Top Stocks Blog - MSN Money

Top Stocks has moved

2009-10-28T14:21:00Z

MSN Money's Top Stocks blog has moved to a new address: http://articles.moneycentral.msn.com/Investing/top-stocks

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Moving is a pain, but we think it's worth it. Remember to update your bookmarks and favorites, and come on over.

McDonald's abandons Iceland

2009-10-27T17:08:00Z

Would you spend $6 on a Big Mac? I wouldn't, and neither will people in Iceland.

That's why McDonald's (MCD) is closing its three restaurants in Iceland and has no plans to return, according to the Financial Times.

The move says more about Iceland than it does McDonald's. Until recently, Iceland was one of the wealthiest countries in the world. But its financial system imploded in the global credit crisis, and its three biggest banks were ruined by high debt. Its currency went into a tailspin and its capital markets shut down.

The departure of McDonald's is perhaps a tacit acknowledgement that the country isn't coming back. McDonald's cited the "very challenging economic climate" on the island nation, according to the FT.

Icelandic McDonald's restaurants imported supplies from Germany, and their costs have doubled as the krona collapsed, the FT reported. The restaurants would have had to raise prices by 20% in response. That means the Icelandic Big Mac would have cost far more than the $6 Big Mac in Switzerland.

Now, Iceland will join Albania, Armenia and Bosnia and Herzegovina on the list of McDonald's-free countries in Europe.

Dole IPO busts out of the gate

2009-10-26T21:40:00Z

Perhaps the little guy is finally catching on to the games that Wall Street loves to play.

Last Thursday, Dole Foods (DOLE) priced its IPO at $12.50 per share, well below an expected range of $13-$15 a share. Based on that, you might have expected it to move higher when shares opened Friday morning.

But investors sensed something sour in this offering, and it wasn't the pineapple. Shares fizzled from the start and closed down fractionally; they sat at $12.20 at Monday's close.

A Better Choice: A Failed IPO That's Set to Double

That's not a huge loss, but it's far from IPO glory. And it reflects the caution that all investors need to have right now.

Dole has been off the market for six years, since private owners took back company. The private holders of the company no doubt hoped someone would be out there clamoring for shares.

But the discount we see here to the expected pricing range suggests that the rules of the IPO game may be changing.

In the old days, Wall Street would price IPOs in a way that all but guaranteed immediate profits for those allocated shares in the deal before the start of public trading. A long sales pitch consisting of road shows and careful study helped all but the worst IPOs shoot up when they hit the market. Those initial shareholders could cash in almost from day one.

Today, that pricing model is all out of whack. Investors are cautious about deploying capital on a stock that may be trading on hype. Sellers are no longer interested in leaving money on the table for greedy buyers of IPOs who trade and trade as prices go up and up.

As a result, there is a vacuum in the IPO market that causes most IPOs to now go bust, even if they represent solid businesses. That's why I recently suggested that investors consider buying busted IPO's instead of newly minted shares.

There is a deep pool of orphaned IPOs that fell in price after becoming public companies. These busted IPOs trade for lower prices for any number of reasons. In many cases, it is the market that is damaged, and not the company.

Dole's problems have more to do with market mechanics instead of inherent value. In addition to pricing the IPO, the chairman of the company, David Murdock, was simultaneously selling an unrelated convertible debt deal that may have confused investors about the company's real worth.

It was Mr. Murdock who took Dole private in a heavily-leveraged deal a few years ago. Proceeds from the IPO are being used to pay down some of that debt.

The company’s finances are a lot more complex than selling fruits and veggies, and investors appear to be saying not so fast.

That caution is exactly what is needed in this environment. While it would be easy to get sucked into the IPO game, given the bullishness of stocks right now, investors are better served waiting for a better price.

I would stay away from DOLE until the dust settles and check out busted IPO's instead.

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Verizon's good and bad news

2009-10-26T19:58:00Z

Third-quarter earnings, announced before the opening on Monday, should be a reminder of why I added Verizon (VZ) to my Dividend Income portfolio rather than to any of my more growth-oriented portfolios on October 9th.

Making enough money to pay the stock's 6.6% dividend doesn't seem to be a problem; getting enough growth in the new businesses to compensate for the decline in the old businesses continues to be a challenge.

