Jim Cramer's Mad Money Review

Wall Street traded mixed Tuesday, selling off large companies' stocks but buying up those of smaller companies, as investors cashed in gains from Monday's big rally and poked around for new bargains.
Investors were only slightly fazed by the National Association of Realtors' report Tuesday that its seasonally adjusted index of pending sales for existing homes fell 6.5 percent in August from July and 21.5 percent from a year ago. The data suggest sales of existing homes will probably keep declining in the coming months -- bad news for the economy, but good news for those hoping for another interest rate cut.
After the Federal Reserve lowered rates on Sept. 18, the stock market is hoping for a similar move again at the Fed's Oct. 30-31 meeting. That optimism drove the Dow Jones industrial average up nearly 192 points Monday to close at 14,087.55 -- a new high and its first foray above the 14,000 level since mid-July, right before a credit market squeeze triggered a stock selloff.
On Tuesday, the Dow fell as investors sold some of their large-cap stocks, such as Honeywell International Inc., ExxonMobil Corp. and United Technologies Corp., which have recently performed well. Also, with commodities prices retreating and the dollar rebounding, big oil and mining companies -- such as Exxon Mobil -- may see smaller profit margins.
"The economy is soft, you have this big run-up, and the fact is people are just taking some profit," said Scott Fullman, director of investment strategy for I. A. Englander & Co. "There's not a ton of news to trade on, and investors are also looking ahead to the unemployment report on Friday."
Meanwhile, small-cap stocks rose as investors returned to companies that were unattractive during the summer's tight credit environment and now appear cheap.
"Larger-cap companies don't need to do borrowing. After the rate cut, those who believe there will be another rate cut would want own smaller-cap stocks," said Matt Kelmon, portfolio manager of the Kelmoore Strategy Funds.
In late afternoon trading, the Dow fell 56.01, or 0.40 percent, to 14,031.54.
Broader stock indicators were mixed. The Standard & Poor's 500 index fell 2.52, or 0.16 percent, to 1,544.52, while the Nasdaq composite index rose 0.94, or 0.03 percent, to 2,741.93.
Source: Madlen Read, AP Business Writer

Labels: ABX, C, CBH, GM, HON, NEM, TD, UTX, XOM

Canada's TD Bank Financial Group said Tuesday it will acquire the Mid-Atlantic regional bank Commerce Bancorp Inc. for $8.5 billion in cash and stock.
The deal would double TD Bank's United States presence, adding Commerce's roughly 460 branches on the East Coast.
TD Bank, one of Canada's five largest banks, had about $404 billion in assets as of July 31. Commerce had about $48 billion in assets as of June 30.
TD Bank owns TD Waterhouse Canada and TD Waterhouse U.K., along with a stake in TD Ameritrade.
The deal would also mean New Jersey's largest homegrown bank would no longer be based in the state.
Terms call for a 75 percent stock and 25 percent cash transaction that values Commerce at $42 per share, a 7 premium over the stock's Monday closing price of $39.61.
Commerce Bancorp shares rose 12 cents to $39.74 in morning trading Tuesday after briefly rising to a 52-week high of $41 earlier in the session.
Source: Geoff Mulvihill, Associated Press Writer

Labels: CBH, TD

In addition to Royal Bank of Canada (NYSE:RY - News), which was one of the original Stalwarts, we added four additional wide-moat Canadian banks to the list last month: Bank of Montreal (NYSE:BMO - News), Bank of Nova Scotia (NYSE:BNS - News), Canadian Imperial Bank of Commerce (NYSE:CM - News), and Toronto-Dominion Bank (NYSE:TD - News). These are all very solid banks that would make fine investments if they fell to our 5-star prices. In addition to their strong business models, which we'll highlight below, the Canadian banks are quite shareholder friendly and pay healthy dividends. At our consider buying prices, and based on this year's current dividend, each of the 5 banks would sport a dividend yield near to or above 4%. Canadas top six banks dominate the Canadian market with roughly 90% market share in deposits and assets. Banking is also big business. Even though more than half of Canada's exports are commodity-related, its largest industry, as measured by gross domestic product, is financial services. Surprisingly, the financial metrics of Canadian banks are relatively underwhelming, with margins noticeably lower than their U.S. counterparts. This may seem counterintuitive, given their dominant market positions. However, high margins in banking attract not only competition, but also regulatory and political scrutiny. So theres an incentive to post good, but not great, margins if you hold a dominant market position. The key point is that despite so-so margins, they earn returns on capital well above their cost of capital. This is the linchpin of a wide moat, and these banks do it consistently. While all five Stalwarts are excellent banks, I'm particularly fond of Bank of Nova Scotia. In Canada, this bank has posted an impressive 31% return on equity over the past five years, a testament to its wide moat. Unlike most of its peers, which expanded to the United States in search of growth, BNS attacked Latin America. It has worked well so far. The firm's foreign operations have generated a very healthy 17% return on equity over the last five years. The bank's expense efficiency and business diversification isn't as good as some of its peers, but the firm manages its balance sheet very well. Its net interest margins--a key measure of banking that measures the spread between what it earns on its assets and what it pays for its liabilities expressed as a percentage of assets--are higher than its peers, thanks to careful management of interest-rate risk. Unfortunately this bank's not trading for a very cheap price right now--that's true of the other Canadian banks as well--but it's certainly worth keeping them on a watch list and patiently waiting for a fat pitch opportunity to present itself.
Source: Morningstar.com

Labels: Banks, BMO, BNS, Canada, CM, RY, TD