Money and Investing Thoughts

In October, 2008 when the world was going to end as far at the stock market goes I wrote an article for another website discussing 5 large cap stocks. My hypothesis is that these companies are so well run and know so much about their markets that they will continue to grow their earnings. The last two earnings periods and now the current on continue to provide proof of my hypothesis. Since the other website is no longer paying me for articles I will share my thoughts on these 5 excellent companies here.

As we roll into the 2nd quarter earnings season, several of the 5 have reported earnings already. The list:

Apple, Inc. (AAPL: 463.97 0.00 0.00%) Today Apple reported earnings that were 15% higher than the same quarter last year. The $1.35 per share net beat the estimates by 18¢. Apple just keeps making products people want to buy and they get premium prices for them.

The Coca Cola Company (KO: 68.03 0.00 0.00%) Coke is a monster when it comes to selling their products around the world. Earlier this week the company reported profits 43% higher than a year earlier. Coke earned 88¢ per share compared to 61¢ for Q2, 2008 and 65¢ in the first quarter of 2008. 80% of the company’s sales are outside of the U.S. and think about how much Coke products Americans drink.

Google, Inc. (GOOG: 609.09 0.00 0.00%) continues to grow profits despite the economic slowdown everywhere. For the 2nd quarter Google had revenues 3% higher than an year earlier (remember the 2nd quarter of 2008, GOOG was $580 per share). Net income increased by 74¢ to $4.66 per share.

IBM Corp. (IBM: 192.82 0.00 0.00%) had reinvented itself from a hardware company to a service contract provider. Revenues and earning move steadily upward. As one headline put it, “IBM is a Profit Machine“.  2nd quarter earnings of $2.32 per share beat the estimates by 15% and were 18% higher than a year earlier.

McDonald’s Corp. (MCD: 99.49 0.00 0.00%) reports earnings tomorrow (Thursday) and the estimate is 97¢ per share compared to earnings of 86¢ a year ago and 82¢ in the 1st quarter of 2009. Let us see how they do.

These companies continue to grow their businesses and surprise the experts. Take a look at what the market did to their stock prices in November and March. Walmart (WMT: 61.88 0.00 0.00%) is another company close to making the list. I like to research and own small cap stocks, but these companies will treat long term investors well and we can all learn from the success of superior business plans put into action.

Sacramento-area home sales fall for 1st time since April 2008 – Sacramento Business, Housing Market News | Sacramento Bee.

The headline in the Sac Bee article linked above highlights the fact that the Sacramento region for the first time in 14 months did not have year-over-year sales gains. This is primarily because the supply of repo homes has fallen to the point that willing buyers cannot find a home to buy. The listed home inventory has fallen by 43% over the last 12 months. However, it was the highest monthly sales for 2009 so far.

The median price remained stable in June and TrendGraphix reported the median per square foot increase by 1% to 3% in the area counties. With a decreasing inventory of foreclosure homes, buyers are looking to short sales the get the prices they want. In June, 16.6% of sale were of the short variety. Bankers have been making the short sale process smoother with lender response times cut in half.

The Sacramento are home market is a little bi-polar right now. The employment picture is grim with the State of California putting employees on furlough 3 days a month and the unemployment rate increasing. On the other side there are currently more buyers than inventory for the repo properties that are available.  Buyers are sensing that if they do not get a home soon they will be missing out on the pricing bottom.

The last housing meltdown in the Sacramento area happened in the early 1990′s when the government shut down 3 large military installations in the city. Prices were stagnant for several years they started a serious runup up from the later 90′s until 2006. Buying a home now will look pretty good 5 to 10 years in the future.

Home Front: Roseville new-home market looks robust – Sacramento News – Local and Breaking Sacramento News | Sacramento Bee.

I have a couple of quick articles today about the Sacramento housing market. The one linked above from the Sacramento Bee had a couple of items about new home sales in the region that caught my eye.

First, new home sales for the region totaled 1,670 for the first half of 2009 compared to 4,695 for all of 2008. Extrapolating puts the 2009 sales at about 70% of the previous year. Less new home sales and inventory does help the absorbtion of existing home inventory.

Second, the average selling price for a new home was $376,679. The number is quite astounding when the median price for existing homes is around $180k. It shows how much of the repo sales market was at the bottom the regions housing picture. It also gives a peak at how bad the condition of some of the repo houses must be. Finally, the price differential shows how much money the bankers are leaving on the table in their rush to unload bank owned inventory.

California home builders are on pace to build and sell less than 50k new homes compared to the 20 year average of 140k. This will eventually help get inventory of all homes back in line with demand. California right now has some serious employment problems but this to shall pass.

Southland home sales up; median levels off .

Yes, the median existing home sales price in Southern California was 6.4% higher in June than in May. The big cause of the jumb was buyers coming back in to the above $500k market. Homes above $500k were 19.6% of all home sales.

The number of sales climbed for the 12th straight month and the percentage that were foreclosures continue to drop. June sales were the highest for the month since 2006 but still 17.7% below the average June sales since 1988.

June was the 2nd month in a row with a month over month price increase. The median price remains 47% below the peak of early 2007. The decrease in the median price is largely due to a shift in buyers looking for distressed housing in lower cost areas.

It appears that the Southern California housing market is slowly working towards more normalized operations. Prices are stabilizing and sales continue to climb towards historical averages. Questions remain on how much foreclosed property will come into the market and how fast it will come. New home builders are building at about 20% of their historical averages. It will be interesting to see where the numbers go from here.

Source: DQNews, article linked above.

Auto production and sales in Brazil surge as confidence returns — MercoPress.

The article linked above chronicles the increases of auto production and sales following the governments tax reductions on auto purchases. Auto sales hit a record in June. From the article:

A combination of tax breaks, lower prices and improved confidence has sent consumers flocking to showrooms, industry executives said last week. The June data underscore the success of President Lula da Silva’s tax breaks on vehicles and home appliances to revive industrial production and pull the economy out of recession.

Contrast the result of tax breaks in Brazil against the “stimulus package” path being followed by the U.S. government.