The company did manage to beat Wall Street's earnings estimates for the quarter by a penny a share. Revenue came in as expected at $27.3 billion, up 10.2% from the third quarter of 2008.

The total number of wireless customers grew to 89 million. That's a 26% increase.

But Verizon still trailed archrival AT&T (T), which added 2 million customers in the quarter to Verizon's 1.3 million. The difference, of course, was AT&T's exclusive deal to sell Apple's (AAPL) iPhone.

But the real problem was the mixed picture on the profitable data and video services that are Verizon's future. Sales of data services rose 48%, but customer turnover climbed to 1.49% from 1.33% in the third quarter of 2008. Turnover, or “churn,” as it's called by wireless operators, is a real profit killer, since it costs so much to acquire a new customer to make up for those that have departed.

The numbers from Verizon's FIOS TV and Internet fiber network, however, were the biggest disappointment. The company added fewer customers this quarter -- 198,000 for its FIOS Internet and 191,000 for its FIOS TV product -- than last quarter and than analysts expected. For example, Verizon added 300,000 FIOS TV customers in the second quarter of 2009.

That's not good news, since the company is spending $23 billion this year and next to build out its high-speed TV and Internet fiber network.

At the time of this writing, Jim Jubak did not own or control shares of any company mentioned in this post.

Market mildly bullish

2009-10-24T16:29:00Z

Each weekend on Top Stocks I like to take stock of the market and see if the market has changed direction and I might need to rethink my strategy. I report how my portfolio on Wall Street Survivor is doing against the other participants from MSN's Top Stocks blog. I try to use the same standard methodology and explain my conclusions.

I use BarChart and the various technical analysis indicators I have come to rely on for the last 5 years. Let's look at them one at a time:

Value Line Index - an index of the 1700 stocks followed by Value Line - I like this better than the S&P 500 because it contains more stocks and is not market cap weighted so that larger companies are not given greater weight. To me that's a better feel of the overall market.

BarChart still ranks the index as a 32% overall buy with 7 of the indicators buy, 3 sell and 3 hold. I would point out that the 3 sells are all short term and are what I expected to see. Bullish but not big time.
The Value Line Index is tracking below its 20 day moving average -- just barely, but still tracking above it's 59 & 100 DMA. Weaker than last week but still in the green. Bullish but still weak.
The Index is down for the week by 1.74% but up for the month by 1.02%. The index has been up each of the last 5 months

BarChart Market momentum - are stocks trading above or below their DMAs for various periods? Follows approximately 6000 stocks - still positive, so bullish.

51% above their 20 DMA
68% above their 50 DMA
82% above their 100 DMA

Ratio of stocks hitting new highs to stocks hitting new lows for various periods: 1.0+ positive, 1.0 neutral, below .99 negative -- this week bullish

20 day new high/new low ratio -- 652/619 = 1.1 -- bullish
50 day new high/new low ratio -- 467/202 = 2.3 -- bullish
100 day new high/new low ratio -- 442/116= 3.8 -- bullish

All of the 3 areas I look at are still bullish but not as much as last week's review.

On Wall Street Survivor I compare my performance for the month since that is the only time frame we all have participated. The S&P is up 2.13% for the month but I'm down .03%. No need to panic but that puts me in 5th place out of 8 with Anthony Mirhaydari taking away top honors again this week.

Let's not expect too much from the market. Remember this is still earnings season. The market has been climbing on anticipation and earnings season is a reality check time so stocks are adjusting to the accountants earnings and away from the analysts earnings expectations.

Jim Van Meerten is an investor who blogs on financial matters here and on Financial Tides. Please leave a comment below or email FinancialTides@gmail.com

Disclosure: I hold no positions in any of the stocks in my Wall Street Survivor portfolio at the time of publication

Investing in banks that do right by their shareholders

2009-10-23T21:11:00Z

Banks are reporting great earnings. But this is to be expected because making banks profitable is the most politically palatable way for the government to recapitalize the banking system. The government accomplished this by holding interest rates that banks have to pay on their deposits to almost zero and relaxing the accounting rules so they don’t have to be diligent about writing off their bad loans.

It looks to me like the plan is working. If this continues, the banks will make enough money to earn their way out of the bad loans that are still on their books.

