Cardium Oil Stock Valuations: Have We Seen The Peak?

Aftermarket on Wednesday March 17, one of the Calgary oil and gas boutique securities firms, Peters & Co., issued an updated Cardium report - which in a nutshell said

1. They estimated decline rates on wells were higher than expected (meaning the production levels of the wells dropped faster than expected)…
2. …which means operating costs are higher as costs get amortized over a smaller production base…
3. …and once you factor in the very high land costs recently paid by some companies, the break even on "full cycle", or all-in costs, in some of the Cardium plays (and there are several) were up to $75/bbl in some cases.

What this means for investors is that it's quite possible the next few buyouts could be done at a lower valuation than the most recent three (Berens Energy, Result Energy and West Energy).

The Peters report rightfully pointed out that the Cardium data set is STILL so SMALL (only 35 wells over a huge area - the formation stretches 1000 km) that these results could be dramatically revised - up or down - in the next quarter as even more wells come onstream.

One big revision potentially happened today, Monday March 22, as Bellatrix Explorations (BXE-TSX) announced a boomer well of 910 barrels of oil equivalent per day (boe/d), in their Willesden Green Cardium play (81% oil, 19% natural gas).  There was no mention of how long the duration the production test was - 12 days, 12 hours, 12 minutes - investors don't know.

This would belie the Peters' report conclusion - but Bellatrix also noted that two Cardium wells hit only 100 boe/d, which is 50%-60% of average IP (initial production) rates in the Cardium so far.

Between the Cardium being SO popular, this negative report and my strong profit position, the Oil and Gas Investments Bulletin portfolio locked in profits of 60%, 70% (over 2 months) and 172% (over 6 months) on its remaining Cardium positions in the first two weeks of March, not including the West Energy take-over.

How future valuations will be affected, only time will tell.

As background, through the second half of 2009, analysts quickly moved the new Cardium horizontal well play up to #2 on their comparison of profitable plays in the Western Canadian Sedimentary Basin (WCSB) based on some initial well results. (Other plays (or formations) include the Viking, the Lower Shaunavon, the Bakken, the Pekisko etc.)

The market started smoking "hopium" and quickly convinced itself that with improvements in completion techniques (fracking), the Cardium economics could approach the Bakken, and that production levels would be consistent across every acre of Cardium lands.

Stocks started to fly upward.  Then we saw three take-overs in the Cardium in the first three months of 2010 - Berens Energy, Result Energy and West Energy (which was in the OGIB portfolio).

When analysts backed out their estimates of the value of the production in those buyouts, they came up with some very high guesses as to what the value of the raw Cardium lands were for the acquiring companies. (And of course, it was to their benefit to have that # be as big as possible, so they could put the spin on that the rest of the Cardium players still had lots of room to move…)

That caused stocks like Vero Energy and Bellatrix in my portfolio to fly up and up, and I took profits on the day West Energy was taken out - which so far, was very, very close to the top.

The Peters report said that from the limited number of wells to date, first year declines are 65%-80%.  Using a hypothetical example, if a well has an Initial Production (IP) rate of 200 bopd in the first month, in one year it will only be producing 40-70 bopd.

They estimated the break-even price per barrel on the play - depending on which part of the Cardium - was $58 - $66 on a half cycle basis.  Think of that as meaning just the operating costs, and not including or amortizing in land costs.  As comparison, the Bakken break-even price is more like $40.

And once land costs are included - especially at some of the land prices being paid recently, up to $4 million per section - the break-even price goes up to $75/bbl.  There is precious little profit margin there!

(This is similar to what happened in the US shale gas plays.)

As an example, the report estimated full cycle economics in the East Pembina part of the Cardium - at $4 million per section land value - having only single digit return at US$80/bbl.

The Cardium has usually been ranked by analysts as #2 in profitability of the WCSB plays.  The Peters report estimated the median return of the 8 reservoir plays to be 44%, and the horizontal wells at Garrington in the Cardium were dead last.  The Garrington well profile (how long it will produce at what rate) was downgraded 15% by Peters, the most of any Cardium play.

Bull Of The Day: SanDisk Corp. (SNDK)

SanDisk ( 33.8175 0.00 0.00%) has a strong product portfolio and is a significant player in the U.S. flash memory market. The company posted very encouraging fourth quarter 2009 results, exceeding the management guidance.

SanDisk witnessed major gains in the OEM business and higher product revenue and has provided a decent guidance for the first quarter. The company has reduced its cost of production significantly, which in turn has improved gross margin substantially in 2009. SanDisk is cash rich and is aggressively reducing capital expenditure outlay, while reducing convertible debt. In order to reduce inventory level, the company is slowing down in-house NAND supply.

Although SanDisk is showing signs of revival, its customer concentration risk is a factor. We are optimistic about the long-term growth story of SanDisk and upgrade the stock to Outperform.

Stock Buy: Estee Lauder

Estee Lauder ( 64.95 0.00 0.00%) beat second-quarter consensus estimates by 4.9% and guided higher for the third quarter.

Company Description

Estee Lauder is a leading global cosmetics firm with a diversified portfolio of well-established brands including Estee Lauder, Aramis, Clinique, Bobbi Brown, and La Mer. The company is also the global licensee of Tommy Hilfiger, Donna Karan, and Sean John.

