Last Fridays jobless report showed employment in the USA topped forecasts and global manufacturing strengthened. U.S. stocks rose for the fifth straight week. The Labor Department figures showed payrolls increased by 243,000 in January, the most since April 2011. The report exceeded all forecasts as economists in a Bloomberg News survey called for an increase of 140,000 jobs. The unemployment rate dropped to 8.3 percent, the lowest since February 2009.

Since Jan. 27^th, one of the more popular index’s, the S&P 500 rose 2.2% to 1,344.90 completing the longest weekly rally since January 2011.  The Dow added 201.77 points, or 1.6% to 12,862.23 this week. For the year The S&P 500 is up 6.9%, making it the best annual start since 1987.

Since the European debt crisis which drove the index down 19 percent between April 29^th, and Oct. 3^rd, 2011, the S&P 500 has recovered. It is 1.4% away from surpassing its peak nine months ago and reaching its high since the June 2008 financial crisis and the ensuing stock market crash. This stock market rally was boosted by better than estimated economic data and corporate profits.

Two sectors with the largest gain are the Financial and Technology sectors. Financial companies in the S&P 500 climbed 4.2% as a group, the largest gain among 10 industries.  Technology companies increased 3.1%, the second- biggest increase in the benchmark measure.

After reviewing last week’s earnings reports we will follow up on those companies that announced their earning to see how their actual reports compared to their expected results.  At first glance there seems to be little surprises as earning came in more or less as expected. This information is not a recommendation, we are only trying to inform you of the street’s expectations for these companies. All the data provided here is from Yahoo Finance.

 Eli Lilly and Company (LLY) Earning beat expectations of $0.81 and came in at $0.87 on revenue of $6.05 b compared to analyst expectations of $5.90B. The company reconfirmed recently announced 2012 guidance.

Pfizer, Inc. (PFE) Earning beat expectations of $0.47 and came in at $0.50 on revenue of $16.7b compared to analyst expectations of $16.57B.

The company’s chief executive officer Mr. Ian Read said that the company was moving ahead with plans to shed its animal health and nutrition businesses later this year. Catherine Arnold, an analyst at Credit Suisse, said that the strong fourth-quarter performance by Pfizer’s nutrition and animal health businesses should help the company’s plans to sell or spin them off.

http://www.ft.com/intl/cms/s/0/7106695a-4c0e-11e1-b1b5-00144feabdc0.html#axzz1lcZNftED

Allergan, Inc. (AGN) Announced earning as expected. The company expects total product sales in 2012 of between $5.65 billion and $5.85 billion. It expects earnings, excluding one-time items, of between $4.13 and $4.19 a share.  This compares to annual revenue expectations of $5.43B. and earnings of $3.64.

Merck & Company, Inc. (MRK) Earning beat expectations of $0.95 and came in slightly higher at $0.97 on revenue of $12.29 B. this was slightly lower than the expected $12. 48B.

JP Morgan analyst Chris Schott said the earnings beat was largely due to a lower tax rate and noted that company sales did not eclipse forecasts as they have over the past year.

Even so, Schott predicted in a research report that Merck earnings will grow by an average of 7% a year through 2017 and be in the industry’s top tier. This is despite the expected decline from Singulair,  a leading asthma drug whose U.S. patent lapses in August, as the company introduces new medicines.

http://www.reuters.com/article/2012/02/02/us-merck-idUSTRE81110X20120202?type=companyNews

 Astrazeneca PLC (AZN) Announced earning as expected. Revenue of $8.66B beat slightly expectations of $8.59B.

AstraZeneca announced that it plans to cut 7,300 jobs. The Company also announced it planned to buy back $4.5 billion in shares in 2012.

Gilead Sciences, Inc. (GILD) Announced earnings of $0.97 below expectations of $1.05 on revenue of $2.18B.

Despite weak quarterly results the stock was up on news about their anti-hepatitis C treatment. This is attributed to Gilead’s recent purchase of Pharmaset Inc., whose cache of hepatitis treatment drugs Gilead coveted.  GILD suffered a hit right after the deal closed, due to its large price tag of nearly $11 billion.  Three months later, after conducting a four week, all-oral combination treatment using experimental pill GS-7977 and ribavirin all genotype-1 hep-C, patients appeared to be virus-free. While this is not yet proof of a cure, such results are clearly promising.