Some banks are putting their executives’ interests ahead of their shareholders’, by using the lion’s share of the profits to pay record bonuses. Other banks are using the profits to do things more in line with their shareholders’ interests — paying back TARP, making acquisitions, and rebuilding their capital without diluting shareholders.

Now that profits are rising, I think banks that are using the profits to do right by their shareholders are going to be good investments. Two picks from Marketocracy mFOLIO Master Eugene Groysman, that I have written about in the past are US Bancorp (USB) and Barclays (BCS). Both still look good at current prices. I think these two banks may be among the first to start to restore their dividend.

It can be hard to find these articles after they scroll off the front page. So, if you would like to be notified via email when I post a new one, click here.

Ken Kam, Marketocracy Data Service's Editor in Chief, also is portfolio manager for mutual and hedge funds advised by a Marketocracy affiliate. Before relying on his opinions, always assume that he, Marketocracy, its affiliates and clients have material financial interests in these stocks and hold or trade them contrary to those opinions. Click here to continue reading for more detailed and important disclosures, disclaimers, limitations and material conflicts of interest.

Has Microsoft turned the corner?

2009-10-23T19:24:00Z

When I added Microsoft (MSFT) to Jubak’s Picks on July 24, 2009 after the company announced results for its fiscal fourth quarter, I wrote “This is as bad as it gets.”

After its Oct. 23 earnings release, the company is now saying the same thing. In the post-earnings conference call, Microsoft CFO Chris Liddell said that the fourth quarter may have been the bottom. Certainly, the company is behaving as if it were: Microsoft resumed buying back shares in the quarter that ended in September, with purchases of 1.4 billion shares.

First quarter earnings for fiscal 2010 fell to 40 cents a share, but that beat the 32 cents expected by Wall Street. Revenue declined by 14% from the first quarter of fiscal 2009 to $12.92 billion. That big drop in revenue came because Microsoft deferred $1.47 billion in revenue from customers upgrading to Windows 7. Put that back in and revenue came to $14.39 billion, a 4% decline from the year-earlier period.

Microsoft beat Wall Street estimates this quarter by cutting costs by more than Wall Street expected. Operating costs dropped 6.9% after the company made its first ever company-wide firings, slashed travel costs, and cut the prices it pays vendors. In the conference call, the company increased its cost-cutting target.

The big question going forward, however, isn’t about cutting costs, but about how many copies of the new Windows 7 operating system Microsoft can sell.

Here, too, the news was good.

Deferred revenue came in above analyst expectations because pre-orders of Windows 7, which officially went on sale on Oct. 22, were higher than projected. The company sold more copies of Windows in the quarter than in any other previous quarter, with sales fueled by demand for Windows 7 and by sales to netbook makers of copies of the older Windows XP operating system.

In the conference call, Microsoft said that it sees the potential for a corporate PC “refresh” beginning in calendar 2010, but expects companies to stretch out their replacement of older PCs (and older operating systems from Microsoft) over a couple of years.

Microsoft also backed up numbers from Intel (INTC) signaling that the PC market could actually show growth of as much as 2% in calendar 2009. Earlier in the year, market analysts had projected that PC sales would decline again this year. (For another way to play the upturn in PC sales, see my recent buy of Taiwan Semiconductor (TSM).)

As of Oct. 23, I’m increasing my target price for Microsoft to $33 by June 2010 from the prior $31 a share.

Full disclosure: I own shares of Microsoft in my personal portfolio.

Is the economic roller coaster at the bottom?

2009-10-23T17:22:00Z

If there is one economic report I look forward to every month, it's the Conference Board's Leading Economic Index. Most of the stuff written by economist is so full of statistics, formulas, tables and graphs that by the time you weed through it all you forgot what the information says; the Conference Board's report is different. They use only 3 major categories:

Leading Economic Index -- LEI -- 10 indicators
Coincident Economic Index -- CEI -- 4 indicators
Lagging Economic Index -- LAG -- 7 indicators

This month I'll sum up the report by this quote: "All in all, the behavior of the composite indexes suggests that the recession is bottoming out and that economic conditions will continue to improve in the near term." Pretty simple to understand, straight forward and to the point.

