Stock Picks For Friday 12 March: DryShips, Plug Power, Hemispherx BioPharma

DryShips (DRYS: 6.18 0.00 0.00%) - The stock is threatening to break through the 200 day moving average which would be a very bullish sign for DRYS. Resistance is $6.26. The stock has been strong over the past days, so watch it closely the next few trading sessions.

 

Plug Power (PLUG: 0.585 0.00 0.00%) closed up two pennies on Thursday, which is a positive sign for Friday. The stock hit a high of $0.59 for the day, which is resistance for Friday's follow through move. If the stock can break resistance, we should see a good upside move.

 

Hemispherx BioPharma (HEB: 0.8295 0.00 0.00%) broke resistance on Thursday. This should be the start of a bigger move, which could occur Friday. Resistance is $0.83, which was Thursday's high of the day. This looks to be a good breakout, so watch the stock very closely over the next few trading sessions.

Disclaimer: Trading stocks involves risk, this information should not be viewed as trading recommendations. The charts provided here are not meant for investment purposes and only serve as technical examples.

Stock Picks

Speculative plays

(DRYS: 6.18 0.00 0.00%) - Dryships could be a takeover target according to many analysts. Chart looks bullish in short-term. Heavy call activity on DRYS again on Wednesday.

(OSIR: 7.82 0.00 0.00%) - Osiris had a great day on Wednesday. $8 is the next resistance level.

(MDVN: 12.87 0.00 0.00%) - Stock price rebound at a level higher than the most recent low, breaking above some resistance with volume significantly increasing.

(HEB: 0.8295 0.00 0.00%) had also a great day on Wednesday. $0.81 is the next resistance level that if broken, could send shares back to $1

(AMAT: 12.41 0.00 0.00%) - The next major resistance level for Applied Materials is located at $12.65 ( 200 dma ). A close above this level would be very bullish.

(PALM: 5.57 0.00 0.00%) - Shares of Palm had a mini rally on Wednesday before pulling back. This could be the start of something larger. At this point, I think you can buy Palm shares here with a stop at $5.47.

(XNPT: 8.42 0.00 0.00%) - Stock rebound showing its strength.

Number And Percent Of U.S. Tax Nonpayers At Record High; More Tax Filers Now See IRS As A Source Of Income

From The Tax Foundation:

A nonpaying tax return is one filed by an individual or couple who, thanks to legal credits and deductions, owes nothing. Nonpaying status used to be a sure sign of poverty or near-poverty, but Congress and the President have changed the tax laws to pull much of the middle class into the growing pool of nonpayers. The income level at which a typical family of four will owe no income taxes has risen rapidly, now topping $51,000 (see chart above).

As a result, recently released IRS data for the 2008 tax year show that a record 51.6 million filers had no income tax obligation (see chart, click to enlarge). That means more than 36% of all Americans who filed a tax return for 2008 were nonpayers, raising serious doubts about the ability of the income tax system to continue funding the federal government's ballooning expenditures.

Bottom Line: Over the past two decades, Washington lawmakers have increasingly turned to the tax code to deliver social benefits, incentivize behaviors, and funnel money to targeted groups, which they always refer to as "helping the middle class." These measures have not only added complexity to an already Byzantine tax system, they have also eliminated the income tax obligation for millions of tax filers and their families. As a result, a record 51.6 million tax filers-36 percent of all filers-had little or no connection with the basic costs of government in 2008.

Tax years 2009 and 2010 are likely to produce a number of nonpayers equal to or greater than in 2008 because of Obama's new tax credits targeted at lower- and middle-income taxpayers. As the number of refundable tax credits continues to grow, more and more tax filers are seeing the IRS as a source of income, not something to which taxes are paid. The consequences of these trends deserve a broader national discussion than either party in Washington seems willing to engage in."

Stock Buy: Genesco Inc

Genesco Inc. ( 28.26 0.00 0.00%) is projecting solid growth over the next few years and continues to rise on the heels of its latest earnings surprise.

