Monday, September 07, 2009

Weekly Stock Pick

Buy Sell Hold

The Market This Week

The USA August Unemployment report last Friday came in at 9.5% - 9.7% depending upon where you’re getting your data from. This week the market will digest this and give more clues for its future direction. I’m betting its down. If unemployment keeps increasing then GDP should decrease. I think US unemployment is heading for double digits still, and I do think a depression for the USA is very possible. With traders coming back to the market after the Labor Day Weekend, we should be seeing increased volume, and volatility as the market decides its next moves this week. Commodities look to be a good place to park money especially soft commodities such as food, except for pork until Swine Flu goes away.

My Stock Pick This Week

Speaking of Swine Flu, my stock pick this week is involved in the production of hogs, processing of pork, production of turkey, and live cattle operations. The company is releasing its quarterly results Tuesday morning. Analysts are expecting a loss of 55 cents a share, considerably wider loss than last year's two-cent loss. One of the biggest problems for this company is its fixed costs associated with their operations, as current genetics along with the environmentally “clean” methods now required to raise hogs means profits are only realized when their facilities are running at full capacity. Volatility in feed and energy prices along with the “Swine Flu Pandemic” have all worked against their profitability. These problems are affecting this companies profitability with a decline in current demand with sales falling short of analysts forecasts, and margins are decreasing while costs are increasing. Classic recipe for a lower stock price it smells like.

Sell Short Smithfield Foods – Ticker SFD

Sell Entry: 13.28 to 12.71

Stop-Loss: 13.41

Take Profit Areas: 12.14 to 11.57, 11.26 to 11.12, 10.39 to 10.26

Smithfield Foods Company Profile

Smithfield Foods, Inc., together with its subsidiaries, engages in the production and marketing of fresh meat and packaged meat products in the United States and internationally. It involves in the production of hog, processing of pork, production of turkey, and live cattle operations. The company offers fresh pork to retail customers as unprocessed, and trimmed cuts, such as butts, loins, picnics, and ribs; packaged meat products, including smoked and boiled hams, bacons, sausages, hot dogs, deli and luncheon meats, pepperoni, dry meat products, beef, and poultry, as well as ready-to-eat prepared foods, such as pre-cooked entrees, and pre-cooked bacons and sausages. It sells its products to supermarket chains; wholesale distributors; the foodservice industry, including fast food, restaurant and hotel chains, hospitals, and other institutional customers; export markets, and other further processors. The company sells its products through its salespersons and independent commission brokers. Smithfield Foods, Inc. was founded in 1961 and is headquartered in Smithfield, Virginia.

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