Let's look for some gems in the report:

LEI - 8 of 10 increased. The 2 that were down were average work week and building permits. We all know we have excess housing inventory and both present and future foreclosure inventory to work through. What I thought was interesting was supplier deliveries, and manufacturer's orders of nondefense capital goods and new orders for consumer goods and materials were up - more on this in just a minute.

CEI - Unchanged - Industrial production is up with the nonagricultural payroll down. Let's go back to Accounting 101. Industrial production up, supplier deliveries up, manufacturer's orders up, average work week down, nonagricultural payroll down; sounds like improving margins are in store for the manufactures. That is a very good sign.

LAG - Improvement in labor cost per unit of output; again a good sign of future profit margins.

At least this report makes me feel better. Orders, production and deliveries up with labor costs down -- I like that. It seems like the roller coaster may have reached the bottom and all the bad news that hasn't already hit the fan at least has been discussed and accounted for. I think that we can be confident that a year from now the economy will be better than it is today.

Jim Van Meerten is an investor and writes about financial matters here and on Financial Tides. Please leave a comment below or email to FinancialTides@gmail.com.

Don't ignore the analyst

2009-10-23T14:38:00Z

Before you read too much into the headline notice I didn't say listen to the analysts; I said don't ignore them. Let me explain the difference. My own blog is called Financial Tides for a reason; I don't recommend swimming against the tide.

I think analysts and astrologists have a lot in common. They both claim they can foretell the future by interpreting the signs better than anyone else and are willing to share their insight with you for a price. Most of the analysts are young MBAs with CFAs so they have 2 little pieces of paper to certify how much better they are than you at reading the tea leaves. Their job is to produce reports that will give their brokers something to talk to you about.

Most brokerage firms do not allow their sale reps to do their own research. That would open them up to liability so they use these young MBA/CFAs to peruse all the published info on a company to document why they are making a buy/sell recommendation. How can you lose an arbitration hearing if your recommendations are well documented and produced using a standardized methodology?

We are in the middle of earnings season and have you noticed that most stocks either beat expectations or did not meet consensus? That's the wordsmith way analysts use to justify that they totally missed the mark with their projections. The estimate wasn't wrong, it's the companies' performance that is the reason for the bad estimate.

I always use my own technical analysis research to come up with my buy recommendations but the last thing I do before I push the buy button is to check the analysts recommendations. It's not that I'm looking for them to agree with me, I'm making sure they don't disagree with me; big difference.

If I notice a stock has hit new highs 50% of the time in the last 20 day, I like that and would probably buy it. If however, several of the major brokerage firms have a sell recommendation I've got to realize that there are probably 50,000 brokers out there telling all their clients to sell that stock. I would be hard pressed to think that the stock would continue to climb if there are that many brokers each calling their top 250 clients saying:" The sky is falling, our analyst recommends selling this stock immediately".

Do your own research but don't be foolish enough to think you can swim against the tide. Don't ignore the analysts.

Jim Van Meerten is an investor who writes about financial matters here and on his blog Financial Tides. Please leave a comment below or email FinancialTides@gmail.com.

3 busted IPOs to buy now

2009-10-22T21:45:00Z

Is the market turning into a raging bull?

One sure way to tell if a bull market is back is by examining the number of private companies lining up to become publicly-traded securities.

That number seems to be rising. Last week private equity giant The Blackstone Group (BX) announced that it would be selling many of its portfolio companies via the public market. Interestingly, it was the IPO of BX itself that signaled the end of the last bull market in 2007.

But IPOs are a dangerous game for investors. Companies often debut with a lot of hype and at too-high prices. Stocks shoot up, then fall back as insiders and private investors who hold shares start selling. It’s the little guy who chased down shares in the market that loses.

So, I have a better idea for you: buy shares of busted IPOs. Here's why, plus three failed IPOs to buy now.

Today, at the dawn of a new bull market, some interesting IPOs will soon start trading. But the risks haven't changed. When times are good, the price of an IPO often has minimal correlation to true value, and it's often simply hype. And early investors stand ready to sell and bring prices back down.

Consider instead the case for busted IPOs.

Many companies that have ridden the IPO roller coaster now stand idly by with broken valuations. Their business plans may look suspect. But the froth and hype has also been removed.

If they're good companies with solid businesses and lots of potential, you can buy huge upside potential at much lower cost, with much less downside risk. That’s an equation that makes sense to me.

