- Brown and Brown (BRO)
- Brady Corp (BRC)
- Cincinnati Financial (CINF)
- Citizens Banking (CRBC)
- Cullen Frost Bankers (CFR)
- First Charter (FCTR)
- FirstMerit Corp (FMER)
- Fulton Financial (FULT)
- Progressive (PGR)
- Protective Life (PL)
- Sallie Mae (SLM)
Near the Bottom...
Performance Update of Select Dividend Achievers
- ABM Industries (ABM) 62%
- Applebee’s (APPB) 45%
- Aptar Group (ATR) 45%
- AT&T (T) 57%
- Avon (AVP) 45%
- Bandag (BDG) 55%
- Eaton Vance (EV) 49%
- Energen (EGN) 54%
- EnergySouth (ENSI) 41%
- Family Dollar Stores (FDO) 36%
- Frischs Restaurants (FRS) 68%
- Fuller H B (FUL) 46%
- General Growth Properties (GGP) 58%
- Gorman Rupp (GRC) 64%
- Healthcare Properties (HCP) 46%
- Helmerich and Payne (HP) 41%
- Holly Corp (HOC) 80%
- Johnson Controls (JCI) 43%
- Kimco Realty (KIM) 47%
- McDonald’s (MCD) 40%
- McGrath Rents (MGRC) 45%
- Meridian Bioscience (VIVO) 50%
- Nucor (NUE) 46%
- SEI Investments (SEIC) 51%
- Service Master (SVM) 58%
- Sherman Williams (SHW) 54%
- San Jose Water (SJW) 82%
- Stryker (SYK) 67%
- Supervalu (SVU) 49%
- Telephone Data (TDS) 56%
- VF Corp (VFC) 48%
- Vulcan Materials (VMC) 81%
- West Pharma Svc (WST) 44%
- Wolverine Worldwide (WWW) 44%
As you’ll notice, companies with 10 to 35% returns were not included. However, if they were included during this time frame I would have had to add many more companies to the list. If anyone were to complain about receiving only 30% percent in one year with significantly reduced risk then investing in stocks isn't their cup of tea.
Despite the performance of these stocks I would not buy any of them since they are at or near their 1 year high. I currently hold a large position in Helmerich & Payne which I bought near the 1 year low. I always focus on those stocks that are within 5% of their 1 year low. At that time I determine if the stock is actually worth buying. Once I find another stock that is worth buying I will then jump ship.
Investment Tip: The larger your stake in a particular investment the better. While diversification is the general rule it is only sufficient when you don't understand the risks associated.
Stocks to Consider...
- AFLAC (AFL): This company is among the leading insurance companies in the U.S. and Japan. This company has traded in the $45 - $50 range since 2005 while the dividend has increased over 17% annually over the same period. According to IQTrends (www.iqtrends.com) written by Geraldine Weiss, AFL is undervalued when the dividend reaches 2%. The current dividend yield is at 1.60%. AFL has increased it's dividend for 22 years in a row.
- Bank of Hawaii (BOH): BOH is the largest bank in the state of Hawaii. BOH has increased it's dividend for 27 consecutive years in a row. This stock has traded in a range for the last 3 years. According to IQTrends BOH is undervalued with a dividend yield of 4%. BOH is yielding around 3.20%. While I am hesitant to dive into banking stocks, especially after the rash of mortgage loan delinquencies, I believe that BOH will prove profitable since it finances some of the most valuable real estate in the world. BOH has traded in $50 range since 2004.
- Lancaster Colony (LANC): This company is a diversified consumer product company that produces packaged foods to automotive parts. LANC has increased it's dividend for 35 years straight. This stock has traded in a range since 2002.
- Leggett and Platt (LEG): LEG has traded in the $20 -$30 since 1998. This translates into an incredible amount of untapped value. LEG has increased it's dividend for 33 years.
Good luck with your research. Please note that this list is expected to change.
Famous Last Words...
"...we have several years worth of losses built up in the current allowance for loan losses."
At the time, NEW had a closing price of $35.90. Today, NEW trades at $3.87. With such a brazen and flippant response, one has to wonder if the management team at NEW was thinking clearly at the time.
