After hitting a one-year high of $60.00 in December, the stock has hit a new one-year low today. This morning, AET opened at $36.98. So far today the stock has hit a low of $36.01 and a high of $37.99. As of 11:55, AET is trading at $37.29, down 2.50 (-6.3%). The chart for AET looks bearish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bearish hedged play on this stock, I would consider an August bear-call credit spread above the $45 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.2% return in six weeks as long as AET is below $45 at August expiration. AET would have to rise by more than 20% before we would start to lose money.
With a slowing economy and corporate layoffs being announced daily, look for online education companies to benefit. Many unemployed are and will be looking for a profession, and many employed people are always looking to make career changes. Online education companies are therefore enjoying higher enrollment rates.
Shares in Apollo Group (NASDAQ: APOL) are surging over 20% on a strong earnings report.
According to the AP: " Total degree enrollment rose 11 percent during the quarter to 345,300 students, versus a year ago. Apollo has boosted student retention with expanded academic programs, improved courses and other services." The company even managed to raise tuition by 4-10% depending on the program.
Pretty good business climate if you can both raise prices and increase enrollment. With a continuing weak economy, look for shares in online education to potentially be an interesting trade in a struggling economy.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no position in any stock mentioned, as of 7/2/08.
Let's just say that if the Dow Jones Industrial Average on Thursday closes down 200 points, we'll call it a moral victory. The Dow Wednesday closed down 166.75 points to 11,215.75.
"What was that famous Bette Davis line about a bumpy night? Well, Thursday could be a bumpy day," economist Peter Dawson told BloggingStocks Wednesday.
Thursday could be very bumpy for the stock market because a series of data points -- all expected to be negative -- are converging at a traditionally difficult time of the year for the market - the start of summer.
Three data points of significance
First up is the European Central Bank's interest rate decision at 7:45 a.m. EDT, at which the bank is expected to increase its key, short-term interest rate, the refinance rate, by a quarter-point to 4.25%. The ECB is trying to check inflation, Dawson said, but it may end up hurting the dollar. If the markets believe the already-weak dollar will fall further, that will increase commodity prices, including oil, "which will not be good news for stocks," he said.
According to CNBC, employees will receive 20% of last year's bonus in stock that vests over three years. "Lehman's decision to issue additional stock to employees is being interpreted by some in the market as a sign that the Lehman is not planning to sell itself for a below-market price," writes CNBC ON-Air Editor Charlie Gasparino.
Hmm. Didn't the same conventional wisdom believe that Bear Stearns was too big to fail and that the end of the write-downs at Wall Street banks was near? So, pardon me if I am a little skeptical.
As Fortune magazine notes, Lehman, like other Wall Street banks, got itself into trouble by making scores of bad real estate investments.
"Because it prided itself on real estate expertise - it helped popularize real estate-backed securities in the early 1970s - and investment prowess, Lehman risked far bigger proportions of its own capital doing deals than its major competitors did," the magazine notes. Little wonder that the stock is down more than 65% this year.
Sorting out through this mess will take years. Any Lehman employees who were smart enough to get hired probably know a bad deal when they see it. This well-timed leak to CNBC is part of Lehman's efforts to avoid becoming the next Bear Stearns.
For now, the ploy is working. Shares of the New York-based investment bank are trading up on the news -- Lehman shares closed up 6.68%. Over the long run, though, investors and Lehman employees will see through the smokescreen.
In the first half of 2008, the S&P 500 fell 12%. June's stock market was the worst since 1930. So are stocks now a screaming buy or are they poised to plunge further? Nobody knows. But my guess is that stocks will move based on how well they perform compared with expectations. And the risk of negative surprises in most industries exceeds the chance of positive ones. So stocks will probably keep falling.
Here's a quick review of six negatives:
Oil prices. With oil at $142, up 492% since January 2001, consumers are paying about $4.10 a gallon for gas and companies that use oil are getting squeezed while trying to raise prices. An attack on Iran, a big oil supplier, looms on the horizon. This and other geopolitical uncertainties could put further pressure on oil.
Housing. Three million people are expected to face foreclosure on their homes. And prices have dropped 15%. Since people were using home equity to finance their purchasing, their negative equity is sucking the wind out of the economy.
Deutsche Bank (NYSE: DB) shares are trading 4.2% higher in premarket action after the bank, seeking to calm investors, said it expects a profit in its second quarter.
While AT&T Inc. (NYSE: T) unveiled its pricing strategy for Apple Inc. (NASDAQ: AAPL)'s 3G iPhone to go on sale July 11 with a $199 and $299 (with contract) price points as expected, Canadians are outraged over Rogers Communications Inc. (NYSE: RCI)'s 3G iPhone rates and have created an online petition that collected over 19,000 signatures already.