Here then are three ideas for those interested in the busted IPO.

The Blackstone Group (BX)

Leave it to the ultimate private equity institution to time the market perfectly. The Blackstone Group (BX) went public in late 2007 just as the market was about to reverse course. At the time of the offering, investors scooped up shares enthusiastically, sending the price to above $30. It did not take long for the sellers to push that price down. In fact, the stock did nothing but go down in the first year-plus of trading. The environment was not conducive to big profits for any financial institution, including BX.

But today, you can buy BX for just over $15 per share. You're buying shares as the market for financial services is beginning a new profit cycle. That is far better than buying shares at $30 near the end of the last business cycle. I would buy BX today.

Why This Failed IPO Penny Stock Is Set to Double

Orbitz Worldwide (OWW)

Another late-2007 IPO was for the hot online travel booking site, Orbitz Worldwide (OWW). It should be noted that The Blackstone Group had was involved in this offering as well. Shares traded for $15 at the time of the offering, but quickly fell apart in grand fashion. At the bottom, investors could have bought OWW for about a buck per share.

Was the company busted or was the market busted? In this case, the market was the problem. Shares of OWW have since rallied to its current price of around $6.50 per share, far below where they traded initially.

The discount is still a big opportunity for investors. The economy is on the mend, and travel, both leisure and business, looks to increase over time. That should bode well for the booking company that has established itself as a key player in the industry. The stock is worth at least $15 in my opinion.

Dice Holdings (DHX)

Is it really worth the dollars to go public at the end of a bull market? I get the allure, but the subsequent bust of an IPO may ultimately do more damage in the long run. Then again, some lucky private investors are able to profit at the higher sale price. It should be no surprise to find our third busted IPO in the 2007 offering trash heap. Dice Holdings (DHX) went public in late 2007 and has spent its public-trading life in selling mode. The bottom was reached in March at $2 per share.

In the case of DHX, the collapse should not be much of a surprise. The company specializes in job searches. When companies are not hiring, its business will naturally suffer. That said, with a recovery taking place it may be time to look at this business anew. It is a perfect time in the cycle to be buying any business tied to the job market. The job market will be the last thing that improves as the economy returns to growth. Though DHX has returned to about $7 per share, that is half what it sold for in 2007. It is not too late to buy DHX and participate in this IPO at half the price.

Investing in IPO’s can be a thrilling experience. Unfortunately in many cases the thrill is replaced by disappointment. However, buying a busted IPO gives you some of the same thrill and less chance of disappointment.

Get the names and buy prices of 5 More Busted IPOs to Buy Now here.

At the time of this writing, Jamie Dlugosch did not own shares of BX, OWW and DHX in personal or client portfolios.

Follow Jamie Dlugosch on Twitter.

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401k Match Makes a Comeback

2009-10-22T20:42:00Z

Yesterday I wrote about perks for jerks. Today, the little guy gets his due.

While the economy may not be producing jobs sufficient to relieve persistent unemployment, corporations are feeling good enough to reinstate 401k matches to those currently employed.

With times tight and layoffs mounting many corporations suspended 401k matching as a way to preserve capital. No matter that doing so would hurt the very people that corporations depended on for long-term success.

The Best Vanguard Funds for your 401k

This was a time for desperate measures. Or was it a way to keep the good times rolling for those at the top?

We’ll never know, but I have my suspicions.

What I do know is that the reinstatement of matches is being done quietly. The reason for doing so is that cutting the matches pretty much happened under cover of darkness.

No sense bringing in the attention when all that attention will do is highlights the ridiculousness of cutting the matches in the first place.

Take American Express (AXP). This financial services behemoth could not pay TARP money back fast enough so as to avoid any scrutiny of management compensation or mishandling of government funds.

Imagine the heat that would come from a revelation of corporate jets and country club memberships at a time when the AXP workforce had its 401k matches suspended. No wonder they are making a come back.

News of 401k matches making a comeback is quite compelling and says much about the health of the economy and the future of the recovery. As worrisome as it can be to say that job growth is a lagging indicator we have evidence now that such is true.

401k matches do indeed cost money and management spending of that money takes a certain amount of confidence. The next step will be for that confidence to grow into downright enthusiasm.