Estimates Creeping Up

Since the January feature on Genesco, we have seen a few upward estimate revisions for full-year 2011. The average forecast is now $2.07, which marks a growth rate of 8%.

Next year's estimates are averaging $2.35, which is a 14% growth rate. These estimates could climb after the latest quarterly report.

Beat the Street

On March 3rd Genesco reported a 6% increase in sales, to $479 million for the fourth quarter of fiscal 2009. Net income came in just shy of $28 million, or $1.15 per share.

This beat Wall Street's expectations, as the Zacks Consensus was $1.11. This was the Genesco's fourth consecutive earnings surprise.

The Chart

Shares have surged on the earnings news but remain a good value at just over 13 times forward earnings.

Gap’s Estimates Soar

Earnings estimates of Gap Inc. ( 22.24 0.00 0.00%), a premier international specialty retailer, have increased recently with strong fourth quarter and fiscal 2009 results. The company reported net income of $352 million or 51 cents per share during the quarter, compared to $243 million or 34 cents per share in the year-earlier quarter. For fiscal 2009, Gap reported net income of $1.1 billion or $1.58 per share compared to $967 million or $1.34 per share in fiscal 2008.

Net sales during the quarter were $4.24 billion compared to $4.08 billion in the year-ago quarter. Comparable store sales increased 2% during the quarter compared to a year earlier. Robust earnings were primarily driven by solid sales at its low-priced Old Navy segment and the highest fourth quarter operating margins in over a decade. The Old Navy chain has benefited from the increasing preference among U.S. shoppers for lower-priced stores due to the challenging macroeconomic environment.

Gross margins increased 550 basis points to 39.5% during the quarter compared to the year-ago quarter. Operating margins increased 410 basis points to 13.9% due to effective cost-control measures and prudent inventory management policies. Gross margin in fiscal 2009 increased 280 basis points year-over-year to 40.3%, while operating margin increased 210 basis points to 12.8%.

Full-year merchandise margins were up 290 basis points.Gap is now focusing more on improving its business model by striking the right balance between its cost structure and merchandise by better aligning inventory with sales trends. Gap ended the fourth quarter with $1.5 billion in inventory, down 2% versus the prior year. Inventory per square foot at the end of the quarter was down 1% compared to 2008.

For fiscal 2009, free cash flow of the company was $1.6 billion. This provides it with an operating flexibility to protect and enhance market positions and emerge stronger once the economy fully recovers. Gap defines free cash flow as net cash generated from operating activities less expenses relating to the purchases of property and equipment.

Outlook for 2010

Management expects earnings per share in fiscal 2010 in the range of $1.70 to $1.75. Operating margin is expected to increase approximately 13%. During fiscal 2010, Gap expects to open about 65 stores and close 110 stores, including repositioning. The long-term growth investments of Gap include rolling out the new Old Navy store model to an additional 200 stores; opening its first Gap stores in China and Italy; expanding Banana Republic in Europe; and adding more outlet stores in Canada, Europe and Asia.

Gap has established quite a track record of conservative capital management and cash returns to shareholders in the form of steady dividends and share repurchases. Since 2004, Gap has returned about $8 billion through share repurchases and dividends. The company intends to continue returning excess cash to shareholders in 2010 as well.

Gap increased its annual dividend by 18% to $0.40 per share, which represents a payout of about 25% of its 2009 earnings and a yield of about 2%. The company also recently announced a $1 billion share repurchase authorization.

Estimate Revisions Trend

In concurrence with the superior performance and earnings guidance, several analysts following the stock have revised their estimates for Gap. Over the past 30 days, 27 out of the 30 analysts following the stock have raised their earnings estimates for fiscal 2010, while none has moved in the opposite direction. The current Zacks Consensus Estimate for fiscal 2010 is $1.73 per share. Estimates appear to be trending up, with a year-over-year growth of 9.6%.

