Daily Gains Letter

investor sentiment


Why Chipotle Mexican Grill Represents the Economy’s Overall Predicament

By for Daily Gains Letter | Apr 23, 2013

Why Chipotle Mexican Grill Represents the Economy’s Overall Predicament

Restaurants are one stock market sector that’s worth paying attention to.

If people feel more confident and have more disposable cash, they spend money in restaurants.

Earnings in the group have been all over the map, but this is representative not of weakness in terms of consumer spending within the group, but of the success and weakness of individual chains.

Chipotle Mexican Grill, Inc. (NYSE/CMG) surprised Wall Street by reporting excellent first-quarter earnings results. The company jumped 11.5% on the stock market after the news.

The company’s 2013 first-quarter revenues grew 13.4% to $726.8 million on 48 new restaurant openings. Earnings grew a substantial 22% to $76.6 million and earnings per share grew 24% to $2.45. Comparable store sales grew only one percent.

On the stock market, Cracker Barrel Old Country Store, Inc. (NASDAQ/CBRL) has been on a tear.

The company’s revenues for the fiscal second quarter of 2013, ended February 1, grew 4.4% to $702.7 million. Comparable store sales increased 3.3%, while earnings grew an impressive 37% to $35.2 million. Cracker Barrel recently increased its quarterly dividend by 25%.

Darden Restaurants, Inc. (NYSE/DRI), which includes Red Lobster and Olive Garden, has been a laggard within the group.

Red Robin Gourmet Burgers, Inc. (NASDAQ/RRGB) has been doing extremely well on the stock market. The position is not up to its all-time stock market high set in 2005, but it’s working its way back.

And Burger King Worldwide, Inc. (NYSE/BKW), which expects a small decline in its comparable store sales for the first quarter of 2013, recently forecast adjusted earnings growth of about 25%.

On balance, the restaurant group is looking … Read More


Stock Market’s Vulnerable, but These Stocks Just Don’t Care

By for Daily Gains Letter | Apr 11, 2013

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Right now, there is still some incredibly positive action in this stock market.

Following the major stock market indices is useful, but some of the best stocks out there are significantly outperforming these indices.

Leadership at the speculative end of the stock market is pronounced in biotechnology stocks. These have been some of the best stocks going for the last couple of years, and they are still extremely powerful wealth creators.

One of the best stocks that just broke out of a major stock market consolidation is Celgene Corporation (NASDAQ/CELG). This stock is up almost 50%—since the beginning of the year! Now that’s what I call a powerful breakout. Celgene’s stock chart is featured below:

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Chart courtesy of www.StockCharts.com

Celgene develops cancer treatments, and the company has been growing at an incredibly fast pace for such a large-cap enterprise. It’s also a stock market favorite among institutional investors, and recent buying in the shares could mean continued momentum.

I have to say, however, that one of the best stocks in the entire biotechnology sector has been Biogen Idec Inc. (NASDAQ/BIIB). Biogen has not only been one of the best stocks in the biotechnology sector, but it has also been one of the best stocks in the entire stock market since 2010.

This company has developed a number of therapies, but it’s been very successful in helping people who suffer from multiple sclerosis (MS). MS is a disease with very few meaningful treatments, so Biogen has an edge. Biogen’s stock chart is below:

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Chart courtesy of www.StockCharts.com

Some of the best stocks that the market has to offer are companies that … Read More


Tune out the Noise: Three Ways to Improve Your Stock Picking

By for Daily Gains Letter | Apr 2, 2013

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Lots of people own stocks. Lots of people like to trade the stock market, invest in the stock market, and short the stock market. Like everything else, being a good stock-picker takes practice.

So here are three techniques to practice to improve your stock-picking skills.

1. Tune out the Noise

I’ve learned to turn off the stock market as much as possible. It’s not that I don’t want to be informed about what’s happening to investor sentiment, the trading action, news, and trading volume; it’s just that all the noise takes away my attention from finding great companies.

For example, I don’t watch CNBC. There are lots of great hosts, stories, and interviews, but I find that it sensationalizes the daily economic news, just like most media. It’s more useful to spend the time screening for new stocks than watching TV. Their views on investor sentiment or the trading action are much less valuable than your own.

 

2. Listen to Corporations

The only thing that matters when it comes to investing in the stock market is what corporations say about their businesses. And you have to be bold. You have to go against investor sentiment, or the prevailing news in the media, and believe what a company is saying about its business conditions. It is true that some companies are better at predicting their business conditions than others. And some corporations have more integrity than others, wanting to sway investor sentiment, rather than tell the truth. But all you have to do is just go back and read through a company’s financial results and listen to its earnings conference … Read More


Where to Find Certainty in the Stock Market with Cyprus on the Edge

By for Daily Gains Letter | Mar 27, 2013

270313_DL_clarkThere are a lot of great stocks out there with proven track records for making money. These are retirement stocks—brand-name stocks that pay dividends to create wealth. With dividend reinvestment, you can effectively compound this wealth in an easy, costless manner.