Pharma Earnings Update

Amgen Inc. (AMGN) – : Although a biotech not your typical pharmaceutical I am including it into our review due to their popularity. It said it earned $1.04 billion, or $1.21 per share, down 6 percent from $1.1 billion, or $1.17 per share, and off $0.1 from analysts expectations of $1.22.  Revenue beat expectations by .5b they were $3.97 billion, up 3 percent from $3.84 billion in 2010′s fourth quarter.

Amgen announced its plans to buy cancer therapy developer Micromet Inc. for $1.16 billion in cash to boost its oncology pipeline. Founded in Germany and based in Rockville, Md., Micromet is developing an experimental antibody-based drug, blinatumomab. It’s currently in mid-stage testing to treat leukemia and in clinical development for the treatment of non-Hodgkin lymphoma.

The purchase is Amgen’s largest since it bought BioVex Group last year in a deal worth up to $1 billion, including milestone payments.

Gilead Sciences, Inc. (GILD) - Friday, before the bell: Another popular biotech not your typical pharmaceutical. Analysts are looking for EPS of $1.05 on revenue of $2.18B this compares to last year’s gain of $0.95. The consensus range is for $1.00 – $1.13, and $2.15B – $2.23B for revenue. For the fiscal year 2011, revenues are expected to rise 5.4% to $8.38B from $7.95B for the previous year. Earnings per share are expected to increase to $3.93 compared to $3.69 for 2010.

Watson Pharmaceuticals, Inc. Co (WPI)– Tuesday Feb 14^th, before the bell: Analysts are looking for EPS of $1.75 on revenue of $1.54B. This compares to last year’s gain of $0.93. The consensus range is $1.60-$1.78 for EPS, and $1.43B-$1.62B for revenue. For the fiscal year 2011, revenues are expected to increase 28% to $4.58B from $3.57B for fiscal 2010. Earnings per share are expected to increase to $4.73 compared to $3.42 in the past year.

Recently earning expectations were raised from $1.62 as for 2012 revenues are expected to increase 17.20% to $5.36B and earnings are expected to be $5.59.

Teva Pharmaceutical Industries (TEVA) - Wednesday Feb. 15^th, before the bell: Analysts are looking for EPS of $1.58 on revenue of $5.64B this compares to last year’s gain of $1.25. The consensus range is for $1.53 – $1.62, and $5.30B – $5.81B for revenue. For the fiscal year 2011, revenues are expected to rise 13.9% to $18.35B from $16.12B for the previous year. Earnings per share are expected to increase to $4.97 compared to $4.54

As for 2012 revenues are expected to increase 19.30% to $21.89B and earnings are expected to be $5.60

Mylan Inc. (MYL) – Monday Feb 21^st, before the bell: Analysts are looking for EPS of $0.5 on revenue of $1.55B. This compares to last year’s gain of $0.45. The consensus range is $0.48-$0.53 for EPS, and $1.49B-$1.62B for revenue. For the fiscal year 2011, revenues are expected to increase 12.9% to $6.15B from $5.45B for fiscal 2010. Earnings per share are expected to increase to $2.01 compared to $1.61 in the past year.

Big Pharma Announcing Earnings Next Week‏

It’s been a few years now that investors have shunned large pharmaceutical companies as many of the companies have lost or will lose their patent protection on some of their most successful and profitable drugs. From 2010 to 2014, it is estimated that roughly $90 billion worth of branded drugs are going to go generic, which gives people the opportunity to buy the cheaper version generic drug but limits the profits of lucrative brand names.

 According to a report by the IMS institute for Healthcare Informatics, average annual sales are expected to grow only 3% to 6%, reaching nearly $1.1 trillion by 2015. This trend however, reflects a slowdown seen during the previous five years where annual growth was 6.2%. In addition they are expecting to see an accelerating shift in spending towards generic drugs, where they expect them to rise to 39% of cumulative spending in 2015, up from 20 % in 2005.

 As pharmaceutical stocks joined the recent market uptick and started to rally investors feel that the group has bottomed. According to Jim Cramer of Mad Money “this is as bad as it gets.” Big pharma stocks could continue to go higher, he said, because they are still trading at depressed price-to-earnings multiples with juicy dividend yields. “After years where the prospects for these companies kept deteriorating, they can finally look forward to a future that’s brighter than the recent past.”

