Archive for June, 2006

  • Instant FOMC Statement
    , June 30th, 2006 at 1:22 pm

    Paul Kedrosky has built a Fed press release generator. Every time you click the photo Bernanke, you get new words of wisdom from the FOMC.
    Here’s a sample:

    The Federal Open Market Committee decided to increase its target for the federal funds rate by 50 basis points to 5 3/4 percent.
    The Committee used to think that a more restrictive than ever stance of monetary policy, coupled with baffling underlying growth in high-beta stocks, is providing cautionary support to economic activity. However, the whizzy change of geopolitical tensions has increased softwood prices, moderated Mad Money ratings, and damaged debt markets. These developments, along with the neutral stance of monetary policy and ongoing whizzy change in high-beta stocks, should foster decreased economic stability over time.
    Although the extent of that decline remains uncertain, the Committee perceives that over the thirty-three seconds the upside and downside risks to the attainment of sustainable growth are roughly equal. The Committee believes that, taken together, the balance of risks to achieving its goals is weighted toward mild growth for the foreseeable future.

    Hey, why not?

  • Wow!
    , June 29th, 2006 at 4:06 pm

    We didn’t have a 2% up day in over 2-1/2 years. Today we had our second 2%+ day of the last two weeks! How’s that for volatility?
    Expeditors (EXPD) jumped nearly $4 a share, or 7.7% to another all-time high. SEI Investments (SEIC) was up 4.1%, also a new all-time high.

  • The Fed Raises Rates
    , June 29th, 2006 at 3:03 pm

    And the market loves it.

    Here’s the Fed’s statement:

    The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 5-1/4 percent.

    Recent indicators suggest that economic growth is moderating from its quite strong pace earlier this year, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices.

    Readings on core inflation have been elevated in recent months. Ongoing productivity gains have held down the rise in unit labor costs, and inflation expectations remain contained. However, the high levels of resource utilization and of the prices of energy and other commodities have the potential to sustain inflation pressures.

    Although the moderation in the growth of aggregate demand should help to limit inflation pressures over time, the Committee judges that some inflation risks remain. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information. In any event, the Committee will respond to changes in economic prospects as needed to support the attainment of its objectives.

    Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Jack Guynn; Donald L. Kohn; Randall S. Kroszner; Jeffrey M. Lacker; Sandra Pianalto; Kevin M. Warsh; and Janet L. Yellen.

    In a related action, the Board of Governors unanimously approved a 25-basis-point increase in the discount rate to 6-1/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, and Dallas.

  • Waiting for the Fed
    , June 29th, 2006 at 11:00 am

    We’re all standing by waiting for the Fed announcement. I think another 25 basis points is a foregone conclusion. There’s some talk of 50 basis points, which I doubt, but that could come at a future meeting. The long-end of the bond market has not been in a good mood for the past two weeks, and that’s the ultimate driver of Fed policy.
    I’ve been surprised by the resurgence of the energy sector lately. Every time I think the group is flat on its back, it comes to life again. The Dow Jones Oil and Gas Index (^DJUSEN) tried to break 500 three different times. I’m not a chart guy, but that may have been a warning sign. The index quickly fell to 420 around mid-June. Today, it’s back up to 470.
    I still like defensive stocks, like consumer staples and health care. Although I noticed that General Mills (GIS) lowered its forecast today. The company reported earnings that were in line with expectations.
    It looks to be another nice day on Wall Street. Almost all of our stocks are up. On our Buy List, Medtronic made some minor adjustments to its earnings report for last year. The adjustment reduced revenues by $11 million, and earnings by $6.6 million. This won’t have any impact on its future business.
    I’m starting to get annoyed with Home Depot (HD). The company made a big mistake with its recent shareholder conference, plus it stopped providing sales reports. Since its March high, the stock is down nearly 18%. Lowe’s (LOW), by comparison, is down about 8%.
    I still like HD a lot, and it had a very good earnings report last quarter. The stock is going for less than 12 times this year’s earnings, which is very cheap. But I’d like to see management be a bit more shareholder friendly.
    The mega-cap stocks are trailing the market again today. I noticed that of all the stocks will market values of $100 billion or more, Cisco (CSCO) had the highest P/E ratio, but it’s followed by General Electric (GE), Amgen (AMGN), Procter & Gamble (PG) and Coca-Cola (KO). That’s an odd mix. I wouldn’t have expected to see so many consumer names. This is a very weird market.