Source Citation: "Q3 2006 New Century Financial Corporation Earnings Conference Call - Part 2." The America's Intelligence Wire (Nov 2, 2006): NA. InfoTrac OneFile. Thomson Gale. San Francisco Public Library. 9 Mar. 2007
Gaming the Pre/After Hour Markets
Articles
Entropy notes
Gold-Eagle
http://www.gold-eagle.com/editorials_98/marantette121698.html
The Entropy Danger We continue to review Entropy Tops and Bottoms in our newsletters. Over the past 27 years, we have found the analysis of Entropy Tops and Bottoms a terrific addition to the buy and sell points of cyclic analysis. No more valuable or accurate technical analysis tool exists.
Our Entropy work comes from a tangential application of The Second Law of Thermodynamics. This law basically says that, in the end, all things come to rest. When applied to humans, Entropy equals death.
When applied to the stock or commodities markets, it means the end of one move and the reversal to the other direction. If the current direction is up, it shows the end of the upmove and the reversal to the downside. If the current move is down, it shows the end of the downmove and the reversal to the upside.
As we read our charts and discover Entropy Tops and Bottoms, we find the rules apply equally to charts of stocks or commodities. The rules apply equally to charts of any time period — daily, weekly or monthly. The rules apply equally to Dow Jones Industrial stocks and gold mining company stocks. The rules apply equally to Standard & Poor Futures and to Gold or Silver Futures.
Entropy rules as we now apply them are correct over 90% of the time. No other Technical Analysis tool comes close.
This week we are fortunate to have a weekly chart that exemplifies the basic rules and also shows a couple of the finer Entropy points as well. Over the years our work has shown us two basic time elements. They are: 1.) Moves up or down at the rate of 80 to 85 degrees, normally last 6 to 9 units of time. 2.) Moves up or down at the rate of 85 to 90 degrees, normally last 3 to 6 time units.
On a daily chart, time units are calendar days, not trading days. Entropy moves are a minimum of three days. The first unit of any Entropy move counts as day one.
Entropy moves are basically moves up or down at a rate of change of 80 plus degrees. Entropy moves are exhaustion moves and signal the end of the effort required to make the move to begin with.
Entropy moves end when the price move of a certain day goes above or below the extreme of the prior day. If a current move is up, the Entropy Top is in place when price action goes below the low of the prior day. If a current move is down, the Entropy Bottom is in place when price action goes above the high of the prior day.
The chart we use today to show examples of Entropy is the S&P Futures chart – weekly time period.
The first Entropy move to the upside begins the week of 6-19. It is a rise of 87 degrees and lasts 5 weeks. It ends the week of 7-24 when price action that week goes below the low of the prior week.
The week of 7-24 begins an Entropy move to the downside. This move lasts 4 weeks at a rate of decline of 88 degrees. It ends when price action the week of 9-18 goes above the high of the prior week. In this instance the downmove doesn't end, as there is a two week extension. However both the Entropy upmove and Entropy downmove result in profitable trades.
The next upmove begins the week of 10-09. This rise lasts an abnormal 8 weeks long. This rise is truly stupendous at the rate of 87.39 degrees. Remember this is an index of 500 stocks. Some stocks in the index are rising at even higher rates of climb.
The Entropy Top is now in place as price action last week went below the low of the prior week.
BUNGEE JUMPERS — READ ON
So far we've covered the basic points that we make in our two weekly newsletters. Here are the additional finer points we want to point out now.
There are times when, especially in rises, we say, "Watch Out – after rises like this, the decline on the other side can be as fast if not faster than the rise that brought us to this Entropy Top."
Now you look at this S & P Futures chart and your reaction may be, "Marantette – No Way!" Well, stay with us. Look back at the 06-19 rise. It took 5 weeks to go from 1074.67 to 1188.04. It took 4 weeks to fall from 1188.04 to 1054.00.
5 weeks up +113.37 points
4 weeks down –134.04 pointsMarkets go down faster than they go up.
Now look at last week's price action on the chart again. Is this market now starting down faster than it went up? Looks like it! Time and time again our Entropy analysis shows that after an Entropy rise, the stock or commodity can decline at a rate faster than the previous rise.