Next week, we will be hearing from many of the more popular drug stocks, many of which are widely held. The following is a review of the earning expectations. By looking at the group and comparing the companies within this group this should give you a deeper understanding of the particular companies. This information is not a recommendation, we are only trying to inform you of the street’s expectations for these companies. All the data provided here is from Yahoo Finance.

Bristol-Myers Squibb Company Co (BMY)- Thursday, before bell: Analysts are looking for EPS of $0.55 on revenue of $5.5B. This compares to last year’s gain of $0.47. The consensus range is $0.52 – $0.57 for EPS, and $5.37B – $5.67B for revenue. For the full year, revenues are expected to increase by 9.3% to just under $21.3 billion. Earnings per share are expected to increase to $2.30 compared to $2.16 in the past year.

 Amgen Inc. (AMGN)- Thursday, after the close: Although a biotech not your typical pharmaceutical I am including it into our review due to their popularity. Analysts are looking for EPS of $1.22 on revenue of $3.92B. This compares to last year’s gain of $1.17. The consensus range is $1.07 – $1.34 for EPS, and $3.83B-$4B for revenue. For the full year, revenues are expected to increase slightly to $15.5B. versus $15.05B for the previous year. Earnings per share are expected to increase to $5.33 compared to $5.21 in the past year. Amgen has beat earnings estimates in each of the past four quarters.

Eli Lilly and Company (LLY) – Monday, before bell: Analysts are looking for EPS of $0.81 on revenue of $5.90B. This compares to last year’s gain of $1.11. The consensus range is $0.76-$83 for EPS, and $5.64B-$6.06B for revenue. During the past three months earnings were revised downwards. For the fiscal year 2011, revenues are expected to be $24.13B. versus $23.08B. for fiscal 2010. Earnings per share are expected to decline to $4.35 compared to $4.74 in the past year. Lilly will report its first quarter to include the loss of patent exclusivity for Zyprexa. The company recently predicted a bigger than expected drop in 2012 profit, partly as Zyprexa sales have declined more than anticipated especially in Europe.

Pfizer, Inc. (PFE) Monday, before bell: Analysts are looking for EPS of $0.47 on revenue of $16.57B. This compares to last year’s gain of $0.47. The consensus range is $0.43-$0.50 for EPS, and $15.9B-$17.18B for revenue. For the fiscal year 2011, revenues are expected to decline slightly to $67.22B. from $67.79 for fiscal 2010. Earnings per share are expected to increase slightly from $2.23 in the past year to $2.28. PFE has beat earnings estimates by small margins in each of the past three quarters.

Allergan, Inc. Common Stock (AGN) - Thursday, before bell:Analysts are looking for EPS of $1 on revenue of $1.41B. This compares to last year’s gain of $0.88. The consensus range is $0.98-$1.02 for EPS, and $1.36B-$1.43B for revenue. For the fiscal year 2011, revenues are expected to increase 11% to $5.43B. from $4.88B for fiscal 2010. Earnings per share are expected to increase to $3.64 compared to $3.16 in the past year.

Astrazeneca PLC Common Stock (AZN) – Thursday, before bell: Analysts are looking for a loss of $1.61 on revenue of $8.59B. This compares to last year’s gain of $1.39. The consensus range is for a loss of $1.54-$1.72, and $8.48B-$8.76B for revenue. For the fiscal year, revenues are expected to rise slightly to $33.53B. from $33.27B. for the previous year. Earnings per share are expected to increase nicely to $7.31 compared to $6.71 in the past year. However expectations for 2012 are supposed to decline for both earnings and revenues.

Merck & Company, Inc. (MRK) – Thursday, before the bell: Analysts are looking for EPS of $0.95 on revenue of $12.48 B. this compares to last year’s gain of $0.88. The consensus range is for $0.92 – $0.97, and $12.02M – $12.89B for revenue. For the fiscal year 2011, revenues are expected to rise slightly to $48.22B from $45.99B for the previous year. Earnings per share are expected to increase to $3.76compared to $3.42 for 2010. Expectations for 2012 are supposed to decline slightly for both earnings and revenues.

