S&P 500 and US dollar index

The negative correlation between S&P 500 and US dollar index is super strong.

Johnson & Johnson (JNJ)'s financial ratios --- Peer comparison

Four other companies' ratios are compared with JNJ. These four are Pfizer, Eli Lily, Abbot, and Norvartis. It appears that Eli Lily performs the best while Pfizer did the worst. Well, for choosing your stock you need to do more homework than just ratio comparison. Outlook is the key.

Johnson & Johnson (JNJ)'s financial ratios

Johnson & Johnson is engaged in the research and development, manufacture and sale of a range of products in the health care field. The Company operates in three business segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics.


It's a dividend play company and good one to diversify your retirement portfolio in my opinion. I'll list some of the financial ratios below (esp. for Tao). Seems to me people care about its profitability the most since there is not much change in efficiency anyway. (In JNJ's earning report they don't even bother put out balance sheet) In order to understand the company's potential you will want to dig into the segmental data they include in their financial statements. In addition, you also need to know the product pipeline, expiration of patents etc. 

some thoughts on Chinese ADRs

It's amazing to see how frequently some Chinese ADRs got investigated for accounting fraud. If there are real fraud what were the auditing firms (IPO time) for these firms doing? Shame on them. Most recent ones are RINO, ONP, FUQI. They all have unbelievable growth if judging from their accounting numbers. I did look at ONP before by reading 10K and calculate financial ratios. The inventory turnover is crazily higher than all chinese peers and US ones (5 to 10 times higher). And the company borrowed money from CEO, etc. All kinds of strange stuff. I have to wonder who would want to be the investors on these stock. Probably at this stage only day traders are left in play.

This is common for other foreign ADRs as well. I would say find the ones making sense and don't believe in too good to be true numbers.

BTW, the market has another down day. And people think S&P500 will go down to 1165 then bounce back up; it's the 50 day moving average. It will be a 5% correction then. It's amazing to see how the market trades technically among the past few months. Is it really the high frequency trading effect?

Cisco's latest earning report

A not bad earning but very bad outlook. As Cisco beat both revenue and earnings their guidance for next quarter is far below expectations. http://www.reuters.com/finance/stocks/keyDevelopments?rpc=66&symbol=CSCO.O&timestamp=20101111023000

“Cisco Systems, Inc. announced that for fiscal 2011, it expects annual revenue to grow in the range of 9% to 12% on a year-over-year basis. For the second quarter of 2011, it expects revenue to be in the range of 3% to 5% on a year-over-year basis and earnings-per-share (EPS) to be in the range of $0.32-$0.35 per share and GAAP EPS to be in the range of $0.08-$0.10 per share lower than the non-GAAP EPS. The Company reported revenues of $40.040 billion in fiscal 2010; revenues of $9.815 billion in the second quarter of 2010. According to Reuters Estimates, analysts were expecting the Company to report EPS of $0.42 on revenues of $11.083 billion for the second quarter of 2011; revenues of $45.279 billion for fiscal 2011. “

So there you have it, ~17% drop after the ER day. Has the fundamental changed? Probably not, Cisco is just getting large and hard to grow fast. Acquisition helps growth but as you might know the cost of acquisition is also usually high. Many times so called synergy never materialize. I believe it won’t be an exception for Cisco.  

For people don’t know Cisco, here is short intro from Google finance:

Description

Cisco Systems, Inc. designs, manufactures, and sells Internet protocol (IP)-based networking and other products related to the communications and information technology (IT) industry and provide services associated with these products and their use. The Company provides a line of products for transporting data, voice, and video within buildings, across campuses, and around the world. Its products are designed to transform how people connect, communicate, and collaborate. Its products are installed at enterprise businesses, public institutions, telecommunications companies, commercial businesses, and personal residences. The Company has five segments: United States and Canada, European Markets, Emerging Markets, Asia Pacific, and Japan. The Emerging Markets theater consists of Eastern Europe, Latin America, the Middle East and Africa, and Russia and the Commonwealth of Independent States. In September 2010, the Company acquired Arch Rock Corporation.

I really like the telecom concept and have been enjoying the Skype and such products. Communication is supposed to be easy. The trend as I see is on mobile communication: facetime etc.

 In theory, IT spending should pick up as economy slowly recover. But Cisco’s guidance told a different story. Let’s hope it’s a localized issue.

Now let’s take a look at how analyst view Cisco: pretty bearish lately.

How is the stock perform on earning report day? Not exciting at all.

Non-GAAP earnings: not good growth sign. (compare it with Amazon you’ll see what I mean sign of growth).

The stock of the company seems really stuck into a range if you look back five years. I don’t blame investors since I don’t think I want to own their stock even after 19% drop.

The quarterly financial key data is listed in next table.

A few points: bad margin trend, bad sale growth trend, and would be worse considering the guidance for next quarter. 

a bad week for S&P500

But you really shouldn't feel surprised as the market has run up for over 2 months. I think a correction of few percentage point is not a big deal since the Feds will keep pumping the money into the market. Considering all the money at sidelines and the policy changes in Asia the market should still have more new highs to go when money comes back to US equity market. In addition, if you have QE2 then you can have QE3 as long as Ben is around. When the economy holds up until the unemployment rate goes down further, everything will be fine.

SPX from Stockcharts.com

Everything was down on Friday.

Cisco's management outlook for next quarter certainly triggered some fear about the economy. But hey, isn't that why Feds put out QE2? 

Still, be aware of the market condition and focus on individual stocks is my practice. 

China Lodging Group, Limited (HTHT)

Since I'll be busy with housework for a while after closing I try to give my quick thoughts on HTHT.

Cuz it’s only listed in US for a short while so there are not much financial infos.

Here are a few key numbers for past five quarters: (margins are pretty good.)

The recent price action seems to be triggered by Ctrip. Ctrip.com lowered their 4^th quarterly sales a lot, roughly from 117 m to 80m so that analysts downgraded the stock.  I think that guidance might give the market a hint that the travel business in China for next quarter is not as bright as expected. If you look at the price chart for HTHT you’ll see at the end of July they raised the whole year revenue guidance which gave the stock a boost. Investors probably just think HTHT might also lower guidance for Q4 like CTRP.

So it looks like a group sell-off (CTRP, HMIN, HTHT) for the past few days. It might go down further before the earning release. On the bright side, when the earning announcement is due possibility of upside surprise is a little higher than downside as expectations has been lowered a lot. I’m guessing that the latest quarter should have good result but next one is not as great partly due to the end of Shanghai World Exhibit.  Since it’s a growth stock (high PE ratio), pay attention to revenue growth and maybe margin. As long as the slow growth trend does not continue the stock should be ok.

From technical analysis point of view if the 13 moving average goes below 50 moving average the price becomes bearish. But TA again is just probability play; only for reference.