Tag Archives: financial

Aqua America – A Retirement Stock

Analyst project positive revenue and earnings. Financial strength A-. Great price momentum. Retirement investing is a little different than the Total Return Investing you may have been doing all your life. You used to swing for the fence knowing that time, volatility and regular capital additions to your portfolio would prove the principles of long-term dollar-cost averaging. During retirement and distribution phase of your life, dollar-cost averaging works against you and becomes your worst enemy. Your new goals are: Capital preservation A conservative total return that exceeds your withdrawal rate, taxes and inflation A return that beats the market You fully research a stock and make sure you have the information needed to rationally decide the stock is a good addition to your portfolio. I use a screener provided by Barchart to find stocks that currently are having a positive price momentum and then make sure they fit the criteria listed above. When I screened the Russell 3000 Index stocks today, Aqua America (NYSE: WTR ) was right near the top of the list. Aqua America is one of the largest U.S.-based, publicly traded water utilities and serves nearly 3 million people in Pennsylvania, Ohio, North Carolina, Illinois, Texas, New Jersey, Indiana and Virginia. First I make sure the stock is outperforming the market. Why would I want to add a stock to my portfolio unless it significantly does better than the market? I use the Value Line Arithmetic Index as my Market benchmark for 2 reasons: 1) it contains 1,700 stocks with a total capitalization of almost 95% of the U.S. stock market, and 2) it is not weighted by capitalization, so the big stocks have the same weighting as the small ones. During the last year, while the market was down 2.79%, WTR gained 17.30%: I like to research the stock’s underlying fundamentals to see if that price momentum is warranted. Market Cap $5.28 Billion P/E 23.26 Dividend yield 2.45% Revenue expected to grow 4.80% this year and another 5.30% next year Earnings are estimated to increase 5.80% this year, an additional 7.10% next year and continue to compound at an annual rate of 5.55% for the next 5 years Financial Strength A- The overall sentiment of the investing community is very important. A stock will not maintain its upward momentum is some of the major players are starting to bail. Wall Street analysts have issued 4 strong buy, 2 buy and 4 hold recommendations on the stock to their clients Institutional investors own about 48.18% of the outstanding shares. During the last year, 170 added to their positions, while 140 decreased their shares for a net gain of 1.998 million shares Insiders decreased their positions with 22 buys and 36 sells but the net result was only down 225,665 shares On TheStreet, Jim Cramer’s staff gave the stock an A+ buy rating I like to follow the individual investors on Motley Fool, and its readers voted 540 to 32 that the stock will beat the market Short sellers have almost doubled their positions from around 2.846 million shares at the beginning of the year to 5.747 million shares recently I use Barchart for technical momentum data and only consider day from the current 6-month period: 100% technical buy signals Trend Spotter buy signal Above its 20-, 50- and 100-day moving averages 9 new highs and up 3.75% in the last month Relative Strength Index 63.29% Barchart computes a technical support level at 29.02 Recently traded at 29.99 with a 50-day moving average of 28.71 I try to compare my stock to the largest 3 stocks in the same sector. In the Water Utility sector, Aqua America gained 17.30% in the last year, while America Water Works (NYSE: AWK ) gained 14.00%, Companhia de Saneamento Basico do Estado De Sao Paulo (NYSE: SBS ) lost 23.21% and American States Water (NYSE: AWR ) gained 22.19%: Additional comparisons: American Water Works Market Cap $10.56 billion P/E 21.82 Dividend yield 2.40% Revenue expected to grow 5.40% this year and another 4.90% next year Earnings estimated to increase 6.50% this year, an additional 7.20% next year and continue to increase at an annual rate of 7.34% for the next 5 years Wall Street analysts issued 4 strong buy, 7 buy and 5 hold recommendations on the stock Financial strength B+ Companhia de Saneamento Basico do Estado de Sao Paulo Market Cap $ 3.02 billion P/E 44.00 Dividend yield 1.94% Revenue expected to decline by 53.50% this year but grow again by 16.50% next year Earnings are estimated to decrease 66.10% this year, increase by 168.40% next year and compound at an annual rate of 12.30% for the next 5 years Wall Street analysts issued 2 buy and 2 hold recommendation on the stock They did not rate the financial strength America States Water Market Cap $1.53 billion P/E 24.19 Dividend yield 2.23% Revenue expected to decline .70% this year, rise again by 4.10% next year Earnings are estimated to increase by 1.30% this year, an additional 6.30% next year and compound at an annual rate of 4.00% for the next 5 years Summary: My opinion is that the 2 best in the sector are WTR and AWR, but I think Aqua America has a slight edge. It has good price momentum, stable revenue and earnings projections, high financial strength and is expected to give investors an annual total return in the 11% range for the next 5 years. Below I have included a chart of the price against the 20-, 50- and 100-day moving averages plus a 14-day high/low turtle chart, which shows recent upward price momentum. If you’re looking for an exit point to protect your gains, the 50-100 Day MACD Oscillator has been a reliable technical trading strategy for this stock.

No Respite For Oil And Energy ETFs In 2016?

