• United States Lime & Minerals
    Posted by on January 19th, 2017 at 12:35 pm

    If you’ve followed for some time, you know that I have a soft spot for small, not well-known stocks that have performed very well.

    Here’s another good example—United States Lime & Minerals (USLM).

    Fourteen years ago, USLM was going for $3 per share. Today it’s at $77. So how many analysts follow it? Zero.

    The stock has a market cap of $425 million. I also have to say that I love that name.

    So what do they do? From their website:

    United States Lime & Minerals, Inc. (“US Lime”) is a public company traded on the NASDAQ Global Market® under the symbol USLM and conducts its business through two segments:

    Lime and Limestone Operations and Natural Gas Interests.

    The Lime and Limestone Operations manufactures lime and limestone products, supplying primarily the construction (including highway, road and parking lot contractors), metals (including steel producers), environmental (including municipal sanitation and water treatement facilities and flue gas treatment), oil and gas services, industrial (including paper and glass manufacturers), roof shingle and agriculture (including poultry and cattle feed producers) industries. The company is headquartered in Dallas, Texas, and primarily serves markets in the Central United States and consists of open-pit quarries and an underground mine, plants and distributions facilities owned by US Lime’s wholly owned subsidiaries: Arkansas Lime Company, Colorado Lime Company, Texas Lime Company, U.S. Lime Company, U.S. Lime Company — Shreveport, U.S. Lime Company — St. Clair and U.S. Lime Company — Transportation.

    Through its wholly owned subsidiary, U.S. Lime Company — O & G, LLC (“U.S. Lime O & G”), under a lease agreement (the “O & G Lease”), US Lime has royalty interests ranging from 15.4% to 20% and a 20% non-operating working interest, resulting in an overall average revenue interest of 34.8%, with respect to oil and gas rights in wells drilled on approximately 3,800 acres of land located in Johnson County, Texas, in the Barnett Shale Formation. Through U. S. Lime O & G, US Lime also has a drillsite and production facility lease agreement and subsurface easement (the “Drillsite Agreement”) relating to approximately 538 acres of land contiguous to Johnson County, Texas, property. Pursuant to the Drillsite Agreement, US Lime receives a 3% royalty interest and a 12.5% non-operating working interest in any wells drilled from two pad sites located on the property.

    Not too sexy, but they make money. Don’t expect to hear a lot about this one on TV or in the newspapers. USLM is about as dull as they get. About the only time they make news is when they release their quarterly earnings, and no one seems to pay too much attention to that.

  • Signature Bank Earned $2.11 Per Share for Q4
    Posted by on January 19th, 2017 at 11:57 am

    This morning, Signature Bank (SBNY) reported Q4 earnings of $2.11 per share. That was two cents more than Wall Street’s consensus. Overall, this was another good quarter for Signature.

    The bank earned $7.37 per share for the year. That was only 10 cents more than 2015’s total, but remember they took a 70-cent charge related to their medallion loans. Still, they were to top 2015’s result which made 2016 their ninth record year in a row. Total deposits grew 19% on the year. The key stat is net interest margin and that came in at 3.30%. That’s quite good.

    The bank also improved its fiscal condition this year by raising money from the capital markets. They had a common stock offering that brought in $320 million, plus a debt offering that took in $260 million.

    Signature Bank Chairman of the Board Scott A. Shay, noted: “Signature Bank has produced yet another record year of earnings and solid financial performance. We are proud that — even from the depths of the financial crisis — we maintained a rapid growth pace while remaining a pillar of strength for our clients during those uncertain times.

    “As the Bank continues to grow, we retain our strong disciplines and follow the hedgehog theory of business – doing a few things but doing each of them very well. In our case, that means maintaining our unrelenting commitment to depositor safety and service and conservative lending posture. We look forward to the New Year and to embracing many opportunities as we have built a platform poised to serve an expanding roster of clients,” Shay concluded.