This is why our long-term stock market investors are now 100% in cash. This is why our DowStock mid-term portfolio is 90% short.
Other work of ours also shows that over the past 30 years, when the stock market declines, gold stocks decline faster and longer then the general market. In our Goldstock Trading Portfolio, which by the way is +62.48% year to date, we are now 100% in cash.
Unless you are truly a gunslinger, this is no time to be in the stock market.
David T. Marantette III
Goldstock Newsletter
http://www.goldstock.com
16 December 1998
What kind of game is this?
Today, Standard and Poor upgraded Countrywide Financial (CFC) from Strong sell to Sell. What kind of game are these analysts trying to play with us? Does it make sense that something which is so unattractive be worth deeming it less dead that previously noted.
This kind of manipulation by analysts raises my suspicions. Are the analysts fearful that, by painting a negative, but accurate picture, it is going to become a self-fulfilling prophsey? Does Standard and Poor have a vested interested in CFC? The justification given by Standard and Poor analyst Stuart Plesser for raising Countrywide from the dead to near dead is that it has been hammered so much that it couldn't possibly go any lower. Come on!!!!
This leads to unjustified optimism without the necessary proof that things have turned around. We need evidence not an analyst's assurance that it can't possibly get worse. This seems all the more outrages when you consider that some 21 companies in the subprime lending industry have filed bankruptcy at or near a perceived top in the real estate financing market (as opposed to the valuation of real estate itself.)
Continue to wait for the proof before considering this company as worth investing in. Countrywide is still a STRONG SELL.
Countrywide Financial (CFC)
Ups from 1 STAR (strong sell) to 2 STARS (sell)
Analyst: Stuart Plesser
http://www.businessweek.com/investor/content/feb2007/pi20070227_897788.htm?campaign_id=yhoo
Overall Market Direction...
I have decided to review the previous market cycle top that occurred from Jan. 1966 and ended around Jan. 1982 to demonstrate the power of the market cycles. The chart below from "The Wall Street Waltz" by Forbes Columnist Kenneth Fisher shows the Dow on an inflation-adjusted basis. This chart shows how, after inflation, the market moved sideways or down from Jan. 1966 to Jan. 1982.
As any cycle goes there is a point that there is an ultimate high or low. The best we can do as market observers and investors is to guesstimate where the bottom might be. Since the stock market has run on a 16-year cycle for the last 100 years it is safe to say that the stock market will hit it's ultimate bottom between 2008 to 2016.
This forecast doesn't seem very upbeat, I know. However, it is important to keep in mind that this will help you to choose your investments wisely in the coming years. Companies that have a consistent history of paying dividends are definitely going to make the difference in your investment performance.
Imagine if you bought stocks at the peak of the market in 1966 or 1972. If you had, the biggest stocks for that time would have broke even on your investment in a short period of time (3 to 5 years.) That is why I recommend that you read the article titled "The Nifty Fifty Revisited" by Jeremy Siegel. Siegel studied the top companies performance assuming that you bought at the market peak. It is no coincident that a majority of the companies studied by Siegel were dividend-paying stocks that can still be found in the current Mergent Dividend Achiever list.
If you chose to invest in stocks then knowing the market's history should serve you well. For those who bought the largest income paying stocks, from '66 to '72 and held on, they were richly rewarded.

Informative Financial Resources
- Mises- Hard Core Economics
- John Reed -Real Estate
- Caroline Baum -Interest Rates
- John Rogers -small cap values
- Gary Shilling -big pic and stocks
- James Grant -big pic and stocks
- Steve Hanke -big pic and stocks
- David Dreman-big pic and stocks
- Richard Russell's Dow Theory Letters
- Prudent Bear -potential pitfalls
- Financial Sense- Book Author Interviews
Investment Myth Number 2...
This thesis is based on the assumption that, if you’re wrong about your investment choices (lose all/majority of invested capital) then you’ll be able to make up money lost at a later time.
Yes, you’ll definitely have a chance to make up for the loss later on down the road. However, by the time you get to the point of “down the road” you’ll have lost the one thing that you could never get back and that is time.