Recent Results

On Jan 28, Estee Lauder had second-quarter revenues of $2.26 billion, an increase of 11%. Reported earnings were $1.28 per share, beating the Zacks Consensus Estimate by $0.06.

Bullish Outlook

For the third quarter, EL expects revenue growth of 9% to 12% and EPS of $0.20-$0.30. The Zacks Consensus Estimates are slightly more bullish and expect Estee lauder to report EPS of $0.31. The consensus is up $0.05 in the last two months.

The company's outlook for fiscal year 2010 calls for EPS of $2.55-$2.73. Again, the analysts in the Zacks consensus are more optimistic and estimate that Estee Lauder will earn $2.77 per share. Three months ago, the consensus was $2.28 per share.

Estee Lauder is scheduled to report third-quarter results at the end of April.

 

Last Week's Growth and Income Zacks Rank Buys

Nordson (68.93 0.00 0.00%) easily topped first-quarter EPS estimates by 10 cents. Management also guided higher for the second quarter. Nordson has beaten the Zacks Consensus Estimate in four of the last five quarters by an average of 15.1%. Our previous article on Nordson is here.

Brown-Forman  Brown-Forman reported 73 cents per share, which was two cents better than the Zacks Consensus Estimate. This spirits company has current dividend yield of 2.2%. For more details, click here.

Phillips-Van Heusen (55.43 0.00 0.00%)is a global designer and marketer of branded apparel. Its EPS were inching higher before the company announced that it was going to acquire Tommy Hilfiger. Click here to read more about PVH.

Unitrin ( 28.08 0.00 0.00%) is a Zacks Rank #2 stock. Analysts expect UTR to have long-term EPS growth of 20%, while offering a dividend yield of 3.7%. For a closer look, go here.

Bear Of The Day: Eni SpA

Following the presentation of the company's 2010-2013 strategic plans, we are downgrading Eni SpA ( 46.53 0.00 0.00%) ADRs to Underperform from Neutral. Our primary concerns for the company are the lack of a clear dividend policy, a declining dividend yield trend, cyclical low returns, doubts over rising competitive threats to its core gas business and quality of the upstream growth profile.

Eni lowered its production growth target to 2.5% from 3.5%. We believe that this growth target also carries a higher degree of delivery risk as the bulk of it comes from risky projects in Iraq, Venezuela and Kazakhstan.

In addition, management also hinted about a lower earnings visibility for its Gas trading business. We now set a target price of $42 per share.

Canadian Active ETFs Poised For Growth

As the Active ETF space in the United States has grown quite rapidly in recent months, with total assets in excess of $270 million as of March 1, 2010, the Canadian Active ETF space is still in relative infancy. Where the US market currently has 5 distinct players in the field, with lots more lining up to launch Active ETFs, the Canadian market is monopolized by just one player - Horizons AlphaPro, managing around C$100 million in these products.

Why is there potential in the Canadian market? - The Canadian mutual fund industry managed around $584 billion in assets as of Jan 2010, according to the Investment Funds Institute of Canada.  While that looks small relative to the $12 trillion US mutual fund industry, if you take into account that Canada's population is 1/10th that of the US, the figure makes more sense. Here's another fact, this study from July 2007, which received a lot of attention, concluded that Canada's mutual fund industry is the most expensive in the world for investors. The average Canadian equity mutual fund had an expense ratio of 2.56%, compared to 1.29% worldwide and 1.11% in the US. While the numbers have likely improved since then, Canada is quite likely still one of the most expensive places to purchase a mutual fund. And that's what should make an ETF structure all the more attractive to Canadians, given all their advantages, and especially the cost efficiencies they provide over mutual funds.

Despite this, the only player in the Canadian Active ETF space is Horizons AlphaPro, which started off by launching a managed S&P/TSX 60 ETF in Jan 2009. Since then, they have launched a seasonal rotation product, the popular Gartman ETF - run by Dennis Gartman, and recently 3 more conventional value, dividend and growth strategies managed by well-reputed Canadian money managers. As an industry though, there are only 4 main ETF providers in Canada - Claymore Investments, Horizons, BMO Financial and iShares. And of these, Claymore has already indicated their disinterest in the Active ETF space. That leaves the arena wide open for an issuer to challenge AlphaPro's monopoly, which they are clearly enjoying seeing how a majority of their Active ETFs are able to charge a hedge-fund style performance fee, on top of a management fee.

Disclosure: No positions in above-mentioned names.

More Bank Failures, Tally Hits 37

Although the economy is showing signs of a gradual recovery with large financial institutions stabilizing, tumbling home prices, soaring loan defaults and rising unemployment continue to take their toll on small banks.
 
As a result, U.S. regulators on Friday shuttered seven more banks in Alabama, Georgia, Minnesota, Ohio and Utah. This brings the total number of bank failures to 37 so far in 2010, compared to 140 in 2009, 25 in 2008 and 3 in 2007.
 
While we expect economic recovery to gain momentum soon, there remain lingering concerns in the banking industry. Failure of both residential and commercial real estate loans as a result of the credit crisis has primarily hurt banks. As the industry tolerates bad loans made during the credit explosion, the trouble in the banking system goes even deeper, increasing the possibility of more bank failures.
 
The failed banks are:
 
Draper, Utah-based Advanta Bank Corp. with $1.6 billion in total assets and $1.5 billion in total deposits.
 
Ellijay, Georgia-based Appalachian Community Bank with $1 billion in assets and about $917.6 million in deposits.
 