    Shares of SBNY weren’t doing much until the election. Then the stock jumped 21% in four days. The rally started to peter out once SBNY got to $150 per share, and that’s about where the stock is today.

  • Morning News: January 19, 2017
    Posted by on January 19th, 2017 at 6:51 am

    China Says Can Resolve Trade Disputes With New U.S. Government

    As E.C.B. Meets, Monetary Policy Faces Complications Worldwide

    May’s Speech to the 2017 World Economic Forum

    Treasury Yields Rise on Yellen’s Hawkish Tone

    A Border Adjustment Tax Threatens Disruption For U.S. And Its Neighbors

    Safran to Buy Zodiac for $10 Billion in All-French Aero Deal

    Goldman Exodus Isn’t Just About Trump

    How Deutsche Bank Made −€367 Million Disappear

    Here’s Why Netflix’s Share Price Just Hit a New All-Time High

    Australia to Welcome Back Vegemite, a Surprisingly American-Owned Spread

    JPMorgan Hit With Pair of Bias Claims in Obama’s Final Hours

    Mallinckrodt Will Pay $100 Million to Settle Price-Hike Suit

    Student Loan Collector Cheated Millions, Lawsuits Say

    Jeff Miller: Neglected Investment Ideas

    Roger Nusbaum: Tweets & Press Conferences

    Be sure to follow me on Twitter.

  • Industrial Production and Inflation
    Posted by on January 18th, 2017 at 3:24 pm

    Two econ reports to pass along.

    The first is that the Fed said that industrial production rose by 0.8% in December. That’s a strong number. It was the best in two years.

    Manufacturing output, the biggest component of industrial production, climbed 0.2% in December, led by gains for primary metals and autos.

    Factory activity had been stagnant for much of 2016 but appears to have perked up a little in the final month of 2016. Still, a long stretch of lackluster growth left December output only 0.2% ahead of the same month a year ago.

    A separate gauge of manufacturing finished 2016 at its highest mark in two years. The Institute for Supply Management earlier this month said its purchasing managers index rose amid stronger household demand for goods and a brighter consumer outlook following November’s presidential election.

    This caused some pain for the long-end of the bond market, and I think that’s a good thing. A month ago, the 10-year yield broke above 2.6%. It’s now back around 2.4% but I’d like to see it rise again.

    At the shorter end, inflation continues to be quite tame. The government said that the CPI rose by 0.3% last month while the core rate rose by just 0.2%. For the year, the CPI rose by 2.1%. That’s the highest rate since 2011, but that’s because the other years were so low.

    With today’s CPI report we have some final numbers for 2016:
    S&P 500 +9.54%
    S&P 500 Total Return Index +11.96%
    CPI +2.07%
    Real S&P 500 +7.31%
    Real Total Return Index +9.68%

  • Q4 2016 Earnings Calendar
    Posted by on January 18th, 2017 at 12:58 pm

    Twenty of our 25 Buy List stocks are due report Q4 earnings over the next few weeks. Here’s a list of reporting dates, Wall Street’s consensus estimates and actual reported results:

    Company Ticker Date Estimate Result
    Signature Bank SBNY 19-Jan $2.09 $2.11
    Stryker SYK 24-Jan $1.76
    Alliance Data Systems ADS 26-Jan $4.66
    CR Bard BCR 26-Jan $2.74
    Microsoft MSFT 26-Jan $0.78
    Sherwin-Williams SHW 26-Jan $2.21
    Aflac AFL 31-Jan $1.64
    Danaher DHR 31-Jan $1.03
    Ingredion INGR 31-Jan $1.64
    Snap-On SNA 2-Feb $2.41
    Cognizant Technology CTSH 6-Feb $0.86
    Intercontinental Exchange ICE 7-Feb $0.69
    Axalta Coating Systems AXTA 8-Feb $0.29
    Fiserv FISV 8-Feb $1.16
    Cerner CERN 9-Feb $0.61
    Express Scripts ESRX 14-Feb $1.87
    Wabtec WAB 16-Feb $0.93
    Moody’s MCO 17-Feb $1.13
    Continental Building Products CBPX 20-Feb $0.27
    Cinemark CNK 22-Feb $0.42
  • Morning News: January 18, 2017
    Posted by on January 18th, 2017 at 5:47 am

