Monday, March 26, 2012

Short Selling Diversification on Weak Earnings

After reviewing the DJIA, SP500 and Nasdaq indicies as well as many other major global indicies this week the chances for reversal to the downside of this slow grind up on low volume is building greater every week it continues up. This week looks like it’s the ripest time for a sell-off to hit and I’m betting more bears will be coming out and into the equities market this week. Then again the dovish tone from the Fed just might keep stocks moving up.

Zacks Investment Research reports they have downgraded Loews Corporation to Underperform from Neutral on the back of weak fourth quarter results. Operating earnings in the fourth quarter lagged the Zacks Consensus Estimate owing to lower investment income from limited partnership, increase in insurance reserves for its payout annuity business, lower earnings at Diamond Offshore and weak performance of equity investments.

Results at HighMount remained soft due to lower sales volume stemming from lower drilling activity and lower natural gas prices. CNA has substantial exposure to catastrophe losses. Losses in the fourth quarter totaled $208 million, a substantial deterioration from $113 million a year ago.

Zacks six-month target price of $35.00 per share equates to about 12.1x 2012 earnings estimate. This price target along with the annual dividend of $0.25 per share implies an expected negative total return of 9.6% over that period.

Technically Lowes stock chart is showing a low-risk high reward short-sell trade setup this Monday. With the stock market over-bought with a sell-off that could easily happen anytime now I’ve got a low-risk high-reward short-sell on Lowes this week.

Sell Lowes Corp – Ticker L

Sell Entry: 40.55 to 39.17

Stop-Loss: 43.79

Take Profit Areas: 35.68 to 35.09, 34.52 to 33.95, 31.00 to 30.44, 24.22 to 23.83, 19.34 to 18.99

Company Profile

Loews Corporation, through its subsidiaries, operates primarily as a commercial property and casualty insurance company. It provides risk management, information, warranty, and claims administration services; professional liability and other coverages through property and casualty products and services; and surety and fidelity bonds, and vehicle warranty services. The company also offers standard and excess property coverage, marine coverage, and boiler and machinery coverages; workers’ compensation coverage; general and product liability; commercial auto and umbrella coverages; and long term care, group reinsurance, and life settlement contracts. In addition, Loews Corporation owns and operates drilling rigs that are used in the drilling of offshore oil and gas wells on a contract basis for companies engaged in exploration and production of hydrocarbons. It owns 46 offshore drilling rigs. Further, the company involves in exploring, producing, and marketing natural gas, natural gas liquids, and oil in Permian Basin in Texas. As of December 31, 2010, Loews Corporation had 1.3 trillion cubic feet of natural gas equivalent of net proved reserves. Additionally, it engages in the interstate transportation and storage of natural gas. The company owns and operates 3 interstate natural gas pipelines covering approximately 14,200 miles of interconnected pipelines transporting approximately 2.5 trillion cubic feet of gas to customers; and underground storage fields with aggregate working gas capacity of approximately 167.0 billion cubic feet of natural gas. Loews Corporation serves producers, local distribution companies, marketers, intrastate and interstate pipelines, electric power generators, and direct industrial users in the Gulf Coast, the Midwest, and northeast regions of the United States. It also owns and/or operates 18 hotels, including 16 in the United States and 2 in Canada. The company was founded in 1954 and is headquartered in New York, New York.

Click the Loews Corp stock chart for a larger view.