Post by Catdaddy on Nov 1, 2007 14:24:06 GMT -5
Is the Citigroup news about having to raise $30 billion significant? Are the comments made by analysts at CIBC World Markets a cover story? Who knows. I just think it's interesting that this figure is coming up at this time. Just a hunch. Later,
Catdaddy
Brokerage Notes: Citigroup, Harmony Gold, and Newmont Mining
Looking at Citigroup (C), Harmony Gold (HMY), and Newmont Mining (NEM) following today's brokerage action
By Mark Fightmaster (mfightmaster@sir-inc.com) 11/1/2007 11:33 AM ET
www.schaeffersresearch.com/commentary/observations.aspx?ID=20715
Again, quite a bit of brokerage action this morning. The action on Citigroup (C: sentiment, chart, options) can't be ignored, so I will address that in a moment. C will be followed by a look at 2 miners that were subject to the scrutinizing eye of the analysts, Harmony Gold (HMY: sentiment, chart, options) was upgraded and Newmont Mining (NEM: sentiment, chart, options) was downgraded. With gold flirting with the $800 level, I felt it might be prudent to take a look at what the analysts feel about these 2 companies.
Analyst rankings are an important sentiment indicator that we like to use here at Schaeffer's. Why? Well, analyst rankings are a way to help gauge sentiment on the Street toward a certain stock. Brokerage recommendations also help us gauge potential buying demand. If a stock receives all "buy" or "strong buy" ratings, new money will need to enter into the picture in order to fuel a rally. The question then becomes, is there enough sideline buying demand to support the stock, or has it become top heavy? If this is the case, the buyers of a day ago now represent potential sellers. Of course, the opposite is the case if a stock is bottom heavy in the form of brokerage ratings. What about a "hold" rating? Consider them bearish rankings, leaving potential for upgrades, which could push the stock higher. For an explanation of analysts rankings, make sure to check out Andrea Kramer's interview of Jocelynn Drake.
Citigroup (C)
Dow component Citigroup has lost more than 7% today thanks to comments made by analysts at CIBC World Markets. The brokerage noted that Citigroup may be required to raise more than $30 billion, and in order to achieve this end may have to sell off assets, cut its dividend, raise capital, or create some Frankenstein-ish combination of all these options. In a research note, CIBC (which cut Citigroup to "sector underperformer" from "sector performer") stated that, since 2006 the company "has made $26 billion in acquisitions, taken over $6 billion in recent charges, and increased its dividend against a backdrop off [sic] almost no net income growth." CIBC's analysts noted that the firm's dilemma is that selling assets will constrain its power to generate profit growth, meaning the most likely outcome is a combination of sales and raising capital. The analysts pegged Citigroup's tangible capital at 2.8%, below the level of its peers. Citigroup was also cut to "neutral" from "outperform" by Credit Suisse today. These moves could be the tip of the iceberg for Citigroup, as 5 analysts (out of 12 total) deem it worthy of a "strong buy." Ratings of this ilk are supposedly rare, and downgrades from the lofty perch carry quite a bit of weight.[/b]
The stock has dropped more than 6% this morning and is trading below the 40 level for the first time since April 2003. The round-number level could have acted as support, but failed in its first try. This is disappointing, as the 40 level acted as resistance in the past and should have switched roles when given the chance. Alas, stocks don't always follow the "woulds" and "coulds" of technical performance. A final technical note, C's 10-month and 20-month moving averages have completed a bearish cross. This formation suggests that the stock should see further downside.
While the stock's recent performance may not warrant optimism, this hasn't stopped the options players from being rather optimistic. While a Schaeffer's put/call open interest ratio (SOIR) percentile ranking of 38 isn't a bullish extreme, it is still more bullish than one would expect for a poor performer. This optimism could be the result of Citigroup's membership on the Dow.
Before going addressing the miners, let's take a look at gold in general. The commodity has slipped early after pushing past $800 an ounce. This morning's drop has come as the dollar is showing signs of tightening up a bit. Nonetheless, the precious metal's recent strength can not be denied, despite the fact that some analysts believe that the market is overbought and due for a correction. As gold battles the rather significant and powerful round-number 800 level, keep in mind that it could see further overhead resistance from its all-time high of $875, which was set in January 1980 (man, I was 6 years old . . . I feel old).
