Intel Corporation (NASDAQ: INTC) shares fell today with most other tech stocks after Nvidia Corporation (NASDAQ: NVDA) lowered its second-quarter revenue outlook to a range between $875 million and $950 million, well below analysts' expectations of $1.1 billion. NVDA cited end-market weakness for the lower forecast, which could be a bad sign for INTC. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on INTC.
After hitting a one-year high of $27.99 in December, the stock hit a one-year low of $18.05 in January. This morning, INTC opened at $20.62. So far today the stock has hit a low of $20.26 and a high of $20.80. As of 12:10, INTC is trading at $20.65, down 0.28 (-1.3%). The chart for INTC looks bearish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bearish hedged play on this stock, I would consider an August bear-call credit spread above the $23 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 13.0% return in six weeks as long as INTC is below $23 at August expiration. Intel would have to rise by more than 11% before we would start to lose money.
After hitting a one-year high of $60.00 in December, the stock has hit a new one-year low today. This morning, AET opened at $36.98. So far today the stock has hit a low of $36.01 and a high of $37.99. As of 11:55, AET is trading at $37.29, down 2.50 (-6.3%). The chart for AET looks bearish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bearish hedged play on this stock, I would consider an August bear-call credit spread above the $45 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.2% return in six weeks as long as AET is below $45 at August expiration. AET would have to rise by more than 20% before we would start to lose money.
I was actually in Detroit on Monday. I'm not going to write about the urban decay and the deterioration of the city. Many have researched and documented this far better than I ever could. But even in my short three-hour visit, the evidence was all too clear. Personally, I think Detroit has more character than many other richer and far more maintained and manicured cities. Even abandoned and in shambles, many of the buildings are architectural gems. Perhaps because one can still see the glorious past through the ruins, that it is so affecting. Or, as the website names them, they are The Fabulous Ruins of Detroit.
This week has been very busy for automakers, starting with June car and truck sales reported on Tuesday. General Motors Corporation (NYSE: GM) reported an 18.2% drop in sales, which was actually better than expected, and Ford Motor Company (NYSE: F) a drop of 27.9%. Meanwhile, Japan's Toyota Motor Corporation (NYSE: TM) posted a 21.4% sales decline. GM shares actually got a boost from the sales figures, but that didn't last long.
Abbott Laboratories (NYSE: ABT) got approval for its new drug-coated stent. The products are used to open clogged arteries, often in the place of by-pass surgery. The field has been dominated by deeply troubled medical device company Boston Scientific (NYSE: BSX). It looks that the weakened company is in for much more pain.
According toThe Wall Street Journal, ABT "received regulatory approval for its Xience V drug-coated stent, which is expected to be the top seller in the roughly $2 billion U.S. market because it appears to be more effective than rival devices." Boston Scientific will sell the new Abbott product, but with 40% of the revenue going to its rival, it is hard to see how that is a good deal.
BSX has been beaten by competition at almost every turn. It took on tremendous debt when it bought medical device company Guidant. It faced trouble when some Guidant products hit quality control issues. Boston Scientific stents came under criticism a year ago, when medical research questioned how effective they were.
BSX traded at almost $45 in 2004. It is now at about $12. With new competition and a bad balance sheet, that is not likely to change much.
Douglas A. McIntyre is an editor at 247wallst.com.
Factory orders increased 0.6% in May, the U.S. Commerce Department announced Wednesday, on rising demand for computers and defense equipment. It was the third consecutive monthly rise in factory orders, the Commerce Department said. Excluding the often-volatile transportation component, factory orders increased 0.4%.
Economists surveyed by Bloomberg News had expected May factory orders to increase by 0.6%. Factory orders increased a revised 1.3% in April.
Economists follow the factory orders statistic because it provides one of the most comprehensive surveys of advance orders for durable goods -- how busy factories are likely to be in the period ahead. Factory orders also are a major value-added component of the U.S. economy.
In May, new orders rose 1.2%, bookings increased 0.6%, shipments rose 0.1%, and unfilled orders increased 0.1%. Also, the inventories-to-shipments ratio was virtually unchanged in May at 1.23, compared to 1.22 in April.
The Wall Street Journal was good enough to humiliate General Motors (NYSE: GM) CEO Rick Wagoner by pointing out that he still has his job. The company's share price is down almost 85% since he took over. The newspaper writes that Mr. "Wagoner's decision a few years ago to tilt GM's product mix more toward trucks and SUVs isn't looking good."
Fair enough. But there are two critical elements to Wagoner still having his corner office. One is that the rest of the US car industry is as bad off as GM, maybe worse. The other is that no CEO in his right mind would leave a good job to take over GM. Boeing (NYSE: BA) exec, Alan Mulally, moved to Ford (NYSE: F) as the head man and he must regret the decision every day.
