Archive for May, 2006

  • Zimbabwe Government Raids Stock Exchange
    , May 31st, 2006 at 11:35 pm

    This doesn’t look good.

    HARARE – A desperate Zimbabwe government, hard-pressed for cash, has raided the Zimbabwe Stock Exchange (ZSE) demanding Value Added Tax (VAT) on all brokerage incomes received on the bourse since 2004, a move that analysts say gives a graphic illustration of the Mugabe administration’s “policy deficiencies.”
    The intelligence-led swoop on the ZSE, accused by government of failing to remit VAT for two years, was expected to raise a Z$15 trillion windfall for government.

    I’m selling my Zimbabwean stocks immediately.

  • The Cara 100
    , May 31st, 2006 at 11:20 pm

    Blogger Bill Cara has unveiled his Cara 100. I’m happy to see that it features several stocks from our Buy List.

  • A Few Brief Comments
    , May 31st, 2006 at 4:38 pm

    From Ken Lay’s Web site:

    Dear Visitor:
    Now that my trial has concluded, I would like to offer a few brief comments.
    Certainly, we are surprised at the verdict against me. Perhaps it is more appropriate to say we are shocked, as this is not the outcome we expected.
    I firmly believe that I am innocent of the charges against me, as I have said from day one. I still firmly believe that to this day. I will continue to work diligently with my legal team to prove this.
    In spite of what has happened, I am still a very blessed man. I have a very warm, loving and Christian wife and family that supports me, as well as many, many loving and supportive friends. I’d like to thank all of the people who have shown their concern, support and kept our family in their prayers.
    Most of all, my family and I believe that God is in control and, indeed, He does work all things for good for those who love the Lord. And we love our Lord.
    Thank you.
    Kenneth L. Lay

    Did anyone see the word “sorry”? Me neither.

  • The Fed’s Minutes
    , May 31st, 2006 at 2:55 pm

    This is what everyone was waiting for, the minutes from the Fed meeting three weeks ago:

    Although the Committee discussed policy approaches ranging from leaving the stance of policy unchanged at this meeting to increasing the federal funds rate 50 basis points, all members believed that an additional 25 basis point firming of policy was appropriate today to keep inflation from rising and promote sustainable economic expansion. Recent price developments argued for another firming step at today’s meeting. Core inflation recently had been a bit higher than had been expected, and several members remarked that core inflation was now around the upper end of what they viewed as an acceptable range. Moreover, a number of factors were augmenting the upside risks to inflation: the surge in energy and commodity prices, some recent weakness in the foreign exchange value of the dollar, and the possibility that the apparent increase in inflation expectations could, if it persisted, impart momentum to inflation. In addition, the economy appeared to be operating at a relatively high level of resource utilization and had been growing quite strongly, and whether economic growth would moderate to a sustainable pace was not yet clear. At the same time, members also saw downside risks to economic activity. For example, the cumulative effect of past monetary policy actions and the recent rise in longer-term interest rates on housing activity and prices could turn out to be larger than expected. Still, it seemed most likely that, with modest further policy action, including a 25 basis point firming today, growth in activity would moderate gradually over coming quarters, pressures on resources would remain limited, and core inflation would stay close to levels experienced over the past year.

  • Tiffany’s Earnings
    , May 31st, 2006 at 12:59 pm


    Overseas Demand Adds Luster to Tiffany
    Tiffany’s first-quarter profit beat Wall Street’s expectation as strong sales in overseas markets overshadowed a soft performance at its U.S. stores.
    The jeweler earned $43.1 million, or 30 cents a share, in the quarter, compared with $40.1 million, or 27 cents a share, a year earlier. Analysts had forecast earnings of 28 cents a share for the latest quarter, according to Thomson First Call.

    It’s always worth tracking the earnings of a company like Tiffany’s. The reason is that the company’s business moves in two gears–very fast or nothing at all. That’s the life of being a high-end retailer.
    Even though the company had a good earnings report, the share are down over 20% since last November.

  • Overpriced Curio to go Public
    , May 31st, 2006 at 7:53 am

    At least at some point:

    Gauging Segway’s prospects in an IPO is difficult, since the company will not reveal its yearly revenue or whether it is profitable. Norrod will only say that “tens of thousands” of Segways have been sold around the world, and that the company’s revenue has been growing by at least 50% over each of the last few years.