For a graphic comparison of 11 of the top global pharmaceutical companies CLICK HERE.
The graphic shows how the companies measure up. Are the companies with the biggest market caps also spending the most on R&D? Is there better value in the higher dividend yields or the largest revenue growth? Here you have the chance to analyze the data for yourself.

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After hearing from many of the more popular bank stocks, we would like to review some of the more significant stories. The main trends that seem to define the future of the financial business were declining trading revenue, and heavier regulations causing higher expenses. On the bright side there was lower loan losses and higher loan originations.

On Tuesday, Citigroup Inc. and Wells Fargo & Co. recorded their strongest loan-growth numbers since the financial crisis. The figures confirm a warming trend highlighted last week by J.P. Morgan.

The lending gains mark a defined change from the past few years, when lackluster figures opened banks to criticism from politicians and others that their tight grip on cash was staling economic growth. The recent data offers the latest signal that the deleveraging that swept the economy following the 2007-08 turmoil may be easing. This information is not a recommendation we are only trying to collect and group together some of the more popular banks presenting a general view of the group’s earnings, which may give you additional insight and understanding into the financial industry.

Citigroup (C) – Fourth-quarter net income dropped 11 percent compared to the same period in 2011, to $0.38. Due to a decline in revenues, there was a $465 million hike in operating expenses, and a $470 million jump in tax provisions. Analysts were looking for EPS of $0.48 the consensus range was $0.30 – $0.64 a share. Revenue came in at $17.17B compared to expectations of $18.54B.

Full Year 2011 net Income of $11.3B was up 6% and Full Year 2011 revenues of $78.4B compared to $86.6B in 2010. Book value per share was up 8% to $60.78, tangible book value per share was up 12% to $49.81.

One bright spot was a drop in loan losses, which fell 40 percent to $4.1 billion, suggesting that for consumers at least, the economy was becoming more solid.

Wells Fargo (WFC) – Announced earnings of $0.73 and revenue of $20.06B.  Analysts were looking for EPS of $0.72 on revenue of $20.08B. This compares to last year’s gain of $0.61. For the full year revenues are expected to decline to $80.61B. The company reported revenues of $80.9 and earnings per share increased to $2.83 from $2.21 in the previous year.

Goldman Sachs (GS) – Although earnings dropped 58 percent to $1.01 billion, or $1.84 a share, they beat the $1.28 average estimate by 56 cents. Revenues fell 30% year over year to $6.05 billion versus the $6.32 billion consensus. Revenue for 2011 dropped 26 percent to $28.8 billion, the lowest since 2008. Revenues were expected to decline to $30.15B. Book value per common share was $130.31 and tangible book value per common share was $119.72.

Bank of America (BAC) - Analysts were looking for EPS of $0.23 and the consensus range was $0.03-$0.48. Earnings came in at $0.15 this compares to last year’s gain of $0.04. Revenue was $25.1 billion, up 11% from $22.7 billion in the prior-year quarter. Revenues also surpassed Estimates of $24.11B.

Bank of America is one of the largest credit card issuers and they made the point that Americans seemed to be getting their financial houses in order by paying off more debt in a timely manner. Their customers who paid bills a month late declined for the 11th consecutive quarter.
Morgan Stanley (MS) posted a smaller-than-expected​d loss of $250 million, or 15 cents a share, on strong trading revenue. Revenue plunged 26% to $5.71 billion. After lowering estimates deeply, analysts were looking for a loss of $0.57 on revenue of $5.57B.

“The bar is pretty low,” Ralph Cole, a senior vice president in research at Ferguson Wellman Inc., told Bloomberg News in regards to these results. “If they can show less weakness than their peers, that appears to be strength.”

Morgan Stanley, underwriting revenue of $477 million fell 54% from last year’s fourth quarter, while advisory revenue fell 16% to $406 million. Here again Morgan Stanley beat earnings estimates making it the fifth quarter in a row to beat expectations.

Next Week Northeast and Mid-Atlantic Banks Earnings

This information is not a recommendation we are only trying to inform you of the street’s expectations for these companies. All the data provided here is from Yahoo Finance.

New York Community Bancorp, Inc (NYB) – Wednesday, before bell: Analysts are looking for EPS of $0.27 on revenue of $295.94M this compares to last year’s gain of $0.31. The consensus range is for $0.25 – $0.31, and $ 282.72M – $307.00M for revenue. For the fiscal year 2011, revenues are expected to rise to $1.2B from $1.18B for the previous year. Earnings per share are expected to decline to $1.10 compared to $1.21 for 2010.

