Moral of the Story: Sell the Cyclicals

John Ransom | September 03, 2014 1:59 PM

Welcome to John Ransom’s Stocks in the News where the headlines meet the trendlines.

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Stock number one: Delta Air Lines Inc.

U.S. airlines stocks fall after Delta trims margin outlook—Reuters

U.S. airlines stocks fell on Wednesday after Delta Air Lines trimmed its operating margin forecast and reported that international passenger traffic lagged slightly in August, heightening concerns that other U.S. carriers might encounter similar headwinds.

While Delta's August performance was relatively robust, Delta shares were down 5.2 percent at $38.79 in midday trading Wednesday on the New York Stock Exchange. American Airlines Group Inc shares were down 3.3 percent at $39.16 on the Nasdaq, United Continental Holdings stock fell about 2.3 percent at $48.83.

Symbol: DAL

Trailing PE: 3; Forward PE: 10

PEG: 1.11

Dividend: 1.00%

Estimate Trend: Up

Ransom Note Trendline: Sell Delta

Stock number two: Compuware Corporation

Compuware Set to Go Private, Thoma Bravo Offers $2.5B--Zack's

Compuware Corp. (CPWR) is finally selling itself to private-equity firm Thoma Bravo for approximately $2.5 billion. Under the agreement, shareholders will receive $10.92 per share, which is a premium of approximately 17% from Compuware’s closing stock price of $9.35 on Aug 29. Shares surged 13.3% to close at $10.59 on Sep 2.

For Q3, the co expects shipments of ~ 1,350,000 tons, a decrease of ~3% from the 1,398,000 tons shipped in the second quarter of 2014. Shipments for the third quarter reflect the effects of reduced production at the company's Ashland Works blast furnace due to a recent unplanned maintenance outage and subsequent production shortfall, partly offset by continued strong demand from the automotive market.

Symbol: AKS

Trailing PE: NA; Forward PE: 8.2

PEG: 53.45

Dividend: NA

Estimate Trend: Up

Ransom Note Trendline: Sell AK Steel