Silver price manipulation case narrows in on JPMorgan; drops HSBC for now
by Fred Mason
A new wrinkle in the silver price manipulation lawsuit against JPMorgan Chase & Co. (NYSE:JPM) has dropped the spotlight off HSBC Holdings PLC (NYSE:HBC) for now. The fresh lawsuit amendment, which was filed last Tuesday, now names JPMorgan as the sole defendant in the case (per the Wall Street Journal).
Here’s what we know: a lawsuit filed by individual silver investors alleged that JPMorgan and HSBC amassed massive short positions in silver futures between 2008 and 2010, then reaped the rewards as silver prices declined in the face of the large short positions. The new move drops allegations against HSBC, as investors have entered into a tolling agreement with the London bank.
Tolling agreements give both sides in the case time to negotiate a settlement. Should those talks crumble, HSBC could be re-added to the lawsuit. A tolling agreement certainly isn’t an admission of guilt on HSBC’s part, but it’s a clear signal that they don’t want to go to trial (perhaps to avoid the massive legal fees, the bad press, or because they fear they’d be on the losing side of the case). What bothers me about the agreement is the fact that we may never know whether HSBC was truly involved in attempting to manipulate the price of silver – especially if JPMorgan enters into a similar agreement in the future.
New numbers in the amended lawsuit allege that JPMorgan’s shorts pushed silver prices down 12 percent in a single day – a move that, if true, made the bank $220 million.
All told, more than 43 separate silver price manipulation lawsuits were filed against JPMorgan and HSBC (per Reuters). Those lawsuits were eventually combined into a class action lawsuit.
“The complaint alleges that HSBC and J.P. Morgan made large, coordinated trades, among other things, to artificially lower the price of silver at key times when the precious metal should have been trading at higher levels,” the law firm Girard Gibbs LLP writes on its web site. “By depressing the price of silver, the class action alleges that the defendants made substantial illegal profits while harming investors and restraining competition in the COMEX silver futures market.”
Due to it’s small size and relative lack of liquidity, the silver market has often been the target of price manipulation (see my post Silver Thursday, the Hunt Brothers, and the collapse of a precious metal for more). But there’s also a tendency for the media to brush off reports of manipulation in any markets – particularly emotionally-charged markets like precious metals. This lawsuit could help bring visibility to a problem that’s lost a lot of money for a lot of people. Let’s just hope it makes it to trial.
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Tags: HBC, JPM, silver price, silver price forecast, silver price manipulation
Posted in Bank stocks, commodities, financial stocks, precious metals, shorting stocks, silver coins | No Comments »
Eleven reasons to AVOID investing in Dow Jones Industrial Average stocks
by Fred Mason
When I first started writing this blog post, I was going to call it “How to Invest Safely in Stocks.” My second recommendation was that beginners should start with a handful of the 30 stocks that make up the Dow Jones Industrial Average. Once I started digging through the numbers, though, I was a startled at what I found. Apparently, the blue-chip stocks aren’t the no-brainers most investors like to think they are.