During the time that you’ve erroronously invested your funds (you believe otherwise at the time) you’ve lost the opportunity to compound your investment with dividend paying stocks, CDs, bonds, real estate or any other income producing investment. You end up carrying all the risk with little to show in the way of reward as you finally and ultimately give in to the reality of your current investment choices.
Investment Reading List
- The Nifty Fifty Revisited by Jeremy Siegel
- Relative Dividend Yield- Anthony Spare
- Dividend Connection- Geraldine Weiss
- Single Best Investment- Lowell Miller
- Dividends Don't Lie by Geraldine Weiss
- 100 Minds that Made the Market by Kenneth Fisher
- A Treasury of Wall Street Wisdom- Harry Schultz
- ABC of Stock Speculation- S.A. Nelson
- Against the Gods- Peter Bernstein
- Bear Markets- Harry Schultz
- Beating the Dow by Michael O’Higgins
- Dow 3000- Richard Shulman & Thomas Blamer
- Dow Theory Today- Richard Russell
- Dow Theory- Robert Rhea
- General Semantics of Wall Street- John Magee
- Investment Madness- John Nofsinger
- The Great Crash- John Kenneth Galbraith
- The Intelligent Investor- Benjamin Graham
- The Stock Market Barometer- William Peter Hamilton
- The Ultimate Dividend Playbook-Josh Peters
Labels
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- accumulation (1)
- AFLAC (2)
- American National Insurance (1)
- analyst ratings (1)
- Annaly (1)
- Anthracite (1)
- Bank of Hawaii (1)
- banking (1)
- Briggs and Stratton (2)
- Carlisle (1)
- CenturyTel (1)
- Clorox (1)
- commodity (1)
- countrywide (2)
- Dividend Notes (1)
- fall (1)
- general market (2)
- Illinois Tool Works (1)
- Individual Stock (7)
- inflation (1)
- Investment Myths (2)
- Investment Truths Disguised as Opinion (1)
- John Rogers (1)
- Jones Lang LaSalle (1)
- Lancaster Colony (1)
- Learn More About Dividends (1)
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Research: Helmerich and Payne at $23.03
HP is now selling 6.72% above it’s 52-week low. According to Standard & Poor’s stock report, HP sports a Price-to-Earnings ratio (P/E) of 10, which is well below its 10-year average of 17. This presents an opportunity to buy at or near the lowest price relative to historical earnings.
Imagine keeping a company profitable while at the same time rewarding investors for their patience. The executive team at HP has managed to increase its dividend every year for the last 28 years. This implies that the management team knows exactly how to run a company in a volatile industry.
If we were to look back 28 years ago, we would find that the Oil & Gas drilling sector experienced tremendous growth due to the OPEC oil cartel in the late 1970’s. The cartel forced major oil companies to seek oil supplies from non-traditional regions of the world. This meant significant growth in oil services drillers who built oil platforms and oil rigs that could be easily be built anywhere around the world.
However, as the oil cartel lost its grip on the price of oil, drilling companies had already over-committed themselves by borrowing excessively to meet anticipated demand that never materialize and flooded the market with too many rigs. The drilling industry went into a nose-dive which left only a few companies standing, HP being among them.
HP has fallen 42% from the 52-week high of $40.24, which implies that significant opportunity exists for upside potential. HP moved to the $40 range mainly due to the fact that the price of oil rose so much. Now that the price of oil has fallen from a high of $79 to the around $60 there exists the feeling that oil will continue to fall.
A decline in the price of oil is the most likely risk facing this stock. Many commodity analysts, such as the famed Jim Roger, believe that we are in the early stages of a commodity bull market. And while we might not be at the peak of this bull run there will be many brutal dips to the downside between now the next market top. Since oil often moves in unison with political and economic turmoil I expect that a decline of at least 33%-66% is waiting in the wings before rebounding to its ultimate top.
What happened to the dividends?
The answer will follow the latest on Dividend Achievers at or near their 52-week lows.
