were then. Of those, fifteen are up more than 30% (table below).

While the list is dominated with stocks from the Technology sector, one sector not represented on this list is Financials. Of the seventy nine stocks currently in that sector, only five have had a positive return in the post-Lehman world. These winners are FHN (21.7%), GS (15.2%), TRV (8.8%), JPM (6.3%), and BEN (3.9%).

Schering-Plough (SGP), Ford (F), Micron (MU), Nvidia (NVDA), AngloGold (AU), Whole Foods (WFMI)

[Excerpted from Bill Cara's Daily Report]

While the broad market was vacillating in a narrow range onWednesday, underneath the surface something was a glittering. Ahead ofthe upcoming G-20 meeting, precious metals were bid, and bid, and bid,all day long (GLD + .22%, SLV +2.85%), and volume in the goldminers($XAU +8.6%) matched the break-out in price.

Only 39 stocks in the S&P 500 are trading below their 50-day moving averages. That means nearly 93% of stocks in the index are trading above their 50-days, which is the highest reading in at least three years. Below we highlight the stocks in the index that are the most overbought and oversold versus their 50-days.

As shown, AIG is the furthest above its 50-day at 61.06%, followed by GCI, EK, HIG, LEN, and C. These are names that have been in perpetual trouble over the last few years, so clearly investors are going out and buying up beaten down, risky names. Other notable stocks on the most overbought list include COF, WYNN, WFMI, and BAC.

Whole Foods Market (WFMI) is the kind of investment that is nearly impossible to pass up (but you probably should)… The company is the largest retailer of natural and organic foods in the US and has actually seen its footprint extend beyond national boundaries into Canada and the UK. The firm has been incredibly successful not only in developing a profitable business, but also in leading an entire culture to value more healthy nutritious food.

WFMI was one of the few momentum stocks to largely survive the turbulent investment period early this decade, continuing to show investors triple digit profits while technology stocks were tracing the inverse patterns as they traded down to nothing. Stores were opening at an incredible clip and it seemed no matter how aggressive analysts would set their expectations, WFMI would somehow find a way to pleasantly surprise quarter after quarter. It’s no wonder the stock soon became one of the most well known ticker symbols even as the store brand became a household staple.