Archive for June, 2007

  • The Buy List’s Performance for the First Half
    , June 29th, 2007 at 4:56 pm

    We’re halfway done with 2007 (and three-fourths done with this decade), so let’s look at how the Buy List is doing.
    The Buy List is up 3.05% for the year while the S&P 500 is up 6.00%. Obviously, I’m not happy to lose to the overall market, but we’re in the black and we’ve closed the gap recently. Also, the Buy List is somewhat conservative. The daily volatility is 4.7% less than the S&P 500.
    Adding in dividends, the Buy List is up 3.33% and the S&P 500 is up 6.96%. The annual yield of the Buy List is 0.53%.
    Here’s a chart:
    image488.png
    As you can see, I totally missed the S&P’s cyclical surge in April and May. I purposely underweighted cyclicals at the beginning of the year (though we have a few good ones like Graco and Donaldson), and I’m even more leery of those sectors today.
    Ten stocks are up, ten stocks are down. The best is Jos. A Banks (JOSB) which is up 41.29%. The worst is Harley-Davidson (HOG) down -15.41%.

  • Shareholder Urges Fair Isaac to Explore Possible Sale
    , June 29th, 2007 at 10:25 am

    MarketWatch reports:

    Investment management firm Sandell Asset Management Corp. on Friday disclosed a 5% stake in Fair Isaac Corp., and urged the company to hire a financial adviser to review alternatives, including a possible sale. In a letter to Fair Isaac Chief Executive Mark Greene, Sandell also urged the Minneapolis-based provider of analytic software and data management products to “continue to aggressively repurchase shares at the current depressed valuation levels.” Fair Isaac shares rose 5.8% to $39.60 in Friday afternoon trade.

    This stock needs something to shake it up. Earnings were lousy last quarter and the shares haven’t done much all year.

  • The Fed Holds Again
    , June 28th, 2007 at 2:15 pm

    No change on rates. Here’s the Fed’s statement.

    The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.
    Economic growth appears to have been moderate during the first half of this year, despite the ongoing adjustment in the housing sector. (This is a slight change from the previous statement which said that growth had slowed.) The economy seems likely to continue to expand at a moderate pace over coming quarters. (Same.)
    Readings on core inflation have improved modestly (new! used to be elevated) in recent months. However, a sustained moderation in inflation pressures has yet to be convincingly demonstrated. (Huh? What the hell does that mean??) Moreover, the high level of resource utilization has the potential to sustain those pressures.
    In these circumstances, the Committee’s predominant policy concern remains the risk that inflation will fail to moderate as expected. (Same.) Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.

    I’m taking this as good news. I think the Fed sees that inflation is becoming less of an issue.

  • Ditch Quarterly Guidance?
    , June 28th, 2007 at 1:27 pm

    The Committee for Economic Development says it’s time to drop quarterly guidance.

    “Quarterly guidance is at best a waste of resources and, more likely, a self-fulfilling exercise that attracts short-term traders,” says the report by the group, which was brought together by the Committee for Economic Development, a Washington think-tank.
    “The pressure associated with quarterly earnings guidance has been cited as one of the factors fuelling the boom in private equity buy-outs,” adds the report by the CED, whose members include influential figures such as Pete Peterson, co-founder of the private equity group Blackstone and William McDonough, former head of the New York Federal Reserve.
    More than half of US listed companies provide their own forecasts of quarterly results – a practice that is illegal in most other countries.

  • Biomet: First Horseman of the Apocalypse?
    , June 28th, 2007 at 10:18 am

    A reader pointed out this item at FT’s Alphaville about how the market could get spooked if a major private equity deal fell apart:

    In the light of which, the first apocalyptic horseman to worry about is Biomet, the buyout of which is backed by Blackstone, Goldman Sachs, KKR and TPG, looking to raise $7bn in loans and bonds for the deal, including a $2.6bn cov-lite loan.
    One Deal Journal reader commented: “Biomet….Tender offer deadline 7/11/07. Anyone quoting odds?”

    Personally, I would cheer if the deal fell apart.

  • The New World of Recruiting
    , June 28th, 2007 at 9:47 am

    Bloomberg looks at how business recruiting is done today:

    “Recruiting is absolutely critical right now,” Dimon says. “I send senior people to campuses now, and they have to show up.”
    They’re also trying soft-sell approaches. Merrill sponsored a dress-for-success night for women at the Wharton School in Philadelphia, with stylists from Prada. (Tips: Avoid bright red nail polish. And wear closed-toe shoes — no flip-flops.) Merrill also hands out video games, including “Cyber IPO,” in which players score when they correctly order the steps for a fictitious company’s initial public offering.

    Do you really have to tell Whartoners not to wear flip-flops? Wait, don’t answer that. If it’s yes, then I don’t want to know.

  • Q1 GDP Grew By 0.7%
    , June 28th, 2007 at 8:52 am

    The government revised first-quarter GDP growth up to 0.7% from 0.6%. For the last four quarters, the economy grew by just 1.91%.

    In the report, personal consumption spending that fuels two-thirds of national economic activity rose at a 4.2 percent rate, slightly lower than the 4.4 percent rate estimated a month ago but still a strong underpinning to keep the economy growing.

    Here’s the key bit:

    A prices measure favored by Federal Reserve policy-makers — personal consumption spending excluding food and energy — was revised up during the quarter to a 2.4 percent rate from the prior 2.2 percent estimate. This will likely be weighed by Fed officials as they meet on Thursday for a second day of a policy meeting at which they are expected to keep interest rates unchanged while reaffirming concerns over the risks of inflation.

  • But Then Again
    , June 28th, 2007 at 6:34 am

    The New York Times
    June 25, 2007

    So much for the argument often made by managers of hedge funds and mavens of private equity that higher taxes would cripple their business.
    The prospect of higher taxes did not dent, in the least, the initial public offering on Friday of the Blackstone Group, the giant private equity firm.

    The New York Times
    June 27, 2007

    Shares in Blackstone closed at $30.75, down 5.2 percent, or $1.69, on the day, and slipping below the $31 price set for its initial offering on Friday. The slide poses an embarrassing setback for Blackstone, whose debut was among the most widely anticipated of the year, drawing armies of television cameras to the New York Stock Exchange.

    (Hat Tip: New York Sun)

  • Five Homebuilding Stocks
    , June 27th, 2007 at 5:34 pm

    It hasn’t been a good two years.
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  • Carly Fiorina on CNBC
    , June 27th, 2007 at 4:39 pm

    This is strange. Maria asks Carly Fiorina about the behavior of corporate boards. Yet every single part of her answer was a not-so-hidden dig at HP.

    Maria: Do you think the corporate governance environment has improved in the last five years? Meaning, are directors more independent today?
    Carly: Well, first I think that anything that increases the transparency and the accountability of a group’s actions is a good thing, and I think that applies to a board as well. Secondly, I think there are some common themes that define good corporate governance.
    I’ve sat on many, many boards as you know. I think good boards keep their deliberations confidential (unlike what I had) but are transparent about their decisions. I think good boards deliberate in an atmosphere of calm (unlike what I had) and consider all of the points of view (unlike what I had), and strive always for unanimity (unlike what I had).
    And finally, I think good boards have board members with judgment (unlike what I had) and perspective (unlike what I had) and ethics (unlike what I had), and if those three things sound kind of sound old-fashioned (ugh!), it’s because they are. There’s no silver bullet for good corporate governance. But I think in general, transparency about decisions and accountability for decisions is a good thing.

    Aw, poor widdle Carly. So how’s HP’s stock doing since she left?