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Archive for July, 2010

Corporate Earnings Results Mostly Positive

Friday, July 23rd, 2010

Are you keeping track of the corporate earnings results from home? If you are an invested in this market, I strongly suggest you keep a close eye on earnings reports. So far the earnings news from this quarter has been quite good. Some major companies such as UPS, Caterpillar, 3M, AT&T, Intel, and American Express have really topped analyst’s expectations quite easily.

What is most encouraging about the results thus far? The single most encouraging thing about the positive surprises this earnings season is that they are spread out among many different industries and sectors. If a company like 3M is surprising to the upside, it speaks well about several industries. Caterpillar and UPS have struggled for several quarters, so for them to be so upbeat is a welcome change for the market.

If you look closely at American Express and their earnings report, they mentioned that customer spending is almost back to pre-recession levels. As I pointed out in last week’s post, Intel was upbeat about business spending rising in a big way. This combination certainly speaks well for the long-term prospects of the recovery.

Make no mistake about it; there are plenty of obstacles yet to overcome. The unemployment rate is still extremely high and consumers and investors need to regain confidence in the economy and the market. In the short-term I think you should expect continued volatility as the economic news remains fairly mixed. Remember, this is a time of year that the stock market does not typically fare very well. August and September are notorious for being bad months for the market. In light of the fact that corporate earnings results are starting to come around, it may be prudent to start putting together a shopping list of stocks you may want to purchase in the fall after the market has discounted some high quality names.

Intel Record Earnings A Catalyst for Stocks?

Tuesday, July 13th, 2010

Over the last few weeks the bulls on the stock market have been looking for a catalyst to drive the stock market higher. The hope was that earnings reports might be able to do just that, but in recent days the hopes had pretty much turned to fear that the news might be bad. As it turns out, Intel absolutely knocked the cover off the ball when it reported its second quarter earnings after the bell earlier today.

How good was this Intel quarter? The consensus estimate was for 43 cents per share, and the company raked in a hefty 51 cents per share. Maybe the most impressive number of all was Intel’s gross margin, which sat at 67% in the second quarter. In their conference call Intel said that demand was higher than expected in all areas of the world, including Europe. The company raised expectations for the current quarter and the year. Intel is now expecting its sales to set a new record this quarter of somewhere between $11.2 billion dollars and $12 billion dollars. The quarter was so good that the company CEO actually called it “the best quarter in the company’s 42 year history.”

Is Intel hitting a home run on the earnings front going to be a catalyst for the stock market going forward? In the short-term it is likely to give investors reason for optimism about the rest of the earnings season. The big question now will be whether other major technology companies like Microsoft, Dell, and Cisco are seeing the same types of good times. The fact that demand is so strong for Intel, especially on the business side, makes me wonder if the corporate world is starting to feel a little more comfortable about the economy. At the same time, it is completely plausible that technology could be in a period of outperformance and the rest of the market is still in the doldrums.

For now, Intel’s earnings report is only a start, but it sure is a great way to start the earnings season! Keep a close eye on earnings reports in the next couple weeks, because they will certainly move the markets in a big way!

Fight Market Volatility with Consistent Dividend Payers

Wednesday, July 7th, 2010

The last few months, and even the last few weeks, has been packed with all kinds of stock market volatility. The Dow Jones Industrial Index has been jumping above and below the key 10,000 level on what seems like a weekly basis. Overall, the trend of late has been downward, but powerful short-term rallies have been present as well. What should you do? As an individual investor I think it is unwise to try to time the market right now. Many participants have been burned when trying to time the market. I think a much wiser solution is to try to combat the stock market volatility with consistent dividend paying stocks.

As I have said before, you must always remember that not all dividends are created equally. Some stocks have an “attractive” dividend yield simply because they have lost so much market value in recent trading. These aren’t typically the stocks that you should be looking for when trying to find a safe haven. On the other hand, some stocks have a solid dividend, typically in the range of 3%-5%, and are also consistently growing that dividend. Often you’ll find that these are companies that have a great deal of cash on the balance sheet, and are diversified nicely in their business sectors.

The simple fact of knowing that you can receive a much higher rate of return from these dividend yields than you can from any bank money market or certificate of deposit is very encouraging. Additionally, these stocks that have a history of hiking their dividend payout in all economic environment’s are much more likely to hold up than a speculative stock.

Use the current stock market volatility to learn an important lesson in the power of consistent dividend paying stocks. These are the stocks that will help you get through the tough market and build up a nice savings in the long run.

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