Harmony Gold (HMY)
Harmony is one of the stocks that hasn't been able to cash in on the recent strength in gold. The stock has rallied a bit lately, but it has not proven able to break through overhead resistance levied by its 80-day moving average. In addition, the 11 level may supply a bit of a barrier. The recent poor performance sent the shares through the lower rail of a trading range bracketed by the 13 and 17 levels, so watch out for a potential return to range-bound ways.
HMY's poor performance is met with pessimism on the Street. The firm's SOIR of 0.84 is higher than 97% of the past year's worth of readings and is well within what we consider a bearish extreme. Now, analysts could provide a bit of a boost, as all 4 following HMY rate it "hold" or worse (not including this morning's downgrade to "sell" from "neutral" by UBS). In addition, we could see fresh positive coverage, but the shares' recent weakness leaves little reason for upgrades or positive coverage.
Newmont Mining (NEM)
Let's wrap up on a positive note and look at an upgrade. Newmont Mining was upped to "sector perform" from "underperform" at RBC Capital Markets after announcing that its third-quarter profit doubled while upping its sales forecast. The stock has dropped slightly more than a percentage point today, which could be due mainly to overall market weakness. Nonetheless, a continued drop should meet its demise at the 48 level. Why? Well, this level has acted as resistance off and on since July 2004. Of course, in order to drop to the 48 level, the round-number 50 level would have to fail. The potential for failure of the 50 level is lessened as it as acted as resistance in the past as well.
The stock's new-found upside is greeted by skepticism from options players and analysts alike. NEM's SOIR of 0.73 is higher than 75% of the past year's worth of readings, which is on the doorstep of a pessimistic extreme. In addition, Zacks shows that 9 of the 13 analysts following NEM rate it a "hold" or worse, leaving room for the bearish bunch to join RBC Capital in a move to the bullish side. Both of these sentiment indicators hint that the stock could see further upside as pessimism unwinds.
What do you think of the new format? Drop me an email me with comments you may have. Who knows, maybe you'll even get a response from yours truly, it could be your lucky day! One last thing, remember we are all adults here, no need for name calling . . .
Want more of my thoughts on the market? Don't like my views and want to see those of my colleagues Andrea, Beth, Elizabeth, Jocelynn, or Joe? Make sure to check out our Schaeffer's Daily Market Blog section throughout the trading day.
Catdaddy
Brokerage Notes: Citigroup, Harmony Gold, and Newmont Mining
Looking at Citigroup (C), Harmony Gold (HMY), and Newmont Mining (NEM) following today's brokerage action
By Mark Fightmaster (mfightmaster@sir-inc.com) 11/1/2007 11:33 AM ET
www.schaeffersresearch.com/commentary/observations.aspx?ID=20715
Again, quite a bit of brokerage action this morning. The action on Citigroup (C: sentiment, chart, options) can't be ignored, so I will address that in a moment. C will be followed by a look at 2 miners that were subject to the scrutinizing eye of the analysts, Harmony Gold (HMY: sentiment, chart, options) was upgraded and Newmont Mining (NEM: sentiment, chart, options) was downgraded. With gold flirting with the $800 level, I felt it might be prudent to take a look at what the analysts feel about these 2 companies.
Analyst rankings are an important sentiment indicator that we like to use here at Schaeffer's. Why? Well, analyst rankings are a way to help gauge sentiment on the Street toward a certain stock. Brokerage recommendations also help us gauge potential buying demand. If a stock receives all "buy" or "strong buy" ratings, new money will need to enter into the picture in order to fuel a rally. The question then becomes, is there enough sideline buying demand to support the stock, or has it become top heavy? If this is the case, the buyers of a day ago now represent potential sellers. Of course, the opposite is the case if a stock is bottom heavy in the form of brokerage ratings. What about a "hold" rating? Consider them bearish rankings, leaving potential for upgrades, which could push the stock higher. For an explanation of analysts rankings, make sure to check out Andrea Kramer's interview of Jocelynn Drake.