AstraZeneca (NYSE: AZN) rose in Europe and is rising over 2.7% in premarket trading after winning a court case against Teva Pharmaceutical (NASDAQ: TEVA) and the Sandoz unit of Novartis (NYSE: NVS) over patents on its Seroquel schizophrenia drug.
Celgene Biopharma (NASDAQ: CELG) shares are trading higher today after an analyst on CNBC's Fast Money recommended the stock last night, adding that the company could be getting some good news related to the development of its Lymphoma treatment soon. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on CELG.
After hitting a one-year high of $75.44 in October, the stock hit a one-year low of $41.26 in December. CELG opened this morning at $65.90. So far today the stock has hit a low of $65.16 and a high of $66.93. As of 12:50, CELG is trading at $66.73, up $2.86 (4.4%). The chart for CELG looks bearish and improving slightly, while S&P gives the stock a bullish 4 Stars (out of 5) Buy rating.
For a bullish hedged play on this stock, I would consider an August bull-put credit spread below the $55 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 5.3% return in just seven weeks as long as CELG is above $55 at August expiration. Celgene would have to fall by more than 17% before we would start to lose money. Learn more about this type of trade here.
Sherwin-Williams (NYSE: SHW) shares are trading higher today after the Rhode Island Supreme Court overturned a $2.4 billion ruling against SHW and two other former lead-paint producers that would have ordered the companies to inspect and clean thousands of homes built before 1980 that were likely to contain lead paint. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on SHW.
After hitting a one-year high of $73.96 last July, the stock hit a one-year low of $45.89 yesterday. SHW opened this morning at $48.29. So far today the stock has hit a low of $45.82 and a high of $48.86. As of 11:55, SHW is trading at $47.36, up $1.43 (3.1%). The chart for SHW looks bearish and steady, while S&P gives the stock a neutral 3 Stars (out of 5) Hold rating.
For a bullish hedged play on this stock, I would consider an August bull-put credit spread below the $40 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 7.5% return in just seven weeks as long as SHW is above $55 at August expiration. Sherwin-Williams would have to fall by more than 15% before we would start to lose money. Learn more about this type of trade here.
It was only last week that Goldman Sachs (NYSE: GS) caused havoc in the stock market (or at least lead the charge) downgrading Citigroup Inc.(NYSE: C), and General Motors (NYSE: GM) among others, but now they have started to express concern that some of the defense sector stocks may be vulnerable to the next president's ax.
It was only a few weeks ago I posted Chasing Value: General Dynamics & Raytheon: The defense does not rest and things continued to look bright until a few days later, perhaps after the GS behind the scenes warning started to have an impact on the market that the sector took a mysterious swoon -- now I know why.
If Goldman Sachs, one of the few investment houses with any credibility left, makes a move everyone else seems to want to get out of the way.
I have viewed the defense sector favorably this year and will not abandon ship because GS is getting cold feet. They have been rather negative on everything lately and I do not think the (stock) world is coming to an end.
The Bloomberg article notes that while some programs will be cut others will be added. It is all a guessing game as either presidential candidate will want to review the entirety of defense expenditures in a new administration.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of GD.
After hitting a one-year low of $59.50 in August, the stock hit a one-year high of $144.34 in May. This morning, PCLN opened at $119.78. So far today the stock has hit a low of $114.38 and a high of $121.95. As of 12:10, PCLN is trading at $117.95, down $7.18 (-5.7%). The chart for PCLN looks neutral and improving, while S&P gives the stock a neutral 3 Stars (out of 5) Hold rating.
For a bearish hedged play on this stock, I would consider an August bear-call credit spread above the $155 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 5.3% return in seven weeks as long as PCLN is below $155 at August expiration. PCLN would have to rise by more than 32% before we would start to lose money. Learn more about this type of trade here.
PCLN hasn't been above $145 at all in the past year and has shown resistance around $132 recently. This trade could be risky if the company's earnings (due out in early August) are a positive surprise, but even if that happens, this position could be protected by resistance PCLN might find around $140, where it topped out in May.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in PCLN or EXPE.
What will it take to break the downward cycle for the U.S. stock market and its economy? Get back to our roots as a country that lives within its means.
The source of the problem is that we have gotten away from the idea of paying only for things we can afford. To close that affordability gap that results from lower income and higher prices, we have borrowed money -- $9.3 trillion in federal debt, a $410 billion federal budget deficit, and $2.5 trillion in consumer borrowing -- which has caused other countries to view the dollar as a distress currency. It's lost 72% of its value since January 2001 -- when it traded at 92 cents to the euro.