The current Zacks Consensus estimate for fiscal 2010 first quarter is $0.36 per share. Quarterly estimates appear to be trending up as well, with a year-over-year growth of 16.1%. Of the 29 analysts having a first-quarter earnings estimate, 10 have raised their estimates in the last 30 days, while only 3 have reduced them.

With respect to earnings surprises, the stock has moved up moderately over the last four quarters in the range of 2%-3%. The average remained positive at 2.7%. This implies that Gap has surged ahead of the Zacks Consensus Estimate by 2.7% on average over the last four quarters.

Our Recommendation
 
We maintain our Outperform recommendation on Gap as we anticipate it to perform well above the market. Gap is the leading player in the highly fragmented specialty retail sector, and has a market cap which is more than double its nearest competitor. The company has improved its business model by realigning its inventory to sales trends. In addition, the company has a strong balance sheet with adequate liquidity and no outstanding debt. Gap has also been active on the share buyback front and has recently increased its dividend.

However, Gap operates in a highly fragmented market and competes with national and local department stores and discount stores that offer products at fire sale prices. With the reduction in disposable income and a cut in consumer discretionary spending due to the prolonged economic downturn, the company is under severe stress to maintain profitability.
 

Anticipating Stock Dividend Increases

I am a big fan of companies that make it a regular habit of dialing up a dividend. This is why I have been such a proponent of the dividend aristocrat group. Nothing perturbs me more though than to buy into a 2% dividend stock that I believe will crank up its rate only to be forced to wait multiple years before seeing that increase. To counteract this here is a simple parachute that can increase your confidence that a rate will increase.

CFO Turnover

In order to be confident that our investigations will be worthwhile it is important to see how long key people stay with the company. If the CFO, CEO and others are spinning through the company like a revolving door then your company has changed or is changing- investigation into it's past may not indicate likely actions in the future. If however you find that current key positions have been with the company for some time then we can proceed with our investigation.

Investigate previous payout ratios

A payout ratio shows you what percentage of the net income is being paid out to shareholders. These rates can be anywhere from 10% -110% depending on the dividend paying company's industry and financial condition. Having a low rate doesn't necessitate a dividend increase, or conversely having what appears to be a higher rate doesn't mean that an increase won't happen. The task is to see what that payout ratio was the last few times an increase was done. This information can be found by understanding how the dividend payout ratio is calculated (Dividends / Net Income) and then retrieving the information from previous year's financial statements on morningstar or the company's own investor page.

Bring it together

People are creatures of habit. I have found that if you have the same CFO, CEO and the same payout ratio as the last time a dividend rate was increased you are very likely to see the same again. Conversely if these factors are not present you are very likely to end up disappointed despite what you might think is a fair current payout ratio. Simple but true.

Another Oppenheimer ARS Investor Unloads On New York AG Cuomo

 

Investors defrauded in the distribution of auction-rate securities deserve a voice. Sense on Cents is happy to provide it. Aside from feeling screwed by Wall Street banks and money managers in the distribution of auction-rate securities as a cash surrogate, investors now feel increasingly incensed by the lack of support in the judicial system and in selected attorneys general offices in our country.

The latest AG to feel the wrath of ARS investors is New York AG Andrew Cuomo for his recent settlement with Oppenheimer Holdings. Rather than reading my opinion of Cuomo's settlement, let's listen to an investor (who remains nameless for obvious reasons). In my opinion, this individual's letter speaks volumes and echoes the sentiments of thousands of investors who continue to hold the $150 BILLION in frozen ARS.

Wall Street, Washington, state AGs, and to a very large extent the media have done these investors an enormous disservice in not addressing and rectifying the fraud involved in the distribution of ARS. The investor writes:

Cuomo sold us out. As an Oppenheimer ARS victim and a New Yorker and someone who was manipulated out of more than a million dollars by Oppenheimer I was thrown under the bus. First we had too big to fail now we have too small to regulate.