Once that happens hiring will begin en masse. The estimate is that half the companies that suspended 401k matches will return the popular program for employees.

That is a good thing for the market and the economy, even if it is happening quietly.

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7 reasons housing is doomed

2009-10-22T20:06:00Z

Buying a house is one of the biggest purchases most Americans will ever make. And right now, the housing market is the one of the biggest anchors holding back the U.S. economy. Though a recovery is under way in many sectors, the housing market remains a problem, and it looks likes it's going to get even worse.

7 Housing Stocks to Sell Now

Why do I say that? Here are seven reasons I'm convinced the housing market will continue to crater:

Reason #1 - Low Housing Starts

On October 20, data showed new housing starts were worse than expected, as builders remain cautious. While the total number of starts edged up a bit from 587,000 to 590,000, the increase was well under Wall Street's forecast of 610,000. Single-family starts appear to be leveling off—not increasing as some had hoped—and multi-family units saw a dramatic 15.2% drop on the month.

Reason #2 - Foreclosures Hit Record Numbers

Part of the reason it's so difficult to pare down the inventory of unsold homes is because of record foreclosure rates flooding the market with properties.

During the third quarter, foreclosure activity hit an all-time record, as 937,840 homeowners received foreclosure letters. That works out to 1 in every 136 U.S. homes.

If that's not bad enough, consider the concerted government and lender efforts to prevent foreclosures right now. Without any workout programs, the number could easily have topped 1 million homes. As it stands, the figures show a 5% increase from the second quarter and a 23% jump over the third quarter of 2008. Ouch!

Reason #3 - Housing Has No Relief at the Top

The Wall Street Journal recently reported that expensive homes continue to represent more and more of the growing foreclosure market. That's because the financing that people used to get to buy expensive homes, such as jumbo mortgages, are increasingly hard to get. Once a mortgage tops $729,750, banks can't sell the loans to Fannie Mae or Freddie Mac, meaning interest rates for homeowners soar, and banks require much more money down for the loan.

The housing bubble killed any complex mortgages, such as zero-down and interest-only mortgages, that could make it easier to obtain jumbo loans. This puts high-end houses out of reach for everyone but the extremely wealthy.

Reason #4 - Banks Are Reeling From Mortgage Losses

In order for banks to feel comfortable extending loans of any size, they need to feel comfortable with their current portfolio of mortgages and willing to lend more cash. And unfortunately, mortgage-related losses continue to creep up, so lending is not going to get any easier anytime soon.

We also saw a number of banks release earnings recently that were weighed down by bad debt charges. And worse, these companies raised their loan loss reserves for the coming months in anticipation of even more problems.

At the beginning of October, JPMorganChase (JPM) reported pretty good numbers, but even this leading bank said that its past-due loans doubled in the third quarter, with a total price tag of $20.4 billion in bad debt. When one of the best banks is facing troubles like this, it's a very bad sign.

7 Housing Stocks to Sell Now

Reason #5 - Property Prices Still Falling

In my home state of Nevada, the Las Vegas metro area is a case study in how badly the hosing market has cratered. In August, the median sales price in this metro area was down a jaw-dropping 46% compared with 2008.

While it's true that all real estate markets are unique, it's hard to deny that areas like Nevada, Florida and Michigan more than offset any "favorable" markets that are firming up.

Reason #6 - Housing Permits Drop

Housing permits are a gauge of future construction, since you need legal approval before building. Looking forward, things are bleak, because home building permits fell in September by the largest amount in five months, so we'll see fewer homes popping up in October and November.

Specifically, building permits rose dipped 1.2% to 573,000. What's more, this was also dramatically below the consensus estimate of 595,000. Looks like the housing market isn't just bad, it's worse than most economists thought.

Reason #7 - New Homebuyer Tax Credit Expiring

As a capstone to all this, it's important to acknowledge that any anemic growth in the housing market over the last several months will come screeching to a halt on December 1, when the $8,000 tax credit for new homeowners expires. If we're seeing slow growth—or worse, continued declines—in the housing market even with this cash incentive to buy a home, just imagine how bad it will be when the credit expires and the real estate market enters the seasonally weak winter months.

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McDonald’s beats the Street

2009-10-22T17:43:00Z

Now that’s the kind of quarter investors own McDonald’s (MCD) for.

