Stocks in the News: Yahoo, Northrop Grumman, JC Penney

Posted: May 18, 2013 12:01 AM

Stocks in the News is produced by Ransom Notes Radio and Goodfellow, LLC. Crista Huff manages Goodfellow LLC, a website that recommends outperforming stocks using fundamental and technical analysis.   

Stock number one is

Yahoo! Inc., (SYMBOL: YHOO) and the headline says:

Yahoo's $2.75 billion fine waived off, case dismissed – The Times of India

A breach of contract lawsuit against Yahoo! Inc. and Yahoo! Mexico has been dismissed by an appellate court in Mexico, along with the $2.75 billion fine which was awarded to plaintiffs in 2012.  The lawsuit pertained to breach of contract allegations over a Yellow Pages listing service, and the fine stunned the technology world.  Yahoo! Mexico will instead pay damages of $172,500. The original $2.75 billion fine was awarded by a law clerk, after the judge presiding over the case stepped down.

Yahoo! Inc.’s earnings are projected to grow 20% this year.

The stock price broke past long-term resistance at $19 in December and had a big run-up.  We would wait for the chart to stabilize before considering any further investments.

Our Ransom Note trendline says:  STAY ON THE SIDELINES.

Stock number two is: 

Northrop Grumman Corp., (SYMBOL: NOC) and the headline says:

Northrop Grumman Adds $4 Billion To Share Buyback Program – Dow Jones Newsire

Weapons maker Northrop Grumman Corp. announced plans to repurchase another $4 billion of stock, and to repurchase a total of 25% of shares through 2015.  Repurchases will be funded by cash flow, and possible issuance of new debt.

Earnings per share are projected to fall 9% this year, with small rebounds in the next two years.  The dividend yield is 2.97%.  Northrop stock recently broke past medium-term resistance and rose 17%.

We don’t see the point in owning shares of companies that can’t grow their earnings without buying back shares, when comparable household names with strong earnings growth are available, such as Verizon Communications, Macy’s, Dow Chemical, and Whirlpool.

Our Ransom Note trendline says: STAY ON THE SIDELINES.

Stock number three is:

J.C. Penney Co., (SYMBOL: JCP) and the headline says:

J.C. Penney widens loss, but returning CEO says it’s fixable – Dallas Morning News

Beleaguered retailer J.C. Penney Co. reported a first quarter loss of (-$1.31) per share vs. the consensus loss of (-$0.89).  The company recently brought back former CEO Mike Ullman in a last ditch attempt to save the store from detrimental changes in merchandising and pricing, brought on by recent CEO Ron Johnson.

J.C. Penney was on the verge of bankruptcy this spring, when additional financing became available, but 70% of the new credit lines have already been used up.  The company plans to attract former customers and shore up margins by returning to previously successful strategies.

We told investors to sell J.C. Penney shares three times this year.  The company is projected to continue losing money for the next three years.  The stock price reached ten-year lows in April, and will probably trade between $18 and $22 near-term.

Our Ransom Note trendline says:  SELL J.C. PENNEY.