Time to buy Sunrise Senior Living, Inc. (NYSE:SRZ)?

Was the move in Sunrise Senior Living, Inc. (NYSE:SRZ) stock too much, too fast? Probably.

Shares in Sunrise Senior Living (NYSE:SRZ) exploded yesterday, rising 66 percent in a single trading session. The move came on news that the company would sell eight of nine of their assisted living facilities in Germany to GHS Pflegeresidenzen Grundstucks GmbH and Prudential Real Estate Investors. The deal was worth $74.5 million with the funds going to pay off debt on the property.

The move will strengthen Sunrise’s balance sheet, but it doesn’t point to any future growth in the company and that makes Sunrise look like a great short play. The deal was worth $74.5 million, but the stock rose $81.6 million in market cap yesterday. Too much, too fast? Probably. Especially since the company isn’t directly pocketing any cash in the deal.

Top five biggest bank stocks in the U.S. by market cap

The roiling financial markets in the U.S. have knighted new winners and demoted the old guard. What are the top five biggest banks in America?

The roiling financial markets in the U.S. have knighted new winners and demoted the old guard. What are the top five biggest banks in America?

Bank of America Corporation (NYSE:BAC) $132 billion
JPMorgan Chase & Co. (NYSE:JPM) $149 billion
Wells Fargo & Company (NYSE:WFC) $129 billion
Citigroup Inc. (NYSE:C) $111 billion
Goldman Sachs Group, Inc. (NYSE:GS) $72 billion

Today’s Top 10 biggest earning surprises

Solarfun (SOLF) and RTI Metals are just two of the companies fascinating investors. Here’s a look at the Top 10 earnings surprises for Aug. 3, 2010.

Acorda Therapeutics, Inc. (NASDAQ:ACOR)

A $1.3 billion biopharm company that does research into treatments for neurological problems including multiple sclerosis (MS), ACOR surprised analysts with a much smaller loss than expected. The company burnt through 18 cents a share last quarter versus estimates of a loss of 46 cents per share. The stock was up more than 5 percent at last check on high volume. The company credited demand for AMPYRA as narrowing their loss citing the fact that “4,200 Physicians have Written Prescriptions for AMPYRA as of July 30, 2010.” AMPYRA is designed to improve walking in patients with MS.

Coach, Inc. (NYSE:COH)

Coach offered a nice upside surprise by beating analysts estimates of $0.56 per share. They earned $0.64 cents per share last quarter indicating that demand for high-end products may be growing faster than products targeted at lower-income shoppers. That’s generally a good sign for the economy (but somehow it doesn’t have me convinced).

Lear Corporation (NYSE:LEA)

Lear trounced analyst estimates of $1.29 per share, instead turning in earnings of $2.96, up from a loss nearly as big a year ago. The automotive supplier indicated that they didn’t think this meant next quarter would be a big upside surprise, too. They left their estimates for 2010 net sales of about $11 billion right where it is.

Marathon Oil Corporation (NYSE:MRO)

Marathon’s second-quarter earnings surged 72 percent to $1.11 per share (analysts had expected $0.81). The company cited better oil and gas prices as well better refining margins (i.e. they cut their costs). The markets weren’t too enthusiastic, though. They pushed the stock down a half percent near the start of trading.

Radian Group Inc. (NYSE:RDN)

The giant credit and insurance company Radian got absolutely crushed last quarter. The company’s still absorbing losses from derivatives that have been stagnating on their books. Still, the loss was staggering: $4.31 per share when analysts were expecting a loss of just $0.75. The ray of light? The company reported mortgage insurance delinquencies declined for second consecutive quarter. Maybe housing is getting better?

RTI International Metals, Inc. (NYSE:RTI)

The biggest surprise of the day? RTI’s domination of the titanium market. The company reported net income of $21.6 million, or $0.72 per diluted share, compared with a net loss of $1.3 million, or $0.06 per diluted share, for the same period a year ago. Titanium prices have started a slow climb since April, and it’s finally starting to show in RTI’s earnings.

Solarfun Power Holdings Co., Ltd. (NASDAQ:SOLF)

The markets were most exuberant about Solarfun’s huge quarter. Traders showed their excitement by pushing the stock up more than 10 percent when Solarfun reported that it earned $0.59 per share last quarter. That’s more than double analyst estimates of $0.25 per share. The company’s also not shying away from bold predictions. They boosted their outlook on increased demand and rapidly ramped up manufacturing capacity.

