The major indexes appeared to be in the process of forming a significant short-term low. Why not, it is time for one. What we needed was a good rally to confirm it, and that’s just what we got on Friday. This must be an excellent time to pick up the stocks you’ve have on your buy-on-next-pullback watchlist.
We’re also starting to hear some good earnings news. In this morning’s Investor’s Business Daily, some Page 2 headlines are:
- Whirlpool profit jumps on mix
- Honeywell ’16 outlook beats
- Seagate easily tops on profit
- Colgate Q4 profit beats Street
Holy cow, let me back up the truck to my broker’s loading dock.
Well, you can. I won’t, and here is what is wrong with the picture.
- Whirlpool’s revenue actually fell 7.4%
- Honeywell’s sales fell 2.8%
- Seagate’s revenue slid 19%
- Colgate’s revenue fell 7.6%
Positive earnings can positively affect stock prices, but only for a while. Earnings cannot grow indefinitely without revenue growth. There is only so much cutting-back and efficiency gaining you can do before you need revenue growth.
And as far as my four examples above, would you be buying these at good values?
- Whirlpool’s (WHR) P/E is now 11, which is good compared to the 5-year range of 10-38. The decline in revenue is the first one in several quarters. WHR is paying a 2.7% dividend yield, is averaging a 15% 5-year growth rate in the dividend, and has increased the dividend for 5 consecutive years. If it seems like the revenue drop may be a short-term thing, then WHR shares could be considered a value at this point.
- Honeywell’s (HON) P/E is now 16, which is fair compared to the 5-year range of 12-23. The quarterly decline in revenue is the fifth in a row. HON is paying a 2.3% dividend yield, is averaging a 12% 5-year growth rate in the dividend, and has increased the dividend for 5 consecutive years. Even though Honeywell’s CEO is Jim Cramer’s next door neighbor, HON doesn’t seem like much of a bargain after 5 quarters of decreasing revenue.
- Seagate’s (STX) P/E is now 8, which is fair compared to the 5-year range of 3-15. The quarterly decline in revenue is the fourth one in a row. STX is paying an 8.7% dividend yield, but is averaging a 0% 5-year growth rate in the dividend, and has increased the dividend for only 2 consecutive years. Seagate’s decline reflects the troubles in the desktop PC market.
- Colgate Palmolive’s (CL) P/E is now 23, which is no bargain compared to the 5-year range of 16-25. The quarterly decline in revenue is the fifth one in a row. CL is paying a 2.3% dividend yield, is averaging a 7.5% 5-year growth rate in the dividend, and has increased the dividend for 53 consecutive years – at least that’s good news.
I just don’t see good value here, and these are basic American companies that provide the some of the products U.S. consumers buy on a regular basis. My truck keys are remaining on the hook beside the door.
Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day. To find out more, please click on the following link: www.markettamer.com/seasonal
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