Having spent the last two weeks in Europe, that weak currency hurts -- everything seems to be about 50% more expensive there than it is here. Gasoline there is far more expensive than it is in the U.S. -- roughly $9.60 a gallon compared to $4.25 here. And the reason that our stock market is dropping while oil rises is a result of deliberate government policies designed to weaken the dollar and strengthen oil.
Oil was again the headline event today with the price per barrel near $142.00 and talk of $150.00 sooner rather than later. But all in all this day was far "less bad" than it could have been, especially if you consider the selloff yesterday, and consider that this was a Friday ahead of a shortened work week where traders are leery of holding positions. To top it off, the June quarter ends on this coming Monday.
The University of Michigan posted consumer confidence today at a 28-year low as inflationary pressures and fears remain high. The final June reading fell down to 56.4 from 59.8 in May and down from the prior June preliminary release of 56.7.
What can I say, one of my best stocks picks of 2007 has turned into one of my worst of 2008. Valero Energy(NYSE: VLO) the largest independent oil refiner in the United States has experienced shrinking profit margins as oil prices have continued to climb throughout the year.
It was reported in the Associated Press that a Wall Street analyst at Friedman, Billings, Ramsey & Co downgraded his expectations for the major oil refiners Wednesday. In regards to VLO, analyst Eitan Bernstein lowered his price target from $77 to $65.
Analysts are notoriously optimistic and I myself would not hazard a guess picking a number out of thin air given the number of variables to consider, but I would go as far as to say this downgrade makes me laugh.
The stock closed yesterday at $41.25 and is trading down further today around $40. But this is considerably lower then anyones price targets for the stock so perhaps this is a case where the downgrade is actually an upgrade.
This is a company with a price-to-sales ratio of 0.43 and a price-to-book of 1.42 that accompany a P/E of 7 and a yield of 1.41%. I may have been caught in the downdraft of a cyclical stock recommending it last December, but I sure do feel more comfortable recommending to readers that they examine VLO today.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money.DISCLOSURE: I currently own shares of VLO.
After hitting a one-year high of $32.35 in July, the stock hit a one-year low of $19.43 last week. BMY opened this morning at $20.06. So far today the stock has hit a low of $20.00 and a high of $20.60. As of 12:50, BMY is trading at $20.45, up 78 cents (4.0%). The chart for BMY looks bearish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider a September bull-put credit spread below the $17.50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 11.1% return in just three months as long as BMY is above $17.50 at September expiration. BMY would have to fall by more than 14% before we would start to lose money. Learn more about this type of trade here.
BMY hasn't been below $19.40 at all in the past year and has shown support around $19.50 recently. This trade could be risky if the company's earnings (due out on 7/24) disappoint, but even if that happens, this position could be protected by the support the stock might find from bargain hunters looking for defensive stocks. Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in BMY.
AK Steel (NYSE: AKS) shares are trading higher today after Standard & Poor's announced they have added the stock to the S&P 500 index. These announcements drive stock prices higher since any mutual fund that is tracking the S&P 500 will need to add AKS to its holdings soon. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on AKS.
After hitting a one-year low of $27.90 in August, the stock hit a one-year high of $73.07 in May. AKS opened this morning at $65.74. So far today the stock has hit a low of $65.42 and a high of $68.10. As of 12:30, AKS is trading at $67.18, up $4.00 (6.3%). The chart for AKS looks neutral and deteriorating, while S&P gives the stock a bearish 2 Stars (out of 5) Sell rating.
For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $55 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 7.5% return in just three weeks as long as AKS is above $55 at July expiration. AKS would have to fall by more than 18% before we would start to lose money. Learn more about this type of trade here.
AKS has not been below $55 since April and has shown support around $63 recently. This trade could be risky if the global economy tanks in the next few weeks, but even if that happens, this position could be protected by the support the stock might find around $63, where it has bounced twice in the past month. Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in AKS.
Aetna (NYSE: AET) shares are falling today after an analyst at Goldman Sachs downgraded the stock to "Sell" from "Neutral," saying the company will face lower profit margins over the next few years. Other companies in the health-care industry also got downgrades today. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on AET.
Let's just say that if the 
Lehman Brothers Holdings Inc
In the first half of 2008, the S&P 500 fell 12%. June's stock market was the worst since 1930. So are stocks now a screaming buy or are they poised to plunge further? Nobody knows. But my guess is that stocks will move based on how well they perform compared with expectations. And the risk of negative surprises in most industries exceeds the chance of positive ones. So stocks will probably keep falling.
It was only last week that 
What will it take to break the downward cycle for the U.S. stock market and its economy? Get back to our roots as a country that lives within its means. 
What can I say, one of my best stocks picks of 2007 has turned into one of my worst of 2008. 
Comfort Zone Investing: Keep your recovery expectations real
Will Americans have to slim down to fit into their cars?
Starbucks: The next McDonald's