Need proof? Check out this chart I put together of the 10-year returns for each of the 30 Dow Jones stocks:
| Company |
10-Year Stock Return |
10-Year Dividend Return on $1,000 investment |
$1,000 is now worth |
| 3M Company |
+46.6% |
$590.94 |
$3,458 (aided by a stock split) |
| Alcoa Inc. |
-68.1% |
$134.46 |
$449.82 |
| American Express Company |
+41.47% |
$122.40 |
$1,514 |
| AT&T Inc. |
-31.8% |
$357.12 |
$1,024 |
| Bank of America Corp. |
-51.8% |
$718.58 |
$1,109 |
| The Boeing Company |
+12.54% |
$218.16 |
$1,311 |
| Caterpillar Inc. |
+208.7% |
$787.17 |
$7,093 (aided by a stock split) |
| Chevron Corporation |
+113.9% |
$794.85 |
$4,791 |
| Cisco Systems, Inc. |
-7% |
$7.20 |
$933 |
| The Coca-Cola Company |
+45.2% |
$284.76 |
$1,734 |
| du Pont |
+11.1% |
$372.72 |
$1,462 |
| Exxon Mobil Corporation |
+82% |
$319.44 |
$2,086 |
| General Electric Company |
-61.9% |
$200.4 |
$572 |
| Hewlett-Packard Company |
+2% |
$123 |
$1,129 |
| The Home Depot, Inc. |
-32.7% |
$117.58 |
$780 |
| Intel Corporation |
-29.7% |
$136.54 |
$825 |
| International Business Machines Corp. |
+57.1% |
$127.26 |
$1,605 |
| Johnson & Johnson |
+20.8% |
$257.22 |
$1,426 |
| JPMorgan Chase & Co. |
-16.1% |
$273.12 |
$1,107 |
| Kraft Foods Inc. |
+8.7% |
$283.34 |
$1,339 |
| McDonald’s Corporation |
+198.4% |
$387.25 |
$3,351 |
| Merck & Co., Inc. |
-51.2% |
$218.70 |
$698 |
| Microsoft Corporation |
-20.1% |
$416.64 |
$1,998 |
| Pfizer Inc. |
-56.3% |
$196.56 |
$634 |
| The Procter & Gamble Company |
+68.6% |
$607.79 |
$3,884 (aided by a stock split) |
| The Travelers Companies, Inc. |
+11.8% |
$120.34 |
$1,206 |
| United Technologies Corporation |
+94.9% |
$529.54 |
$4,305 |
| Verizon Communications Inc. |
-31.5% |
$305.33 |
$988 |
| Wal-Mart Stores, Inc. |
+4.7% |
$130.29 |
$1,141 |
| The Walt Disney Company |
+25.1% |
$110.20 |
$1,330 |
What’s startling is this: of the 30 stocks in the Dow Jones Industrial Average, 11 of them would actually be worth less or just about the same as they were 10 years ago (including dividends!). That’s remarkable considering I didn’t factor in inflation, which have averaged 2.4 percent over the past decade (per FinTrend.com).
That means your odds of throwing a dart at a list of the Dow stocks and hitting a winner are only around 63 percent. That’s not much better than going to the casino and counting a few cards at the blackjack table.
Before you toss your hands up and cash in your IRA for guns and ammo, though, I’d be remiss if I didn’t point out that the average return on $1,000 for the 30 Dow component stocks was $1,842 over the past 10 years. Indeed, a $1,000 investment in Caterpillar Inc. (NYSE:CAT) would be worth $7,093 today. That’s not bad, but seeing the returns from a company like GE, which has crumpled more than 60 percent over the past 10 years is scary. And this year hasn’t been kind to the Dow, either. Take a peek at the YTD returns on each of the component stocks:
| Company |
Ticker |
YTD Return |
Dividend Yield |
| 3M Company |
NYSE:MMM |
-10.8% |
2.86% |
| Alcoa Inc. |
NYSE:AA |
-27% |
1.07% |
| American Express Company |
NYSE:AXP |
+3.9% |
1.61% |
| AT&T Inc. |
NYSE:T |
-3.17% |
6.05% |
| Bank of America Corp. |
NYSE:BAC |
-51.8% |
0.62% |
| The Boeing Company |
NYSE:BA |
-10.5% |
2.88% |
| Caterpillar Inc. |
NYSE:CAT |
-14.7% |
2.3% |
| Chevron Corporation |
NYSE:CVX |
+2.25% |
3.34% |
| Cisco Systems, Inc. |
NYSE:CSCO |
-25.8% |
1.6% |
| The Coca-Cola Company |
NYSE:KO |
+2.28% |
2.79% |
| du Pont |
NYSE:DD |
-12.1% |
3.74% |
| Exxon Mobil Corporation |
NYSE:XOM |
-4.02% |
2.68% |
| General Electric Company |
NYSE:GE |
-17.3% |
3.97% |
| Hewlett-Packard Company |
NYSE:HPQ |
-41.9% |
1.96% |
| The Home Depot, Inc. |
NYSE:HD |
-7.9% |
3.1% |
| Intel Corporation |
NYSE:INTC |
-7.85% |
4.33% |
| International Business Machines Corp. |
NYSE:IBM |
+8.33% |
1.89% |
| Johnson & Johnson |
NYSE:JNJ |
-1.51% |
