Wednesday, July 22, 2009

7/22/09 am P&G to Sell Prescription Drug Biz

Post #14 The following is brought to you by Intellivest Securities Research, Inc. The following is not intended as advertising by a broker-dealer and is not a research report. Click on yesterday's Blog or any Blog since 7/16 and at the end you will find a description of this week's profiled company, AA Alcoa, a company that is not usually in the news compared with the other Dow 30s. Following an edited Wikipedia entry on Alcoa you will find an edited Wikipedia entry on its CEO Klaus Kleinfeld. Alcoa closed Wednesday at $10.14 down0.46 or 4.34% on volume of 46,445,589.

Today's Dow Thought for the Day: "Tao of the Dow" is what I call my approach to the Dow Jones Industrial Average. Keep it simple and nonaggressive. By taking the time to learn about the Dow 30 companies and how the numbers that comprise the Dow Jones IA work, the natural flow from that will be good things which could include profits.

The Dow closed Tuesday at 8915.94 up 67.79 +0.79% from Monday's close of 8848.15. Of the Dow 30: 18 gained, one (INTC) was unchanged and 11 companies declined with the biggest gainer again being CAT Caterpillar $39.46 +2.81 7.67% 62,502,797 NYSE and the biggest loser being UTX United Technologies $53.97 -1 1.82% 7,241,226 NYSE.

A read of Tuesday's 7/20/09 print editions of: Wall Street Journal, AJC, Financial Times, and USA Today yielded the following stories about Dow Jones 30 component companies:

WSJ pB1 "P&G Drug Unit Closer to Sale, Could Fetch About $3 Billion" says PG Procter & Gamble is getting closer to a possible sale of its prescription drug business and Warner Chilcott and private equity firm Cerberus Capital Management are in late stage discussions to buy it.

WSJ pC1 in a sn article about yesterday's Dow said CAT Caterpillar and MRK pushed the Dow up while UTX was a damper - more about all three below. Similar theme at WSJ C5 "Large Stock Focus" and USA Today p4B.

Fin times p10 "Cokerpillar" (not an inadvertent misspelling) talks about decreased demand for CAT Caterpillar products and how KO Coke products are holding up in a discusion about US "earnings circus" rolling into town. A related story at Fin Times p11 "Profits boost for US industry Industrial companies post strong results -Hopes increase for economic rebound" says Corporate America took anotehr step along its long road to recovery as CAT MRK and DD DuPont surprised Wall Street with stronger than expected profits and bullish outlooks.

WSJ pA5 "Senate Kills Funds for F-22 Fighters" says in a 58 to 40 vote, the Senate cancelled $1.75 billion that had been set aside to buy 7 F-22s that were to be made by BA Boeing and Lockheed Martin Corp. BA fell yesterday .82 to $12.19.

WSJ pA6 "Surgeon Faces Probe of Research" says a top surgeon at UCLA is in trouble becuase he didn't disclose he was being paid by several companies whose products he was studying, one research project was sponsored by DePuy Spine Inc., a JNJ Johnson & Johnson unit.

WSJ pB1 "Yahoo Continues to Struggle Amid Ad Slump" says Yahoo's sales declined again in 2Q as advertising business continued to deterioriate and says Yahoo CEO Carol Bartz is under pressure to do a search deal with MSFT Microsoft. Related story about Yahoo at Inv Bus Daily pA4 says Yahoo's fee revenue has suffered due to renegotiated contracts with Internet service providers such as T AT&T. Related story about Yahoo at NYT pB3.

WSJ pB1 in a story about Wynn Resorts and Las Vegas Sands' plan to take their Macau's casinos public says Wynn is looking to raise up to $2 billion and has hired JPM JP Morgan, Morgan Stanley and UBS for that purpose. Related story at Fin Times p11.

WSJ pB2 "Order Fall Hits Carrier Parent" says UTX United Technologies 2Q profit fell 24% on restructuring charges and a weak performance of its Carrier unit. Utx fell 1.8% to $53.97 yesterday. UTX had a profit of $976 milllion or $1.05 per share, down from $1.28 billion or $1.32 a year earlier. Utx has shed 5% of its more than 200,000 person work force. Related story at Inv Bus Daily pA2 "United Tech beats due to cost cuts" (strange headline, I know). Related story at NYT pB4 "Military Contractors Wary Of Lower Orders in Future."

