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:
Alcoa Inc., (SYMBOL: AA) and the headline says:
Alcoa Junk Downgrade Is Rare Trauma for Dow Stocks -- Bloomberg
Aluminum company Alcoa Inc.’s recent credit downgrade to junk bond status makes it vulnerable for removal from the Dow Jones Industrial Average. “A financial or technology company may be favored to replace Alcoa because the industries are under-represented in the Dow,” says Richard Moroney, editor of Dow Theory Forecasts newsletter.
Earnings per share are expected to rebound 88% this year, then climb 56% next year. The PE is 18, the dividend yield is 1.45%, and the long-term debt level is a manageable 33%.
The stock price never recovered from the 2008 Financial Meltdown, and is currently in a neutral trading pattern. While experienced investors could buy low and be rewarded due to earnings growth, the low credit rating hampers the stock's outlook.
Our Ransom Note trendline says: STAY ON THE SIDELINES.
Stock number two is:
International Business Machines Corp., (SYMBOL: IBM) and the headline says:
IBM to Buy Cloud-Computing Firm SoftLayer for $2 Billion -- Bloomberg
IBM plans to buy public cloud specialist SoftLayer Technologies Inc., and combine its capabilities with IBM’s private cloud operations, in order to more effectively compete with public cloud leader Amazon.com. IBM can easily pay the $2 billion pricetag without making much of a dent in its cash-on-hand.
Earnings are on a long-term growth trend at IBM, and are expected to grow another 9-10% for each of the next three years. The dividend yield is 1.85%, and the PE is 12.3.
The stock has been trading between $181 and $215 for over a year. It experienced a big shakeout in April, and appears ready to climb again in the near-term.
Our Ransom Note trendline says: BUY IBM.
Stock number three is:
Apple Inc., (SYMBOL: AAPL) and the headline says:
The U.S. Bans iPhone Imports: Big Deal or No? – BusinessWeek.com
“The International Trade Commission ruled on Tuesday afternoon that certain models of Apple’s iPads and iPhones violate patents held by Samsung,” reports Business Week. Apple could now face import restrictions on older iPhones and iPads. New product announcements are expected next week at Apple’s Worldwide Developers Conference.
Earnings are projected to fall 10% this year. The PE is 11.3 and the dividend yield is 2.7%.
Apple’s share price is beginning to stabilize, after falling 300 points since September. The chart is still neutral, with price resistance at $485.
Our Ransom Note trendline says: STAY ON THE SIDELINES.