3.6% |
| JPMorgan Chase & Co. |
NYSE:JPM |
-21.2% |
2.99% |
| Kraft Foods Inc. |
NYSE:KFT |
+6.47% |
3.46% |
| McDonald’s Corporation |
NYSE:MCD |
+14.3% |
2.78% |
| Merck & Co., Inc. |
NYSE:MRK |
-13.1% |
4.85% |
| Microsoft Corporation |
NYSE:MSFT |
-14% |
2.67% |
| Pfizer Inc. |
NYSE:PFE |
+0.9% |
4.52% |
| The Procter & Gamble Company |
NYSE:PG |
-4.07% |
3.40% |
| The Travelers Companies, Inc. |
NYSE:TRV |
-11.8% |
3.34% |
| United Technologies Corporation |
NYSE:UTX |
-14.02% |
2.84% |
| Verizon Communications Inc. |
NYSE:VZ |
-2.6% |
5.6% |
| Wal-Mart Stores, Inc. |
NYSE:WMT |
-3.23% |
2.80% |
| The Walt Disney Company |
NYSE:DIS |
-14.6% |
1.25% |
Just seven out of the 30 Dow component stocks have actually appreciated in value this year. That should give you pause before you invest in a high-profile company solely on the strength of its name and brand.
The Takeaway
Here are three key things I take away from the charts above:
1) Energy is the name of the game. One sector in the Dow has strongly out-performed others in recent years. Namely, oil (ala Chevron and Exxon). And I wouldn’t expect that to change – particularly as fears over inflation mount.
2) Banking stocks have a lot of ground to make up. The fact that JPMorgan Chase is down 16.1 percent over the past 10 years, and Bank of America’s down a whopping 51.8 percent could get you thinking banking stocks have to turn the corner soon. I’d argue there’s a lot of pain for them on the horizon, particularly with the imminent threat of inflation. Banks thrive and dive on interest rates, and all those fixed mortgages BAC’s underwriting at 3 percent could come back to bite them in a high-inflation environment. That’s a big part of why banking stocks have fallen in recent months, and it’s a trend I expect to continue.
3) Follow the macro-trends. If you would have invested $1,000 in gold at the start of 2001, you’d now be holding onto $6,797 in bullion. Energy and inflation are the stories du jour, and your portfolio should reflect that reality. No one can say the next 10 years will play out the same as the past 10, but we can say the demand for oil isn’t going away anytime soon, and neither is our government’s debt problem. You can’t afford to ignore the macro picture anymore, unless, of course, you’re happy rolling the dice in your IRA.
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Tags: AA, AXP, BA, BAC, CAT, CSCO, CVX, DD, DIS, Dow Jones Industrial Average, GE, HD, HPQ, IBM, INTC, JNJ, JPM, KFT, KO, MCD, MMM, MRK, MSFT, PFE, PG, T, TRV, UTX, VZ, WMT, XOM
Posted in Bank stocks, commodities, economy, energy stocks, NYSE, stock tips | No Comments »
Why Bank of America stock (NYSE:BAC) got crushed
by Fred Mason
It’s not often that one of the 30 largest stocks in the country drops 20 percent in a day. That’s what happened to Bank of America Corporation (NYSE:BAC) yesterday, though. The Dow component stock crumpled from $8.17 a share to $6.51 and it shed another 1.5 percent in after-hours trading.
Year-to-date, Bank of America stock is down 51 percent. But the bad news just doesn’t seem to be going away for America’s largest bank holding company. Here are five reasons the stock got crushed yesterday:
1) The mother of all lawsuits. American International Group, Inc. (NYSE:AIG) filed suit against BAC yesterday seeking at least $10 billion in damages for alleged fraud at the bank and at Countrywide Financial, a mortgage origination company that Bank of America acquired in 2007.
2) Did we mention the other lawsuits? AIG is just the latest in a string of high-profile lawsuits against BAC. Freddie Mac, Fannie Mae, BlackRock, Inc. (NYSE:BLK), PIMCO and Goldman Sachs Group, Inc. (NYSE:GS) have also filed suits against the bank. And no one’s sure just how much it’s going to cost BAC to defend itself (not to mention how much it will cost if the bank does have to pay for damages one day).