Hiawassee, Georgia-based Bank of Hiawassee with about $377.8 million in assets and $339.6 million in deposits.
 
Fort Deposit, Alabama-based First Lowndes Bank with $137.2 million in assets and $131.1 million in deposits.
 
Duluth, Georgia-based Century Security Bank with $96.5 million in assets and $94 million in deposits.
 
Parma, Ohio-based American National Bank with $70.3 million in assets and $66.8 million in deposits.
 
Aurora, Minnesota-based State Bank of Aurora with $28.2 million in assets and $27.8 million in deposits.
 
These bank failures will deal another blow to the Federal Deposit Insurance Corporation's (FDIC) fund meant for protecting customer accounts, as it has been appointed receiver for these banks.

When a bank fails, FDIC reimburses customers for their deposits of up to $250,000 per account. The outbreak of bank failures has significantly stretched the regulator's deposit insurance fund. However, the FDIC has about $66 billion in cash and securities available in reserve to cover losses arising from bank failures. Also, the FDIC has access to the Treasury Department's credit line of up to $500 billion.
 
The seven failed banks together would cost the FDIC's Deposit Insurance Fund about $1.28 billion.
 
The Advanta Bank is expected to cost the deposit insurance fund about $635.6 million, Appalachian Community Bank will cost about $419.3 million, Bank of Hiawassee will cost about $137.7 million, First Lowndes Bank will cost about $38.3 million, Century Security Bank will cost about $29.9 million, American National Bank will cost about $17.1 million and State Bank of Aurora will cost the insurance fund about $4.2 million.
 
Luverne, Alabama-based First Citizens Bank will assume the deposits and assets of First Lowndes Bank.
 
Carrollton, Georgia-based Community & Southern Bank will assume the deposits and assets of Appalachian Community Bank.
 
Citizens South Bank of Gastonia, N.C., will assume the deposits and assets of Bank of Hiawassee.
 
Thomaston, Georgia-based Bank of Upson has agreed to assume the assets and deposits of Century Security Bank.
 
Ashland, Wisconsin-based Northern State Bank has agreed to assume the deposits and assets of State Bank of Aurora.
 
Wilmington, Ohio-based National Bank and Trust Co. will assume the assets and deposits of American National Bank. However, the FDIC was unable to find a buyer for Advanta Bank.
 
In the fourth quarter of 2009, the number of banks on the FDIC's list of problem institutions grew to 702 from 552 in the third quarter. This is the highest since the savings and loan crisis in 1994.

Increasing loan losses on commercial real estate are expected to cause hundreds more bank failures in the next few years. The FDIC anticipates bank failures to cost about $100 billion over the next three years.

The failure of Washington Mutual in 2008 was the largest in U.S. banking history. It was acquired by JPMorgan Chase ( 43.74 0.00 0.00%). The other major acquirers of failed institutions since 2008 include Fifth Third Bancorp ( 13.43 0.00 0.00%), U.S. Bancorp ( 26.22 0.00 0.00%), Zions Bancorp ( 22.61 0.00 0.00%), SunTrust Banks ( 27.09 0.00 0.00%), PNC Financial ( 59.85 0.00 0.00%), BB&T Corporation (: 32.00 0.00 0.00%) and Regions Financial ( 7.62 0.00 0.00%).

We expect loan losses on the commercial real estate portfolio to remain high for banks that hold large amounts of high-risk loans.

Ciena Acquires Nortel’s Assets

Ciena Corporation ( 15.38 0.00 0.00%) announced that it has completed the acquisition of substantially all of the optical networking and Carrier Ethernet assets of Nortel Networks' ( 0.32 0.00 0.00%) Metro Ethernet Networks (MEN) business for $773.8 million in cash.
 
Ciena said that the purchase price will be subject to adjustments based upon the level of net working capital transferred to Ciena at closing, which is currently estimated to result in a downward adjustment to the aggregate purchase price of approximately $62 million.
 
Ciena has made a series of acquisitions to expand its addressable market and enter new growth markets. Ciena will take over Nortel's long-haul optical transport portfolio, metro optical Ethernet switching and transport solutions, Ethernet transport, aggregation and switching technology, multiservice SONET/SDH product families and network management software products.
 
Ciena expects the deal to be significantly accretive to its operations in fiscal 2011. Ciena has completed the applicable regulatory reviews in the United States and Canada. We believe that the deal has the potential to drive significant growth in Ciena's rapidly expanding metro Ethernet business and optical networking products.
 
The Nortel deal would be the largest ever for Ciena and would also help it expand geographically and provide better cross-selling opportunity. It will also enhance the company's existing Canada-based development resources, making Ottawa its largest product and development center.
 
Also, the merger could double Ciena's revenue, as Nortel's Ethernet business generated approximately $1.18 billion in revenue in 2009.
 
While, the Nortel acquisition will enable revenue growth, integration risk is a major issue in our opinion. Ciena will incur integration-related costs of approximately $180 million in the first 12 months of closing the deal, which will also dilute its earnings.
 
The deal will also pull Ciena into a net debt (debt exceeding cash) position and result in lower operating cash flow. The company recently raised $375 million in convertible senior notes to help finance the purchase of Nortel's assets.
 
