Joshua Byrini's Market View

It might be yesterday's headline by now, but who can tell until they bet, right?  So let's beat that dead horse until we can squeeze something from it.  So if you are sniffing for Puts, these software companies that may be hanging high and heavy like big rotton apples.

 

According to the WSJ., On Oct. 19,"Goldman Sachs analyst Rick Sherlund reckons that earnings of companies in the software sector will drop by more than 20% next year. Their average price-to-earnings ratio, based on 2006 earnings estimates and last Friday's prices, will jump to 27.2 from 21.6.,"  Further, " Yet even with earnings season now under way, consensus earnings estimates published by Thomson Financial don't include the options effect for 14 of the 21 companies in the S&P 500 on midyear-ending fiscal years, according to Mr. Zion."

 

Also in the WSJ on Oct. 19:, " Barring a last-minute call from the governor, companies of all stripes will need to start treating stock options awarded to employees as an expense, a move that will cut earnings for companies in the Standard & Poor's 500-stock index by about 3%, according to Credit Suisse First Boston accounting specialist David Zion."

 

Four companies on Zion's hit list of companies with P/Es that are expected to expand like that white insulation you spray from a can you can buy at the Hardware Store. Here are the four with their p/e and projected p/es after the options are realized in their earnings:

Over the last three months, NOVL and PWER charts show them climb, meaning this predictions in the media may not be realized in the price of their shares.  The other two seem to have taken a bit of a hit already.  So, puts in NOVL and PWER could be something to look at, like Vital Yankee in the 7th at Belmont. 

 

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