Corporate Profits Might Be Falling, But Don’t Let Yours…

The Oxford Portfolio Update – January 22, 2009 (Broadcast #842)
by Louis Basenese, Oxford Club Senior Analyst

Forget the four-day rally for the S&P 500. Or the fact that it traded above its 50-day moving average yesterday for the first time in weeks. Unless you’re a technician, these feats hold little value.

What matters instead, is what’s going on at the company level. And two headwinds exist that can’t be overlooked.

First, companies keep cutting dividends. At the fastest pace in 50 years, no less, according to Howard Silverblatt, Senior Index Analyst at S&P. Already this year, seven companies in the Standard & Poor’s 500 index have decreased their dividends, wiping out roughly $12 billion in payments investors were banking on.

Second, only 45% of U.S. companies have beat earnings estimates. That’s even more pathetic when you consider how dramatically analysts have cut estimates in advance of announcements. True, earnings season is far from over. But if this trend keeps up, it would be the worst “beat rate” in a decade, according to Bespoke Investment Group.

Yesterday, the Fed whipped out its crystal ball and pegged the second half of 2009 as the turning point for our dismal economy. Banks and securities companies concur, according to a recent survey by Bloomberg.

And if that’s the case, here’s a company that it’s time to load up on…

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