AJC pA5 "Coke sales rise abroad" and WSJ pB3 "Coke Net Buoyed by China, India Profit is Better Than Expected Despite Stronger Dollar, Tepid Sales in US, Eurpose" says KO posted better than expected 2Q profit, reflecting robust volume growth in China and Inida that helped offset not so good sales in US and Europe. KO was down .68 to 50.35 yesterday. Profit rose to $2.04 billion or .88 per share, up 43% from $1.42 billion or .61 per share. Related story at Fin Times p13 "Coca-Cola says consumers not ready for soda tax" saying KO attacked proposals to create a soda tax on sugared drinks to help pay for US healtcare reforms. Story about KO is at NYT pB3 "Overseas Growth Lifts Coke's Profit." Related story at USA Today pB1 "Coa-Cola's profit up 43."

WSJ pB3 "Caterpillar's Earnings Fall 66%, but Cost Cutting Boosts Forecast" says CAT reported a 66% decline in 2Q profit but raised its full year forecast as costs cutting has started to yeild results. For 2Q, CAT had net income of $371 million or .60 per share, down from $1.11 billion or 1.74 a year earlier. CAT closed up 2.81 to 39.46. Related story at Fin Times p20 "Caterpilar leads rise on signs of growth in global demand" that also mentions results of DD DuPont and UTX United Tech. Related story at Inv. Bus. Daily pA2 "Caterpillar's profit crushes views." Related story at NYT pB9 "2nd Quarter Earnings Top Expectations At Caterpillar" & NYT pB10 "Banks Stumble, but arkets End Higher."

Related story at WSJ pC12 "Caterpillar Chews on Green Shoots" says CAT is cutting excess capacity and inventories.

WSJ pC5 under "The Good News" charts CAT Caterpillar because its 2Q results beat estimates and it raised its profit forecast and under "The Bad News" charts KO says KO is hurt by the stornger dolalr and continued fluctuations in foreign currencies.

WSJ pC12 "For GE, It's Oh So Quiet" says GE's problems with its GE Capital unit discusses its steep share price decline that has created much pain for individual investors and gauges mutual funds' reactions to GE's problems.

WSJ pB5 "Merck Profit Skips, but Results Top Market forecast Merger Costs, Lower Vaccine Sales Hurt Drug Maker; Deal partner Schering-Plough Increaes Earnings 45" says MRK 2Q profit fell 12% amind merger costs and lower vacine sales. Earnings for the quarter fell to $1.56 billion or .74 per share from 1.77 billion or .82 per share a year earlier. Mrk was up 1.71 to close yesterday at 29.65. Related story at NYT pB4 "For Merck, Asthma Drug Helps Offset Earnings Fall."

WSJ pB5 "Investment in Elan Gives J&J Sway Over Biogen" says JNJ has made a deal to buy 18.4 of Irish biotech Elan Corp. and as part of the deal acquired the option to finance Elan's purchase of Biogen's Tysari drug for MS that generates nearly $1 billion in revenue per year. Related story about Biogen at NYT pB1.

WSJ pB6 "DuPont Sees Further Declines Profit Fell 61% at Chemicals Gaint; Agribusiness Grew" says DD's 2Q profit plunged 61% as the global economic downturn continued to zap demand for the plastics and chemicals used in most consumer products, from T shirts to cars. DD had earnings of $417 million or .46 per share, down from 1.08 billion or 1.18 a share a year earlier. Revenue decreased 22% to 6.86 billion. DD closed at 28.32 yesterday down a penney. Related story at Inv Bus Daily pA2 "DuPont tops, affirm guidance."

WSJ pB4 "Chasing Promise of High Tech Homes Cisco, GE and Others Invest in Software to Control Security Systems, Lights" also notes that HPQ Hewlett-Packard and MSFT Microsoft are selling systems to centrally store and maintain digital media in the home.

WSJ pB5 in an article about Starbucks swinging to profitability says that in recent months Starbucks has faced increased competition from MCD McDonald's campaign to sell its McCafe specialty coffee.

WSJ pB6 in an article about UK Grocer Morrisson notes that Asda Group Ltd, a unit of WMT Walmart has been gaining market shares from chian food market in the UK.

WSJ pB8 "Cisco, HP Square Off in Hunt for Revenue Amid a Slowdown in Technology Spending, Telepresence market becomes a Battleground" and says CSCO is pulling ahead in Telepresence, the high end videoconferencing technology that some companies are buying to reduce travel costs.