    Just to be safe, I’m going to give it a price target of $200 a share. I think it’s a tipping point.

    The company’s critics believe Segway’s continued silence regarding its finances is an indication it is still not profitable, especially given the reported $100 million spent developing it.

    Sources close to “walking” indicate that it will continue to be private.

  • The Buy List Year-to-Date
    , May 31st, 2006 at 6:01 am

    Here’s how the Buy List has done year-to-date versus the S&P 500:
    Through Tuesday, we’re down -0.99% and the S&P 500 is up 0.93% (not including dividends). The Buy List’s daily volatility is 6.1% greater than the S&P 500.

  • More on the Return of Volatility
    , May 30th, 2006 at 4:13 pm

    The S&P 500 was down over 1.5% today. In the past 12 months, the S&P 500 has dropped by more than -1.1% eight times. The last four have happened since May 11.

  • David Phillips on Bed Bath & Beyond
    , May 30th, 2006 at 2:18 pm

    David Phillips, the 10-Q Detective, takes a look at Bed Beth & Beyond (BBBY) and likes what he sees:

    On its 4Q:05 Earnings Conference Call, management was comfortable—based on its most recent real-estate analysis—in updating the store openings [square footage] that will fuel this growth: “We now anticipate that we can grow to approximately 1,300 Bed Bath & Beyond stores in the United States [ed. note. before saturation becomes a concern], in addition to continuing the expansion and integration of our Christmas Tree and Harmon store concepts…. expanded information technology capabilities, new merchandising initiatives and developing concepts significantly adds to our potential to create a much larger, more successful retailing business.”
    Corporate has issued guidance calling for FY 2006 EPS to grow by approximately 13% to about $2.17 per share, based on the following planning assumptions:
    1. The Company’s fiscal 2006 store opening program is expected to include approximately 80 BBB stores, six CTS stores and the continuing development of its Harmon concept. The Company’s new store openings are expected to add approximately 2.5 million square feet of store space.
    2. Bed Bath & Beyond new stores are expected to generate net sales of between $160-185 per square foot in the first 12 months of operation. Consolidated comp sales are expected to increase from 3-5% and net sales, including the 53rd week, are expected to increase between 13% and 14%.
    3. Based on the current interest rate environment, interest income is expected to be somewhat higher than in FY ’05.
    4. The effective income tax rate for FY 2006 is presently being estimated at about 36.6 percent.
    5. Average diluted shares outstanding for full FY ’06 is estimated to be 288 million.
    6. FY ’06 will be a 53-week year.
    The Company has deployed a total of $950 million for share repurchases since December 2004. In our opinion, this demonstrates the impressive cash generating ability of the Company. Aside from initiating a cash dividend payout, the trailing twelve-month ROE of 25.65% suggests that management believes that share buybacks are a prudent investment—and will probably continue as a practical course of action in coming months.
    In our opinion, now may be a good time to start accumulating shares in Bed Bath & Beyond. The stock price has already discounted any potential retail slowdown, with the forward P/E of 14 times 2007 consensus estimates of $2.49 is near the stock’s historic trough. Any sales or EPS guidance nudged upward by management will serve as the necessary catalyst to expand the P/E multiple and push the stock to a target value of $45.00 per share.


  • The Midday Market
    , May 30th, 2006 at 1:41 pm

    Thanks to Kinder Morgan, the energy sector got off to a strong start this morning, but now it’s been dragged lower with the rest of the market. Of the 100 Dow industry groups, 93 are currently down for the day. The S&P 500 just dipped below the -1% mark for the day.
    For a fleeting moment last week, the 10-year Treasury yield fell below 5%, which is the Fed’s target rate for overnight lending. The inversion didn’t last long. Yields are up all across the yield curve. The 10-year came close to breaking 5.1% today.
    On the Buy List, Home Depot (HD) and Danaher (DHR) are both down over 2%. Dell (DELL) is back up to $25 a share. Medtronic (MDT) is taking a rest after its recent run. I wouldn’t be surprised to see Medtronic make a run at $55 a share.