The vicious trading of oil and the energy sector is likely to persist for more months especially after the Fed finally pulled its trigger on the first rate hike in almost a decade. Higher interest rates will drive the U.S. dollar upward, making dollar-denominated assets more expensive for foreign investors, and thus, dampening the appeal for the commodity. In addition, it will make the borrowings, in particular for high-yield firms, costlier and result in less money flows into capital-intensive shale oil and gas drilling projects. This in turn will lead to higher bankruptcies, hitting the already battered energy sector. Following the rate hike announcement, U.S. crude dropped nearly 5% to $35.52 per barrel, just a few dollars away from $32.40 that it hit during the financial crisis in 2008. Meanwhile, Brent oil tumbled to the nearly 11-year low of $37.11, which is not very far from the December 2008 low of $36.20. Analysts expect breaking the 2008 levels could take oil prices to levels not seen since 2004 given fears of growing global glut and weak demand that have been weighing on the oil prices. Weak Trends The latest inventory storage report from the EIA for the last week showed that U.S. crude stockpiles unexpectedly rose by 4.8 million barrels against the expected 1.4 million-barrel drawdown, underscoring further weakness in the energy sector. This is because production has been on the rise across the globe with the Organization of the Petroleum Exporting Countries (OPEC) continuing to pump near-record levels of oil to maintain market share against non-OPEC members like Russia and the U.S. Additionally, Iran is looking to boost its production once the Tehran sanctions are lifted. On the other hand, demand for oil across the globe looks tepid given slower growth in most developed and developing economies. In particular, persistent weakness in the world’s biggest consumer of energy – China – will continue to weigh on the demand outlook. Further, a warm winter in the U.S. will depress demand for energy and energy-related products. Adding to the grim outlook is the International Energy Agency’s (IEA) expectation that the global oil supply glut will persist through 2016 as worldwide demand will soften next year to 1.2 million barrels a day after climbing to a five-year high of 1.8 million barrels this year. ETF Impact The Fed move and the bearish inventory data have battered the oil and energy ETFs and are expected to continue doing so in the coming months with bleak oil fundamentals. In particular, the iPath S&P Crude Oil Total Return Index ETN (NYSEARCA: OIL ) , the United States Oil ETF (NYSEARCA: USO ) , the PowerShares DB Oil ETF (NYSEARCA: DBO ) and the United States Brent Oil ETF (NYSEARCA: BNO ) lost over 3% in Wednesday’s trading session. All these products focus on the oil futures market and are directly linked to the U.S. crude or Brent oil prices. In the equity energy ETF space, the First Trust ISE-Revere Natural Gas Index ETF (NYSEARCA: FCG ) and the SPDR S&P Oil & Gas Exploration & Production ETF (NYSEARCA: XOP ) were the worst hit, shedding 2.7% and 2.2%, respectively. These were followed by declines of 2% for the Market Vectors Unconventional Oil & Gas ETF (NYSEARCA: FRAK ) and the PowerShares S&P SmallCap Energy Portfolio ETF (NASDAQ: PSCE ) . FCG This fund offers exposure to the U.S. stocks that derive a substantial portion of their revenues from the exploration and production of natural gas. It follows the ISE-REVERE Natural Gas Index and holds 30 stocks in its basket that are well spread out across each component with none holding more than 6.95% of the assets. The fund has amassed $161.1 million in its asset base while charging 60 bps in annual fees. Volume is solid with more than 1.8 million shares exchanged per day on average. XOP This fund provides equal-weight exposure to 66 firms by tracking the S&P Oil & Gas Exploration & Production Select Industry Index. Each holding makes up for less than 2.3% of the total assets. XOP is one of the largest and popular funds in the energy space with an AUM of $1.5 billion and expense ratio of 0.35%. It trades in heavy volume of around 12 million shares a day on average (see all the energy ETFs here ). FRAK This ETF provides exposure to the unconventional oil and gas segment, which includes coalbed methane, coal seam gas, shale oil & gas, and sands market. This fund follows the Market Vectors Global Unconventional Oil & Gas Index, holding 57 stocks in the basket. Average daily volume at 39,000 shares and an AUM of $41 million are quite low for the fund while expense ratio is at 0.54%. PSCE This fund provides exposure to the energy sector of the U.S. small-cap segment by tracking the S&P Small Cap 600 Capped Energy Index. Holding 32 securities in its basket, it is heavily concentrated on the top two firms that collectively make up for one-fourth of the portfolio. Other firms hold less than 5.8% of total assets. The fund is less popular and less liquid with an AUM of $33 million and average daily volume of about 19,000 shares. Expense ratio came in at 0.29%. In Conclusion Investors should stay away from the above-mentioned funds as more pain is in store for oil and the energy sector. FRAK and FCG have a Zacks ETF Rank of 5 or “Strong Sell” rating while XOP and PSCE have a Zacks ETF Rank of 4 or “Sell” rating, suggesting their continued underperformance going into the New Year. Original post