Can anyone in the financial sector be found guilty of anything? What other industry allows criminals, when they get caught, to give back what they took, only if they have the money, over a very long period of time, possibly pay an insignificant fine, and neither admit nor deny any wrong doing? They get to go back to their companies as if nothing ever happened. They are free to dream up the next product they can scam us with. Knowing that the cycle will just repeat itself. If Madoff didn't basically give himself up he would still be out there pillaging and plundering investors. What chance does the average investor have out there?

The part that really sticks in my gut is this. Right before the ARS market crashed the CEO and other top executives, knowing the market was going to crash and keeping this info to themselves, were selling their own ARS. They were using their brokers to dump their own personal ARS on me, using the guise of "cash equivalent" until the very end. They got most of their money out, because they had inside information, and have full use of their money today while our money will be stuck for decades. By the summer this will all be forgotten by everyone except the victims. I can picture Lowenthal (Oppenheimer CEO) at his country club having a good laugh about this. After all, the hardest part of this settlement for Oppenheimer is to figure out how to prove to Cuomo every 6 months they have no extra money. Hardly a chore in this business environment and with their particular skills.

Some more food for thought. For the past 2 years Oppenheimer has been collecting fees daily for the auctions that still go off and fail. That's fees on $960 million. In reality, the Cuomo settlement is costing Oppenheimer little or nothing of their own money. If you subtract the fees they collect from the amount they owe it's close to a wash. Every AG across the country that got an ARS settlement settled for full redemption for the people of their state.

Cuomo is the only AG that got a settlement that favored the company that misrepresented the sale of ARS and did as close to nothing as you can get for the people of his state.

Remember, it's their money. They deserve it back. They should be first in line. Fraud is fraud. Theft is theft. America is supposed to be better than this.

Stock futures fall on 1-year anniversary of low

Stephen Bernard, AP Business Writer , On Tuesday March 9, 2010, 8:44 am

 NEW YORK (AP) -- Stock futures are falling ahead of Tuesday's opening, a year after the stock market hit bottom.

 With little in the way of economic reports or earnings to help drive shares higher, investors are taking a breather after major indexes rose the past few weeks.

 Stocks have surged over the last year since hitting 12-year lows.  The Dow Jones industrial average is up 61.2 percent during that stretch.  But traders' expectations about an economic recovery have also grown.  That means it will take more than just an occasional upbeat economic report or earnings release to send stocks up.

 Stocks are also seen as more fairly priced now, so it will take exceeding higher expectations for growth and economic recovery to help sustain a rally.

 Overseas, Asian stocks were little changed, while European shares fell.  A few disappointing earnings reports and renewed concerns about how banks will perform once stimulus measures are removed helped push major indexes in Europe lower.

10513。 Ahead of the opening bell, Dow Jones industrial average futures fell 25, or 0.2 percent, to 10,513. 1,132.80， Standard & Poor's 500 index futures fell 4.30, or 0.4 percent, to 1,132.80, while 100 index futures fell 3.75, or 0.2 percent, to 1,884.50.

In corporate news, Merck & Co. and Sanofi-Aventis SA said they are combining their animal health businesses. The joint business will control about 29 percent of the $19 billion market for pet and livestock medicines.

 Major indexes were narrowly mixed on Monday.  The Dow dipped 14 points.  The mixed trading came as investors saw no big reasons to move the market in either direction.  It also came one session after the Labor Department said the employers cut fewer jobs in February than expected, which helped the market rally.

While the report was positive, investors are likely to stay cautious until they see actual jobs growth.  High unemployment remains a major stumbling block to a sustained economic recovery.

Insurer American International Group Inc. announced Monday it reached a deal to sell a major foreign subsidiary to  MetLife 155 Inc. for $15.5 billion.  The deal was AIG's second major sale this month.  It has been shedding assets to help repay billions in government bailout money.

During the strongest periods of the market's rally over the past year, such deals would have been a reason to bid up stocks.

