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Market Analysis: Stocks in Focus - August 15, 2006

Strategic Insights

— 3 min read

On August 15, 2006, Schaeffer's Market Blog featured several stocks of interest, including Dell (NASDAQ:DELL), Wal-Mart Stores (NYSE:WMT), General Electric (NYSE:GE), Home Depot (NYSE:HD), and Deere & Co. (NYSE:DE). The blog's writers provided insights into the stocks' performance, earnings, and market activity from an options perspective.

General Electric (NYSE:GE) has been a lackluster stock for the past couple of years, yet sentiment towards the company remains optimistic. Option activity on the shares has been bullish, with a Schaeffer put/call open interest ratio of 0.66, below 81% of readings taken during the past year. Analysts love the shares, with 13 "buy" ratings, one "hold" rating, and zero "sell" ratings. If investors are looking for a stock that will rally, GE might not be a good choice.

Dell (NASDAQ:DELL) saw a surge in its stock price after recalling more than four million notebook computer batteries due to a fire hazard. Investors might be reacting to the company's statement that the recall would have "no material adverse effect" on its results of operations, financial position, or cash flows. However, the blog's writer suggests that today's run higher in the shares could be setting the stock up for a bigger fall, should Dell disappoint with its upcoming earnings report.

Home Depot (NYSE:HD) rallied three-and-a-half percent after the company's second-quarter profit rose more than five percent to 90 cents per share. Sales rose 16.7% to $26 billion, while retail sales grew by 5.1%. The stock, however, continues to waffle beneath its 10-week and 20-week moving averages, and the Schaeffer's Equity Scorecard rating of 3.0 portends further downside.

Deere & Co. (NYSE:DE) announced that its third-quarter income increased 13% to $1.85 per share, thanks to higher prices for its agricultural equipment and better sales of its landscaping, construction, and forestry machines. Revenue for the third quarter came in at $6.27 billion, beating the Street's expectations. However, the company hinted that poor growing weather could lead to lower farm-equipment sales in the quarter.

Wal-Mart Stores (NYSE:WMT) announced that its second-quarter profit dropped 26% due to the sale of its retail business in Germany. The company backed its full-year forecast but noted that the second half of 2006 could be "challenging."

Key Takeaways:

  • General Electric's (NYSE:GE) sentiment remains optimistic despite its lackluster performance over the past couple of years.
  • Dell (NASDAQ:DELL) saw a surge in its stock price after recalling more than four million notebook computer batteries, but the blog's writer suggests that today's run higher might be setting the stock up for a bigger fall.
  • Home Depot (NYSE:HD) rallied three-and-a-half percent after its second-quarter profit rose more than five percent to 90 cents per share, but the stock continues to waffle beneath its 10-week and 20-week moving averages.
  • Deere & Co. (NYSE:DE) announced that its third-quarter income increased 13% to $1.85 per share, thanks to higher prices for its agricultural equipment and better sales of its landscaping, construction, and forestry machines.
  • Wal-Mart Stores (NYSE:WMT) announced a 26% drop in its second-quarter profit due to the sale of its retail business in Germany.
  • The Schaeffer's Equity Scorecard rating of 3.0 for Home Depot (NYSE:HD) portends further downside.
  • Poor growing weather could lead to lower farm-equipment sales in the third quarter for Deere & Co. (NYSE:DE).

Statistics:

  • General Electric's (NYSE:GE) Schaeffer put/call open interest ratio is 0.66, below 81% of readings taken during the past year.
  • Dell (NASDAQ:DELL) recalled more than four million notebook computer batteries due to a fire hazard.
  • Home Depot's (NYSE:HD) second-quarter profit rose more than five percent to 90 cents per share.
  • Deere & Co.'s (NYSE:DE) third-quarter income increased 13% to $1.85 per share.
  • Wal-Mart Stores' (NYSE:WMT) second-quarter profit dropped 26% due to the sale of its retail business in Germany.

Sources:

  • Schaeffer's Market Blog, August 15, 2006
  • Schaeffer's Investment Research, www.SchaeffersResearch.com
  • General Electric (NYSE:GE)
  • Dell (NASDAQ:DELL)
  • Home Depot (NYSE:HD)
  • Deere & Co. (NYSE:DE)
  • Wal-Mart Stores (NYSE:WMT)

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