This week was not as exiting or
profitable as the last two, markets were generally up and earnings
announcements continue. Yet this week some saw some massive gainers, amongst
which were Microsoft, Amazon, and Boeing.
This
week although pretty flat for me personally, highlighted the heightened uncertainty
in the Stock Market, next Wednesday the Federal Reserve will announce whether
or not they will start to dial back on the $85 billion monthly stimulus
program. The popular consensus is that they will not, the Federal Reserve wants
to see some undeniable evidence that the U.S economy is growing steadily enough
not to require federal assistance, and they don’t have it.
Personally
I believe the Federal stimulus program had to go in September, the last time
the Fed had met to discuss its future, now after the Government Shutdown and
the debt ceiling limit postponed until early next year I feel like the Federal
Reserve should not start tapering until mid-next year.
But
eventually the stimulus program has to end, so there is no point in debating
its future, what’s truly important is the results of the Earnings that were
announced this week and the earnings that will be announced next week.
Some
big names announced their 3rd Quarter results this week were the
Defense Contractors Lockheed-Martin, and Boeing. Earnings for these contractors
were supposed to disappoint due to the Government Shutdown and reduced military
spending yet they did not, both Boeing and Lockheed Martin beat earnings
expectations and saw their shares rise this week, yet I would not recommend buying
into defense contractors for one reason, they are two reliant on government
contracts.
If the Government
debt standoff showed anything it showed that the Government does not collect
enough money to run the Country, and eventually spending is going to have to be
cut and military contracts cost the Government Billions of dollars every year.
Putting the two and two together it is obvious that in the future the military
contracts Defense companies like, Lockheed Martin, Northrop Grumman, General
Dynamics, and Boeing rely on will either be allowed to expire or are going to
be cancelled. Now this won’t happen for at least a few years, since most
Military contracts are not due to expire until 2015, but still with the
politics in Washington affecting Government spending I would not want to put my
money into companies that rely heavily on Government funds.
Defense Contractors
were not the only companies that announced earnings this week, Internet retail giant;
Amazon announced its 3rd Quarter 2013 results also. Now Amazon is
huge, with a market value of some $166 billion! Amazon has grown so large that it’s
starting to carve into Wal-Mart, the undisputed king of retail, share of the
market. Amazon beat average earnings estimates which predicted revenues to be
at $16.76 billion, revenue topped $17.09 billion, and after this news shares
surged 9.39% to close at $363.39. Amazon has just one problem…..its
unprofitable! Amazon lost $.09 a share (this matched estimates) or a loss of 41
million.
This loss irritates
me, since Amazon has the potential to become extremely lucrative. But my
feelings aside shares of Amazon are up over 52% this year, considerably better
than other traditional retailers. Normally I would discourage investing into an
unprofitable company but Amazon is a special case, its revenues are growing,
and it’s not like the company is hemorrhaging money, what I think Amazon needs
is a financial advisor to manage their funds more affectively.
My recommendation when
looking at Amazon is to look at the numbers and ask yourself what they mean to
you, to me Amazon’s numbers show some unreasonable spending that has to be cut
back in order to make the company profitable. I do not have the confidence to
say buy it or not buy it but this is my analysis of the company.
Another giant that
reported earnings this week was Microsoft, I admit I am biased against this
company, I cannot stand Microsoft products, and I feel that the software
company is a dinosaur that is watching its dominated PC market slowly die. But
Microsoft announced earnings that were actually impressive, since the company
is trying to reinvent itself as a device and services company, since it’s
buying of Nokia’s phone business.
Microsoft reported
earnings of $18.53 billion in revenue and 5.24 billion in profit ($0.62 per
share). Also sales of new Microsoft tablets, and its office system supplemented
for declining sales of windows. This shows that Microsoft is on its way to
revitalizing its self. Shares of Microsoft were up 5.96% on Friday, closing at $35.73
a share.
My recommendation
for Microsoft is to buy and hold, if you are looking for a quick profit this
stock should be avoided since Microsoft is a steady blue chip company that will
not see a resurrection for at least a few years. If you are the type of person
who wants to put their money somewhere where you could watch it grow at a
faster rate than a standard bank account, then Microsoft might the perfect
match for you. Microsoft pays a high dividend of 3.13%, with this in mind it
may be another retirement stock to put your 401K in.
There were other
companies that announced earnings this week such as Ford, and Caterpillar, and generally
Wall Street found overall earnings good enough to send the DOW up over 100
points this week, next week though several other large companies are announcing
earnings, such as Apple, Facebook, General Motors, and Exxon Mobil.
My advice for
these companies is to avoid buying into Apple stock until after the company
announcing earnings on Monday, since Wall Street is forecasting another bleak Quarter
for the technology giant. With this said Apple would make a great investment
since the company is currently undervalued, and may be issuing a large buyback
soon. I would buy into Apple after the company announces earnings since stock
will probably fall and you could take advantage of the low prices.
As for Facebook, I
stated my opinion on the social media giant in my first entry. I believe the
company is highly overvalued, and that with shares surging over the last 3
months this Quarter announcement might send shares falling back to level where
I think they should be trading at, in the mid 20’s. Yet Facebook may surprise people
and shares might continue to go up but in the long term Facebook, and social
media in general is a terrible investment, since it relies too much on
advertising and produces little real profit.
General Motors on
the other hand might be a good investment, since Ford announced good earnings
GM might just be the next automaker to surprise Wall Street, as for Exxon
Mobil, I would not buy into the Oil giant, because of falling oil prices that
may have a negative effect on the world 2nd largest corporation.
I would ask that if you may please
leave comments about how you liked the article and any suggestions you have
about how to make it better. Also if you enjoyed this article I would ask if
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I will be posting an article every
Friday and looking back at the political and economic events of that week, both
personally impacting events and suggestions about my opinions on the future of
the market. (I apologize for the late posting this week, I have been very busy)
