Are MLPs and REITs Becoming Bargains As Investors Worry Too Much About the Fiscal Cliff? (WMT, DLTR, NTAP, PLCE, BXG, SB)
Stocks continue to struggle with the fiscal cliff looming. Meanwhile, income-oriented groups such as MLPs, BDCs, and mortgage REITs have been particularly hit hard after the election due to fears about what legislation might come out of Washington. For MLPs and BDCs, there is a fear that there will be changes in the tax code on pass-through entities. For agency mortgage REITs, it’s the worry of extreme government policies in the mortgage sector that will lead to increased refinancing. We think the fears are overblown, and view these areas as some of the best bargains on Wall Street right now.
The Real Estate Development Stocks Index was the top performing tickerspy Index on the day, led by Bluegreen (BXG) with a 56% gain. The Dry Bulk Shipping Stocks Index was the day’s worst performing tickerspy Index, with Safe Bulkers (SB) down -25%.
Stocks fell on the day, with the Dow closing -29 points lower to 12,542. The S&P fell -2 points to 1,353, while the Nasdaq sank -10 points to 2,8837. Oil fell -87 cents to $85.45 a barrel, while gold dipped -$16.30 to $1713.80 an ounce.
In economic news, initial claims for jobless benefits rose by 78,000 to 493,000 last week. Economists had expected a reading of 375,000 claims. The Labor Department, meanwhile, said October’s reading of the consumer price index climbed 0.1%, while core CPI, which excludes food and energy, rose 0.2%. Economists were looking for a 0.1% increase for both. Elsewhere, the Federal Reserve Bank of New York said general business conditions for the region rose to -5.2 in November from -6.2 in October. Economists had expected a November reading of -5.0.
In earnings news, shares of Wal-Mart (WMT), the world’s largest retailer, fell -3.6% after the company said it expects a fourth-quarter profit of $1.53-$1.58 per share. Analysts were expecting $1.59. For the full-year, Wal-Mart expects to earn $4.88-$4.93 a share. That is up from previous guidance of $4.83-$4.93. Wal-Mart posted a fiscal third-quarter profit of $3.63 billion, or $1.08 per share, compared with $3.33 billion, or 96 cents per share, a year earlier. Net sales rose 3% to $113.2 billion, while same-store sales rose 1.5%. Analysts had expected a profit of $1.07 per share on revenue of $114 billion.
Dollar Tree (DLTR) shares jumped 5.1% after the dollar store operator said it expects to earn 97 cents to $1.02 per share on sales of $2.20-$2.26 billion in the current quarter. Analysts were expecting EPS of 97 cents. Dollar Tree posted a fiscal third-quarter profit of $155.4 million, or 68 cents per share, compared with $104.5 million, or 43 cents per share, a year earlier. On an adjusted basis, the company earned 51 cents per share. Sales rose 8% to $1.72 billion, while same-store sales increased 1.6%. Analysts had expected a profit of 49 cents with a same-store sales increase of 2.4%. Twenty-three pros held Dollar Tree in their portfolios at the end of Q3 and nearly 230 tickerspy members own the stock in their portfolios.
Shares of data storage provider NetApp (NTAP) soared 11.4% after the company forecast a fiscal third-quarter profit of 53-58 cents per share on revenue of $1.58-$1.68 billion. Analysts were expecting a profit of 54 cents per share and revenue of $1.61 billion on average. The company said its fiscal second-quarter profit fell to $109.6 million, or 30 cents per share, from $165.6 million, or 44 cents per share, a year earlier. On an adjusted basis, NetApp earned 51 cents. Revenue rose 2% to $1.54 billion. Analysts had expected EPS of 48 cents per share and $1.54 billion in revenue.
The Children’s Place (PLCE) shares slid -14.2% after the youth apparel retailer forecast a fiscal fourth-quarter profit of $1.01-$1.06 per share. Analysts were expecting net income of $1.24 per share. The Children’s Place also lowered its full-year earnings outlook to $3.10-$3.15 from $3.20-$3.30 a share. Analysts were expecting EPS of $3.31. The company said its fiscal third-quarter profit rose to $35.0 million, or $1.44 per share, from $33.7 million, or $1.33 per share, a year earlier. On an adjusted basis, the company earned $1.60 a share. Revenue rose to $500.9 million from $484.1 million. Analysts had expected a profit of $1.60 on sales of $502.2 million. Two pros counted The Children’s Place among their top holdings at the end of Q3 and more than 50 tickerspy members own the stock in their portfolios.
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