To benefit from the acquisition, Ciena has appointed Philippe Morin, previously president of Nortel's MEN division, as Ciena's Senior Vice President, Global Products Group. The company plans to announce the combined portfolio update on March 22, 2010.
 
Although, the deal will be significantly accretive to Ciena's operations in fiscal 2011 and drive much higher revenue and profit growth, near-term results are expected to be pressured due to increased expenses related to the acquisition of Nortel.

The Stock Market’s Rate Of Ascent Is Changing

I feel the market is tilting? Its rate of ascent since the March 9 low has continually and inexorably been flattening with the rate of change, or slope, shifting from steep to nearly flat as depicted in the following charts (click on image to enlarge):

We all look back fondly to last year when, if you had the courage, you could buy nearly any stock and see it appreciate handsomely within weeks or months. Then in November, rather then bouncing off the lower trendline and heading to new highs, the Index began barely crawling along the lower boundary trendline. On January 19, it hit the magic 1150 level and broke below the support.

We hoped that the break would be minor and the bull market continue albeit tempered. But those hopes were dashed when the lower boundary of that less steep upward channel was also broken. The correction finally found an intra-day bottom at 1044 followed by the most recent nearly 10% bounce.

Paul Lim in Sunday's NYTimes recaps the challenges of the second year of a bear market recovery:

• In nine of the last 10 market recoveries going back to 1932, stocks gained ground in the second year after a bear market…[but]…if the rally continues through 2010, the year "is unlikely to be anywhere near as rewarding as the past one,"
• … second years of rallies are almost always less fruitful than the first. Only twice has the S.& P. 500 index gained more than 12 percent in the second year after a market bottom. And the average gain was just 9 percent,
• …Year 2 has been particularly challenging after bear markets related to recessions. In the second year after the most recent bears in this category - which spanned from 1980-82 and 2000-02 - stocks gained only 2 percent and 8 percent, respectively.
• … using 10-year average corporate profits, the market's price-to-earnings ratio is 20.6. That's noticeably higher than the historical average of 16. In periods when the market's P/E ratio has been between 19 and 25, the average real return for stocks over the subsequent decade has been 3.8 percent after inflation…Assuming that inflation is around 3 percent, stocks are likely to return less than 7 percent, which is lower than their long-term historical gain of around 10 percent a year.

If last week marks another top, then the market's upward bias will be further compromised and trend flattened even more:

I looked at all my postings since January 1 and they reflect the ambiguity of the market itself. In January, I write about "dominoes" falling in a long anticipated and significant correction. In February, I advise using bounces as opportunities to further lighten up. Finally, in March, I assemble watchlists of stocks that could lead the market as it moves in the next leg of the bull market.

While there's no market momentum, I got swept up in the excitement of 9 consecutive up-days and identify one bright spot, stocks in Retail-Restaurants group. Tread carefully, however, because this market can still move in either direction when volume returns.

Stocks To Watch On Monday 22 March

(EEGI.PK: 0.02 -0.001 -4.76%) -Eline Entertainment Group is a penny stock to watch. The stock is catching the attention of market players after the earnings report. the stock exploded to the upside Friday morning after closing above $0.020 on Thursday. Resistance is now located at $0.025 but if EEGI can push up into the $0.027's, I feel it could retest $0.035 or above. Chart looks bullish. Keep an eye for a possible breakout over $0.025.

-American International Group closed just above the 5 day moving average on Friday amidst crappy stock market conditions.

-OceanFreight Inc. actually showed some nice strength on Friday despite the stock market sell off. Resistance remains at $0.84 and I would be a buyer on a break above that level.

- Plug Power Inc. continues to pop and then drop. I like pullbacks under the 5 day moving average to buy as a swing trade. I plan to get even more aggressive under $0.58 next week if the opportunity presents itself.

- Lloyds Banking Group PLC skyrocketed Friday after the company released the following news: The company said it expects to return to a profit this year, helped by a steeper-than-expected drop in bad debts and further cost cutting. The next major resistance is located at $3.90.

- Hemispherx BioPharmaI - I like the stock as long as it remains above $0.69.

 - Medivation - I own the stock and like it for the long term.

 -XenoPort - The stock is pulling back to the 10 day moving average after the recent spike higher. If you like XNPT, this would be a great area to buy.

- Cell Therapeutics, Inc. - The stock closed below key support level of 0.96 on Friday for the first time in over two weeks, this is something worth watching.It is still a bearish signal. The next support level is 0.90 and 0.96 now becomes resistance. I am now being cautious until we close back over 0.96.

Friday's Trend Reversal Alerts - Bearish

APC - Anadarko Petroleum
BHI - Baker Hughes
CMI - Cummins
COG - Cabot Oil & Gas
FCX - Freeport McMoRan Copper & Gold
FTI - FMC Technologies
MEE - Massey Energy Company
X - United States Steel Corporation