3) Stock dilution, anyone? Bank of America maintains its stance that the company won’t have to issue more shares in order to cover costs associated with ongoing litigation. If the lawsuits keep coming, though, BAC might not have a choice. Win or lose, lawyers need paid.
4) Jumping ship. Regulatory filings released yesterday showed that hedge fund manager David Tepper of Appaloosa Management LP took a carving knife to his stake in BAC last quarter. Tepper pared off 42 percent of his holdings in the bank, narrowly escaping the guillotine that dropped yesterday. The news of Tepper’s move added fuel to an already fiery sell-off.
5) Downgrade central. In just two trading days, Bank of America shares were downgraded three times. On the heels of downgrades from Standard & Poor’s and Wells Fargo, the most recent thumbs-down comes from CLSA analyst Mike Mayo (per TheStreet). Mayo cut the stock from “buy” to “outperform” (which almost seems meaningless considering the stock’s loses year-to-date). Still, it’s yet another vote of no-confidence for BAC.
All told, yesterday’s 20 percent plunge in Bank of America’s share price wiped out $16 billion. Other banks didn’t fare much better, but it’s clear investors feel like Bank of America’s the ugliest house in a pretty crummy-looking neighborhood. For the year, BAC is down 51 percent. Citigroup Inc. (NYSE:C) is down 41 percent YTD, Wells Fargo & Company (NYSE:WFC) is down 26 percent, and JPMorgan Chase & Co. (NYSE:JPM) seems heroic having lost just 20 percent since the start of the year.
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Tags: stock price collapse
Posted in BAC, Bank stocks, C, financial stocks, GS, investment banks, JPM, NYSE | No Comments »
HomeStreet IPO: 5 things you didn’t know about Homestreet’s stock
by Fred Mason
HomeStreet Bank filed for an IPO late last week as the company looks to raise some capital after heavy losses during the financial crisis of 2008. Here are five things you probably didn’t know about the Seattle-based bank culled from the company’s S-1 filing:
1) An IPO by decree? HomeStreet’s under orders from the Office of Thrift Supervision and the Federal Deposit Insurance Corp. to raise regulatory capital and reduce problem assets. After failing to raise enough regulatory capital last year, the company chose to turn to the markets to shore up its books. That makes HomeStreet “subject to certain restrictions on our operations” until it satisfies the government’s capital requirements. An IPO should generate enough cash to lift the increased regulations on the company.
2) Storied history. Founded 90 years ago, HomeStreet has the oldest continuous relationship with Fannie Mae in the country. They were the second company approved by Fannie Mae at its founding in 1938.
3) Scope. As of December 31, 2010, HomeStreet had total assets of $2.49 billion, net loans held for investment of $1.54 billion, deposits of $2.13 billion and shareholders’ equity of $58.8 million. All told, the company operates 20 bank branches and nine stand-alone lending centers from the Puget Sound to Hawaii. The bank’s branches averaged $106.5 million in deposits last year.
4) New Management. In August of 2009, HomeStreet overhauled its executive management team as part of its turnaround strategy. Mark Mason, former CEO of Los Angeles-based Fidelity Federal Bank, was named CEO at HomeStreet. “A substantial portion of Mr. Mason’s career has been spent resolving or recapitalizing troubled institutions, restructuring operations and upgrading troubled loan portfolios,” the company writes in its S1 filing.
Mason’s strategy at HomeStreet thus far has emphasized offloading the bank’s other real estate owned property, restructuring troubled loans and implementing stricter underwriting policies.
5) Turning the corner? HomeStreet’s revenue was up $8 million last year to $39 million (though well off revenue of $90 million in 2007), and the company’s net loss fell from $110 million in 2009 to $34 million in 2010. Once HomeStreet’s regulatory status is lifted, the company plans to expand the number of branches it operates and look at potential acquisitions in the Pacific Northwest.