Lackluster day for gold stocks despite powerful market rally

Irrationality in the markets leaves gold stocks in the dust while driving up just about every other sector. The perfect short environment seems like it’s just around the corner.

The dollar dropped an average of roughly 1 percent against the Pound and the Euro. The Dow rallied 208 points (1.99 percent), and the FTSE was up 2.65 percent. What’s going on with gold? Despite an early surge on the New York NYMEX, the yellow metal spot price and corresponding stocks couldn’t keep pace with other equities. Here’s a handful of the most obvious underperformers in gold stocks:

  • Hecla Mining Company (NYSE:HL), +1.01 percent
  • Coeur d’Alene Mines Corporation (NYSE:CDE), +0.46 percent
  • Richmont Mines Inc. (AMEX:RIC), +2.12 percent
  • DRDGOLD Ltd. (NASDAQ:DROOY), +1.21 percent
  • Allied Nevada Gold Corp. (AMEX:ANV), +0.75 percent

The best performers were the international majors who are more tied to basic materials. Among them:

  • Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX), +4.56 percent
  • Rio Tinto (NYSE:RTP), +5.26 percent

It appears better-than-expected earnings have created a micro-bubble, that could present some excellent short opportunities – particularly in the technology and basic materials stocks. In two weeks, earnings will taper off, and I expect reality to start setting in.

The ECRI, for instance, is pointing to a recession. Alan Greenspan’s calling for a double dip, and I’m try to free up capital and move into dividend stocks after my shorts blew up in my face today. I want to short at the top, and I think we’ll have that opportunity in the next two weeks – no matter what sector you’re in.

Top 5 recession proof stocks

Five stocks you should own when recession strikes.

Now that Alan Greenspan is warning that the U.S. could be headed for a double-dip recession, investors should be looking to hedge or reverse their positions in equities. If we are, indeed, headed for negative GDP, it’s hard to know what stocks may thrive, but if history can give us any clues, we might want to look in unexpected places. Here are five tickers to do more research on if you want to protect your money with stocks during a recession:

1) SPDR Barclays Capital 1-3 Month T-Bill ETF (NYSE:BIL).

When the economy really hits the fan, treasuries have time and again proved the ultimate safe haven. People keep buying them even when their returns goes negative! That happened late in 2008 when investors were more comfortable with negative returns than they were with the volatile markets. The Barclays 1-3 Month T-Bill ETF provides somewhere to park your money when you’ve lost faith in just about everything else.

2) iPath S&P 500 VIX Short Term Futures ETN (Public, NYSE:VXX).

When the markets turn sour, equities get volatile. That means one place to look for a return is on the volatility itself! Strange concept, but it works. The VIX Short-Term Futures ETN from iPath offers exposure to a daily rolling long position in the first and second month VIX futures contracts. It’s essentially mirroring back volatility in S&P 500 Index. That means the more volatile the markets, the better off you do. VXX is down 25 percent over the past six months.

3) Altria Group, Inc. (NYSE:MO).

According to at least one writer, you can’t do much better than booze and tobacco during recessions. What better time to drink and smoke away your woes away then when the economy looks blackest? “Alcoholic beverage makers not only beat the market in 80 percent of recessions prior to this one, they actually rose an average of 6 percent,” Nilus Mattive writes. “Household products manufacturers posted a gain of 1.8 percent and outperformed in every single instance… And tobacco companies rose 9.6 percent and beat the market every time.” Throughout 2009, Altria – the maker of Malboro cigarettes – paid dividends of $1.29 and rose from $15 to $19. Still, that’s off the stock’s pre-recession highs of $24. There could be something more at work here, though: changing U.S. sentiment towards tobacco. Explore booze stocks for potential recession beaters.

4) Wal-Mart Stores, Inc. (NYSE:WMT).

Everyone likes to save money. During a recession, though, pinching pennies goes from a past-time to an absolute necessity. People who might otherwise eschew shopping at Wal-Mart suddenly find themselves in line with everyone else. That’s one of the reasons Wal-Mart has beaten the S&P by more than 30 percent since the start of 2008.

5) ProShares UltraShort Real Estate ETF (NYSE:SRS).