Stocks within 5% of their 52 week low:
- Atmos Energy (ATO)
- Bandag Inc. (BDG)
- Popular Inc. (BPOP)
- Anhueser Busch (BUD)
- Conagra (CAG)
- Community Bank System (CBU)
- Commerce Group (CGI)
- Forest City Ent. (FCY)
- FNB Corp. (FNB)
- First Oak Brook (FOBB)
- Frischs Restaurants (FRS)
- General Electric (GE)
- Hersey (HSY)
- Johnson and Johnson (JNJ)
- Sara Lee (SRE)
- Sysco Corp. (SYY)
- Tootsie Roll (TR)
- Wrigley, WM (WWY)
If dividends were reinvested in the DJIA, the average would have been 652,230 at the end of 1998.
(source: Roger Clarke and Meir Statman. 2000. "The DJIA Crossed 652,230." Journal of Portfolio Management. Winter 89-93.)
The Power of Dividends
Steve Leuthhold and his group turn out some of the best research obtainable (612-332-1567). In his latest report, Steve notes that the annual compound growth of stocks, with dividends reinvested, is 10.8%. But excluding dividends, the long-term total return drops to 5.9%. Thus, 45% of the annual total return over the last 100 years has come from dividends and the reinvestment of those dividends.
Then Steve notes that the “difference between 5.9% compounded over 100 years and 10.8% compounded is GIGANTIC.” This sounds incredible, but here’s the difference: $1,000 invested at 5.9% in 1900 grew to $319,694. But $1,000 invested at 10.8% grew to $29,471,614.
Dividends don’t matter? Don’t tell that to someone who understands compounding. Market action plays a large part in how and when companies pay dividends. When stocks are going up and producing capital gains, it is said that companies don’t have to pay dividends because corporations, in their wisdom, can make better use of the money than simply paying it out in taxable dividends. But when times are hard and stocks are down, it is said that dividends are valuable because even if your stock is declining or going nowhere, the dividend is something tangible, the dividend is income, and in hard times income is extremely important and in many cases “a life saver.”
Leuthhold notes that in 1978 the S&P [500] was priced at less than 10 times earnings while providing a yield of better than 6%. Investors in 1978 were still traumatized by the 1973-74 bear market collapse, and they wanted value and the wanted a return on their investments. In 1978 66.5% of the stocks on the NYSE (New York Stock Exchange), the Amex and the Nasdaq paid dividends. In 1998, however, only 20.7% of stocks on those exchanges paid dividends.
Today the percentage has dropped below 20%, largely because the great majority of IPOs and new issues pay no dividends. And as Steve Leuthhold says, “How can they pay dividends? Then don’t have any earnings.”
Russell, Richard. Dow Theory Letters. "Dividends and Total Return." September 27, 2000. p.5. http://www.dowtheoryletters.com
Feb. 9th: HNI Corp. and Carlisle Co. Inc.
HNI manufactures office furniture and hearth products. This company has increased its dividend every year for 16 years. There is little explanation for sell off in the stock other than “selling on the news.”
HNI has seen a 40.51% appreciation in the stock price in the last 52 weeks. It is possible that this stock is at a point of exhaustion.
Biggest percentage gainer of the day: Carlisle Co. Inc.
Carlisle Co. was up 8.89% today. This tops off a 27% increase in the last year. Carlisle Co. manufactures rubber products for roofing, construction, trucking and aircraft industries. Carlisle has increased its dividend every year for 28 years.
Feb. 8th: Pier One and Protective Life
Pier One looks like it is up against the ropes. Today it fell 6.95% and was the largest decliner among the Dividend Achievers. Due to decreased cashflow, earnings and the issuance of new debt the rating agency Standard and Poor’s lowered PIR credit rating.
PIR has a technical support level of $8.50; if the stock falls below this level we could expect PIR to go to $5.25. $5.25 is a major support/resistance level which would hold major significance. PIR has increased its dividend every year for 13 years and has a tangible book value of $7 per share.
Biggest percentage gainer of the day: Protective Life (PL)
Protective Life was up 7.60% on an increase of net income. PL has also announced that it will purchase the stock of five insurance companies from JP Morgan Chase. PL has reached a new multi-year high with the most recent increase. In 1990, PL was at $2.40, today it trades at $49.01 an increase of 2000%.
PL has increased its dividend every year for 15 years. Any Dividend Achiever that sells insurance should be considered for every portfolio. $35 billion investor Warren Buffett made his start by investing in insurance companies.