Homestreet stock ticker: NASDAQ:HMST
Homestreet IPO date: July 2011
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Tags: HMST, HomeStreet IPO
Posted in Bank stocks, financial stocks, IPOs, private companies | No Comments »
Is Ally IPO a buy?
by Fred Mason
Welcome to the new incarnation of GMAC: Ally Financial, Inc. The storied company was originally founded by General Motors in 1919 as a lending house for car buyers. Nearly a century later, GMAC had expanded into insurance, online banking, and subprime lending.
It was subprime lending, of course, that would eventually knock GMAC Bank to its knees in May of 2008. The Federal government swept in, buying ever-larger chunks of the company until – in December of 2010 – it would become the majority stakeholder. Out of the ashes would rise Ally Financial, a bank holding company that’s announced plans to go public with an IPO in the next several months. Will the Ally IPO be a buy, though? Here are three (not necessarily convincing reasons) to be bullish on the stock:
1) Dollars and cents. Ally’s got a long row to hoe, but at least it’s profitable. As it stands, the company owes the U.S. Government $12.3 billion in funds received from the TARP program. That’s even after Ally’s already repaid $4.9 billion. There are glimmers of hope, though. Early figures estimate the company could raise $5 billion (per Reuters) from an IPO. That figure could grow as Ally’s IPO date nears, too.
While Ally owes the government $12.3 billion, the Treasury holds $5.9 billion in preferred stock. That means Ally actually needs to come up with just $6.4 billion to pay off the government (before any interest Uncle Sam decides to take). Total net revenue at Ally grew 22 percent last year to $7.9 billion. That was good enough $1.1 billion in profits.
2) New car anyone? I like to think of Ally as an extension of the auto industry. The bank, after all, funds 80 percent of all GM dealers and half of GM’s customers, according to the Capitalistpig Hedge Fund‘s managing member Jonathan Hoenig. Indeed, Ally financed 10 percent of all new cars sold in the U.S. last year. As the prospects for the auto industry improve, so too do Ally’s.
3) Diversification. To be successful moving forward, Ally will have to find creative new ways to make money. Mortgage lending rules will be tighter, and fees the bank can impose on its customers will be smaller. It’s clear the company must find new ways to make profits. That might not be as difficult as it sounds. When you’ve got $172 billion in assets, there are a lot of potential directions you can go in. Given Ally’s leadership in online banking and its early foray into subprime lending, the company has shown it’s not afraid of taking risks. If it makes better choices moving forward, this IPO could unlock a new and exciting chapter in the company’s future.
Bears will be bears: The bearish case against Ally is just as powerful as the bullish case, though. Since the company’s prospects are so pervasively intertwined with the fortunes of General Motors Company (NYSE:GM) and Chrysler, headwinds for American automakers mean headwinds for Ally. And gauging by the performance of GM’s stock since its IPO (down 10 percent), it looks like it’ll be a while before investors start jumping on the bandwagon again.
Then, there’s the pesky matter of dealing with regulators. Ally’s mishandling of foreclosures last year could ultimately lead to a multi-billion dollar fine from the government.
While the publicity surrounding Ally’s IPO will make it a tempting daytrade, it doesn’t take much looking to find companies with more intriguing growth profiles. Smaller companies might not have the name recognition of Ally, but they’ve probably got better financials – and that’s what matters in the long run. Until we see more innovation at Ally, there just isn’t a whole lot to get excited about.
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Tags: Ally, GM, TARP
Posted in auto stocks, Bank stocks, financial stocks, investment banks, IPOs, private companies, stock tips | No Comments »
How to invest in ISIS
by Fred Mason
Online mobile shopping could command as much as 12 percent of total global e-commerce by 2015, according to a report ABI Research. It’s a sign of just how comfortable consumers are getting using their phones to make purchases. The next logical step is to use mobile phones as payment mechanisms in stores, restaurants and small businesses – doing away with plastic once and for all.
The transition from credit cards to phone swiping could completely change the way with interact with businesses. No longer would we use a simple plastic card with a magnetic strip on the back, we’d be paying with a computer that could track purchases, offer discounts, tick off rewards points and offer incentives to come back.
ISIS is leading the charge into the pay-by-phone marketplace through a partnership with AT&T, Inc. (NYSE:ATT), Verizon Communications Inc. (NYSE:VZ) and T-Mobile USA. The national mobile commerce network will use near-field communication (NFC) technology to allow phones to wirelessly communicate with checkout terminals.