The most straightforward way to profit off a falling market is to pinpoint where the problems are going to be and find an inverse ETF that covers that sector or commodity. One of the triggers of the Great Recession was, of course, the real estate and mortgage-backed derivatives collapse. At one point late in 2008, the ProShares UltraShort Real Estate ETF was trading for more than $1,000 a share! It closed at $23.58 Friday (factoring in a 1:5 split in April).

If you really crave risk, you might take a peek at Direxion Funds Direxion Daily 30-Year Treasury Bull 3X Shares (NYSE:TMF). This Direxion fund seeks 300 percent of the price performance of the NYSE Current 30 Year U.S. Treasury Index. It’s up 34 percent over the past six months.

Best deflation stocks and sectors

What are the best deflation stocks? Where should I put my money when the value of the dollar or commodities are falling?

As the pendulum swings from fear of inflation to fear of deflation, investors will begin reassessing their portfolios to find good deflationary hedges. In general, dividend paying stocks are safest place to be – particularly since you’ll be earning relatively more on your dividends than you would if the inflation rate was normal or high.

Here are a few high-yielding dividend stocks (REITs) that could be of interest as deflationary plays:

  • Chimera Investment Corporation (NYSE:CIM), Current Yield: 18.53%
  • American Capital Agency Corp. (NASDAQ:AGNC), Current Yield: 20.79%

Disclosure: I’m currently invested in both of the above stocks.

Since deflation slowly erodes a company’s earnings power, it often creates a tepid environment for stocks. Inverse ETFs give investors a quick and dirty way to profit from down markets. Here are a few to research more when things get hairy:

  • ProShares UltraShort Russell2000 (NYSE:TWM), seeks twice the inverse of the daily performance of the Russell 2000 Index
  • ProShares UltraShort Dow30 (NYSE:DXD), seeks twice the inverse of the daily performance of the Dow Jones Industrial Average
  • ProShares UltraShort S&P500 (NYSE:SDS), seeks twice the inverse of the daily performance of the S&P 500 Index
  • ProShares UltraShort Financials (NYSE:SKF), seeks twice the inverse daily performance of the Dow Jones U.S. Financials Index
  • ProShares UltraShort Real Estate (NYSE:SRS), seeks twice the inverse daily performance of the Dow Jones U.S. Real Estate Index
  • ProShares UltraShort QQQ (NYSE:QID), seeks twice the inverse of the daily performance of the NASDAQ-100 Index

Note: All of the above are 2X ETFs, which mean they’re leveraged 200 percent. Small changes in the market can create huge swings in the above stocks. That could mean large profits, but it could also mean enormous lossses. Always consult a qualified professional before investing.

Earning future looks dim for Goldman (GS) and Morgan Stanley (MS)

If the earnings results from commercial banks are any indication, the investment banking sector could get hammered this week with reports from Goldman and Morgan Stanley.

After some unimpressive earnings from the commercial banking giants, things don’t look great for the upcoming earnings releases from investment banks Goldman Sachs Group, Inc. (NYSE:GS) and Morgan Stanley (NYSE:MS).

On the commercial side, revenues were down at all three of the biggest banks:

  • Bank of America Corporation (NYSE:BAC): Revenue -40 percent
  • Citigroup Inc. (Public, NYSE:C): Revenue -26 percent
  • JPMorgan Chase & Co. (NYSE:JPM): Revenue -24 percent

The good news? The three commercial banks generally beat analysts estimates, but they did it on lower credit losses as consumers hunker down to pay off their debts (another factor that could slow the economy at large).

If the commercial banks are any indication, earnings from the biggest investment banks will be unimpressive, too. Be wary of a sell-off in shares of Goldman and Morgan Stanley. Goldman is slated to report their earnings on Tuesday, July 20, before the market open. Analysts are calling for earnings of $2.04 per share, down $2.89 from a year ago. Morgan Stanley will report earnings Wednesday, July 21, before the market open. Analysts are anticipating earnings of $0.46 per share, up $1.83 from a year ago’s loss of $1.37 per share.

Is now the time to be bullish on stocks?

Contrarian investors are trying to figure out if now’s the time to buy back into stocks, but investors shouldn’t be too quick to pull the trigger.

Contrarian investing is one of the boldest and scariest things an investor can do. It involves identifying a trend in stocks, bonds or sentiment, and betting against it.