Hudson City Bancorp, Inc. (HCBK) – Wednesday, before bell: Analysts are looking for a loss of $0.74 on revenue of $228.62M this compares to last year’s gain of $0.25. The consensus range is for a loss of $0.76 – $0.72, and $215.27M – $245.10M for revenue. For the fiscal year 2011, revenues are expected to decline to $1.01B from $1.19B for the previous year. Earnings per share are expected to decline to a loss of $1.51 compared to a profit of $1.09 for 2010.

Brookline Bancorp, Inc. (BRKL) – Wednesday, after the close: Analysts are looking for EPS of $0.12 on revenue of $26.85M this compares to last year’s gain of $0.11. Being a smaller Bank there are few analysts covering this company. For the fiscal year 2011, revenues are expected to rise to $1.05M from $91.75 reflecting 14.5% growth from the previous year. Earnings per share are expected to rise to $0.50 compared to $0.45 for 2010.

First Niagara Financial Group (FNFG) – Thursday, before bell: Analysts are looking for EPS of $0.24 on revenue of $304.73M this compares to last year’s gain of $0.24. The consensus range is for $0.22 – $0.26, and $295.54M – $312.40M for revenue. For the fiscal year 2011, revenues are expected to rise to $1.12B from $784.40M for the previous year. Earnings per share are expected to rise to $0.98 from $0.87 last year.

Valley National Bancorp Common (VLY) – Thursday, before bell: Analysts are looking for EPS of $0.19 on revenue of $138.21M this compares to last year’s gain of $0.23. The consensus range is for $0.18 – $0.21, and $133.88M – $152.51M for revenue. For the fiscal year 2011, revenues are expected to rise to $585.7M from $554.08M for the previous year. Earnings per share are expected to rise to $0.84 from $0.77 last year.

Provident Financial Services (PFS) – Friday, before bell: Analysts are looking for EPS of $0.27 on revenue of $54.77M this compares to last year’s gain of $0.23. The consensus range is for $0.26 – $0.28, and $54.35M – $55.50M for revenue. For the fiscal year 2011, revenues are expected to rise to $216.85M from $208.96M for the previous year. Earnings per share are expected to rise to $1.03 from $0.90 last year.

Earnings season is upon us, Alcoa the first major company to announce its earrings in the past week. JP Morgan the first major bank stock to announce earnings said, quarterly net income was $3.72 billion, or 90 cents a share, compared to $4.83 billion, or $1.12 a share in the same quarter last year. The GAAP Capital IQ Consensus Estimate was for $0.92 and the non-GAAP consensus was $0.90. Revenues fell 9.6% year over year to $21.47 billion and versus consensus expectations of $22.68 billion.
After the Martin Luther King Jr. Holiday, we will be hearing form many of the more popular banks stocks, many of which are widely held. I would like to review some of the large bank stocks as well as some of the local NY area bank stocks, mainly companies held by our clients. Slowing economic growth, mounting mortgage liabilities and heightened worries that Europe’s debt crisis will spread have weighed heavily on bank stocks all year. Our banks had the industry’s worst two years of revenue growth since the Great Depression, according to Mike Mayo, an analyst with independent research firm CLSA in New York. Earnings across the industry in bank stocks were weak in the fourth quarter and won’t have much improvement this year, he said. New Regulations The so-called Durbin amendment, which limits what lenders can charge merchants on debit transactions, took effect on Oct. 1, affecting almost all U.S. banks and costing the top 25 bank stocks about $1.5 billion. JPMorgan said that the new rules will reduce its net income by about $600 million a year. Estimates on bank stocks have been slashed by many analysts as future revenues are expected to be soft, one may argue that bad news has been built into the market’s expectations. Recently optimism in the market’s have sent the financial sector sailing, Obviously, yearend bank stocks earnings, will have an effect in determining their future performance . This information is not a recommendation, we are only trying to inform you of the street’s expectations for these companies. All the data provided here is from Yahoo Finance.