The goal of ISIS is to provide wireless services to more than 200 million consumers. If the roll-out, which is taking place over the next year, gains traction, it could stand to pad the pockets of several companies. Here are some tickers to consider if you’d like to invest in ISIS and NFC:
Discover Financial Services (NYSE:DFS). Payments made through the ISIS network will be processed by Discover. The Discover network is currently accepted at more than seven million merchant locations nationwide. DFS will, no doubt, get a percentage of all the sales the company processes.
Barclays, PLC (NYSE:BCS) Barclaycard US is expected to be the first issuer on the ISIS network thanks to the company’s experience processing NFC payments using standard credit cards. Eventually the ISIS network will be expanded to other banks.
While it’s unclear exactly how AT&T, Verizon and T-Mobile will profit off ISIS, I suspect they’ll also receive a cut of the payments processed over the network. They’ll likely ramp up efforts to partner with retailers to offer expanded services, too – things like rewards points, customer tracking and coupons.
It’s important to remember, though, that ISIS is just one of the many networks and companies working to dominate the pay-by-phone market. Visa, Inc. (NYSE:V), MasterCard, Inc. (NYSE:MA), eBay Inc.’s PayPal (NASDAQ:EBAY), Google Inc. (NASDAQ:GOOG) and Apple Inc. (NASDAQ:AAPL) are just a few of the heavyweights with skin in the game. It’ll be interesting to see which companies come out on top.
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Tags: aapl, ATT, BCS, DFS, EBAY, GOOG, ISIS, MA, NFC, V, VZ
Posted in Bank stocks, credit card stocks, Internet stocks, retail stocks, tech stocks | No Comments »
Net income at Noah Holdings (NOAH) up 88 percent
by Fred Mason
First off, this disclaimer: Noah Holdings Limited (NYSE:NOAH) is one of the biggest holdings in my portfolio right now. A wealth management company that serves high-net-worth individuals in China, Noah released 4Q earnings last night. Analysts were spot on with their calls. The company reported $0.09 earnings per share, which met the Thomson Reuters consensus estimate of $0.09, according to AmericanBankingNews.com.
Net revenues at the company shot up 157 percent from $5.4 million in Q4 2009 to $14 million in Q4 2010. Over that same time span, net income attributable to shareholders rose 88.9 percent to $4.2 million. Those are heady numbers, and so are the company’s expectations for the rest of the year. Noah forecasts non-GAAP net income attributable to shareholders to hit a year-over-year increase in the range of 56.7% and 86.6%.
Analysts are also positive on the stock. JPMorgan Chase & Co. (NYSE: JPM) initiated coverage on Noah Holdings with an Overweight rating and a $22.00 price target last month. Bank of America (NYSE: BAC) analysts currently list Noah as a Buy with a $22.20 price target.
Both targets are more than 40 percent higher than the stock’s current price at $15.43. Apparently, I should have waited to buy my shares, which are down 3.5 percent since opening day, but I’m definitely not worried about the company’s long-term prospects.
There’s much talk about China’s burgeoning middle class, but, if luxury purchasing is any indication, the ranks of the upper class are swelling even faster. A new report by broker CSLA forecasts overall consumption in China will rise 11 percent per year over the next five years. Sales of luxury goods are expected to grow more than twice as quickly, by 25 percent a year.
“The wealth of China’s upper-middle class has reached an inflection point, reckons [the author of the CSLA report] Mr. Fischer. They have everything they need,” The Economist writes. “Now they want a load of stuff they don’t need, too.”
With great wealth comes the desire to make even more of it, and Noah appears perfectly positioned to help China’s newest millionaires amass even more cash.
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Tags: BAC, JPM, NOAH
Posted in BAC, Bank stocks, Chinese stocks, financial stocks, investment banks, IPOs, NYSE | No Comments »
Buffett trims fat from portfolio (BAC, NKE, FISV, LOW)
by Fred Mason
We got a glimpse at Warren Buffett’s recent investment moves with Berkshire Hathaway Inc.’s (NYSE:BRK.B) 13F filing, which details the company’s stock trades through the end of 2010. Most notably, the Oracle of Omaha ditched 5 million shares in Bank of America Corp. (NYSE:BAC).
