Stocks End Losing Streak As Investors Find Bargains (TOL, AEO, OSIS, BHP, POT, BHS)

Stocks finally found their footing today, rallying in the afternoon to post modest gains after another batch of poor economic data caused a slump at the open. There was no specific news item that we saw to cause a change in sentiment; we can only assume investors finally started to see some bargains. Speaking of news, it normally gets to be rather quiet during the dog days of August as much of the nation heads off for vacation. Business activity typically picks up after the Labor Day holiday. It is the main reason we have only two news briefs today. Rest assured, however, that we will get to as many of the questions readers have sent us as we can.

The Homebuilder Stocks Index was the top performing tickerspy Index on the day, led by Brookfield Homes (BHS) with a 8% gain.

Stocks rebounded from early selling pressure to close moderately higher. The Dow added 20 points to close at 10,060 for a 0.2% gain. The tech-dominated Nasdaq composite gained 18 points, or 0.8%, to 2,142, while the S&P 500 added 3 points, or 0.3%, to 1,055. Gold rose by $7.70 to $1,239.50 per ounce, while oil was up 89 cents a barrel to $72.62.

On the economic front, the Commerce Department said July durable goods orders rose by 30 basis points, a tenth of the increase expected by economists, and excluding a demand spike for transportation equipment, orders slipped by -3.8% — the sharpest pullback since January. The agency also reported that new home sales in July dropped -12.4% to a 276,000 unit annual rate, from a downwardly revised 315,000 units in June. It’s the slowest pace of sales since the Commerce Department started tracking the data in 1963.

In earnings news, luxury homebuilder Toll Brothers (TOL) gained 5.8% after posting better-than-expected fiscal third-quarter results. The company earned $27.3 million, or 16 cents per share, for the three months ended late-July, compared to a loss of -$472.3 million, or -$2.93 per share, a year ago. After excluding one-time items, the company broke even in Q3, topping analysts’ expectations of a -14-cent loss per share. Sales slipped slightly to $454.2 million, but still came in ahead of the $396.4 million consensus. Four Pros counted Toll Brothers in their top-15 U.S.-listed equity bets heading into the second half of 2010.

In the teen retail segment, American Eagle Outfitters (AEO) spiked by 8% after matching Q2 EPS expectations. The company recorded a net profit of $9.7 million, or 5 cents per share, compared to $28.6 million, or 14 cents per share, in the same period last year. Excluding one-time items, adjusted EPS came to 13 cents. Revenue for the three months ended July 31 rose slightly to $651.5 million, which was below the Street’s $662 million expectations. As for the third quarter, American Eagle expects profits to drop to between 23 and 26 cents per share from 32 cents in Q3 2009. Analysts had forecasted 27 cents in EPS for the period. Eight Pros held American Eagle among their top-15 U.S.-listed equity positions at the end of the second quarter.

OSI Systems (OSIS) jumped 8.6% after beating estimates in its fiscal fourth quarter ended June 30. Profits totaled $8 million, or 42 cents per share, compared to $4.3 million, or 24 cents per share, in the year-ago period. Revenue rose 19% to $165.3 million. Adjusted EPS beat analyst consensus by 4 cents, and analysts were looking for $162.3 million in sales. OSI offered fiscal 2011 EPS guidance of between $1.67 and $1.80, which was in line with analyst estimates.

BHP Billiton (BHP), the world’s largest mining company, edged up by 0.1% after the company’s fiscal 2010 profit missed expectations. The company earned $12.72 billion in the year ended June 30, compared to $5.88 billion in fiscal 2009. Excluding certain items, adjusted net income came to $12.47 billion, below analysts’ $12.6 billion expectations. Revenue was up 5.2% year-over-year to $52.79 billion. Investors have been watching BHP’s moves closely since the firm offered $130 per share to buy fertilizer giant Potash Corp (POT) early last week.

Tags: AEO, BHP, BHS, OSIS, POT, TOL