Citigroup (C) – Tuesday, before bell: Analysts are looking for EPS of $0.48 on revenue of $18.54B. This compares to last year’s gain of $0.40. The consensus range is $0.30 – $0.64 for EPS, and $17.48B – $19.84B for revenue. During the past three months earnings were revised downward from previous expectations of $0.89 per share. For the full year, revenues are expected to decline by 8% to just under $80 billion. Earnings per share are expected to increase to $3.81 compared to $3.50 in the past year.

Wells Fargo (WFC) – Tuesday, before bell:Analysts are looking for EPS of $0.72 on revenue of $20.08B. This compares to last year’s gain of $0.61. The consensus range is $0.66-$077 for EPS, and $19.35B-$20.82B for revenue. For the fiscal year 2012, revenues are expected to decline to $80.61 B.  versus $85.21B for the previous year. Earnings per share are expected to increase to $2.82 from $2.21 in the previous year.

Goldman Sachs (GS) – Wednesday, before bell:Analysts are looking for EPS of $1.28 on revenue of $6.65B. This compares to last year’s gain of $3.79. The consensus range is $0.70-$2.50 for EPS, and $5.94B-$8.75B for revenue. During the past three months earnings were revised downward from previous expectations of $3.14 per share. For the fiscal year 2011, revenues are expected to decline to $30.15B. versus $39.16B. for fiscal 2010. Earnings per share are expected to decline to $4.87 compared to $13.18 in the past year.

PNC Financial Services Group, Inc (PNC) – Wednesday, before bell: Analysts are looking for EPS of $1.41 on revenue of $3.54B. This compares to last year’s gain of $1.50. The consensus range is $1.14-$1.64 for EPS, and $3.47B-$3.61B for revenue. During the past three months earnings were revised minimally from previous expectations of $1.42 per share. For the fiscal year 2011, revenues are expected to be $14.33B. versus $15.18 for fiscal 2010. Earnings per share are expected to increase from $5.74 in the past year to $6.19. PNC has beat earnings estimates in each of the past four quarters.

Bank of America (BAC) – Thursday, before bell:Analysts are looking for EPS of $0.23 on revenue of $24.11B. This compares to last year’s gain of $0.04. The consensus range is $0.03-$0.48 for EPS, and $21.94B-$27.24B for revenue. During the past three months earnings were revised slightly upwards. For the fiscal year 2011, revenues are expected to decline to $94.54B.  from $110.22B for fiscal 2010. Earnings per share are expected to decline to $0.11 compared to $0.86 in the past year.

Morgan Stanley (MS) – Thursday, before bell: Analysts are looking for a loss of $0.57 on revenue of $5.57B. This compares to last year’s gain of $0.43. The consensus range is for a loss of $0.34-$0.81, and $4.37B-$9.48B for revenue. During the past three months earnings were sharply revised and cut to the current amount from a gain of $0.42. Revenues are expected to rise slightly to $32.51B. from $31.62B. for the previous year. Earnings per share are expected to decline to $0.82 compared to $2.44 in the past year. On the bright side, Morgan Stanley has beat earnings estimates in each of the past four quarters.

People’s United Financial, Inc. (PBCT) – Thursday, after the close: Analysts are looking for EPS of $0.19 on revenue of $315.76 M. this compares to last year’s gain of $0.10. The consensus range is for $0.17 – $0.20, and $ 271.80M-$ 325.70M for revenue. For the fiscal year 2011, revenues are expected to rise to $1.22B. from $998.20M for the previous year. Earnings per share are expected to increase to $0.66 compared to $ 0.35 for 2010.

Capital One Financial Corporation (COF) - Thursday, after the close: Analysts are looking for EPS of $1.54 on revenue of $4.14. this compares to last year’s gain of $1.52. The consensus range is for $1.26- $1.79, and $3.93B-$4.35B for revenue. For the fiscal year 2011, revenues are expected to be at $16.36B. compared to $16.17B for the previous year. Earnings per share are expected to increase from $6.01 for 2010 to $7.56 for 2011. COF has beat earnings estimates in each of the past four quarters.

Pick Stocks: How to Pick Stocks?

With all the buzz about the January effect, you may want to ask yourself “how do I figure out which stocks to buy?” How do I pick stocks In truth it’s not so hard to do your own homework and compile a list of companies whose stocks have been badly hurt as a result of tax loss selling or in general due to the weak market this past year. The main point is to make sure they still have sound fundamentals behind them.

We will try and give you some ideas on how a little research can pay off!