One blue chip company that I’d like to highlight is Johnson & Johnson (NYSE/JNJ), which has an outstanding track record of increasing its dividends to shareholders and achieving capital gains on the stock market.

I couldn’t get data for before 1972, but Johnson & Johnson has increased its annual dividends every year since then. Since 1972, the company’s stock has split three-for-one on two occasions, and two-for-one on four occasions. The company’s last share split was on June 12, 2001, and the stock is definitely due for another split.

On the stock market, Johnson & Johnson recently spiked 10 points higher. And that’s just since the beginning of January. The company’s long-term stock chart is featured below:

dl_0327_image001Chart courtesy of www.StockCharts.com

Track record-wise, the stock is up well over 10-fold within the last 20 years, and that’s just capital gains; that doesn’t include dividends paid.

Everyone knows Johnson & Johnson’s consumer products; the company’s baby shampoo is for sale virtually everywhere. But Johnson & Johnson is much more than that. It’s dozens of popular healthcare brands, skin creams, and medicines. The company’s pharmaceutical research in oncology, contraceptives, immunology, and vaccines is extensive. Finally, Johnson & Johnson manufactures implants, diabetes care products, and joint replacement products. It’s a company with hugely favorable exposure to demographic changes and an aging population.

Of course, this is why Johnson & Johnson is rarely … Read More


Great Dividend Stock Could Be Ready for Breakout

By for Daily Gains Letter | Feb 27, 2013

270213_DL_clarkThere are a lot of great dividend paying stocks out there, but a good number are trading right at their 52-week or all-time highs on the stock market. Equity investors know that it’s tough to buy a stock trading right at its high.

Among dividend paying stocks, E. I. du Pont de Nemours and Company (NYSE/DD), otherwise known as DuPont, is a higher-yielding stock that’s worth having on your radar screen right now. The company’s last two earnings reports weren’t the greatest, and the stock hasn’t participated like other successful dividend paying stocks in the Dow Jones Industrials.

DuPont has been in a stock market downtrend for the last two years, and it really hasn’t done much over the last dozen years. The stock currently yields around 3.6%, but its valuation is fair at around 16-times current earnings.

Like I say, DuPont is a company to watch right now because a lot of the stock market isn’t currently worth buying. Higher dividend paying stocks, especially those in the Dow Jones Industrials, are almost always worth buying when they’re down. DuPont’s long-term performance on the stock market is modest, but the one thing the chart below doesn’t include is reinvested dividends.

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Chart courtesy of www.StockCharts.com

According to Morningstar.com, DuPont’s simple rate of return over the last 3.5 years (right after the financial crisis low) is about 45%. With dividend reinvestment, the return jumps to over 65%.

Currently, Wall Street expects DuPont to produce earnings growth of around 17% this year and 12% in 2014. Combined with the company’s dividend and valuation, those are pretty decent financial metrics if you’re a stock … Read More


What Rising Dividends Are Telling You About the Market

By for Daily Gains Letter | Feb 26, 2013

260213_DL_clarkThere’s a very good trend developing this year, and it’s benefiting the stock market and income investors. Dividends are going up, and not just with the usual suspects, like the big brand-name companies. Dividends are rising among smaller companies, and it’s a great sign of improving business conditions.

Right now, the stock market is highly uncertain about its future, and rightly so. Musings from the Federal Reserve’s last meeting showed the same sentiment. I don’t see Ben Bernanke suddenly withdrawing massive amounts of monetary stimulus, as he’s always been Wall Street’s biggest booster. Besides, interest rates are too artificially low and the Fed continues to increase the “M2” money supply (the amount of money in circulation, plus savings deposits, balances in money market mutual funds, and deposits) at a substantial pace. The Fed loves the stock market too much to quit.

What’s most important for your investment decisions going forward is what corporations report about their businesses. The numbers and corporate outlooks say it all. And the increased dividends we’re getting are a vote of confidence from corporations, which for the most part, are the strongest and healthiest participants in this economy.

One smaller company that just reported solid financial results and an increase in its quarterly dividends is McGrath RentCorp (NASDAQ/MGRC). This interesting company sells and rents modular buildings and containers to all kinds of customers in different industries. The company’s stock chart is below:

 

dl_0226_001Chart courtesy of www.StockCharts.com

 

In the fourth quarter of 2012, the company reported that its total sales grew 20% to $102 million. Earnings were down slightly to $11.9 million from $13.2 million … Read More