Feb. 7th: Hillenbrand and Nucor
Today Nucor fell 6.5% due to the recent speculation of consolidation of the steel industry. Keep in mind that today's decline is against the previous day's outsized gains. The recent speculation is primarily due to Mittal Steel's (MT) recent bid to acquire Arcelor. Mittal is the world's largest steel producer and getting larger by the minute. Naturally, when the world's largest steel producer attempts to acquire the world's second largest steel producer the impression is that there is room for more consolidation.
In the U.S., monolithic steel producers have fallen to the wayside as smaller, better managed "boutique" producers have moved forward. My feeling is that US regulators will step in to block any acquisition from a "foreign" company. If this is the case, I feel that domestic producers will possibly jump the gun and initiate a wave of domestic acquisition that could lead to larger and potentially poorly managed companies. LTV and Bethlehem Steel are steel companies that had faced bankruptcy due to inefficient operations.
I don't think that immediately after Mittal's most recent target (provided that it is successful) will mean more acquisitions in the near term. This will put the speculator, hopeful of another big move upward, at the bad end of the deal...in the short term. Nucor is one of those better managed steel companies. NUE has increased its dividend for 32 consecutive years in a row. NUE has a tangible book value of $21.67 per share.
Biggest percentage gainer of the day: Hillenbrand Industries (HB)
Hillenbrand’s price increased 6.65% due to higher earnings. This company’s stock price has fallen from it’s high of $70 in 2004. Hillenbrand has increased its dividend every year for 34 consecutive years.
Myth Bustin' #1
Myth #1: Companies that pay a dividend misallocate funds that could be used to generate new revenue. The lack of new revenue will keep the stocks price low over the short and long term.
This is the most fascinating myth that exists about dividend paying companies. The theory seemingly makes sense yet after cursory examination, the truth will out. Look at the 1-year performance of these select Mergent Dividend Achievers:
- Badger Meter (BMI) 96%
- Caterpillar (CAT) 66%
- Berkley (BER) 53%
- Aqua America (WTR) 59%
- Archer-Daniel-Midlands (ADM) 70%
- Franklin Resources (BEN) 52%
- Fuller (FUL) 55%
- Granite Construction (GVA) 92%
- Harleysville Group (HGIC) 50%
- Helemerich & Payne (HP) 114%
- La-Z-Boy (LZB) 67%
- Legg Mason (LG) 90%
- Martin Marietta (MLM) 70%
- McGrath (MGRC) 54%
- Meridian Biosciences (VIVO) 172%
- Nordson (NDSN) 52%
- Nucor (NUE) 92%
- Raven Industries (RAVN) 93%
- Questar (STR) 63%
- AO Smith (AOS) 80%
- State Auto Financial (STFC) 56%
- Schulman (SHLM) 60%
- SWS Group (SWS) 65%
- Tennant Co. (TNC) 58%
- Vulcan Materials (VLM) 53%
- West Pharma Services (WST) 60%
This list is for 1-year performance from Feb. 7, 2005 to Feb. 6, 2006. This does not include the dividend that was paid by these companies over this 1 year period.
As you’ll notice companies with 10%, 20%, 30% and 40% returns were not included. However, if they were included during this time frame I would have had to add 219 companies to this list. If anyone were to complain about receiving only 10% percent in one year with significantly reduced risk then investing in stocks may not be the place to be.
Feb. 6th: Talbots and Vulcan Materials
Talbots fell 3.41% on the confirmation that they would acquire apparel retailer J. Jill Group. TLB will pay over $24 per share for J. Jill Group. Sometimes the best way to gauge the quality of a buyout offer is how the purchase is conducted. In this case the purchase of J. Jill was an all cash offer. Cash offers are far superior to stock & cash and debt offers. All cash offers represents the acquiring company's confidence after having done the necessary due diligence.
TLB has increased it's dividend 10 consecutive years in a row at an annualized compounded rate of 16.83%. TLB also has a tangible book value of $8.82 per share. Although TLB is within striking distance of it's 52 week low there is the likelihood that the stock could fall to the support level of $20 per share as the integration of J. Jill takes place.
