Monthly Archives: October 2012

Businesses and the Markets hit the Pause Button – 10/26/12

We have been reviewing a large number of earnings reports this week and overall the results have been mixed.   The majority of companies that reported earnings have beat analyst expectations but the few that issued forward guidance seem to be less optimistic about future growth.  CEOs at many companies such as Caterpillar have consciously tried to tone down the analysts’ estimates in order to give themselves some room regarding the uncertainty that is forthcoming with the election and the looming “fiscal cliff”.  A host of companies reported numbers exceeding their own stated estimates but many have failed to reach the elevated earnings estimates forecasted by analysts.  As we look at overall revenue and business efficiency in the current earnings reports, it is clear that U.S. businesses are still in good shape. Many corporate balance sheets continue to improve, which has been a result of improved consumer spending along with continued cost cutting measures and reduced capital expenditures. Continue reading

U.S. Economy Continues to Make Strides – 10/12/12

We continue to see progress in many areas of the economy which has translated into positive results for stocks in 2012.  The main risks we see at this time is whether or not consumers and businesses put purchasing decisions on hold as we await the election results and the resolution to the impending “fiscal cliff”.  We think investors will likely anticipate a last minute deal to extend many of the tax cuts for at least one more year as well as a number of “patches” that address some of the tax and government spending time bombs that are scheduled to hit in 2013.  The election will remain an unknown for investors and we will be researching the impact on our investments based on both candidates stated positions on taxes, regulation, energy development, government defense spending, etc. Continue reading

October 5th

Two new positive macro-economic reports came out this week;

First, home prices show continued recovery in August.  Market researcher CoreLogic says prices were up 4.6% in August from a year ago, the largest year-over-year gain in six years.  Home prices are still down about 30% from their 2006 peak.

Much of the recent increase is traceable to tightening supplies of homes for sale. In August, existing single-family home sales were up 9% year over year, but the supply of listed homes for sale was down 18%, according to the National Association of Realtors.  August was the sixth consecutive month that home prices were up on a month over month basis.  CoreLogic expects September home prices were up 5% year-over-year, too.  The housing market lately has shown a forward momentum that was not evident last year and this should help overall consumer confidence going forward. Continue reading

Market Commentary: Third Quarter 2012

The Stock Market Closes a Strong Third Quarter

With the help of considerable amounts of central bank accommodation, stocks finished the third quarter higher.  The S&P 500 climbed 5.7 percent over the past three months and finished the quarter up over 14.5 percent year-to-date.

The balance between fear and fundamentals has shifted thus far in 2012. Investors are starting to focus on fundamentals once again as the fear that clouded the markets in 2011 continues to dissipate.  Even with the equity rally this year, stock valuations remain attractive.  When we consider a variety of valuation metrics, such as price to book, price to forward earnings and price to cash flows, stocks appear inexpensive relative to their long-term averages.

However, future earnings growth will be dependent on revenue growth, as companies have drastically cut costs and will now have to rely on margins to drive earnings. Continue reading