First Segment

Final Segment 2 Title: 'Let's Go To The Tape' .  .  .  .  . Featured Stock(s): Black & Decker (BDK) See BDK's official website here. See the Yahoo! Finance profile for BDK here. See Closing Segment 2, below...

JJC:    How would you like to buy the stock with the single best risk/reward I know right now? I want you to look no further than Black & Decker (BDK)... the great, and greatly hated, maker of power tools and hardware...

BDK is the right stock at the right price at the right time... now!

It's the type of stock you should buy off of the turn in housing that I see coming, and the knowledge that the Fed should have the economy out of recession by Christmastime, with multiple rate cuts... 

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Still to come... more cuts.  Because the Fed blew it, and now people are getting laid off left and right... That was that employment number.

Do you know what, though?...  The rate cuts aren't even the best part of this story...

What is?

How about that we know with near certainty, that this $73 stock can probably go no lower than $65...

But do not take my word for it...

The market has decreed that BDK should go no lower than $65...  Skeptical?... Let's go to the tape... 

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When BDK reported earnings on Monday, it also delivered the ultimate piece of bad news.  The company issued horrible guidance for the next quarter.

The Street right here, was expecting BDK to make $1.46 a share, okay, on the current quarter.   But, on Monday morning, before the bell, BDK said they would only make $1.10- $1.20 a share...

Now, what happened?...

At first, it looked like the stock would open down, as low as $63.87...  Slowly it falls, step by step, inch by inch, to $63.87... But it didn't, because that was just too low...  too darn cheap.  And, right then and there, BDK bottomed...

It bottomed at $65, where it opened.  And it finished the day at $69.88 - just 10 cents below where it had closed on Friday, where all was supposed to be hunky dory...  

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Why did that happen?...

Why did BDK bounce back completely?  And then go even higher?...  As of now, it's trading at $73, off of this bad news...

How did that happen?...  How did they pre-announce the next quarter bad... and - if it was tech, it would be on the floor - but this one went way up?...  Don't stocks normally go lower when they tell you they're going to miss earnings by a mile?...  

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When BDK guided down, the stock got more attractive, because the decline in earnings became what we call 'baked in'...  It was baked in, okay?...  When something's baked in, that means you're pretty much sure that it isn't going to go much lower, all right?...

That means, we can say now that BDK's share price presumes that a recession is coming.  It presumes that a recession is coming.  We all know that BDK's price now assumes bad earnings this quarter.  That's what it means for the low numbers to be 'baked in'... This is now baked in, okay?...

It creates a perfect setup...

These guys saw the Fed's inaction for what it was.... a reckless move that would hurt their earnings, not to mention the economy... so they adjusted it quarterly.  I call if forward thinking.

This stock was at $97, going into the slowdown... 97 smackers...  Now, it's at $73...

The slowdown is baked in...  The negativity is already known...  We're not worried anymore about this one.  And, only after that happens, can we start baking the positives in... 

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People know that the Fed cuts and the stimulus package should now make BDK's baked-in low numbers easy to beat...  The analysts see this coming!...   No they don't... they don't see it.  Not one of them.  Not one sees it coming...  There's only one buy on BDK...  There are nine holds, and one sell... They're all worried about how the slowing economy is going to hurt BDK's earnings...

But we already know that it's baked in...

They (the analysts) know nothing about baking, and they could stand to learn a little bit more about stocks too...

While they focus on a recession that's old news to the stock, we can look ahead, and see the Fed's cuts should turn things around...

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There are some other big themes on BDK's side...

People are hunkering down.  They're fixing up their own homes, because they can't sell them.

The $600-check-in-every-pocket stimulus plan will also make it so you go buy a brand new Black & Decker set of power tools!  It seems like a good idea...

And, now that the bad news seems to be in the past for BDK, it's stock is benefiting from the huge reduction in shares that BDK's mammoth buyback has made, and made happen over the last four years...

They've basically almost cut the float by a third!...  There's just not that much supply out there.  So, when everyone's trying to buy this one, it just shoots up!...

They kept that buyback going, buying back 8% of their shares.   Even when things were really bad, they increased their dividend too.  They increased their cash flow... And they didn't increase their debt, even by a penny.

At 12x earnings, with the disappointment baked in, I think this stock has gotten so cheap, that I think it's going to be begging to be bought.

Consider... In 2004, there were 81 million shares of BDK, and the stock was at $90... a $7.2 billion company...

Now, there are only 62 million shares, and the stock is at $73... BDK is now a $4.5 billion company, even though it has 20% more sales, and 10% higher profits, than at the end of 2004.

That's because of the buyback...  

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Now, let's put the price in terms of Euros (which is much stronger than the dollar currently, i.e., today, 1 Euro = 1.4796 U.S. dollars)...  If you were an interested European buyer, you could pick up BDK for under $3 billion Euros!... thanks to the weak and pathetic dollar...

As I see it, you'd be getting the best brand name in the business - the company that was worth $7.29 billion three years ago, when its sales and earnings were smaller - for just $4 billion U.S. dollars, or 3 billion Euros...  

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The Bottom Line!:     I think Black & Decker (BDK) goes higher, or gets bought!  The one thing I don't see happening is this stock falling below $65, because the recession is baked in.

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