You can start with looking for stories about the biggest blowups in the past year. Some publications will even create a list discussing a variety of corporate disasters or other major headlines. Not only will this give you a feel for the market, it can be an excellent source for investment ideas, and even make for some good reading.

Once you have found a group of stocks that you like, review them. Filter out the stories about companies and stocks that have taken a beating for a specific reason, a one-time event or any other situation that will not have a long term affect on the company. It should be a situation that you believe the company can overcome. For example, a company that reported a large one-time non recurring loss, should not have a lasting effect on the company and may be something for you to look into. A company like this should be able to recover financially in due time.

You can also look for companies that have been downgraded by many analysts. That can be as easy as googeling “Stocks Seeing Big Analyst Downgrades.”
Here one can argue that a lot of criticism may have hurt the stock price. When a company gets knocked down, many shareholders run for cover and sell aggressively overselling the stock. In some cases this will result in replacing the shareholder base and creating a new set of shareholders who are ready to take a bumpy ride.

There are two breaking points to watch and consider. The $10 level and the $5 level. Many institutions will not purchase a stock that is less than $10 since they don’t want to be accused of investing in low quality, low priced companies. This causes a stock that drops under $10 to fall further by institutional shareholders selling their shares. At the $5 level many brokerage houses will deny margin. This will cause excessive selling when they close out the positions that are no longer marginable.

Another point to consider when buying stocks that have sold off sharply is to research if there was any insider buying. As the saying goes there are many possible reasons for an insider to sell a stock but only one reason to buy… They expect the stock to go up and make money!.
When a stock drops, a good indicator to add to the equation is insider buying.

There are many stock screeners available for free on the web. Here are links to Yahoo’s and Google’s stock screener:

Here is a simple screening process I set up that you can use as a starting point;
This is done with the Google stock screener.

Our Criteria
Market cap – You can start with $500 million
52w price change (%) – You can start with 50%
Last price – You can start with $5
EBITDA margin (%)-You can start with 15%
Average volume -You can start with 150,000

Again please don’t forget the main issue, “don’t buy a bad company”. It is most important to make certain that the company you are choosing has sound fundamentals.

At times recurring annual and seasonal cycles can be identified in the stock market.

Cycles identify January as a positive month of the year. Why? Because January is 30 days after the tax loss selling occurred and the month when some of the stocks sold in December for a tax loss are bought back and returned to the portfolio. That is why you see a blip or jump in the value of stocks in January. It is a virtual green shoot.

While there is no such thing as a foolproof recurring pattern in the market, there are known cycles that some people believe in. Some of these cycles are seasonal. We have the Christmas Rally the January effect, presidential cycles, 10 year cycles etc.

Many have been saying that 2011 has been “the year of the Stock Trader’s Almanac”, with all the good ole market clichés falling into place. The famous saying “sell in May and go away” proved to be great advice this year. But that was not the only old boy’s adage that panned out. Our recent Santa Claus rally beginning in mid December seems to take hold now, so it’s only reasonable to take a closer look at another famous trend the “January effect.”

January Effect

As we wrote in our previous blog many investors take stock losses at year’s end for tax purposes. It is not uncommon to see investors sell losing stocks at the end of the year to take advantage of short term losses. Other investors may create a new portfolio at the beginning of the year and then rebalance quarterly or monthly as the market dictates. An end of the year review and portfolio rebalance is very common, creating additional selling pressure to stocks prior to year’s end.

While not every January shows overall gains in the stock market, the pattern is common. Although it is termed the January effect one should be aware that this pattern doesn’t necessarily last the entire month, nor does it begin on January First. Therefore one needs to be careful on how he is going to capitalize on this phenomenon.

UBS analyst Peter Lee points out that such a so-called “January Effect” has over the years shown the most sway with small-cap stocks. More specifically, studies have shown that from the year 1953 to 1995 inclusive, stocks of low capitalization outperformed stocks of higher capitalization for 40 years out of a total of 43 years.

This year, small capitalization stocks have been under a lot of pressure. The Russell 2000 (a Small cap index) is down 2.89 while the Russell 1000 (a Large cap index) is up 2.12%. Some of the stocks in the Russell 2000 are down more than 50% from their 52-week highs and many are down more than 25% from the 52-week high.

There is a good possibility that all the tax loss selling seen in November-December will set up to January gains.