Friday's Trend Reversal Alerts - Bullish

AET - Aetna Inc
AGN - Allergan Inc
AMT - American Tower Corporation
ABC - AmerisourceBergen Corporation
AMGN - Amgen Inc
AON - Aon Corporation
AVY - Avery Dennison Corporation
BBY - Best Buy Company Inc
BIIB - Biogen Idec Inc
BA - Boeing Company
CI - CIGNA Corporation
CAH - Cardinal Health Inc
CEPH - Cephalon Inc
CINF - Cincinnati Financial Corporation
CTAS - Cintas Corporation
CSC - Computer Sciences
GLW - Corning Inc
CVH - Coventry Health Care Inc
DRI - Darden Restaurants Inc
D - Dominion Resources Inc
DNB - Dun & Bradstreet Corporation
EXPD - Expeditors Intl of WA Inc
ESRX - Express Scripts Inc
FHN - First Horizon National Corporation
GD - General Dynamics
GPC - Genuine Parts Company
GENZ - Genzyme Corporation
GS - Goldman Sachs Group Inc
HOG - Harley-Davidson Inc
HON - Honeywell Intl Inc
HSP - Hospira Inc
KSS - Kohl's Corporation
LSI - LSI Corporationoration
LMT - Lockheed Martin
MAR - Marriott Intl
MKC - McCormick & Company
MCK - McKesson Corporation
MHS - Medco Health Solutions Inc
MDP - Meredith Corporation
PCS - Metropcs Communications Inc
MCO - Moody's Corporation
MYL - Mylan Inc
JWN - Nordstrom Inc
ORLY - O'Reilly Automotive
JCP - J.C. Penney Inc
PM - Philip Morris International
PGR - Progressive Corporation
PRU - Prudential Financial Inc
Q - Qwest Communications International Inc
COL - Rockwell CollinsR - Ryder System Inc
SCG - SCANA Corporation
HOT - Starwood Hotel & Resort World
THC - Tenet Healthcare
TIE - Titanium Metals Corporation
TSN - Tyson Foods Inc
UTX - United Technologies Corporation
WLP - WellPoint Inc

Stocks that have a Bearish Engulfing pattern at the end of their daily chart

SE - SPECTRA ENERGY CORP
MTG - M G I C INVT CORP WIS
CSE - CAPITALSOURCE INC
IR - INGERSOLL RAND CO
ARM - ARVINMERITOR INC
CAL - CONTINENTAL AIRLINES
CBG - CB RICHARD ELLIS GR
AFL - AFLAC INC
DISH - Dish Network A
AMX - America Movil SA
PEG - Public Service Ente
URBN - Urban Outfitters, Inc.
NYX - NYSE EURONEXT INC
CPWR - Compuware Corporation
TIN - TEMPLE INLAND INC
HGSI - Human Genome Sciences
AEO - American Eagle Outf
CHRS - Charming Shoppes, Inc.
LEG - LEGGETT & PLATT INC
WNC - WABASH NATIONAL CORP
STEC - STEC Inc
FBR - Votorantim Adr
AMP - AMERIPRISE FINANCIAL
KBH - Kaufman and Broad H
RRD - Donnelley (RR) & Sons
TV - GRUPO TELEVISA S A
ANF - ABERCROMBIE & FITCH CO
SRZ - Sunrise Senior Livi
ETN - EATON CORP
CBL - CBL and Associates
JBHT - J.B. Hunt Transport
AINV - APOLLO INVT CORP
MHP - MCGRAW HILL COS INC
DHR - DANAHER CORP
MJN - Mead Johnson Nutrition
AMB - AMB Property Corp
NVE - SIERRA PACIFIC RESO
DBRN - Dress Barn, Inc. (The)
TDC - Teradata Corp
RAX - Rackspace Hosting Inc
VTR - Ventas Inc
TAM - TAM S.A.
CECO - Career Education Co
FO - FORTUNE BRANDS INC
KEP - KOREA ELECTRIC POWE
PKI - PERKINELMER INC
PH - PARKER HANNIFIN CORP
EXR - EXTRA SPACE STORAGE
JAZZ - Jazz Pharmaceutical
FAF - FIRST AMERICAN CORP
VLY - VALLEY NATIONAL BAN
PMTC - Parametric Technolo
PETM - PETsMART, Inc.
PSS - Collective brands
PSYS - Psychiatric Solutions
CRM - SALESFORCE.COM INC
ALTH - Allos Therapeutics
IPXL - Impav labs Inc
ICON - Candie's, Inc.
BEN - FRANKLIN RESOURCES INC
SHLD - KMart Corp
WPI - WATSON PHARMACEUTICALS
O - Realty Income Corp
MXB - MSCI Inc
RYL - RYLAND GROUP INC
PSA - PUBLIC STORAGE INC
SNPS - Synopsys, Inc.
TPX - TEMPUR-PEDIC INTL INC
OKE - ONEOK INC
PL - PROTECTIVE LIFE CORP
DOV - DOVER CORP
CTRP - CTRIP.COM INTL LTD ADS
VCI - VALASSIS COMM INC
SFL - SHIP FINANCE INTL LTD
BCSI - Blue Coat Systems Inc
NLC - NALCO HOLDING CO
GRS - GAMMON GOLD
HRS - HARRIS CORP
KCI - KINETIC CONCEPTS INC
WERN - Werner Enterprises
VRX - I C N PHARMACEUTICAL
CFN - Carefusion Cp
PGH - Pengrowth Energy Trust
NKTR - Nektar Therapeutics
GMR - GENERAL MARITIME CORP
WMS - W M S INDUSTRIES INC
DCTH - Delcath Systems, Inc.
NTRI - Nutri/System Inc
ATHN - athenahealth Inc
HS - HEALTHSPRING INC
ESI - I T T EDUCATIONAL SVCS
OLN - OLIN CORP
PNR - PENTAIR INC
IOC - Interoil Cp
WRLD - World Acceptance Co
CBST - Cubist Pharmaceutical
CLP - COLONIAL PPTY TRUST
SPPI - Spectrum Pharmaceutical
PEI - PENNSYLVANIA R E I T
SMRT - Stein Mart, Inc.
WG - WILLBROS GROUP INC
EBIX - Ebix Inc
GRA - GRACE W R & CO NEW
SMTC - Semtech Corporation
SKT - TANGER FCTRY OUTLET
CVC - CABLEVISION SYSTEMS
GWW - WW Grainger Inc
TKR - TIMKEN CO
DWA - DreamWorks Animation
WBS - Webster Financial Cp
SUG - SOUTHERN UNION CO
BCR - BARD C R INC
DVA - DaVita Inc
VSEA - Varian Semiconductor
VAR - Varian Medical Systems
TMK - TORCHMARK CORP
CWTR - Coldwater Creek, Inc.
JCOM - JFAX.Com Inc.
AMG - AFFILIATED MNGRS GR
BWS - BROWN SHOE CO INC
SYKE - Sykes Enterprises
CAAS - CHINA AUTOMOTIVE SY
ALB - ALBEMARLE CORP
HCC - H C C INSURANCE HLD
OFC - CORPORATE OFF PPTYS
BLUD - Immucor, Inc.
ABFS - Arkansas Best Corporation
ARBA - Ariba, Inc.
AEA - ADVANCE AMER CSH AD
HUBG - Hub Group, Inc.
ASIA - AsiaInfo Holdings
HRL - HORMEL FOODS CORP
ENR - ENERGIZER HOLDINGS INC
KRC - KILROY REALTY CORP
GMT - G A T X CORP
FOSL - Fossil, Inc.
NVTL - Novatel Wireless Inc
CPRT - Copart, Inc.
XRTX - XYRATEX LTD
SFSF - SuccessFactors Inc
AYR - AIRCASTLE LIMITED
HTS - Hatteras Financial
SIGM - Sigma Designs, Inc.
BEZ - BALDOR ELECTRIC CO
EZPW - EZCORP, Inc.

