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Daniel Cullinane CPA p 848-250-9587
2018 is shaping up as a pretty good year for homebuyers. The nation’s homebuilders are building more, the nation’s banks are lending more and the home price increases we’ve experienced over the past few years are expected to moderate.
There are a couple of negatives as well: interest rates are going up and the new homes that are being built are more expensive due to rising material costs and rising labor costs caused mostly by a shortage of skilled workers. The other side of the coin, however, shows that interest rates remain historically low (around 4.5% currently) though not as low as they were a few years ago, and homes priced for first-time buyers should open up on both the resale and new housing markets.
If you are planning on jumping into the housing market, the odds are nearly 100% that you’re going to be shopping for a mortgage. This can be even more stressful and complicated than shopping for the right house.
But the experts at Realtor.com say it doesn’t have to be if you plan ahead and do everything you can to avoid these six common mistakes.
Don’t wait until you can make a 20% down payment. Although a 20% down payment allows you to avoid paying for primary mortgage insurance (PMI), the insurance adds only about 0.3% to 1.15% to your monthly payment. Take advantage of the low mortgage interest rates now to minimize the impact. Remember, mortgage rates are rising and will be ticking higher all year, according to most forecasts.
Don’t talk with just one mortgage lender. Getting a mortgage is in fact shopping. One lender may make a better offer than another, and even small differences in the rate you actually pay (including PMI and other costs) can make a big difference in how much you pay over the life of the loan and in your monthly mortgage payment.
Don’t get pre-qualified, get pre-approved. The difference between these two items is more important than it may seem. Pre-qualification means a lender has talked to you about a loan but you have not had to prove any of the things you say. Pre-approval means that a lender has run a credit check on you, verified your income and assets and given you a written commitment for a mortgage up to a specific amount.
Don’t move your money around. If you have been pre-approved for a mortgage loan, that means that you have not only disclosed your cash assets but told the lender where they are. When you make an offer on a home, the loan still needs to be underwritten and underwriters want to see that your finances have not changed. This warning applies to moving cash in as well as moving it out.
Don’t apply for new credit cards or credit limits. Not only can such requests lower your credit score, they may indicate to your mortgage lender that you are desperate for more cash. That could mean that you cannot afford the monthly mortgage payment — and that could lead to a change in the terms of the mortgage loan, or worse.
Don’t change jobs. Most lenders look for at least two years of employment with the same firm. A sudden change while the home you have offered to buy is under contract can raise a red flag to the lender. If at all possible, wait until after you close on the sale to change jobs. If that’s not possible, get your new employer to provide written verification of your new job, your title and your new pay.
WHAT TO AVOID WITH A MORTGAGE
What brands make the best vehicles? Consumer Reports has released its annual list. Fiat, a perennial bottom dweller in auto quality surveys, took last place, as its sales in the United States continue to struggle.
The ratings were based on Consumer Reports testing and polling about 640,000 cars measured on “reliability and owner satisfaction.” Researchers described the methodology:
Brands are ranked based on the average Overall Score for all of their current tested models. The Overall Score is a composite of the road-test score and the predicted reliability and owner satisfaction ratings from our Annual Auto Survey.
Safety features, such as standard forward-collision warning and automatic emergency braking, are also factored into the score.
A brand must have at least two current models that have been tested by CR to be included in our rankings. Maserati and Smart lacked sufficient data to be included.
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Along with J.D. Power, the results are among the most carefully followed by car buyers and affect many purchase decisions.
Notably, another Fiat Chrysler Automobiles N.V. (NYSE: FCAU) brand — Jeep — held the next to the bottom place among the 34 brands measured. Fiat Chrysler’s Alpha Romeo was fourth from the bottom, with Range Rover holding the third from the bottom position.
The top position was taken by Hyundai’s luxury Genesis brand, followed by Volkswagen’s Audi, BMW and the Toyota luxury brand Lexus.
After a sharp drop in sales during 2017, Fiat began 2018 badly. Sales of the brand dropped 43% to 1,129. Fiat barely counts as a niche brand in America. It is a wonder Fiat Chrysler spends money to support marketing and a dealer network. Fiat dealers must be worried about whether the brand has a future at all in the United States.
For Fiat, the results are another blow to a brand that cannot afford more damage.
Every quarter, most of the firms we cover on Wall Street come out with top trading and investment ideas, and the big-selloff in early February took what was some very good ideas and tossed them out the window along with the baby and the bathwater. While the markets have recovered much of the losses from early in the month, some of these top picks are still trying to recover, and a few look like outstanding buys at current levels.
We screened the Merrill Lynch top ideas for the first quarter and found four that look like excellent buys right now. They have all been knocked down from highs posted earlier in the quarter and could be some likely investment addition candidates as portfolio managers do some first-quarter window dressing shopping in the next month.
After years of frustrating performance, Advanced Micro Devices Inc. (NYSE: AMD) appears to have turned the corner and is a hot commodity on Wall Street. AMD is one of the largest suppliers of PC microprocessors and graphics processors worldwide to computing original equipment manufacturers. The company’s main product lines include desktop, notebook and graphics processors, and embedded/semi-custom chips.
Last year the company released its first major offering in five years, the Ryzen chipset, which many feel is uniquely positioned to compete with the big players like Intel and NVIDIA in the $50 billion total addressable market for personal computers, gaming, artificial intelligence and servers.
The company posted solid results, and the analysts said this at the time:
Beat and solid raise, we see 20%+ growth trajectory with accretive products even without crypto benefit. Server inflection is here with chance to ramp share from nothing to 5% in $20b billion total addressable market. Raise estimates, reiterate Buy and a top Small/Midcap pick for 2018.
