Archive for November, 2006

  • The 10-Year Yield is Below 4.5%
    , November 30th, 2006 at 1:52 pm

    I don’t know how much longer this bond rally can go on. The 10-year yield (^TNX) is now below 4.5%. It hasn’t closed below 4.5% in ten months.

  • The Dollar’s Effect on the Stock Market
    , November 30th, 2006 at 11:30 am

    The stock market has been freaked out lately due to the falling dollar, and the evidence shows that stocks prefer a strong greenback.
    Since 1973, the dollar has risen on 4,189 days, fallen on 4,130 and stayed the same on 130. On the days of the higher dollar, the S&P 500 has risen a collective 2,356%, which is about 21.3% on an annualized basis.
    On days of a falling dollar, the S&P 500 dropped over 55%, which works out to 4.8% on an annualized basis.
    For the 130 days when the dollar is unchanged, the market is up 6.7%, or about 14.1% annualized.
    Think of it this way, a weak dollar is basically the equivalent of a bear market for stocks.

  • GDP Growth Revised Higher
    , November 29th, 2006 at 10:52 am

    The government revised GDP higher for the third quarter. The economy grew by 2.2% instead of the 1.6% the government said last month. Economists were expecting a revision to 1.8%.
    This begins my quarterly rant against government revisions. I don’t understand why the Commerce Department continually releases data that everyone knows will be altered in a few weeks. I’d much rather wait to get data, then to have data that’s always changing.
    Over the summer, the Commerce Department revised all the GDP numbers going back to 2003. So even after the monthly revisions, the government can step in and revise data going back a few years.

  • Donaldson -7.4%!
    , November 28th, 2006 at 2:14 pm

    Here’s a quick lesson on investing: Today’s move in Donaldson makes no sense whatsoever. The company did exactly what was expected. In fact, sales came in a little better than expected. I don’t care how anyone runs the numbers, this move just doesn’t make sense.
    Don’t get me wrong. I never get mad at the market. Your stocks don’t know you own them. Even if they did know, they still wouldn’t care. But sometimes, the daily moves in the market are simply beyond any analysis.
    It’s perfectly understandably that people need reasons. If the stock is down, there must be a why. But sometimes, there isn’t. It just happens.
    I’ll give you a good example. In July 2002, Wrigley‘s (WWY) plunged. There was no news at all. I remember watching the stock. Every day, it just fell and fell. Sometimes the market does things that don’t add up.
    The odd thing about Donaldson is that the stock was trading higher after hours yesterday, and it even gapped higher at today’s open. I’m not worried at all. This is still an excellent stock.

  • My Favorite Links
    , November 28th, 2006 at 2:00 pm

    I don’t this often enough, but if you have a chance, please check out some of the bloggers from my links page.
    There are lots of terrific stock bloggers out there. Some of my daily reads include:
    10Q Detective
    Abnormal Returns
    Confused Capitalist
    Deal Breaker
    Herb Greenberg
    Jeff Matthews
    Marginal Revolution
    Random Roger’s Big Picture
    Seeking Alpha
    The Stalwart
    Wall Street Folly
    Ticker Sense
    Brett Steenbarger
    Enjoy. I’ll be here when you get back.