Wagoner is part of the "dumbing down" of the American CEO. If the man can't do well, blame it on the industry. That makes it seem that individual companies are powerless to make decisions that will put them ahead of the competition, even in tough markets.
Non-farm private employment decreased 79,000 in June on a seasonally adjusted basis, ADP announced Wednesday in the ADP National Employment Report. (pdf)
Meanwhile, the May estimated change in employment was revised down 15,000 to a gain of 25,000 jobs, ADP said.
In the June jobs report, employment in the service-providing sector fell 3,000, its first declined since November 2002. The goods-producing sector declined 76,000, and manufacturing employment fell 44,000, their 19th and 22nd consecutive monthly declines, respectively.
Employment among small-size businesses, defined as those with fewer than 50 workers, rose just 7,000 during the month, while employment at large businesses with more than 500 workers declined 51,000. Jobs at medium sized business, with 50-499 employees, decreased 35,000.
In a surprise, the U.S. manufacturing sector increased production and expanded in June.
The Institute for Supply Management Manufacturing Index rose to 50.2 in June from 49.6 in May, the Institute announced Tuesday. It was the first increase for the index since January. Readings above 50 indicate economic growth; readings below 50, economic contraction.
Economist David H. Wang Tuesday cautioned against taking a too positive interpretation of the June ISM manufacturing data. "We have to keep in mind that this is just one month and the trend had indicated contraction for five months," Wang said. "Also, we are barely above 50, and the index could easily drop below 50 in the next month, which would be consistent with a continuing contraction, so evaluate the June results in that context."
Drug companies have never liked the FDA. Why should a government agency tell them whether their drugs are safe or effective? The FDA approval process can be a long one, and often new treatments are turned down.
According toThe Wall Street Journal, the head of Schering-Plough (NYSE:SGP) believes that an "intensifying focus on safety and a diminished tolerance for side effects at the Food and Drug Administration have dramatically lowered the odds that the drugs would make it to market -- at least not without a lot of extra time and money."
Perhaps if pharmaceutical companies had a better track record for safety, the process would not to be so long. It is not that long ago that the FDA discovered that anti-depressants could lead to suicidal thoughts. More recently the agency warned that anemia treatments including Aranesp, Epogen and Procrit increased the risk of strokes and heart attacks.
Drug company earnings may be hurt by a long FDA approval process, but, without the current system there would likely be an increase in deceased patients.
Douglas A. McIntyre is an editor at 247wallst.com.
If you're hearing whispers that the dollar might be creeping up in value and that this might put downward pressure on commodities, then let me tell you: Don't you believe it. Although some upward adjustment might occur for the dollar, it's my opinion that this won't, by itself, reduce commodity prices. To think so is just too limited an economic scope.
First, we can believe that the platform of oil prices is going to hold solid. I do think that the price of oil will eventually recede, but it's not going to be soon and it's not going to be much. It'll be a couple years before we see any real decline, if we ever do. That reality gives us a good launching point for some speculation. Alternative fueling for motor vehicles will keep upward pressure on oils other than petroleum. Consider commodity soybeans, soybean oil, and palm oil as possible hedges. There's also potential in propane, and to me, natural gas is still artificially under valued. You might not think there's a relationship between these commodities and petroleum. Believe me though, there is. Also, like the high volume traded commodities, other vegetable oils, such as sunflower oil and cottonseed oil, are worth looking into.
Economists surveyed by Bloomberg News had expected the June reading to total 48.0. Readings above 50 indicate expansion; below 50, contraction.
Economist David H. Wang told BloggingStocks Monday the June PMI reading was roughly what he expected. "We did have a slight uptick, but overall we still see considerable concern expressed by businesses about rising fuel prices and other costs, and about the impact on the consumer," Wang said. "Businesses remain in defensive mode, for the most part, and there is little sign of a recovery."
After hitting a one-year low of $59.50 in August, the stock hit a one-year high of $144.34 in May. This morning, PCLN opened at $119.78. So far today the stock has hit a low of $114.38 and a high of $121.95. As of 12:10, PCLN is trading at $117.95, down $7.18 (-5.7%). The chart for PCLN looks neutral and improving, while S&P gives the stock a neutral 3 Stars (out of 5) Hold rating.
For a bearish hedged play on this stock, I would consider an August bear-call credit spread above the $155 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 5.3% return in seven weeks as long as PCLN is below $155 at August expiration. PCLN would have to rise by more than 32% before we would start to lose money. Learn more about this type of trade here.
PCLN hasn't been above $145 at all in the past year and has shown resistance around $132 recently. This trade could be risky if the company's earnings (due out in early August) are a positive surprise, but even if that happens, this position could be protected by resistance PCLN might find around $140, where it topped out in May.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in PCLN or EXPE.
Citigroup (NYSE:C) will begin a new bonus plan aimed at getting its senior executives to work for common earnings improvement across the entire company instead of only driving profits within their departments. According to the FT, the new system is "an effort to increase co-operation and minimize in-fighting among the disparate parts of the sprawling financial services conglomerate."