Merrill Lynch has an $18 price target, and the Wall Street consensus price objective is $14.86. The shares closed Friday at $12.07.
This top consumer media company has multiple streams of income to push revenue. Walt Disney Co. (NYSE: DIS) is one of the largest U.S. diversified media companies and the global leader in producing branded family entertainment. Key assets include its theme parks (six locations globally), the ABC TV network, ESPN and other cable networks, film studios (Disney, LucasFilms, Marvel, Pixar) and consumer products.
Many on Wall Street feel that the company’s distribution leverage and optionality, as well as its concentration of valuable intellectual property, will only improve with the acquisition of 21st Century Fox assets. Another plus is Disney’s continued impressive theatrical momentum.
Shareholders receive a 1.53% dividend. The $144 Merrill Lynch price target compares to the $120.16 consensus target. Shares closed Friday at $107.25.
This stock has been on fire and could still have big upside. Exact Sciences Corp. (NASDAQ: EXAS) is a molecular diagnostics company focused on the early detection and prevention of the deadliest forms of cancer. The company has commercialized a next-generation non-invasive colorectal cancer screening test, Cologuard, which received concomitant FDA approval and Medicare coverage in 2014.
Cologuard is included in the colorectal cancer screening guidelines of the American Cancer Society and stool DNA is included in the U.S. Multi-Society Task Force on Colorectal Cancer. The stock is down almost 15% from highs posted in January and looks like a great buy at current levels.
The stock was hit Friday but the analysts remain bullish:
The company reported fourth quarter sales inline with the flash results and raised fiscal year 2018 sales guidance slightly with the Cologuard volume guide inline. The first Cologuard guide is softer-than-expected given flu severity, but we think there is plenty of room for upside through the year.
The Merrill Lynch price objective remains at a strong $67. The consensus target is $58.82, and shares closed Friday at $42.37
This stock has long been a Merrill Lynch and Wall Street favorite. PayPal Holdings Inc. (NASDAQ: PYPL) is a global, technology-driven payment platform with greater than 210 million direct customer relationships in more than 200 countries. PayPal empowers a streamlined digital and mobile payment experience in-browser, on mobile devices and in-app. It is accepted at more than 75% of the largest 100 internet retailers.
PayPal enables businesses of various sizes to accept payments from merchant websites, mobile devices and applications, as well as at offline retail locations through a range of payment solutions across company’s payments platform, including PayPal, PayPal Credit, Venmo and Braintree products. The company’s platform allows customers to pay and get paid, withdraw funds to bank accounts and hold balances in PayPal accounts in various currencies.
The stock was hit when the company announced restructuring of the company’s agreement with eBay, which will become merchant of record after the current deal expires in 2020. However, eBay will continue to accept PayPal-branded transactions through 2023.
The Merrill Lynch price objective is $88. The consensus target price is $85.17, and shares closed Friday at $79.69.
Rovio Entertainment, most well-known as the maker of Angry Birds games, suffered a stock sell-off of over 44% to €5.50 as it posted poor results and an even worse forecast.
The starkest indication is how much revenue growth slowed:
For the full year 2017:
Rovio’s revenue grew 55 percent to 297.2 million euros (191.7 million euros)
Games: revenue grew 55.9 percent to 248.0 million euros (159.0 million euros)
For the fourth quarter of 2017:
Rovio’s revenue grew 17.0 percent to 73.9 million euros (63.2 million euros)
Games: revenue grew 42.3 percent to 66.1 million euros (46.5 million euros)
Management boasted that EBIT more than doubled to €10.4 million in the fourth quarter compared to the same period of last year. Investors obviously were not impressed.
As for the 2018 forecast:
Rovio Group revenue is expected to be 260-300 million euros in 2018 (297 million euros in 2017). Rovio’s profitability as measured by earnings before interest and tax excluding items affecting comparability is expected to be 9 to 11 percent (10.6 percent in 2017).
The company, in other words, does not expect to grow.
Like some games, Angry Birds may have hit its peak demand. This has happened at other game companies that rely heavily on one or two games for most of their revenue. And, if this demand has peaked, Rovio investors have to live with the fact that the company’s best days are behind it.
As the philosopher Yogi Berra once said, “It ain’t over ’til it’s over.” Yogi wasn’t talking about the contract between the U.S. Air Force and Boeing Co. (NYSE: BA) to supply a fleet of two 747-8s that will replace the current fleet widely known as Air Force One, but he could have been.
Practically the first tweet-target that President-elect Trump fired at was Boeing’s $4 billion contract for the planes. The list price of a 747-8 in 2016 was $378.5 million, or $757 million for two. If the Air Force paid even half that amount for the planes it would be a surprise. The rest of the cost goes to customizing the planes to meet the demands of a presidential plane.
As it turned out, the Air Force agreed last August to buy two planes that Boeing had built for a now-bankrupt Russian airline. At Boeing’s request, the sales price was not disclosed.
Once the planes were purchased, the contract talks proceeded to fitting out the planes. The president claimed in September that he had shaved $1 billion off the cost of the program, but the budget he proposed earlier this month continues to list the cost at $4 billion.
According to a report at Defense One, the Air Force and Boeing have been negotiating details of the contract. The main sticking point may be Boeing’s unwillingness to sign a fixed-price contract like the one the company agreed to for the new KC-46A tanker. So far the company has had to swallow some $2 billion in cost overruns and Boeing would like to avoid that on this contract.
Defense One also noted that the president and Boeing CEO Dennis Muilenburg “were able to break the gridlock that had stymied lower-level negotiations” and that a finalized deal is expected to be announced soon.
KILLED BY CONSUMER REPORTS
FEBRUARY NEWSLETTER 3