    The Risks of ‘Brexit Means Brexit’

    Loonie in Hottest Streak Since 1970 as U.S. Dollar Retrenches

    Brainard Joins Fed Chorus Warning About Fiscal Stimulus Risks

    Why Trump’s Tariff Threats Get Taken So Seriously

    Treasury Pick Steven Mnuchin, Like His Would-Be Boss Donald Trump, Followed His Own Rules

    Land Rush in Permian Basin, Where Oil Is Stacked Like a Layer Cake

    Reynolds Board Accepts Increased BAT Offer of $49.4 Billion

    HPE to Acquire Data-Storage Startup SimpliVity for $650 Million in Cash

    Deutsche Bank CEO Looks to Future After Mortgages Settlement

    Restaurant Chain Chuck E. Cheese Prepares IPO

    Sears Clings to Catalog Thinking in an Online World

    Bad Behavior Database Aims to Stop Rogue Traders Before They Act

    Compounding Snowballs

    Jeff Carter: If You Don’t Understand Blockchain Or Think It Won’t Apply To You; Read This

    Howard Lindzon: The Dumb Multitasker?

    Be sure to follow me on Twitter.

  • Two Buy List Updates
    Posted by on January 17th, 2017 at 2:16 pm

    There are two Buy List items to mention today.

    Moody’s (MCO) has agreed to pay $864 million to settle with the government over its ratings leading up to the financial crisis. The agreement calls for Moody’s to pay $437.5 million to DOJ and $426.3 million to the states.

    This is a big relief for the stock. The shares have been up as much as 3.9% today.

    Alliance Data Systems (ADS) said it maintains its 2016 FY forecast of $16.90 per share in core earnings on revenue of $7.2 billion. That translates to Q4 guidance of $1.9 billion in revenue and core EPS of $4.64. The stock is currently down more than 3% today.

  • Understanding the Cycle
    Posted by on January 17th, 2017 at 12:31 pm

    I wanted to post this chart of Walmart’s relative strength going back more than 25 years. In other words, this is WMT’s share price divided by the S&P 500.

    The reason this chart is interesting is that you can clearly see the cycles at work. Walmart either outperformed or underperformed the market for years at a time. The hard part, of course, is knowing when the cycle flipped.

    For the most part, WMT did well against the market during tough times, and it lagged against the market in better times. That’s what you can expect from a large-cap blue chip such as Walmart.

    As I look at the market, WMT is currently the #1 performer in the S&P 100. That’s also a good sign that today is a more defensive day for Wall Street.

  • The Dow’s Narrow Range
    Posted by on January 17th, 2017 at 12:22 pm

    Over the last few weeks, the Dow has traded within a very, very narrow range. The vertical axis distorts this, but the gap between the high and low is a little over 1%. This is one of the tightest ranges in history.

  • Trump Wrecks the Dollar
    Posted by on January 17th, 2017 at 12:15 pm

    If you’re ever curious if a stock you own is a defensive stock, a quick test would be to see if it rallied on January 17, 2017. If it did, then there’s a good chance it is.

    What we’re seeing today is a classic rotation pattern. Financial stocks are down the most, while Staples and Income stocks are up the most. As always, there are some outliers. For example, Healthcare is dragging a bit today.

    Overall, this would be a Quadrant III day (see here).

    The U.S. dollar is down today after President-Elect Trump said the greenback was too strong. “It’s killing us,” to be precise. That kind of news is generally bad for an investment.

    British American Tobacco said it will buy out the remainder of Reynolds American (RAI) it doesn’t own. RAI is a former Buy List stock. We had a great run in the stock, but in retrospect, we sold way too early. The BAT deal comes to $59.64 per share. We sold four years ago at $20.72. (Ugh!)