WSJ pC1 a story about Wells Fargo says Wells' loan loss reserves represent just 2.9% of total loans, below BAC BofA's 3.6% and JPM's 5%.

Inv Bus Daily pA5 "IBM Inks Its First OEM Pact With Juniper networking Rivalry Heats Up Big Blue denies favoritism; also expanding reseller deal with Cisco, Brocade" says IBM will expand its partnerships with the 3 largest seller of network gear.

Inv Bus Daily pA5 "US Education Needs Upgrade, Bill Gates Says" notes Gates' connection to MSFT.

Inv Bus Daily pA6 "Despite Recession, Parents Aren't Scrimping On Baby Clothes" discuses Atlanta based marketer of baby and children's wear, Carter's" and notes they distribue through, among othes, WMT WalMart.

USA Today pB1 "New e-book reader to use AT&T" says another e-book retailer, Plastic Logic, will use T's wireless connection.

The current divisor for the Dow found at today's page C4 of The Wall St. Jrnl is
.132319125 unchanged. Imagine, it is calculated out to 9 digits but is really just 13%. It is not even adjusted for inflation to my knowledge. Can anyone out there confirm that the divisor is not inflated for inflation? Please email me at if you know.

Tuesday's Dow numerator was 1179.75 up 8.97 from Monday's Dow closing numerator of 1170.78. This is the sum of all 30 closing prices. A short cut to the Dow numerator is to multiply the closing Dow by the Divisor.

Now, if you divide the Dow numerator increase of 8.97 by the divisor you get 67.79, the increase in Monday's Dow.

The average closing price of Tuesday's Dow Jones was 39.33 up 0.30 from Monday's average Dow Jones closing price of 39.03. The median closing price of Tuesday's Dow Jones was 29.99 down 3.22 from Tuesday's closing Dow Jones median price of 33.21.

The highest closing price Tuesday was IBM $117.04 +0.60 0.52% 8,194,851 NYSE and the lowest closing price Tuesday again was AA Alcoa $10.14 -0.46 4.34% 46,445,589 YSE.

The lowest volume Monday was TRV $40.71 +0.24 0.59% 3,827,148 NYSE and the highest volume was BAC Bank of Am $12.18 -0.06 0.49% 250,333,693 NYSE.

If Tuesday morning before the market opened you had purchased $100 of each of the Dow 30 shares (assuming you could buy fractional shares and assuming no transaction costs) and sold at the close you would have made $900 ($117,990 - $117,090 - $115,710).

Tuesday's Closing Dow closing numbers:

Symb/Last/Change/% Change/Vol./Market

T $24.57 +0.15 0.61% 23,746,404 NYSE
AA $10.14 -0.46 4.34% 46,445,589 NYSE
AXP $29.38 +0.49 1.7% 16,798,103 NYSE
BAC $12.18 -0.06 0.49% 250,333,693 NYSE
BA $43.02 +0.82 1.94% 9,113,027 NYSE
CAT $39.46 +2.81 7.67% 62,502,797 NYSE
CVX $66.25 +0.61 0.93% 9,305,503 NYSE
CSCO $21.59 +0.44 2.08% 70,414,444 NASDAQ-GS
KO $50.35 -0.68 1.33% 14,276,246 NYSE
DIS $25.22 -0.15 0.59% 12,612,845 NYSE
DD $28.27 -0.06 0.21% 10,056,085 NYSE
XOM $70.47 +1.53 2.22% 25,043,671 NYSE
GE $11.47 -0.20 1.71% 99,241,946 NYSE
HPQ $40.57 +0.14 0.35% 13,990,843 NYSE
HD $24.46 -0.34 1.37% 13,596,591 NYSE
INTC $18.9 unch unch 62,185,473 NASDAQ-GS
IBM $117.04 +0.60 0.52% 8,194,851 NYSE
JPM $36.94 -0.04 0.11% 41,757,208 NYSE
JNJ $59.47 +0.41 0.69% 10,426,832 NYSE
KFT $27.58 -0.02 0.07% 6,415,517 NYSE
MCD $58.63 +0.35 0.6% 7,659,383 NYSE
MRK $29.65 +1.71 6.12% 26,497,981 NYSE
MSFT $24.83 +0.30 1.22% 50,483,833 NASDAQ-GS
PFE $15.7 +0.44 2.88% 52,537,534 NYSE
PG $55.49 -0.07 0.13% 10,969,817 NYSE
MMM $64.2 +0.36 0.56% 4,932,149 NYSE
TRV $40.71 +0.24 0.59% 3,827,148 NYSE
UTX $53.97 -1 1.82% 7,241,226 NYSE
VZ $30.32 +0.55 1.85% 13,536,358 NYSE
WMT $48.86 +0.04 0.08% 17,031,738 NYSE


