Stocks in the News: JP Morgan Investigated for Bribery

Posted: Aug 20, 2013 12:01 AM
Stocks in the News: JP Morgan Investigated for Bribery

Stock number one is: 

Nestle S.A., (SYMBOL: NSRGY) and the headline says: Nestle’s Sales Slowdown Seen Leading to Fewer Brands -- Bloomberg

After reporting its weakest revenue growth in four years, Swiss food company Nestle  may consider selling some of its underperforming brands, such as Jenny Craig, Lean Cuisine, and Power Bar.  Competitors Unilever, Kraft, and Sara Lee have all recently sold or spun-off business units to maximize shareholder value.

Nestle’s earnings are expected to grow 10 and 7 percent over the next two years.  However, potential restructuring charges could erode those numbers.

The technical chart is neutral.  Nestle’s share price is likely to trade between $67 and $70 in the near-term.  We would trade out at $70 and invest in a company with stronger projected earnings growth.

Our Ransom Note trendline says:  SELL NESTLE AT $70.


NSRGY data by YCharts

Stock number two is: 

JPMorgan Chase & Co., (SYMBOL: JPM) and the headline says: JPMorgan Faces Bribery Inquiry Over China – The New York Times

JPMorgan Chase is under suspicion of hiring the children of Chinese officials in order to win banking business.  The Securities and Exchange Commission’s anti-bribery unit is conducting a civil investigation into the matter.

This investigation comes on the heels of JPMorgan’s “London Whale” scandal.  Arrests were made last week in connection to the credit portfolio loss that caused JPMorgan to overstate first quarter 2012 earnings by several hundred million dollars.

"The company’s earnings growth is slowing to low-to-mid single digits over the next few years, and the technical chart has turned neutral. 

Despite a low PE and big dividend, we see no reason for investors to buy shares of JPMorgan when there are so many growing financial companies with bullish charts to choose from."

Our Ransom Note trendline says..... SELL JP MORGAN CHASE AT $55.

JPM Chart

JPM data by YCharts

Stock number three is:

And the headline says: S&P Downgrades Opinion on Shares of Apple to Buy from Strong Buy – S&P

S&P remains bullish on shares of Apple, citing September updates to iPhone and iPad products, and a potential new partnership with China Mobile.  Investors were also encouraged last week after learning that billionaire Carl iCahn has taken a large position in Apple shares.

On July 2, we said “there’s limited downside at this point”, and we called Apple a trading buy under $420.  The stock immediately rebounded, then blew through upside resistance a month later.  Shares are up $95 since that day, and traders probably have a little more near-term upside.

We wouldn’t chase Apple stock at this point, because earnings projections continue to slowly decline.  Full year profits are expected to fall about 11% this year, then rise 8 and 2 percent in the next two years.

Our Ransom Note trendline says....  HOLD APPLE.

AAPL Chart

AAPL data by YCharts

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.