Stocks in the News: BAC, GPN, CAKE

Crista Huff
Posted: Apr 04, 2013 12:01 AM

Welcome to John Ransom's Stocks In The News, where the headline meets the trendline.

Stocks in the News is produced by Ransom Notes Radio and Goodfellow, LLC. Crista Huff manages Goodfellow LLC, a website that recommends outperforming stocks using fundamental and technical analysis.

Stock number one is:

Stock number one is Bank of America Corp. (SYMBOL: BAC ) and the headline says:

BofA Chief Moynihan Said to Summon Managers for Revenue Push (Bloomberg)

“Bank of America CEO Brian Moynihan has summoned more than 100 of his regional leaders to a private meeting today where they’ll be pushed to boost the lender’s flagging revenue,” reports Bloomberg.  BofA’s revenue fell 17% in 2011 and another 9% in 2012.

The revenue push will be modeled after Citibank’s famed “Financial Supermarket” concept, which emphasized cross-selling banking, mortgage and investment services to customers.

Projected earnings per share are rising at BofA after a string of losses.  The stock price has risen to a trading range of $11-$15.  Bottom-feeders are finally being rewarded with capital gains, but we wouldn’t recommend people throwing money at BofA shares.

Our Ransom Note trendline says: HOLD BANK OF AMERICA

BAC Chart

BAC data by YCharts

Stock number two is

Global Payments Inc. (SYMBOL: GPN) and the headline says:

Global Payments has Disappointing Quarter vs. Consensus Expectations (Citi Research)

Global Payments Inc., a provider of e-payment processing services, reported third quarter revenue, operating income and earnings per share slightly below expectations.  Citi Research is maintaining  a buy rating on the stock.

Earnings per share are projected to grow 5% this year at Global Payments, while competitors Visa (V) and MasterCard (MA) have projected earnings growth of over 15% for 2013 and more bullish charts.  We recommended Visa & MasterCard on March 28. 

We see no reason to chase less successful companies in the stock market when investors can maximize potential capital gains by going with industry leaders.

Our Ransom Note trendline says:  STAY ON THE SIDELINES

GPN Chart

GPN data by YCharts

Stock number three is:

The Cheesecake Factory Inc. (SYMBOL: CAKE), and the headline says:

S&P Lowers Opinion on Shares of Cheesecake Factory to Sell from Hold

Standard & Poor’s Research is concerned that customer traffic at Cheesecake Factory will diminish due to consumers experiencing higher payroll taxes and higher gasoline costs.  Citing a recent stock price run-up, which frankly only amounted to $2.50 per share, S&P said “sell Cheesecake Factory”.

Curiously, the consensus on Wall Street is that Cheesecake Factory’s earnings per share growth remains strong at 14-15% per year for the next three years.  The PE is high at 30, but has ranged anywhere from 10 to 40 in the last decade.  The long-term debt ratio is just 9%, and there’s a history of strong earnings growth. 

After a seven-year price correction, the stock has just retraced its 2006 high of $38 during the last week.  With a stable chart pattern and good earnings growth….

Our Ransom Note trendline says: BUY CHEESECAKE FACTORY ON A PULLBACK TO $36.

CAKE Chart

CAKE data by YCharts