  • Thoughts of the 2007 Buy List
    , November 28th, 2006 at 12:05 pm

    Mark your calendars now! I’m going to unveil my 2007 Buy List on Friday, December 15. I won’t start tracking the new list until Tuesday, January 2, which will be the first day of trading of 2007. I use this lag period so no one can say I’m cheating or front-running, or whatever else I’m accused of.
    I’ll ruin the suspense right now. Next year’s Buy List will look a whole lot like this year’s I’ll probably keep about half the current stocks and add some new names. Once again, I’ll cap the list at 20 stocks.
    Here’s my current Buy List with some preliminary thoughts on each stock. Please note that I’ll probably change my mind between now and December 15, but I wanted to show you what I’m thinking as of now.
    AFLAC (Keep)
    Bed Bath & Beyond (Keep)
    Biomet (Keep)
    Brown & Brown (Not sure)
    Donaldson (Keep)
    Dell (Dump)
    Danaher (Keep)
    Expeditors International (Dump)
    FactSet Research Systems (Not sure)
    Fair Isaac (Keep)
    Fiserv (Not sure)
    Home Depot (Keep)
    Harley-Davidson (Not sure)
    Medtronic (Keep)
    Respironics (Keep)
    SEI Investments (Not sure)
    Sysco (Keep)
    UnitedHealth Group (Keep)
    Varian Medical Systems (Keep)
    Wachovia (Dump)
    Here are some stocks I’m thinking about adding:
    Johnson & Johnson (JNJ)
    Nicholas Financial (NICK)
    Progressive (PGR)
    Pool Corp. (POOL)
    American Vanguard (AVD)
    Sonic (SONC)
    O’Reilly Automotive (ORLY)
    Johnson Controls (JCI)
    Lincare (LNCR)
    Patterson (PDCO)
    Getty Images (GYI)
    Coastal Financial (CFCP)
    Graco (GGG)
    Courier (CRRC)
    Like I said, this is all preliminary. If you have any favorites, let me know now!

  • The Bond Bubble?
    , November 28th, 2006 at 10:05 am

    Yields at the long-end of the yield curve are near their lowest levels in nine months. Have you ever noticed that the media never questions the judgement of the bond market? There’s no such thing as a bond bubble. That only holds for stocks and real estate. Bond traders are somehow always right. Same thing for oil traders. Funny how they’re immune from being irrational.

  • Donaldson Earned 43 Cents a Share
    , November 27th, 2006 at 4:36 pm

    Ick…Wall Street had a serrious case of the Mondays.
    But the good news is that Donaldson‘s (DCI) earnings were in line with expectations at 43 cents a share. Ah, good ol’ Donaldson. He never lets me down.Sales came in at $446.4 million, which was above expectations.
    Bill Cook, the CEO, said:

    Sales in both our Engine and Industrial Products segments were up 11 percent, and our incoming orders remain strong. Our plants around the world are operating very well. The start-ups at our new plants in China and the Czech Republic have been completed, and they are now up and running per our plans. Overall, economic conditions remain good for most of our businesses around the world. As a result, we are on course for another year of record earnings, our 18th consecutive, in fiscal 2007.

  • Russian Billionaire in Serious Condition
    , November 27th, 2006 at 4:02 pm

    Suleiman Kerimov, who’s listed as the 72nd richest person in the world, is in serious condition after crashing his Ferrari in France:

    He lost control of his Ferrari Enzo, which struck a tree at an enormous speed and burst into flames, as he was traveling from the local airport toward the city center. Kerimov was taken by helicopter to the regional burn center at Hopital de la Conception in Marseille. He is now on artificial respiration.
    The accident occurred at about 3:30 p.m. on a stretch of the Promenade des Anglais where the speed limit is 50 km./h. Kerimov himself was behind the wheel and moving significantly faster then the speed limit when the black Ferrari unexpectedly crossed the sidewalk and struck a tree.
    Kerimov and his passenger were pulled from the burning car by passersby, who also tried to extinguish the flames using clothing and rugs. It took fire brigades from the Nice airport to dowse the flames, however. The accident caused a two-hour traffic jam on the busy highway.

    Here’s his entry from Forbes:

  • 17 Straight Record Years at Donaldson
    , November 27th, 2006 at 10:06 am

    It’s kind of a slow morning, but I’ve got my eye on Donaldson (DCI), which is set to report earnings after the close. If you’re not familiar with Donaldson, it’s one of those great boring little company that doesn’t get much attention from Wall Street. Actually, it’s not so little anymore. Donaldson’s market cap is now over $3 billion.
    The stock bounced along for most of the year up until its most recent earnings report in September. Donaldson not only beat expectations but it also guided higher for next year. I love seeing that. It’s always important to see positive guidance from your stocks.
    Donaldson is the Cal Ripken of mid-cap filtration companies. The company has reported higher profits for 17 straight years. Donaldson now sees 2007 EPS coming in at $1.72 to $1.82 a share, which means the stock is going for about 21 times next year’s estimate.