Biggest percentage gainer of the day: Vulcan Materials (VMC)
Vulcan traded up 7.95% on a stronger earnings report Feb 1st and a proposed takeover today of Lafarge North America Inc. by France's Lafarge Group. All companies are in the concrete business.
VMC has increased it’s dividend every year for 12 consecutive years in a row. VMC also has a tangible book value of $13.65 per share. Morningstar indicates that this company is fairly priced at $72 per share; well below the current trading price of $80.42.
Feb. 3rd: Rohm & Haas and Commerce Group
Speciality materials producer Rohm & Haas (ROH) fell 5.4% on Friday. Much of the decline was due to downgrades in the stock by JPMorgan and UBS. This was an instance of “buy the rumor and sell the fact.” Even though this company had an increase in earnings, sales and revenue it was not enough to satiate the appetite of investors and brokers. Concerns related to higher commodity prices are affecting the outlook for future profitability.
ROH has had a 27-year track record for consecutive dividend increases at 7.29% compounded annual rate. Morningstar estimates fair value for ROH at $44.00 per share with a buy price of $33 per share. Valueline indicates that ROH is undervalued when the price is 11x cashflow or below. Full year 2004 cashflow was $4.30 and estimated 2005 cashflow was $5.05. This implies a $47.30-$55.55 range for undervaluation. Unfortunately, ROH hasn't traded above 11x cashflow since 2002 and has typically fallen in price once achieving the 11x cashflow mark. 1999 and 1993 were the other times that ROH has hit 11x cashflow. This might be used to as an indication of when to sell.
Biggest percentage gainer of the day: Commerce Group
Insurer Commerce Group (CGI) was up 11% on better than expected earnings. The company beat expectations by $0.32 per share. Prior to this most recent rise the stock was registering new 52-week lows on a daily basis. According to Morningstar, the company's price-to-book value range in the last 10 years has been as high as 1.8x and as low as 1.2x. If this company has reversed it's fortunes then the potential upside could take the stock price up to $67.38 based on book value of $37.43.
Commerce Group has increased its dividend every year for the last ten years in a row. What is exceptional about the dividend increase, but not expected to last, is the compounded rate of increase. CGI has had a 24.20% compounded growth rate of their dividend. Amazing!
At a Glance
Helmerich and Payne (HP) is being whip-sawed by the gyrations of the oil and gas sector. HP has been a favorite of mine simply because of it's ability to increase it's dividend for the last 28 years. This is no small feat for an oil services driller that survived the collapse in the sector in the 1980's. Check out HP's spin-off unit Cimarex (XEC) for more quality management in the oil sector.
Legg Mason increased it's earnings over 500% in the last quarter however, much of the gain was from the sale of a unit to Citigroup. Operating earnings were only $0.10 above last year's quarterly earnings...nothing to sneeze at but definitely a stark contrast to the newspaper headlines of HUGE EARNINGS POSTED.
Big Movers of the day:
- Harleysville National fell 12% after rising 24% on Jan. 31st.
- National Penn Bancshares down 4% after rising 12% on Jan. 31st.
- Helmerich and Payne fell 4% due to a drop in natural gas and oil prices.
- Legg Mason up 4.55% on earnings increased 5x.
- Martin Marietta Materials rose 7.4% in sympathy with Vulcan Materials.
- Vulcan Materials up 7.48% on increased earnings.
- Sonoco Products up 7.75% rise in 4 quarter earnings.
As the old adage goes "buy low and sell high," but how many of us actually do it? Somebody has to do it so why can't it be you. The following list shows companies that have fallen within 5% of their respective 52 week low. 52 week lows aren't necessarily the times to buy however, it is a great time to start doing your research on these companies. One of these must be at or below fair market valuation.
Stocks within 5% of their 52 week low:
- Telephone Data
- Tootsie Roll
- 3M
- Allstate Insurance
- Anhueser-Busch
- Atmos Energy
- Bard Inc.
- Comerica Inc.
- Commerce Group
- Conagra
- FNB Corp
- Frisch Restaurants
- General Electric
- Heinz Co.
- Hershey
- Johnson & Johnson
- Kimberly Clark
- Popular Inc.
- Sky Financial Group
- Unitil Corp
- W.M. Wrigley