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AU Optronics Corp. (AUO) designs, develops, manufactures, assembles and markets flat panel displays. The Company’s principal products are thin-film transistor liquid crystal display (TFT-LCD) panels. Its panels are used in computer products, such as notebook computers and desktop monitors; consumer electronics products, such as digital cameras, digital camcorder, car television, car navigation systems and portable digital versatile disc (DVD) players, and liquid crystal display (LCD) televisions. It offers small to medium-size panels, as well as large-size panels. AU Optronics Corp. sells its panels primarily to original equipment manufacturing service providers.

Recent News
Share price of AUO were higher March 20 after Jefferies & Co.’s Brian White launched coverage of the company with a Buy rating and $25 price target. White says the LCD panel market will be “tight” this year, following “capacity underinvestment in recent years.” He says recent visits with Taiwanese LCD panel makers lead him to conclude that “the LCD panel environment will be tight in 2008 and pricing reasonable.” He says AUO is headed for “another year of record sales and profits.” He sees EPS of $2.79 this year and $3.11 in 2009. That certainly makes the stock look cheap: at current levels the shares trade for under 7x 2008 estimates. “AU Optronics is one of the most inexpensive stocks in our coverage universe,” he writes, “yet the company’s growth trends and profit metrics are currently among the highest.”

AU Optronics (AUO) has dismissed a Taiwan newspaper report that claims Sony is shifting some of its TV panel orders from the Taiwan-based LCD panel maker to its Japanese competitor Sharp. The share price of AUO dropped on March 24 in contrast to a large overall rise in the Taiwan stock market. The paper said investors were selling AUO shares on the possibility of Sony shifting orders.

Shares of AU Optronics Corp. dropped again on March 26 after television maker Jabil Circuit Inc. guided its third quarter below Wall Street’s expectations. Jefferies & Co. analyst Brian White said news from Jabil – which uses LCD panels when making TVs, among many other products – could likely hurt shares of AU Optronics and competitor Corning Inc. “We continue to believe investors should remain selective when investing within the electronics supply chain in 2008 in light of a concerning economic environment and volatile demand trends,” White said in a note to clients. Yet demand for LCD products will likely grow, said White, who increased his industry forecast. He now expects 2008 LCD glass shipments of 2.23 billion square feet, or 27 percent growth compared with a previous 23 percent growth expectation. Visits to Taiwanese plants helped formulate the bullish outlook, White said.

Quick Technical Analysis

• Relative Strength Index (RSI) is at 40.60, (entering slightly oversold zone)
• Slow Stochastics is at 27.60, (almost oversold)
• Money Flow Index (MFI) is at 48.91 and
• 50-Day Moving Avg (DMA) is 17.77.

Current Price: $17.04
Entry Price: $16.00 (price which has been good support + oversold RSI indicator)
Exit Price: $17.60 (just below the 50-DMA)
Gain = 10% Profit

Conclusion: All the current information makes AUO an attractive trade at $16.

Source: Google Finance

New home sales measure the number of newly constructed homes with a committed sale during the month. The level of new home sales indicates housing market trends and, in turn, economic momentum and consumer purchases of furniture and appliances.

Why Do Investors Care?
This provides a gauge of not only the demand for housing, but the economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as new home sales, investors can gain specific investment ideas as well as broad guidance for managing a portfolio. Each time the construction of a new home begins, it translates to more construction jobs, and income which will be pumped back into the economy. Once the home is sold, it generates revenues for the home builder and the realtor. It brings a myriad of consumption opportunities for the buyer. Refrigerators, washers, dryers and furniture are just a few items new home buyers might purchase. The economic “ripple effect” can be substantial especially when you think a hundred thousand new households around the country are doing this every month. Since the economic backdrop is the most pervasive influence on financial markets, new home sales have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the new home sales data carry valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies.

Current New Home Sales Data
Sales of new homes fell in February for the fourth straight month, pushing activity down to a 13-year low. While the rate of decline has slowed, the worst slump in more than two decades has not run its course, analysts said.