“He’s closing out a loser,” Jeff Matthews, author of ‘Pilgrimage to Warren Buffett’s Omaha’ told Bloomberg. “We bought it during the crisis. But its earnings power coming out the crisis has been reduced.”
Buffett took a loss of more than 55 percent on the trade after purchasing the shares during the height of the mortgage crisis. Some analysts see the move out of BAC as a sign that Buffett’s cleaning house as he prepares to hand over the reins to a group of successors.
Other positions Berkshire closed out last year:
- Becton Dickinson & Co. (NYSE:BDX)
- Comcast Corp. (NYSE:CMCSA)
- Fiserv Inc. (NYSE:FISV)
- Lowe’s Companies Inc. (NYSE:LOW)
- Nalco Holding Co. (NYSE:NLC)
- Nestle (NSRGY.PK)
- Nike Inc. (NYSE:NKE)
Berkshire now holds positions in just 25 companies. That’s down from 37 in June, according to NewsyStocks.com. Interestingly, Berkshire wasn’t the only investment company to shift capital out of banks.
Trian Partners, which is headed by widely-followed investor Nelson Peltz, ditched stakes in Bank of America, J.P. Morgan Chase (NYSE: JPM) and U.S. Bancorp, (NYSE: USB), according to BizJournals.com, to make a big bet on food stocks, specifically Kellogg’s (NYSE: K).
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Tags: BAC, food stocks, K, Warren Buffett
Posted in BAC, Bank stocks, financial stocks, investment banks | No Comments »
HDFC Bank turns dominant in India’s credit card market (HDB)
by Fred Mason
With rising defaults on personal loans in India, the country’s credit card market has undergone subtle but seismic shifts over the past two years, and it’s beginning to look like HDFC Bank Limited (NYSE:HDB) is poised to come out on top. The company defied market expectations last quarter by reporting a 33 percent rise in net profits.
The number of active credit cards in India has tumbled since March of 2008 from 20.75 million to 10.82 million as of November 2010, according to the Times of India. Unlike most domestic and foreign banks operating in the country, though, HDFC has aggressively grown it’s credit card portfolio.
“Industry officials estimate that HDFC Bank is nearing leadership position, followed by ICICI Bank (ICICI Bank Limited, NYSE:IBN) and SBI Cards,” Mayur Shetty writes in the Times. “Although HDFC has been the most aggressive in card issuance, its card customers are predominantly account holders in the bank.”
Rising interest rates and higher commodity prices will likely crimp borrowing going forward, but the Head of Equities at Ambit Capital, Saurabh Mukherjea, expects HDFC to outperform the sector.
“There will be consensus pullbacks in our FY12 economic growth rates and the banking sector will see some pullback on the back of that,” Mukherjea told the Economic Times. “But by and large the higher quality banking names, HDFC in particular, will outperform the rest of the sector as we enter a softer period from an economic growth perspective.”
The Royal Bank of Scotland ranks HDFC highest among private-sector banks in India, according to Reuters. Analysts there have retained a “buy” rating on HDFC, “hold” on ICICI Bank and “sell” on Axis Bank (AXBK.BO).
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Tags: HDB, IBN
Posted in Bank stocks, credit card stocks, financial stocks, India stocks, investment banks, NYSE | No Comments »
Top five stock picks for 2011
by Fred Mason
One of the keys to successful investing is beating the herd to the next hot stock. Here are my top five stock picks for 2011. They might not be in the limelight yet, but they very well could be by the end of the year:
1) Tech IPOs. In my unofficial tech IPO calendar for 2011, I detail 23 major tech companies that could have large, high-profile IPOs this year. Only one of those companies (Demand Media, Inc., NYSE:DMD) has gone public so far, and it shot up 33 percent in its first day of trading. The best are yet to come, from coupon-of-the-day company Groupon, which turned down a $6 billion offer from Google, to LinkedIn, a social networking company for professionals with more than 90 million members. Keep an eye on tech IPOs throughout the year as the market seems ready to take on more risk in a sector that’s growing rapidly; particularly in China.