Citigroup (C)
Dow component Citigroup has lost more than 7% today thanks to comments made by analysts at CIBC World Markets. The brokerage noted that Citigroup may be required to raise more than $30 billion, and in order to achieve this end may have to sell off assets, cut its dividend, raise capital, or create some Frankenstein-ish combination of all these options. In a research note, CIBC (which cut Citigroup to "sector underperformer" from "sector performer") stated that, since 2006 the company "has made $26 billion in acquisitions, taken over $6 billion in recent charges, and increased its dividend against a backdrop off [sic] almost no net income growth." CIBC's analysts noted that the firm's dilemma is that selling assets will constrain its power to generate profit growth, meaning the most likely outcome is a combination of sales and raising capital. The analysts pegged Citigroup's tangible capital at 2.8%, below the level of its peers. Citigroup was also cut to "neutral" from "outperform" by Credit Suisse today. These moves could be the tip of the iceberg for Citigroup, as 5 analysts (out of 12 total) deem it worthy of a "strong buy." Ratings of this ilk are supposedly rare, and downgrades from the lofty perch carry quite a bit of weight.[/b]
The stock has dropped more than 6% this morning and is trading below the 40 level for the first time since April 2003. The round-number level could have acted as support, but failed in its first try. This is disappointing, as the 40 level acted as resistance in the past and should have switched roles when given the chance. Alas, stocks don't always follow the "woulds" and "coulds" of technical performance. A final technical note, C's 10-month and 20-month moving averages have completed a bearish cross. This formation suggests that the stock should see further downside.
While the stock's recent performance may not warrant optimism, this hasn't stopped the options players from being rather optimistic. While a Schaeffer's put/call open interest ratio (SOIR) percentile ranking of 38 isn't a bullish extreme, it is still more bullish than one would expect for a poor performer. This optimism could be the result of Citigroup's membership on the Dow.
Before going addressing the miners, let's take a look at gold in general. The commodity has slipped early after pushing past $800 an ounce. This morning's drop has come as the dollar is showing signs of tightening up a bit. Nonetheless, the precious metal's recent strength can not be denied, despite the fact that some analysts believe that the market is overbought and due for a correction. As gold battles the rather significant and powerful round-number 800 level, keep in mind that it could see further overhead resistance from its all-time high of $875, which was set in January 1980 (man, I was 6 years old . . . I feel old).
Harmony Gold (HMY)
Harmony is one of the stocks that hasn't been able to cash in on the recent strength in gold. The stock has rallied a bit lately, but it has not proven able to break through overhead resistance levied by its 80-day moving average. In addition, the 11 level may supply a bit of a barrier. The recent poor performance sent the shares through the lower rail of a trading range bracketed by the 13 and 17 levels, so watch out for a potential return to range-bound ways.
HMY's poor performance is met with pessimism on the Street. The firm's SOIR of 0.84 is higher than 97% of the past year's worth of readings and is well within what we consider a bearish extreme. Now, analysts could provide a bit of a boost, as all 4 following HMY rate it "hold" or worse (not including this morning's downgrade to "sell" from "neutral" by UBS). In addition, we could see fresh positive coverage, but the shares' recent weakness leaves little reason for upgrades or positive coverage.
Newmont Mining (NEM)
Let's wrap up on a positive note and look at an upgrade. Newmont Mining was upped to "sector perform" from "underperform" at RBC Capital Markets after announcing that its third-quarter profit doubled while upping its sales forecast. The stock has dropped slightly more than a percentage point today, which could be due mainly to overall market weakness. Nonetheless, a continued drop should meet its demise at the 48 level. Why? Well, this level has acted as resistance off and on since July 2004. Of course, in order to drop to the 48 level, the round-number 50 level would have to fail. The potential for failure of the 50 level is lessened as it as acted as resistance in the past as well.
The stock's new-found upside is greeted by skepticism from options players and analysts alike. NEM's SOIR of 0.73 is higher than 75% of the past year's worth of readings, which is on the doorstep of a pessimistic extreme. In addition, Zacks shows that 9 of the 13 analysts following NEM rate it a "hold" or worse, leaving room for the bearish bunch to join RBC Capital in a move to the bullish side. Both of these sentiment indicators hint that the stock could see further upside as pessimism unwinds.
What do you think of the new format? Drop me an email me with comments you may have. Who knows, maybe you'll even get a response from yours truly, it could be your lucky day! One last thing, remember we are all adults here, no need for name calling . . .
Want more of my thoughts on the market? Don't like my views and want to see those of my colleagues Andrea, Beth, Elizabeth, Jocelynn, or Joe? Make sure to check out our Schaeffer's Daily Market Blog section throughout the trading day.