At the moment, consumer confidence isn’t great. In new numbers (from Thomson Reuters and the University of Michigan) reported Friday, consumer sentiment dropped to its lowest level since last summer. The effect was a sucker punch on the markets. The Dow Jones Industrial Average (INDEXDJX:.DJI) dropped 261 points to 10,097, and the S&P 500 (INDEXSP:.INX) fell 31 points to 1,064.

“We lost jobs and now it appears that we are losing spending,” Jack Ablin, chief investment officer for Harris Private Bank, told the Chicago Tribune. “And when you lose spending you lose profits.”

Fears of deflation, joblessness, slowing economic growth and the ax that fell on unemployment benefits are all pointing toward decreased earnings for public companies, and that’s putting pressure on stocks. Contrarians might say, then, that now’s the time to buy.

Contrarian investing is particularly effective when investing in options (since 90 percent of all options bets are incorrect). Contrarian investing is significantly harder when it comes to investor sentiment. Sentiment can compound upon itself, and make things appear bleaker than they truly are. And we all know that people would rather stop the pain in their portfolios now rather than hold on for some intangible future when things might be better.

Volatility ETNs were about the only things that out-performed on Friday. The iPath S&P 500 VIX Short-Term Futures ETN (NYSE:VXX) surged 6.5 percent, and the more thinly traded Barclays Bank PLC ETN (NYSE:VXZ) rose 4.3 percent.

This is the sort of environment that can paralyze even experienced traders – particularly during earnings season. Sometimes then, it seems, the best solution for indecision is to do nothing and growing your cash reserves.

Top 5 effects of the Financial Reform Bill

A quick and dirty run-down of the top 5 effects of the brand new financial reform bill that passed earlier today.

1) The establishment of an independent consumer bureau intended to protect borrowers against mortgage, credit card and other lending abuses.

2) The establishment of new powers for the government to shut down troubled financial companies – no matter how large or small.

3) The creation of a council of federal regulators who will be tasked with watching for threats to the financial system.

4) New governmental oversight for derivatives (including mortgage-backed derivatives, which helped contribute to the collapse of Lehman Brothers and Bear Stearns).

5) The ability for shareholders to have a bigger say in compensation for executives at public companies.

The impacts of the bill will likely impact the economy in unforeseen ways. That’s typically the way these things work. On the face of it, everything looks like it’s good for investors and bad for banks – that said, I’d be cautious of a drop in financial ETFs today; double- and triple-long financial ETFs could be significantly impacted, stocks like the 2X ProShares Ultra Financials ETF (NYSE:UYG) and Direxion Daily Financial Bull 3X Shares (NYSE:FAS).

Despite all the bills intentions, I have faith (is that the right word?) that the world’s largest and most powerful banks will find creative new ways to circumvent the Financial Reform Bill. I also believe that these new financial regulators will find creative ways to abuse the bill. Intentions and actions are two very different things.

Benjamin Graham’s Principles in The Intelligent Investor

There are five key principles that recur again and again in The Intelligent Investor. To echo Warren Buffet, here are the key elements of Benjamin Graham’s approach to investing.

The Intelligent Investor by Benjamin GrahamAmong the first value investors in modern trading history, Benjamin Graham’s concepts are so fundamental to the views of most stock investors that they don’t even realize the ideas once had to be codified! Slowly and surely, Graham took a lot of the emotion out of investing in stocks, and, of course, his ideas helped spawn some of the greatest investors of all time including Warren Buffet (CEO of Berkshire Hathaway, Inc., NYSE:BRK.A).

There are five key principles that recur again and again in The Intelligent Investor. To echo Warren Buffet, here are the key elements of Benjamin Graham’s approach to investing:

1) When you buy a stock, you’re not buying a symbol or a price movement; you’re buying a stake in a real live company.

2) The market makes steady swings from overvalued to undervalued. Intelligent investors sell when the market has overvalued specific stocks and the buy when stocks are undervalued.

3) Pay attention to a stock’s current price. Future stock values are relative. If you get in when the price is high, your return will be low.

4) Give yourself a “margin of safety” when you invest. Because all stocks carry risk of loss, you can only minimize that risk by buying when prices are low, thereby creating that safety net.

5) You must invest on a principled foundation. If you can control your emotions in bear and bull markets, you can profit in either one.

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