The Purpose of this Dow Monitor Blog

The purpose of this Blog is to study and comment on the Dow Jones Industrial Average and its 30 component companies. Why waste time trying to predict the stock market? It is more intelligent and efficient to study major public companies. For the first time in history, the average investor has at his or her fingertips vast amounts of information provided through the government at, the Internet and the print media. Yet, there are thousands of public companies which are too many to know. The solution is to pick, somewhat admittedly arbitrarily, the 30 most well known companies, the blue chip companies that comprise the Dow Jones Industrial Average. Remember when you were in school and you had approximately 30 classmates? By the end of the year, you were fairly knowledgeable about your 30 classmates. At that point, if you were to predict who would be successful, who might end up in jail, who might succeed at sports or in business you could do so. In other words, to know 30 companies is not that difficult if you persist. The result is that by understanding the fundamentals of these 30 companies and how they intereact with each other, you will have a bellweather not only for the stock market but also for society at large in terms of politics, economic, technological and cultural trends. Join with me in becoming a student of the Dow Jones Industrial Average. To belong to the Dow Monitor Club you must be able to identify all 30 companies unassisted. This is easier than you think - they are all household names. Once you can name all 30 companies, to be a Premium Member you need to do the following:

1. Learn all 30 trading symbols and the exchange on which they trade (CSCO, INTC, MSFT are traded on NASDAQ, the other 27 are NYSE).

2. Learn the range of the daily closing price within a range of five dollars.

3. Learn the names of the CEOs - they are listed at the end of this Blog.

Once you are a Premium Member the following is recommended to increase your knowledge:

4. Track the SEC filings of the Dow 30 each weekend (I will try to do this and give the results at the end of this Blog.)

5. Each morning read the print editions of Wall Street Journal, New York Times, Atlanta Journal Constitution (or your local paper), Financial Times, Investor's Business Daily and USA Today for stories and information about Dow Jones 30 component companies. (I willI try to do this and give the results on this Blog.)

6. Each afternoon give the closing price and volume of each of the Dow Jones 30 component companies. (I will try to do this and give the results on this Blog.)

7. Each weekend read the print edition of Barron's, Forbes, Business Week, CEO, CFO, Time, NewsWeek and various other print periodicals such as The Atlanta Business Chronicle for stories and information about Dow Jones 30 component companies. (I willI try to do this and give the results on this Blog.) Recently, the Dow Jones Company has started a economic sentiment indicator that monitors 15 major print newspapers for mentions of certain "key" words, such as recession. Using this information, they feel they can spot trends. If you follow the print media as we will do, we will not only learn information but we will learn which companies are being discussed which is valuable in and of itself. During the few months of the beta stage of this Dow Monitor Blog I have learned that CAT Caterpillar is hardly ever mentioned. Other companies that don't get in the print media much are KRAFT, Travelers, and MMM. On the other hand, by far, the most mentioned companies are BAC Bank of America and MSFT.

8. Learn the intricacies of the Dow Jones Industrial Average itself. It is really a very simple process. You add the closing prices of all 30 companies and then multiply by a divisor which is found daily at page C4 of the Wall Street Journal(pB4 on Saturdays). The divisor is currently 0.132319125 and changes for stock splits, stock dividends and other recapitalizations. I learned if you dispense with the divisor and just add the 30 prices to get a numerator, you get a different, and arguably better, feel for what the Dow is doing. (You can also track the average daily close and median closing price this way, which is helpful.) The divisor really just multiplies by approximately 7 the increase or decrease in the market. In other words, if at the end of the day all Dow Jones IA stocks closed down .01 at their opening price except IBM moved up 5 points from 100 to 105, that would not be such a big deal but the DJIA would move up 35.59 (4.71 divided by .132319125) and that would seem like a good day on the Dow and people would get all excited even though 29 of the Dow 30 declined. A dollar increase in a price has the same effect on the Dow whether it is low priced Alcoa going from 9.50 to 10.50 (a significant movement) or high priced IBM going from 100 to 101 (no big deal). I will try to tell you the daily divisor on this Dow Monitor Blog. A student of the Dow Jones should memorize it - this will come naturally form looking at it daily and using it as I do to find your own metrics.