Earnings for the third quarter, reported before the market open on Oct. 22, climbed to $1.15 a share from $1.05 in the third quarter of 2008. That was above Wall Street expectations of $1.11 a share. (This puts McDonald’s among the 80% of so of Standard & Poor’s 500 stocks that have beat Wall Street estimates so far this quarter. For more on that, see this Oct. 20 post.)

Revenue fell 3.5% to $6.05 billion. That was below analyst projections of $6.1 billion. But on a constant currency basis, revenue was up 2% from the third quarter of 2008.

Same store sales increased by 3.8% overall and they were up in every region where McDonald’s does business. And by more than Wall Street had projected, according to Bloomberg. Same store sales grew by 2.5% in the United States (analysts had expected 2.2% growth), by 5.8% in Europe (5.4% expected), and by 2.2% in the Asia/Pacific, Middle East, and Africa regions (1.1% expected).

As of Oct. 22, 2009, I’m keeping my target price at $72 a share but extending the schedule from March 2010 to September 2010. On Oct. 22, the stock paid a dividend yield of 3.7%.

Full disclosure: Jim Jubak does not own or control shares of any company mentioned in this post.

Expand the pay czar's role

2009-10-22T12:59:00Z

So the word is out that Kenneth Feinberg, the Obama hatchet man, is going to have the pay of the top 25 executives at 7 of the companies who have not paid back the TARP money, by as much as 90%. If that's a good idea for those companies why not look at the rest of the people who got us into this mess. What's good for the goose is good for the gander, right? There are more than just these 175 executives who deserve pay cuts.

Let's cut the pay of the top 25 executives at the SEC and FDIC, they were asleep at the wheel. Next cut the pay of the 25 top ranking members of both the House and Senate Banking Committees, they didn't create legislation to keep us out of this mess. How about the top 25 executives of the external accounting firms of those 7 companies, they certified financial statements that didn't reflect the true worth of the companies?

While we are on a roll let's cut the pay of the top 25 executives of Standard & Poor's, Moody's, Fitch and A M Best they didn't have proper ratings on these companies. Oh, and let's not forget the top 25 analyst at all the brokerage firms who failed to warn us by downgrading these companies when they should have.

There is a a lot of blame to be spread around and a lot of small investors who took big hits because they listened to the investment advice of people who they trusted, people who they thought were looking out for the little guys.

Little guys of America, unite! Let's hear your comments on who else should take a pay cut. You and I have already taken ours.

Jim Van Meerten is an investor and blogs about financial concerns here and on Financial Tides. Please leave your comments below or email FinancialTides@gmail.com

Time to take protective action

2009-10-21T21:48:00Z

If we've learned anything from last year, it is that our economy is much more fragile than anyone thought possible.

Our government’s policy has created strong incentives for the CEOs of financial institutions that are deemed “too big to fail” to chase opportunities with very large upsides no matter what the risk. If the risks work out, the CEO gets an unbelievably large bonus. If things don’t work out, the chief has to make do with a big severance package while taxpayers pick up the tab for the losses.

As things stand now, our system steers private capital into high risk, high reward bets and relies on taxpayers to provide public capital when the risks go bad. I think it is only a matter of time before one of the “too big to fail banks” makes a big bet that does not work out. When that happens, as we all saw last year, the stock market can drop almost 40%. If we don’t want to go through this again, we need to take advantage of this rally to prepare.

Going forward, there are going to be more times when we are going to have to take steps to protect our portfolios. Knowing when to take such protective steps is a type of investment skill that few people have.

At Marketocracy, our database of track records of thousands of analysts going back over 9 years has enabled us to find the few who don’t just talk a good story, but who also have the track record to back it up. We don’t want analysts who are always defensive just as we don’t want analysts who are always fully invested. What we are looking for is a rare combination of performance and protection. You can look at analysts I selected, and how I selected them by clicking here.

When I look at the combined portfolio of this analyst team I see over 25% is in cash, with another 10% in double inverse the market ETFs — a very defensive posture. When you consider that the market is up more than 60% from its low point earlier this year, and that the economy is still contracting when you back out government spending, I have to say I sleep better at night knowing that we are beating the market eventhough we have a defensive posture.

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