New 52-week High stocks

ABCO Advisory Board Co.
ADP Automatic Data Processing, Inc.
ADTN ADTRAN, Inc.
AFCE AFC Enterprises Inc.
ALXN Alexion Pharmaceuticals, Inc.
AMED Amedisys
ATEC Alphatec Holdings Inc.
ATTD Attitude Drinks Inc.
BBBY Bed Bath & Beyond, Inc.
BCPC Balchem Corp.
BIIB Biogen Idec Inc.
BLKB Blackbaud Inc.
BOKF BOK Financial Corp.
BWLD Buffalo Wild Wings Inc.
CAKE Cheesecake Factory Inc.
CBEH China Integrated Energy, Inc.
CBST Cubist Pharmaceuticals, Inc.
CCRN Cross Country Inc.
CCRT CompuCredit Holdings Corp.
CELG Celgene Corp.
CEPH Cephalon, Inc.
CFNL Cardinal Financial Corp.
CHBT China-Biotics Inc
CHRD Chordiant Software, Inc.
CHSI Catalyst Health Solutions, Inc.
CINF Cincinnati Financial Corp.
CMCSA Comcast Corp.
CMCSK Comcast Corp.
CNMD CONMED Corp.
CNSL Consolidated Communications Holdings Inc.
COHR Coherent, Inc.
CPKI California Pizza Kitchen
CREG China Recycling Energy Corp.
CTDH CTD Holdings Inc.
CTEL City Telecom (H.K.) Ltd.
CTHR Charles & Colvard Ltd.
CTSH Cognizant Technology Solutions Corp.
CVTI Covenant Transportation Group Inc.
DIOD Diodes Inc.
DISCK Discovery Communications Inc.
EBAY eBay, Inc.
EMIS Emisphere Technologies, Inc.
EPIC Epicor Software Corp.
ERIE Erie Indemnity Co.
EXBD Corporate Executive Board Co.
EXPD Expeditors Intl of Washington, Inc.
FAST Fastenal Co.
FFIC Flushing Financial Corp.
FNFG First Niagara Financial Group, Inc.
FORD Forward Industries, Inc.
FPIC FPIC Insurance Group, Inc.
FULT Fulton Financial Corp.
FWRD Forward Air Corp.
GLAD Gladstone Capital Corp.
GSIC GSI Commerce, Inc.
GYMB Gymboree Corp.
HALO Halozyme Therapeutics Inc.
HDSN Hudson Technologies, Inc.
HIBB Hibbett Sports Inc.
HSIC Henry Schein, Inc.
HUSA Houston American Energy Corp.
IACI InterActiveCorp
IART Integra LifeSciences Holdings Corp.
IBKC Iberiabank Corp.
IBTGF Intl Barrier Technology Inc.
INDM United America Indemnity, Ltd.
INET Internet Brands, Inc.
INSU Insituform Technologies Inc.
INTU Intuit, Inc
ITMN InterMune Pharmaceuticals, Inc.
JKHY Jack Henry & Associates, Inc.
JOSB Jos. A. Bank Clothiers, Inc.
KEYN Keynote Systems, Inc
LANC Lancaster Colony Corp.
LDSH Ladish Co., Inc.
LIFE Life Technologies Corp
LINC Lincoln Educational Services Corp.
LINTA Liberty Media Holding Corporation Interactive
LMIA LMI Aerospace, Inc.
LOPE Grand Canyon Education Inc.
LPNT LifePoint Hospitals, Inc.
LSTR Landstar System, Inc.
MBFI MB Financial, Inc.
MIDD Middleby Corp.
MLKNA Medlink Intl. Inc.
MNRTA Monmouth Real Estate Investment Corp.
MTSC MTS Systems Corp.
MWIV MWI Veterinary Supply Inc
MYL Mylan Laboratories Inc.
NABI Nabi
NDSN Nordson Corp.
NIHD NII Holdings, Inc.
NMTI NMT Medical, Inc.
NSIT Insight Enterprises, Inc.
NUVA NuVasive, Inc.
ODSY Odyssey Healthcare Inc.
OMPI Obagi Medical Products, Inc.