9. Learn the dividend habits of the Dow Jones 30.

10. Learn the price earnings ratios of the Dow Jones 30.

11. Read the annual reports on 10K, quarterly reports on 10Q, special reports on 8K on the Dow Jones 30, all available at by putting in the ticker symbol. Also check Wikipedia on the company and its CEO. The CEO's of the Dow Jones Industrial Average should be "celebritized" (my word) because they are under the radar but are, in my opinion, the most powerful group in America and possibly the world.

12. Approach the Dow Jones Industrial Average as you would sports or other hobbies you may have. Just as you know the batting average of your favorite baseball habit, pick a favorite Dow Jones 30 stock and learn about it. (Currently, may favorite Dow company, not necessarily because of its metrics, is Boeing BA.) I guarantee you that not only will you become an expert on the stock market, but your brain will get a good work out and you will find benefits in other aspects of your life. You'll see.

Here are the latest SEC filings as of 7/15/09 other than ownership filings and, except for certain cases, I do not include third party shareholder proposals:

Symbol & Co. Name/Date of Filing/Form Filed/ Comments

T AT&T 6/30/09 11K Annual Report of Employee Stock Purchase Plan
AA Alcoa 7/13/09 8K 2nd Quarter Earnings Results
AXP 6/30/08 8K Settlement w/FDIC re: convenience checks
BAC Bank of Am 7/1/09 8A Regis. of Securities
BA Boeing 7/7/09 8K Acquisition of Vought Aircraft
CAT Caterpiller 6/23/09 11K Annual Report of Employee Stock Purchase Plan
CSCO Cisco 6/2/08 S8 Regis. of securities to employees
KO Coke 6/25/09 11K Annual Report of Employee Stock Purchase Plan
DIS Disney 6/26/09 11K Annual Report of Employee Stock Purchase Plan
DD DuPont 6/29/09 11K Annual Report of Employee Stock Purchase Plan
XOM Exxon 6/24/09 11K Annual Report of Employee Stock Purchase Plan
GE 6/25/09 11K Annual Report of Employee Stock Purchase Plan
HPQ Hewlett-Pack 6/30/09 11K Annual Report of Employee Stock Purchase Plan
HD Home Depot 6/29/09 11K Annual Report of Employee Stock Purchase Plan
INTC Intel 7/14/09 8K Financial results 3rd quarter
IBM 6/29/09 11K Annual Report of Employee Stock Purchase Plan
JPM JPMorgan 7/14/09 Freewriting Prospectus
JNJ Johnson 6/28/09 8K Press release re: financial results
KFT Kraft 6/22/09 8K re: personnel changes
MCD McDonalds 6/22/09 Prospectus
MRK Merck 7/1/09 8K Closing of sale of notes
MSFT Microsoft 6.29.09 11K Annual Report of Employee Stock Purchase Plan
PFE Pfizer 6/29/09 11K Annual Report of Employee Stock Purchase Plan
PG Procter Gam 7/13/09 8K re: 0.44 dividend
MMM 3M 7/7/09 8K settlement of shareholder derivative suit
TRV Travelers 6/24/09 11K Annual Report of Employee Stock Purchase Plan.
UTX United Tech 6/26/09 11K Annual Report of Employee Stock Purchase Plan
VZ Verizon 6/29 11K Annual Report of Employee Stock Purchase Plan
WMT Wal-Mart 6/5/09 10Q

Here are the CEOs of the Dow 30 Companies:

T Randall L. Stephenson
AA Klaus Kleinfeld
AXP Kenneth I. Chenault
BAC Kenneth D. Lewis
BA W. James McNerney, Jr.
CAT James W. Owens
CVX David O'Reilly
CSCO John Chambers
KO Muhtar Kent
DIS Rogert Iger
DD Ellen Kullman
XOM Rex W. Tillerson
GE Jeffrey R. Immelt
HPQ Mark Hurd
HD Frank Blake
INTC Paul S. Otellini
IBM Samuel J. Palmisano
JPM Jamie Dimon
JNJ William C. Weldon
KFT Irene Rosenfeld
MCD Jim Skinner
MRK Robert Clark
MSFT Steve Ballmer
PFE Jeffrey Kindler
PG Bob McDonald
MMM George W. Buckley
TRV Jay S. Fishman
UTX Louis Chenevert
VZ Ivan Seidenberg
WMT Mike Duke