  • GDP Grew By 5.6%
    , June 29th, 2006 at 9:09 am

    The first-quarter saw the fastest growth in 2-1/2 years. In real terms, the economy has grown by 23.1% over the last 13 quarters.

  • Courier Corp.
    , June 28th, 2006 at 2:46 pm

    Here’s a cool little company that’s not widely known, Courier Corp. (CRRC) of North Chelmsford, MA. It has a market cap of just $450 million. It’s not even in the Russell 3000. Only one analyst covers it.
    The company is a speciality book publisher. They mostly publish niche market books like education and religion. Check out these financials:
    That’s not particularly fast, but it’s consistent. Here’s the stock chart:

  • J. Crew Goes Public
    , June 28th, 2006 at 1:19 pm

    Shares of J. Crew (JCG) had a fashionably understated but tasteful IPO. In 2004, the company lost over $100 milllion, but it eeked out a tiny gain last year. J. Crew netted $3.8 million on sales of $953 million.

  • Biomet’s Earnings
    , June 28th, 2006 at 9:33 am

    Biomet (BMET) reported earnings of 41 cents a share for their fourth quarter. Excluding a few charges, the company earned 46 cents a share which match Wall Street’s estimates. Sales rose 7.3% to $539.9 million, which was slightly above the Street’s forecast.

    Looking ahead, Biomet said it remains “comfortable” with analysts’ sales and earnings estimates of $513 million to $530 million and 43 cents to 45 cents per share for the first quarter of fiscal 2007, and $2.15 billion to $2.22 billion and $1.85 to $1.95 per share for fiscal 2007.
    The company’s guidance does not incorporate stock-based compensation costs. On average, Wall Street is looking for first-quarter profit of 45 cents per share on sales of $524.2 million, and fiscal 2007 earnings of $1.69 per share on sales of $2.02 billion.

    Biomet’s shares have been hit for the past two days but the stock is doing well this morning.
    Seeking Alpha has the conference call.

  • The Chief Investment Strategist Derby
    , June 27th, 2006 at 2:13 pm

    Who’s the best chief investment strategist on Wall Street? I decided to compare, but instead of the normal criteria, I looked at what they’re really supposed to do–get their name in the paper.
    Number of mentions this year in the Wall Street Journal:
    Richard Bernstein, Merrill Lynch: 12
    Jeffrey Saut, Raymond James: 11
    Henry McVey, Morgan Stanley: 9
    Joe Battipaglia, Ryan Beck: 4
    Sam Stovall, Standard & Poor: 3
    Abby Joseph Cohen, Goldman Sachs: 3
    Liz Ann Sonders, Charles Schwab: 3
    Francois Trahan, Bear Stearns: 2
    Art Hogan, Jefferies: 2
    Al Goldman, AG Edwards: 0
    Michael Metz, Oppenheimer: 0

  • The Dumbest Reason for a Stock to Fall
    , June 27th, 2006 at 1:53 pm

    FactSet‘s (FDS) stock is down because the co-founder, Charles Snyder, sold 1 million shares. Note tense. He already sold the shares. If anyone is keeping track, the company has about 49 million shares outstanding. Synder’s sale represents a tiny portion of the company.
    It was only a week ago that the stock jumped on its earnings news. There’s nothing wrong with Mr. Snyder cashing in. Afterall, there are a zillion reasons to sell a stock. Myabe he wants to diversify. It’s not necesarily because management thinks that the shares going to tank. Snyder still owns over 4 million shares.
    It’s very easy to draw the wrong conclusions from insider selling.