The set-up has all the hallmarks of failure. Senior investment bankers, money managers, and lending executives break their backs to make their operations successful because they can get multi-million dollar bonuses by doing so. Putting them into a pool where their own efforts are watered down by the bank's overall performance is a good way to get top talent to leave for greener pastures.
The most wrong-headed part of the thinking behind the program is that it does not account for the fact that banking executives do their best out of personal greed. The current system of having every operation in the bank strive for its own best results already maximizes overall earnings. The profits from a number of successful divisions within the firm adds up to better financial results for Citi as a whole. Bonuses based on the performance of the the bank as a whole simply makes star executives believed they are being robbed by being lumped in with the company's losers.
Bonus programs like this would not prevent problems like mortgage-backed investments. Each and every financial firm on Wall St. thought they were a good way to make money. Changing the Citi compensation system would not have changed that.
Douglas A. McIntyre is an editor at 247wallst.com.
A number of corporations bought auction rate securities with their excess cash. They believed that since the instruments offered better yield than many market funds, they would be good for balance sheet management. They also thought that since auction-rate paper had been liquid and widely traded since 1985 that moving in and out of the market would be easy.
It was easy until it wasn't.
The investment banks and money center banks which made the market in these instruments pulled out at the beginning of the credit crisis. They did not want to keep risking their own capital to buy the paper and hold it to keep the market trading. Traditionally what was not bought at one auction was picked up by banks and held until the next round of trading. In essence, large financial firms kept the market trading by underwriting the system in exchange for large commissions.
This post is part of our Big Company, Small Town series, featuring large companies and the small towns in which they are headquartered.
Pilgrim's Pride's home roots in the small town of Pittsburg, Texas, perhaps explain why it is the largest chicken producer in the U.S., even ahead of competitor Tyson Foods, Inc. (NYSE: TSN) in Arkansas. In 1946, Lonnie "Bo" Pilgrim dressed like a standard Pilgrim and tucked a small chicken under his arm when completing orders for customers. He gave away free chicks when he sold chicken feed as a way to expand his market for chicken feed. As of today, Pilgrim's Pride operates chicken processing plants in 13 states and Mexico and processes 44 million chickens per week, resulting in 9 billion pounds of chickens per year and over 528 million chicken eggs per year.
Pilgrim's Pride's operations are almost exclusively located in the U.S. close to its farms, and it has become the second-largest chicken supplier to Mexico as well. It does have processing plants in Mexico and Puerto Rico. Along with such huge chicken-producing numbers come a few problems, as a huge product recall in 2002 due to Lysteria contamination killed seven people and made over 40 customers sick. In 2004, more than 24,000 hens were destroyed after a strain of avian flu was found in Hopkins County, Texas.
Pilgrim's Pride is still based in the same location where it was founded over 60 years ago, but today stands as a completely vertically-integrated company: it owns every process and facility from egg to table, as it says. Wal-Mart Stores Inc. (NYSE: WMT), Publix Super Markets (OTC: PUSH) and KFC, a division of Yum! Brands (NYSE: YUM) ,can be counted as some of Pilgrim's Pride's largest customers.
Intel Corporation (NASDAQ: INTC) shares fell today with most other tech stocks after Nvidia Corporation (NASDAQ: NVDA) lowered its second-quarter revenue outlook to a range between $875 million and $950 million, well below analysts' expectations of $1.1 billion. NVDA cited end-market weakness for the lower forecast, which could be a bad sign for INTC. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on INTC.
I was actually in Detroit on Monday. I'm not going to write about the urban decay and the deterioration of the city. Many have researched and documented this far better than I ever could. But even in my short three-hour visit, the evidence was all too clear. Personally, I think Detroit has more character than many other richer and far more maintained and manicured cities. Even abandoned and in shambles, many of the buildings are architectural gems. Perhaps because one can still see the glorious past through the ruins, that it is so affecting. Or, as the website names them, they are 
Non-farm private employment decreased 79,000 in June on a seasonally adjusted basis, ADP announced Wednesday in the ADP National Employment Report. 
Drug companies have never liked the FDA. Why should a government agency tell them whether their drugs are safe or effective? The FDA approval process can be a long one, and often new treatments are turned down.
If you're hearing whispers that the dollar might be creeping up in value and that this might put downward pressure on commodities, then let me tell you: Don't you believe it. Although some upward adjustment might occur for the dollar, it's my opinion that this won't, by itself, reduce commodity prices. To think so is just too limited an economic scope.
A number of corporations bought auction rate securities with their excess cash. They believed that since the instruments offered better yield than many market funds, they would be good for balance sheet management. They also thought that since auction-rate paper had been liquid and widely traded since 1985 that moving in and out of the market would be easy.
This post is part of our 
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Starbucks: The next McDonald's