 Meanwhile, bond prices rose Tuesday.  The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.68 percent from 3.72 percent late Monday.

 The dollar rose against other major currencies, while gold fell.

6 Mind-boggling Info about China That May Interest You

     40% of Chinese small businesses either went bust or almost went bust during crisisA report mentioned that just after 9 months China claimed its small business sector was surviving the global recession, new figures surprisingly shown that about a whopping 40% of them either failed or close to failing between Nov 2008 and Mar 2009. This is indeed a big headache to the Chinese government who was considering withdrawing the huge stimulus packages late 2010.While the Chinese Academy of Social Sciences reported 20% of small businesses had crashed and another 20 per cent went "to the brink of bankruptcy" during the climax of the global financial crisis, Chen Naixiang (economist and director of the academy's research center) also reported that most of the 20% businesses on the brink of failure have been revivied thanks largely to the recovering economy. 

 

      Buy Chinese stocks if you wish to finance Chinese governmentChina has three main stock exchanges – Shanghai Stock Exchange, Shenzhen Stock Exchange and of course Hong Kong Stock Exchange. Of course unlike Hong Kong Stock Exchange, Shanghai Stock Exchange is still tighly controlled by the Chinese government. The Shanghai and Shenzhen Stock Exchanges have over 1,500 listed companies with combined total market capitalization of US$ 2,658.2 billion (2008) rivaling Hong Kong Stock Exchange (US$ 2,121.8 billion) as Asia's second largest stock market behind the Tokyo Stock Exchange (US$ 3,925.6 billion).However eight of the ten top largest stocks are state-controlled companies:
PetroChina (RMB 3,656.20 billion)Industrial and Commercial Bank of China (RMB 1,417.93 billion)Sinopec (RMB 961.42 billion)Bank of China (RMB 894.42 billion)China Shenhua Energy Company (RMB 824.22 billion)China Life (RMB 667.39 billion)China Merchants Bank (RMB 352.74 billion)Ping An Insurance (RMB 272.53 billion)Bank of Communications (RMB 269.41 billion)China Pacific Insurance (RMB 256.64 billion)   

      

        China's GDP may overtake U.S. as early as 2020Deutsche Bank's Chief Economist for Greater China, Jun Ma, told an investment conference in Hong Kong that China's growth will be underpinned by a rapid expansion in emerging market economies, which will account for about 70% of global GDP growth in the coming decade. China will "massively invest" in these emerging economies using its nearly trillion in foreign exchange reserves, extend its leverage by extending loans to the International Monetary Fund and allow the yuan to appreciate in preparation for the currency's potential reserve status.Jun Ma further added that by early 2020, China'S nominal GDP growth could surpass that of the United States within ten years, a period which will likely be accompanied by a gradual appreciation of the yuan. Ma also expect a final GDP recovery (quarter on quarter basis) to start by middle of 2010 (hopefully this fella is correct).

 

      By 2025, China will have 10 New York-sized citiesAccording to a research done by McKinsey Global Institute (MGI) in "Preparing for China's Urban Billion, China is projected to have a staggering 40 billion square meters of floor space by the year 2025. In another words China will be constructing 20,000 to 50,000 new skyscrapers of which each will be more than 30 floors. This is equivalent to a mind-boggling 10 (ten) New York Cities.
Also by 2025, up to 170 cities in China could meet planning criteria for mass-transit systems – more than twice the current number in Europe. Additionally, China will have up to 5 billion square meters of road and up to 28,000 kilometers of metro rail. China will also need to construct between 700 and 900 Gigawatts of new coal-fired power between 2005 and 2025.