The 1.8 percent drop sent the annual sales rate down to 590,000 units in February. That was the slowest pace since February 1995 and down 57.5 percent from the sales peak of 1.389 million units in July 2005. The median price of a home sold last month dropped to $244,100, 2.7 percent less than the level of a year ago. The median sales price is the point where half the homes sold for more and half for less.

A closely watched gauge of existing home prices, the S&P/Case-Shiller Index, reported recently that 16 of 20 major cities had record annual price declines in January compared with a year ago.

A separate report Monday showed that sales of existing homes posted an increase of 2.9 percent in February, the first gain after six months of declines. Nonetheless, analysts said they do not expect a sustained rebound for many months in the market for resales or new homes, primarily because the number of unsold homes is so high.

The report on new homes showed the number of unsold homes on the market at the end of the month was a 9.8 months’ supply at the February sales pace, matching the 26-year high set in January.

Builders have cut construction and offered heavy discounts. Such efforts have been offset by record mortgage defaults, dumping even more homes on the market.

Analysts said buyers’ demand remains weak heading into the spring sales season. Among the reasons are difficulty in getting loans because of tighter standards and potential buyers’ hesitancy to commit to a purchase in an environment of falling prices.

Sales of new homes dropped the most in the Northeast, by 40.6 percent, and fell 6.4 percent in the Midwest. Sales rose 5.7 percent in the South and 0.7 percent in the West.

The two-year slump in housing has depressed overall economic growth. The government will provide its last look at economic growth in the final three months of 2007. Many economists believe that report will show the gross domestic product edged up by a barely discernible 0.6 percent from October through December. Many analysts believe GDP growth may have dipped into negative territory from January through March, which would be the strongest signal yet that the country has slid into a recession.

The worry is that the slumping economy and rising unemployment will make it more difficult for housing to mount a sustained rebound in the second half of the year.

Source: Bloomberg, ET

Durable goods orders reflect the new orders placed with domestic manufacturers for immediate and future delivery of factory hard goods.

Why Do Investors Care?
Investors want to keep their finger on the pulse of the economy because it usually dictates how various types of investments will perform. Rising equity prices thrive on growing corporate profits – which in turn stem from healthy economic growth. Healthy economic growth is not necessarily a negative for the bond market, but bond investors are highly sensitive to inflationary pressures. When the economy is growing too quickly and can’t meet demand, it can pave the road for inflation. By tracking economic data such durable goods orders, investors will know what the economic backdrop is for these markets and their portfolios.

Orders for durable goods show how busy factories will be in the months to come, as manufacturers work to fill those orders. The data not only provide insight to demand for items such as refrigerators and cars, but also business investment such as industrial machinery, electrical machinery and computers. If companies commit to spending more on equipment and other capital, they are obviously experiencing sustainable growth in their business. Increased expenditures on investment goods set the stage for greater productive capacity in the country and reduces the prospects for inflation.

Durable goods orders tell investors what to expect from the manufacturing sector, a major component of the economy, and therefore a major influence on their investments.

Current Durable Good Orders Data
Orders for U.S. durable goods unexpectedly fell in February, led by a slump in demand for machinery, as the housing downturn and the prospect of a recession made companies hesitant to invest.

The 1.7% drop in demand for products made to last at least three years followed a 4.7% decrease in the prior month. Businesses are cutting equipment purchases as the biggest housing decline in a quarter century hurts sales, and rising fuel costs erode profit. Only exports are preventing manufacturing from declining even more. Economists at Morgan Stanley now predict the economy will shrink at an annual rate of 0.7% in the first quarter, from a previous forecast for a 0.4% contraction. This lead the Dow Jones Industrial Average to decline by 0.9% to 12,422.9.

Economists projected orders would rise 0.7%, after a previously reported 5.3% slump in January. Excluding orders for transportation equipment, which tend to be volatile, bookings fell 2.6%, the most since January 2007.

The slump in orders was paced by a 13% decline in demand for machinery that was the biggest since comparable records began in 1992. Bookings for non-defense capital goods excluding aircraft, a proxy for future business investment, decreased 2.6%, the most since October. Shipments of those items, used in calculating gross domestic product, dropped 2.1%, the most since January 2007. Orders excluding defense equipment decreased 1.6 percent and bookings for military gear dropped 10 percent.