A Look At Monday's 4 Big Winners And 3 Big Losers

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Includes: BAC, E, LYG, MFG, T, TEF, TSM
by: Efsinvestment

The markets started the Monday with an optimistic attitude, pushing the major indices 2% higher than Friday’s close. However, the optimism did not last long, and the markets closed the day just an inch higher. Both S&P 500 and Nasdaq briefly tipped into the negative zone. At the end of the day S&P 500 gained 0.03%, Nasdaq gained 0.15%, and Dow Jones gained 0.34%. Technology stocks gained the most (0.8%), followed by consumer goods (0.4%), industrial goods (0.04%), conglomerates (0.2%), services (0.2%) and utilities (0.1%). Basic material stocks (including oil & energy) did not make any moves (on average). Financial stocks lost 0.8%, primarily due to the poor performance of Bank of America which lost 7.89%. Here is a brief analysis of the 4 Winners and 3 Losers from Monday:

Company

Ticker

Change

Mkt Cap

Winners

Taiwan Semiconductor

TSM

2.74%

$58.26 billion

Eni

E

6.96%

$68.74 billion

Telefonica

TEF

2.31%

$91.10 billion

AT&T

T

1.64%

$168.59 billion

Losers

Bank of America

BAC

-7.89%

$65.06 billion

Llyods TSB

LYG

-4.35%

$30.28 billion

Mizuho Financial

MFG

-3.06%

$30.95 billion

Taiwan Semiconductor Manufacturing Company is one of the largest semiconductor and integrated circuits producers in the world. The stock gained 2.74% on Monday, but is still trading 16.64% lower than its 52-week high. The company offers a nifty yield of 4.61%. As of Monday’s close, it was trading with a P/E ratio of 10.60 and a forward P/E ratio of 11.71. EPS increased by 83.61% this year. The company does not have any debt issues, and the debt/equity ratio is 0.07. Based on an annualized EPS growth estimate of 15%, it has a PEG ratio of 0.71 and an A-Grade O-Metrix score of 8.8.

Eni SpA is an integrated oil company, headquartered in Italy, with operations in worldwide. The stock returned 6.96%, recovering some of the last week’s losses. It is still trading 27.37% lower than its 52-week high. Due to its proximity to conflict zones in North Africa, the stock did not participate in the chaos-related spike in energy stocks. The year to date return is -10.66%. I think the stock is one of the best deals in the market with a yield of 7.23%, trailing P/E ratio of 7.91 and forward P/E ratio 6.40. Based on an annualized EPS growth estimate of 8%, it has a PEG ratio of 0.98 and an A+ Grade O-Metrix score of 10.64.

Telefonica is the largest telecommunication provider in Spain with significant operations in the rest of Europe and Latin America. The stock has a Beta of 1ç02 with average true range of 0.80. The 52-week trading range is $18.63 - $26.22. While the current ratio of 0.61 and debt/equity ratio of 2.95 are not desirable, the gross margin of 68.89% is among the best in the industry. Besides, the stock is trading with a low P/E ratio of 6.82 and a forward P/E ratio of 8.57. Dividend yield is 9.56% (around 8% after taxes). Based on an annualized EPS growth estimate of 5.90%, it has a PEG ratio of 1.16, and an almost perfect O-Metrix score of 9.04.

AT&T gained 1.64% yesterday. I like AT&T and its nifty yield of 6.05%. AT&T is a highly defensive stock. Although it lost 6.17% in the last month, the year to date return of 1.03% is still in the positive territory. Analysts have a mean target price of $33.54, whereas my FED+ fair value range is $37 - $55. The stock is trading with a P/E ratio of 8.62 and a forward P/E ratio of 11.20. Based on an annualized EPS growth estimate of 5.89% for the next 5 years, it has a PEG ratio of 1.46, and a B-Grade O-Metrix Score of 6.03.

Bank of America lost 7.89% on Monday. The stock initially opened at 3% higher than Friday’s close before reversing its trend. There are rumors that Bank of America might need to raise as much as $50 billion of capital to meet new upcoming requirements under the new Basel III rules. Bank of America sounds like a Pandora’s Box to me. On the one hand, there is a gigantic company that serves millions of households in the U.S. On the other hand, there is not much information regarding the possible liabilities from the complex structure of mortgage-related issues. It is a very risky company to invest in, but is too big to fail. It was a pretty expensive stock at $15 and a market cap of above $150 billion. Nowadays, it is in the oversold zone. From a technical perspective, there is a large gap around $8, which I expect to be closed soon. Still, you should invest at your own risk.

Lloyds Banking Group lost 4.35% on Monday. The stock initially opened at $1.85, before falling to $1.76. The stock lost almost 58% since January, and there is no sign of hope. The debt/equity ratio of 4.93 is a strong warning signal to avoid Llyods. However, analysts have extremely positive expectations about the future. Their mean EPS estimate for next year is 0.16, implying a forward P/E ratio of 11. Morningstar offers 4 stars to Llyods, stating that the company controls 30% of the U.K. mortgage market. It could be an outperformer, if things go well in U.K. However, if things go to the south, it will be a disaster for the king of mortgage in U.K.

Mizuho Financial lost 3.06% on Monday. The stock has been a looser for a while, returning -15.94% in the last month, and -24% since January. Morningstar offers 4 stars to Mizuho, while stating the high uncertainty of its future. As of Monday’s close, the company is trading 33.26% lower than its 52-week high. Forward P/E ratio of 6.4 and annualized EPS growth estimate 9.7% seem too optimistic to me. Out of 13 analysts covering the company, 6 have buy, 1 has outperform, 8 have hold, and 1 has underperform suggestion. It is a good stock, if you believe in analysts.

Disclosure: I am long T.

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