Last week, Visa (stock ticker: V) has stopped its incredible bullish trend in almost $90, more than doubling money for the Visa IPO buyers. After retracing more than 12% to $78.80, Visa actually has a stock price of $83.60, as we can see in the following chart:
Is Visa still bullish? What is Visa´s outlook? Lets see some facts…
Major shareholder of Yahoo, Icahn, amasses 4% of Yahoo - proxy fight may loom
Carl Icahn may be smelling blood at Yahoo Inc. (stock quote: YHOO). The activist investor has accumulated a 4% stake of the Internet portal company and may be gearing up for a proxy fight to replace Yahoo’s board. The deadline for Yahoo board nominations is Thursday, with a vote scheduled for the company’s annual shareholder meeting in July. Investors criticized Yahoo for failing to reach a $47.5 billion buyout deal with Microsoft Corp.
China quake disrupts natural gas production
China’s two largest oil companies said the killer earthquake in Sichuan province forced them to shut some gas wells and an oil refinery in the city of Nanchong. PetroChina Co. has cut daily gas output from Sichuan by about 14%. China Petroleum & Chemical Corp. said aftershocks and blocked transportation links led it to keep gas wells closed. Natural gas demand could drop until business resumes in the province, which uses about 19% of China’s supply, said Lehman Brothers Holdings Inc. analyst Cheng Khoo in Hong Kong.
Yesterday, American International Group (AIG), released it´s 1Q 2008 earnings announcement, and investors were quite dissapointed; a massive loss of $7.81 billion. Also, the company revealed that they need tor raise $12.5 billion in the incoming months to improve their financial position.
Dissapointing results, dark outlook and new capital were strong reasons to panic investors, sending AIG´s stock price 6% down to $41.56, less than 5% difference from its 52 week low value of $38.50
AIG is a member of the Dow Jones Index, and therefore a very representative company of the US economy as a whole. We can see in the above chart, that as many companies, they touched bottom on March 2008, and began a slight recovery:
SEC to demand liquidity disclosures
US regulators will soon force Wall Street banks to divulge more details about their capital and liquidity. the requiement seeks to avert a repeat of the sudden collapse of Bear Stearns in March. The new disclosure would be “in terms that the market can readily understand and digest”, said the Security and Exchange Comission.
European Central Bank (ECB) and Bank of England leave rates steady
Although Europe is dealing with an inflation problem, and a higher rate would definetly help them to combat this problem, the central banks decided to leave rates unchanged amid signs of slower economic growth ahead. Most analysts expected this decision.
Regulator of US commodities sees no price manipulation
The US regulatory body for futures markets said commodity prices are not a result of market manipulation. Instead, the high prices for oil, food grains and other are because of reasons including the dollar´s falling value, growing demand from developing nations and biofuel mandates.
Bank of America (BAC) takeover of Countrywide (CFC) may be in jeopardy
Analysts believe that BAC will probably lower its takeover price of CFC or possibly abandon the deal altogether. This is because problems at the mortgage lender intesified, making the agreement less attractive.
Oil pushes above $120 level
Concerns about supply in Iran, Iraq and Nigeria are pushing oil prices higher. Earlier today, oil reached $120,93. Great Britain´s economic recovery, for instance, could be delayed beyond next year if the price of crude oil doesn´t fall. This will also happen worldwide, as higher oil and other commodities pushed inflation higher.
The rapid appreciation of the Chinese currency against the US dollar is taking a big toll on Asian companies using China as base for exports to the United States, according to a top US business official. The higher yuan hits china-based exporters.
The yuan has risen 12 percent against the dollar in 2008, and the currency breached a key psychological level of 7.0 yuan to one dollar on April 10.
The higher yuan makes US exports more competitive with Chinese goods in their home market, while business costs for largely Asian companies producing and exporting from China will rise as they pay more local currency for labor and raw materials and sell their products to the US market in dollars.
The last few weeks have been quite bullish, and Wall Street was generous with most all stocks. Nevertheless, the fact that rate cuts won´t be repeated and the uncertainty about the US economic situation makes it difficult to predict May´s behaviour.
On April 22 we recommended to buy:
In an hypothetical portfolio composed by equitatively by those stocks, the return in 2 weeks would have been + 8,29%. Not bad if we use as a benchmark (point of reference of a portfolio) the Dow Jones Industrial Average (DJIA), that achieved a return of + 2,66%. Nasdaq´s return for this 2 weeks was 4,20%. Therefore, our selection had a very positive performance.
We believe that Visa might continue to decline as some profit taking occurs. A long term investor shouldn´t be worried avout this possible decline, but in the short term it might diminish 5-10% more. The other stocks remain in our favourites.