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.

More Bank Failures, Tally Hits 37

Although the economy is showing signs of a gradual recovery with large financial institutions stabilizing, tumbling home prices, soaring loan defaults and rising unemployment continue to take their toll on small banks.
 
As a result, U.S. regulators on Friday shuttered seven more banks in Alabama, Georgia, Minnesota, Ohio and Utah. This brings the total number of bank failures to 37 so far in 2010, compared to 140 in 2009, 25 in 2008 and 3 in 2007.
 
While we expect economic recovery to gain momentum soon, there remain lingering concerns in the banking industry. Failure of both residential and commercial real estate loans as a result of the credit crisis has primarily hurt banks. As the industry tolerates bad loans made during the credit explosion, the trouble in the banking system goes even deeper, increasing the possibility of more bank failures.
 
The failed banks are:
 
Draper, Utah-based Advanta Bank Corp. with $1.6 billion in total assets and $1.5 billion in total deposits.
 
Ellijay, Georgia-based Appalachian Community Bank with $1 billion in assets and about $917.6 million in deposits.
 
Hiawassee, Georgia-based Bank of Hiawassee with about $377.8 million in assets and $339.6 million in deposits.
 
Fort Deposit, Alabama-based First Lowndes Bank with $137.2 million in assets and $131.1 million in deposits.
 
Duluth, Georgia-based Century Security Bank with $96.5 million in assets and $94 million in deposits.
 
Parma, Ohio-based American National Bank with $70.3 million in assets and $66.8 million in deposits.
 
Aurora, Minnesota-based State Bank of Aurora with $28.2 million in assets and $27.8 million in deposits.
 
These bank failures will deal another blow to the Federal Deposit Insurance Corporation's (FDIC) fund meant for protecting customer accounts, as it has been appointed receiver for these banks.

When a bank fails, FDIC reimburses customers for their deposits of up to $250,000 per account. The outbreak of bank failures has significantly stretched the regulator's deposit insurance fund. However, the FDIC has about $66 billion in cash and securities available in reserve to cover losses arising from bank failures. Also, the FDIC has access to the Treasury Department's credit line of up to $500 billion.
 
The seven failed banks together would cost the FDIC's Deposit Insurance Fund about $1.28 billion.
 
The Advanta Bank is expected to cost the deposit insurance fund about $635.6 million, Appalachian Community Bank will cost about $419.3 million, Bank of Hiawassee will cost about $137.7 million, First Lowndes Bank will cost about $38.3 million, Century Security Bank will cost about $29.9 million, American National Bank will cost about $17.1 million and State Bank of Aurora will cost the insurance fund about $4.2 million.
 
Luverne, Alabama-based First Citizens Bank will assume the deposits and assets of First Lowndes Bank.
 
Carrollton, Georgia-based Community & Southern Bank will assume the deposits and assets of Appalachian Community Bank.
 
Citizens South Bank of Gastonia, N.C., will assume the deposits and assets of Bank of Hiawassee.
 
Thomaston, Georgia-based Bank of Upson has agreed to assume the assets and deposits of Century Security Bank.
 
Ashland, Wisconsin-based Northern State Bank has agreed to assume the deposits and assets of State Bank of Aurora.
 
Wilmington, Ohio-based National Bank and Trust Co. will assume the assets and deposits of American National Bank. However, the FDIC was unable to find a buyer for Advanta Bank.
 
In the fourth quarter of 2009, the number of banks on the FDIC's list of problem institutions grew to 702 from 552 in the third quarter. This is the highest since the savings and loan crisis in 1994.

Increasing loan losses on commercial real estate are expected to cause hundreds more bank failures in the next few years. The FDIC anticipates bank failures to cost about $100 billion over the next three years.

Stock Picks: Applied Materials, Level 3 Communications, Medivation

Applied Materials  broke out of a range on Wednesday and could continue on Thursday. The stock hit a high of $12.69, which is resistance for Thursday's follow through move. If the stock breaks resistance, expect to see heavy volume move the stock higher. Keep a close eye on AMAT as it can be a fast moving stock.

 

Level 3 Communications - Some signs of a reversal on price action mentioned on an earlier post did work out as I expected and players are pushing prices even higher in order to blow away short sellers stops. In addition, another bullish signal can be seen in the RSI which is constructing higher lows and higher highs. Relevant resistance areas located 1,70 and 1.73 zone.

 

Medivation moved up slightly after a huge sell-off last week. There are some signs that the stock is gaining some momentum in recent days. The stock is well oversold and a bull move is probable for the coming sessions. The technical chart shows some divergences on MACD and RSI. Keep an eye on MDVN and be prepared for this upcoming move.