2) Cloud-computing. As more businesses move their web sites and applications from dedicated web servers onto distributed server platforms, several companies are poised to soak up that new revenue stream. Amazon.com, Inc. (Public, NASDAQ:AMZN) has been at the forefront of the cloud computing industry although the company’s not all that transparent on how much revenue cloud computing actually generates for them. Estimates range from $500 million in 2010 to $1 billion. UBS analysts Brian Pitz and Brian Fitzgerald predict cloud computing could pull in some $2.5 billion a year for Amazon by 2014. Two other players you might consider in the space: Cisco Systems, Inc. (Public, NASDAQ:CSCO) and dedicated web hosting company Rackspace Hosting, Inc. (NYSE:RAX). Shares in Rackspace are up more than 86 percent over the past six months.
3) Blue chip stocks. Thanks to exchange rates and a falling dollar, even investors abroad are moving into large-cap American stocks. “Australian investors have a once-in-a-generation opportunity to get as much money as they can into overseas assets, ideally blue-chip global industrial companies,” Mike Hawkins, head of private clients at Evans and Partners, tells The Australian. “When you’re talking about those high-quality global blue-chip names, the likes of Nestle and Procter and Gamble (NYSE:PG) and Kraft (NYSE:KFT) and Unilever (NYSE:UL), you’re talking about companies that are well tapped into the growth in income and demand coming from emerging markets. We see this as a bigger story than China and India’s demand for Australia’s raw materials: the growth of the emerging-market consumer is a far more powerful and enduring theme than simply the supply of raw materials to China.” As a middle class begins to develop in emerging markets, consumers will have more disposable income for food and hygiene products. American blue chips have been positioning themselves in those markets for decades, and it could finally start paying off as the falling dollar will make their goods more affordable on Chinese shelves.
4) Platinum and palladium stocks. In the precious metals community, the focus throughout 2010 was almost exclusively on gold and silver. Gold posted gains for the year of 30 percent and silver rose 80 percent. Platinum and palladium did just as well with palladium shooting up 100 percent in 2010 and platinum rising 20 percent. The gains in platinum and palladium largely came on the heels of increasing demand from China and India where the metals are used as autocatalysts to limit pollution from cars and other vehicles. Car sales surged 32 percent in China and 31 percent in India last year. GM’s President of International Operations Tim Lee expects that growth rate to slow to 10 to 15 percent in 2011 as commodity prices rise. Still, Lee points out that the sheer size of the market in China still equates to a lot of demand. “Even 10 to 15 percent growth on such a huge base makes China a vast market,” he tells AFP. For all the talk of hybrid and electric vehicles, they still only account for 3 percent of the auto market worldwide, meaning they’ll hardly dent the growing appetite for platinum and palladium. Stricter emission standards in the U.S. should also compensate for the decreased demand for platinum and palladium as more of the metals will be used to limit emissions. ETFs offer the easiest (and safest) way to get a finger in the palladium pot. Try ETFS Physical Palladium Shares (NYSE:PALL). PALL’s up 66 percent in the past six months.
5) Wealth management in emerging economies. My fifth and final pick comes from my personal portfolio: Noah Holdings Limited (NYSE:NOAH). A wealth management company, Noah serves high net worth individuals in China. After the company’s IPO in November, shares briefly spiked 30 percent and they’ve since flat-lined around the IPO price. Heavy resistance at $16 per share indicates that the downside risk is limited, and some analysts are calling for earnings growth of 35 percent in 2011 and a target price of $22 per share. The company’s numbers are off the charts with year-over-year growth in net revenue at 210 percent. It makes sense that as the ranks of China’s wealthy swell, so too will the profits at the companies that serve them. Noah Holdings should be perfectly positioned to rake in growing profits from a brand new market.
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Tags: AMZN, CSCO, DMD, KFT, NOAH, PALL, PG, RAX, UL
Posted in Bank stocks, base metals, Chinese stocks, commodities, Demand Media, economy, financial stocks, India stocks, Internet stocks, investment banks, IPOs, mining stocks, precious metals, tech stocks | No Comments »