A Stock Market Breather Before A Big-Time Bullish Breakout? Not Bloody Likely

It is unsettling to deal with the probability that we are closer to a bearish decline in stocks than a bullish reboot. However, if one prepares for inevitable depreciation in overvalued asset prices, buying low becomes less intimidating. At the current moment, far too many folks are being led astray by talking points they hear on CNBC and Bloomberg. History and probability do not favor the idea that stock markets will magically grind higher. It is unsettling to deal with the probability that we are closer to a bearish decline in stocks than a bullish reboot. Investment account values will wane. Household net worth will diminish. And when stock prices near their lowest ebb, the typical investor will decide that buying is impractical. However, if one prepares for inevitable depreciation in overvalued asset prices, buying low becomes less intimidating. For example, in spite of the exceptionally poor rap that trend-following techniques receive from the mainstream financial media, a decision to “stand down” when the 50-day crossed below the 200-day in the previous stock bear provided a remarkably desirable return OF capital. A subsequent decision to embrace risk when the 50-day crossed above the 200-day provided a remarkably desirable entry point for a return ON capital. Selling the S&P 500 near 1500 (a.k.a. “selling high”) and purchasing it again near 900 (a.k.a. “buying low”) helped one successfully transition from capital preservation to capital appreciation. At the current moment, far too many folks are being led astray by talking points they hear on CNBC and Bloomberg. For instance, popular shows regularly trot out analysts who insist that that market is “grinding higher.” First of all, which market is grinding higher? The Dow Industrials, Dow Transports, S&P 500, S&P 400, Russell 2000 and New York Stock Exchange (NYSE) Composite are all lower than they were one year ago. (Note: Ironically enough, the Fed’s last asset purchase actually occurred on 12/18/2014, making 12/17/2015 the end of a full trading year.) It follows that the only significant U.S. index that has made genuine progress since the end of the Federal Reserve’s quantitative easing (QE3) is the NASDAQ . Even there, progress is less impressive when one weights the components of the NASDAQ equally, rather than rely on the super-sized weightings of Facebook (NASDAQ: FB ), Amazon (NASDAQ: AMZN ), Netflix (NASDAQ: NFLX ) and Alphabet (NASDAQ: GOOG ). This is evident in the deterioration of the First Trust NASDAQ-100 Equal Weight Index ETF (NASDAQ: QQEW ):the PowerShares QQQ Trust ETF (NASDAQ: QQQ ) price ratio. Why is the lack of meaningful progress in so many U.S. stock barometers – the Dow Industrials, Dow Transports, S&P 500, S&P 400, Russell 2000, NYSE Composite – being overlooked? The most common answer that I am hearing is the prospect of a “breather.” A proverbial “pause” for U.S. stocks in the middle of a bullish cycle. The problems with the “breather” belief are numerous. For one thing, where consolidation has occurred during previous “pauses,” the number of advancing stocks on the exchanges relative to the the number of declining issues usually move higher. Consider the euro-zone crisis in the summertime of 2011 – the last time stocks experienced anything close to a sharp correction. The NYSE Advance/Decline Line (A/D) offered ample signs of a healthier stock market with a series of “higher lows” and “higher highs.” In essence, the number of advancers began to eviscerate the number of decliners. If one is inclined to believe that the current stock bull is merely catching its breath for a second wind, shouldn’t we see the same kind of improving breadth here in 2015? Like we did in 2011? Yet, over the past year, more stocks in the US have been declining than advancing for the first time since 2009. Moreover, the NYSE A/D Line is not currently demonstrating the kind of resilience that previous bullish rallies demonstrated. A second shot across the “breather” bow is the earnings environment. Combine the strong dollar, low commodity prices, higher borrowing costs, and we’re about to see our third consecutive quarterly decline in S&P 500 earnings. That has not occurred since the systemic financial collapse. What’s more, the profitability concerns are wreaking havoc on traditional valuations; that is, you cannot see a 14% decline in year-over-year earnings , as well as a third consecutive quarter of earnings deterioration, and anticipate anything other than expensive stocks becoming even pricier. A third dilemma for the “breather” believers? The rest of the world’s stock markets are trading near the levels they were trading when the S&P 500 hit 1867 back in August. Or worse. Many of the world markets are trading at even lower prices than the August lows for the S&P 500 . How about the world’s 4th largest economy in the United Kingdom? The i Shares MSCI United Kingdom ETF (NYSEARCA: EWU ) is far beneath its 200-day moving average and hardly shows any indication that it is ready to rally back to new 52 -week highs. Of course, history only rhymes, it does not repeat. There’s no way to know what will transpire with any certainty. Yet history and probability do not favor the idea that stock markets will magically grind higher. (They haven’t for the last year.) History and probability do not favor a bullish breakout to new records when manufacturing is contracting, earnings and sales are declining, and global economic hardships are increasing. Here is one final item to digest. Several years ago, the U.S. Department of Transportation’s Bureau of Transportation Statistics produced a study that showed how its transportation index “…led slowdowns in the economy by an average of four to five months.” Is there anything in the activity of a similar index – the longest running stock index in U.S. history, the Dow Jones Transportation Index – that suggests U.S. stocks are gearing up for a breakout above all-time highs? Does a 17.25% price drop show that stocks are grinding higher or lower? Keep a little cash on hand. Not only will it help you sleep better at night, but it will give you the confidence to buy good stuff lower down the road. D isclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships.