WED. OCT. 1 - Finding Value Amid The Rubble

Particularly in the long-run, one always tries to find ‘value’ and pick bottoms after a lengthy market decline. It is human nature for a trader/investor to do so. But really, how do any of us know what ‘value’ is? In the last few days, companies such as Nike (NKE) and Hewlett Packard (HPQ) have announced extensive buyback programs. This is a notable sign that some companies feel that their stock prices have reached levels at which they feel it is prudent to accumulate shares of their own stock. Otherwise, why buy the shares? The only reason to buy stocks in a market like this is not merely to support your share price because the firms can get drubbed which his obviously the last ting shareholders want. Rather, the companies must feel that there must be value in their own shares. Late last week, we may have found a very definitive answer at one company anyway. On September 10, Joy Global (JOYG) re-set the parameters for their buyback program. The Board of Directors of the company increased the authorization for the buyback from $1 billion to $2 billion worth of stock and extended the last day for completing share repurchases to Dec. 31, 2011 rather than the end of 2008. Furthermore, the company is expected to finish the first $1 billion of repurchasing by the end of 2008. The reason this is important is as such: the market capitalization of the company is approximately $5 billion. Thus, JOYG is buying back at least 20% of their shares over time plus whatever is left in their current buyback. With shares of the stock having fallen 50% from their high a few months ago, this is the company’s way of saying that they think the stock has gotten cheap. Ostensibly, they are privatizing up to 40% of themselves in removing the shares from the float. Does this mean with 100% certainty that the stock is going to halt its decline? Of course not. But, again, what it does tell us is that the company feels like its shares have gotten cheap. For day traders, it is a situation to monitor because these buybacks will likely increase in frequency over time plus the intra-day pops the stocks get (i.e. POT on September 12) can be rather extensive. Thus, keep en eye on which companies announce these buybacks because these are the stocks that will more likely do well whenever the market does eventually turn around; furthermore, the more this practice is commenced, the higher the likelihood of a true market bottom.

Overnight, markets in Asia were mildly higher while markets turned slightly negative again in Europe. Rumors are that the U.S. Senate will change 'the bill' nad pass it tonight; in the interim, look for stocks to come in a bit following yesterday's light volume rally in a thin volatile session marked by little news making it difficult today to day trade.

Reiterating-If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 based on direction of the market unless specified

Lots of imbalances again:

Good-

Either buy thru unch or A-B-A2 to downside because these were all artificially high closes:

FRZ- rallied 65 cents on close

MET- rallied 3 ½ on close

PRU- rallied 4 on close

ALD- rallied 1.15 on close

BK/WFC- rallied sharply on close

GOOG- had bizarre finish yesterday with many trades recalled by NASDAQ; anywhere below 400 on an open is a buy point unless it is due to a downgrade

LVS- The CEO is pumping in his own money - $475 million- as seed capital for the company as a loan

GME- buying France’s largest video game retailer

Bad-

HIG- all sorts of rumors of exposure to AIG, et al and how bad it is…if it opens down but market strong, definite buy thru unch

NARA- closed very weak yesterday

MECA- down sharply after being forced to amend debt agreements…may follow-through to downside today

FDO- oddly lower yesterday ahead of earnings on Friday

HK- reducing capital sending for the year by 1/3…not a good sign for the company’s future prospects

PDX- warned on earnings guidance


Earnings-

WED OCT 1 BEF

ATU .54/426M .56/437M 2.05/1.69B 2.31/1.77B

WWW .60/325M .51/371M 1.90/1.25B 2.10/1.32B

WED OCT 1 AFT

BLUD .23/71M .22/72M .95/297M 1.21/348M

MOS 2.93/4.12B 3.40/4.67B 13.99/19.04B 16.90/21.61B

MU -.22/1.55B -.14/1.62B -1.26/5.94B -.27/6.66B


Good luck today.

http://www.protradingnetwork.com/