 

      By 2030, China's cities will add 350 million people, more than the entire U.S. populationFrom the same research done by McKinsey Global Institute (MGI), it was projected that China's urban population will expand from 572 million in 2005 to 926 million in 2025 – an increase of 350 million Chinese city dwellers which is larger than today's United States entire population. By 2030, China's urban population will reach 1 billion people.Urban investment thus will reach over 24 trillion renminbi by 2025 or 93% of total Chinese fixed investment compared with about 79% in 2007. The urban consumption share of GDP will rise from 25% (or 3.9 trillion renminbi) in 2005 to 33% (or 32.7 trillion renminbi) by 2025. The township of Huaxi in the Yangtze River Delta is a great example of how the Chinese government embraced capitalism to lift 300 million people out of poverty during the last 3 decades.From a farm community with bamboo huts and ox carts in the 1970s, Huaxi is now an industrial and commercial powerhouse with many live in mansions and most have a car with per-capita income of 80,000 yuan (US$ 11,700) making Huaxi the China's richest village.

 

      China has cash to buy 20% of S&P500United States is still worry about China's military strength. Of course there's no way China will reveal her real (military) statistic since it's so fun watching U.S. sending its intelligence gathering information. Can you still remember the detention of 24 U.S. crews after the collision of U.S. EP-3E Aries II spy plane with Chinese fighter jet over the South China Sea back in 2001? United States demanded the return of its spy plane but China said it would only do so after completing its own inspection and collection of evidence. China was having fun stripping the spy plane naked for whatever military technologies or knowhow that China could use.But the strength of China may lies on its economy after all. Instead of engaging in wars, China may just start buying countries with its huge crates of cash. China's central bank recorded foreign exchange reserves of US.399 trillion as of end 2009 (23% jump compared to 2008) and this was achieved during global crisis, mind you. With this type of money China can buy almost 20% of S&P500, if the Chinese government goes crazy.

Why Investors Need to Understand China’s “Crucial Year”

About: Premier Wen Jiabao, Premier Wen, global financial crisis, China's economy, China investing, China economy, China Stock Digest, Chinese economy, China stock market

Every investor with a stake in China will be wondering what to make of Premier Wen Jiabao's declaration that this is China's "Crucial Year."  We'll be hearing that phrase a lot. We'll be seeing lots of boring essays and lengthy speculation. At the China Stock Digest we're looking for brevity and clarity, so we're going to give you the shortest possible read, in point form.

• 8 percent GDP growth is the official target. Don't believe it. That has been the target for the past five years and China has always exceeded its goal.
• 3% inflation is now the official target. Don't be surprised if China's inflation rises to four percent. The flood of lending last year has created tremendous inflationary pressure.
• A bearish indicator would be any inflation level above 4 percent. This will trigger urgent measures to clamp down on lending, putting pressure on business expansion.
• 7.5 trillion yuan is the government's target for lending, substantially less than the flood of money, 9.4 trillion yuan (or $1.4 trillion), lent by banks last year. The gusher of lending in January 2010 equaled three months of last year's lending so it will be tough for the government to meet it's target without crimping business lending

What are western investors to make of Premier Wen's core declaration: "This is a crucial year for continuing to deal with the global financial crisis, maintaining steady and rapid economic development and accelerating the transformation of the pattern of economic development." There is much coded information in this very crowded sentence:

• "dealing with the global financial crisis" means keeping a lid on the value of the yuan so that China won't be shut out of the recovery of developed nations
• "maintaining steady and rapid economic development" might seem contradictory but it means striking a balance between the fastest possible growth while holding down inflation…a very delicate balance.
• "accelerating the transformation of the pattern of economic development" means shifting the resources of the state even further towards social welfare programs, so that impoverished rural Chinese, and city dwellers without health insurance, will be inclined to spend rather than save.

Finally, Premier Wen's description of this year as a crucial year:

• This suggests that 2010 will be a turning point for China. With the rest of the world still weakened, this year will be crucial in achieving China's goal to create a pattern of sustainable prosperity and growth to be envied by the rest of the world.
• Being a crucial year, 2010 will involve some tough choices, changes and volatility. But Beijing clearly sees much better times just around the corner.