The U.S. stock market tumbled yesterday, as news spread that 10 hedge funds have withdrawn some funds from German banking giant Deutsche Bank. The situation brings back memories of panicked hedge funds pulling their money from Lehman Brothers eight years ago, which sent Lehman into bankruptcy. Thus far, withdrawals have been minor, and Deutsche Bank seems strong enough to weather the storm. Investors’ worries could keep stock prices under pressure for the next few days.
In other news, oil prices received a boost when members of OPEC (the Organization of the Petroleum Exporting Countries) reportedly agreed that they need to cut crude oil output to reduce the world’s supply glut. The announcement surprised investors, although terms of an agreement won’t be worked out until the next OPEC meeting in November. However, even if an agreement is reached, members often fail to adhere to output limits and the agreement falls apart at a later date. Oil prices should stay elevated during the next few months, though, which is good news for stocks.
Four Benjamin Graham companies reported quarterly financial results or other noteworthy news. Prices appearing after each stock symbol are the closing prices on Thursday, September 29, 2016. Reports are for the quarter ended August 31, 2016 unless otherwise stated. Sales and earnings increases and decreases are based on year-ago comparisons.
I also present two indexes, which list companies featured in the Cabot Value Model or in the Cabot Enterprising Model during the most recent four months and indicate when my summaries of the companies were published so you can quickly find my recent write-ups for stocks appearing in the models.
My schedule for the next five weeks will be:
* Thursday, October 6, Cabot Value Model issue 267V
* Friday, October 7, Weekly Update
* Thursday, October 13, Cabot Enterprising Model issue 267E
* Friday, October 14, Weekly Update
* Friday, October 21, Weekly Update
* Thursday, October 27, Cabot Wealth Advisory
* Friday, October 28, Weekly Update
* Tuesday, November 1, Wall Street’s Best Daily
Company Reports
Apple (AAPL 112.18) was recently featured by Value Line citing better-than-expected results for the quarter ended June 30. Expectations that the company will soon return to a sustainable growth track is now at hand. Value Line continues to like the shares for patient, buy-and-hold investors. Hold.
BJ’s Restaurants (BJRI 35.04) shares have fallen recently in reaction to weakening sales in the restaurant industry. Lunch traffic at sit-down casual restaurants, including BJ’s, has been especially weak, falling for the fourth consecutive quarter. BJ’s is gaining market share, though, by introducing new menu items and focusing on top-notch service. Sales will receive a boost from 12 new restaurant openings in the second half of 2016 versus seven new openings in the first half. Hold.
FedEx (FDX 175.12) could be challenged by Amazon in the package shipping business. Amazon’s shipping costs have been rising rapidly during the past several years, so the company is building a shipping network to supplement existing carriers, such as FedEx and UPS, during busy holiday seasons. Some analysts believe Amazon will attempt to build an entire shipping network to compete head-on with FedEx and UPS, but the costs seem to be too high for a new shipping business to ever become profitable. Buy at 166.92 or below.
Nike ‘B’ (NKE 52.16) reported strong sales and earnings for the quarter ended August 31. Sales advanced 8% and EPS climbed 9%, after sales increased 6% and earnings were flat in the previous quarter. However, footwear and apparel scheduled for delivery within the next six months rose 5% for the period ending January 2017, compared with 9% growth for the same period a year ago. Orders rose only 1% in the North American region.
Future orders were negatively affected by the usual post-Olympic letdown and the shift to direct to consumer orders on the internet, which are not included in future orders. Nike, though, is losing market share to Under Armour and Adidas, which have had success in selling more colorful, stylish footwear. Nike, no doubt, will catch up to the new fashion trends very soon. A further selloff in Nike shares will present an excellent buying opportunity. Hold.