Other Stocks to Watch:

The daily chart created a bullish engulfing candlestick formation on Wednesday

YHOO - Yahoo! Inc
GME - GAMESTOP CP
LINTA - LIBERTY MED INT A
PCAR - PACCAR Inc
RAX - Rackspace Hosting Inc
PDLI - PDL BioPharma
SVU - SUPERVALU INC
MHS - MEDCO HEALTH SOLUTI
SBIB - Sterling Bancshares
G - Genpact Ltd
AFFX - Affymetrix, Inc.
SMCI - Super Micro Computer
HSNI - HSN Inc
VLY - VALLEY NATIONAL BAN
CKR - CKE RESTAURANTS INC
BWP - BOARDWALK PIPELINE
FCZ - FORD MTR CR CO
CYD - CHINA YUCHAI INTL LTD
HITK - Hi-Tech Pharmacal C

The daily chart created a bearish engulfing candlestick formation on Wednesday

VIP - Vimpel Communications
AAPL - Apple Inc
HPQ - HEWLETT-PACKARD CO
ITUB - Itau Unibnco Adr
FCX - FREEPORT MCMORAN C
UAUA - UAL CORP
AES - A E S CORP
RIG - Transocean Ltd
SNDK - SanDisk Corporation
M - FEDERATED DEPARTMEN
DTV - Directv A
NBR - Nabors Industries Inc
PTEN - Patterson-UTI Energ
IBM - INTERNATIONAL BUSIN
COF - CAPITAL ONE FNCL CORP
STLD - Steel Dynamics, Inc.
HTZ - Hertz Global Holdings
STJ - ST JUDE MEDICAL INC
MOS - Mosaic Co
YGE - Yingli Green Energy
CMI - CUMMINS ENGINE CO INC
CDE - COEUR D ALENE MINES
SID - Companhia Siderurgia
MTL - MECHEL OAO

New 52-week High stocks

SLE - SARA LEE CORP
LNC - LINCOLN NATIONAL CORP
CCE - COCA COLA ENTERPRIS
BBT - BB&T CORPORATION
CBS - CBS Cl B
GGP - General Growth Prop
DIS - DISNEY CO WALT HLDG CO
STI - SUNTRUST BANKS INC
CROX - CROCS INC 8.22
KBE - SPDR KBW BNK
YUM - TRICON GLOBAL REST INC
PEP - PEPSICO INC
DD - DUPONT E I DE NEMOU
LTD - LIMITED INC
SII - SMITH INTL INC
D - DOMINION RESOURCES
ALTR - Altera Corporation
MET - METLIFE INC
PNC - PNC Financial Services
CIT - CIT GROUP INC

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.

Tech ETFs Likely To Boom On Sector’s Strong Fundamentals

As the economy starts to show signs of prosperity and tries to mend the wounds caused by the recession, the technology sector is likely to boom.

For starters, the sector appears to have strong fundamentals and is relatively cheap as compared to other sectors.  In fact, as a whole, the sector boasts a projected five year PEG ratio of 1.1, which indicates that value on the expected growth of the sector is prevalent.  In general, a lower PEG translates to higher value because an investor would pay less for each unit of earnings growth.

Additionally, big technology companies are known to hoard cash, which makes it that much easier to expand into new businesses and hold onto competitive advantages.  With excess cash, these companies are able to take on risk without being at the mercy of a tight credit market.

According to a recent study by the Wall Street Journal, tech giants Apple Inc , Oracle Corp. Google  and Microsoft along with six other companies have accumulated a whopping $68.5 billion in new cash over the past two years and are putting it to use.

Google has entered the mobile phone and computer operating systems market, trying to grab piece of the pie from both Apple and Microsoft.  Microsoft has used some of its cash to enter the search engine business and compete with Google, as well as launched a new operating system, Windows 7, which is expected to run on the majority of personal computers by the end of 2011.  As for Apple, it is using its cash to remain innovative by developing the hyped iPad as well as enter new markets through acquisitions.   Enterprise software giant Oracle used its excessive cash to expanded its business arm into the computer hardware business through its acquisition of Sun Microsystems.

To add icing to the cake, history suggests that companies tend to increase their technology budgets as economies enter periods of recovery, which will likely be beneficial for all of these companies.

To get diversified exposure to these technology behemoths, some possible plays include:

• the Technology Select Sector SPDR, which holds Microsoft, Apple, Google and Oracle in its top holdings. XLK closed at $23.00 on Thursday and is up 52% over the last year.
• the PowerShares QQQ , which mimics the technology driven Nasdaq 100 and gives exposure to IP based networking giant Cisco Systems and wireless communications giant Qualcomm Inc.  in addition to the previously mentioned companies. QQQQ is up 62% over the last year and closed at $47.83 on Thursday.
• the Software HOLDRs ,of which 38.4% of its asset base belongs to Microsoft and Oracle. SWH also gives ample exposure to one of the world's largest enterprise application software for corporations, SAP AG . The ETF closed at $42.61 on Thursday and has gained nearly 53% over the last year.

Although the positives outweigh the negatives, it is important to keep in mind the inherent risks and increased volatility that comes with investing in the technology sector.  A good way to mitigate these risks is through the implementation of an exit strategy which triggers price points at which an upward trend could potentially be coming to an end.