Prospecting investors find nuggets of positive news
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By Jim Victor | Tuesday, March 18, 2008 |
Good news surprises investors. And two big doses of good news provided enough surprise to motivate high volume buying rallies on Tuesday and Thursday. The buying swept area stocks higher here too, but late week selling let our Quad City Times Key 15 retreat 1.81 for the week to 1,343.02.
Good news, you say? Well, yes. The continued fall-out and pain from a slowing housing sector and banks trying to quantify how many home loans could be impaired is a near hourly list of lousy developments.
And don’t forget that rising oil prices have ushered in further rising gasoline prices, at least temporarily swiping some of our buying power away from other consumer wants. In fact, crude oil prices have set seven records in seven sessions, culminating in a Thursday closing price at $110.33 on the New York Mercantile Exchange.
But last week’s good news was bigger yet for investors. Tuesday’s move by the Federal Reserve to add $200 billion of liquidity to financial markets by accepting home-loan backed bonds from banks as collateral for low-interest loans from the Fed also was aimed at building confidence in other mortgage-backed securities. A massive stock market rally ensued.
Thursday’s comments from Standard and Poor’s that “the end of write-downs is now in sight for large financial institutions” surely lifted investor spirits. And it suggested that the seemingly hourly wondering about bank loan portfolio health could improve. Stock investors bid Thursday markets from lower to higher on that news.
The Quad-City area got its own dose of good news in Tuesday’s Manpower Inc. survey of Quad-City employers. For the Iowa side, the report could not have been better: 40 percent of employers plan hiring in the second quarter. None plan layoffs. That’s radically better than the total U.S. survey of 14,000 employers, where 26 percent expect to hire and 9 percent expect layoffs. The best job prospects are in construction and in both durable and non-durable goods manufacturing, according to those Iowa-side employers.
Illinois-side results were curiously below both those surveys for hiring. Here 17 percent plan hiring and 7 percent plan reductions, still solidly skewed to the hiring side. But a significantly smaller percentage will be handing out job applications. Construction workers are needed along with help in wholesale and retail trade. Still, Illinois side manufacturers aren’t hunting for workers like the Iowa-side.
We also would do well to acknowledge who is buying into Quad-City companies. People regarded as smart and wealthy surely would include Warren Buffet, whose recent buying included two area firms. In the final quarter of 2007, his Berkshire Hathaway bought 9,590,300 more shares of Wells Fargo (a) (b), bringing the entire investment to 289.2 million shares, worth $8.7 billion at year end. Wells Fargo shares were up .34 to 28.45 last week as some other investors responded to published concerns about Wells’ home-equity loan portfolio.
Buffet’s Berkshire also added 25.1 million shares of Kraft (a), with Oscar Mayer operations here, bringing its total hoard to 123.4 million shares worth $4.3 billion at year’s end. Kraft shares lost .74 last week to finish at 29.87.
While Buffet was admiring those, Fortune Magazine was admiring Alcoa (a) (b), whose aluminum rolling and fabricating operations kept rolling along. For the 25th year in a row, Alcoa was named as one of Fortune’s Most Admired Companies. Fortune asked industry executives, directors and stock analysts to rate 622 companies on eight criteria ranging from investment value to social responsibility. Congratulations to Alcoa employees and management. Alcoa shares gained 1.81 last week to 38.41.
Meanwhile, HNI Inc. says that Jerry Dittmer will move from corporate chief financial officer to become president of its HON division, the world’s second-largest office furniture manufacturer. HNI shares gained .15 to 28.60.
Monday brings the nation’s industrial production data, hurt by a U.S. consumer pullback but helped by exports. Tuesday brings further pronouncements by the same Federal Reserve that excited investors last Tuesday. Friday brings market closings to observe Good Friday. And any good news could surprise.
Jim Victor is senior vice president-wealth management and financial advisor for Smith Barney, Davenport. Smith Barney is a division and service mark of Citigroup Global Markets Inc. and its affiliates and is used and registered throughout the world.
The information contained herein has been obtained by the writer from sources believed to be reliable, but he does not guarantee its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. a) The firm is a market maker in the publicly traded equity securities of this company. b) Within the past 3 years, Citigroup or its affiliates has acted as manager or co-manager of a public offering of securities of this company.
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