CWS Market Review – January 11, 2011

I wanted to send out a note to bring you up to speed on today’s big news. Nicholas Financial ($NICK) put out a press release announcing that it is “evaluating possible strategic alternatives for the Company, including, but not limited to, the possible sale of the Company or certain of its assets, potential acquisition and expansion opportunities, and/or a possible debt or equity financing.”

The company also disclosed that it has “received an unsolicited, non-binding indication of interest from a potential third-party acquirer.”

In other words, the company is up for sale and someone is interested. This is great news and the stock responded by shooting up to $11.93 per share. That’s a nice 18.31% gain for the day. The stock got as high as $13.50 during the day.

I’ve probably written more about Nicholas Financial than any other stock. Less than two years ago, it was going for $1.70 per share; now it’s at $11.93. All the while, I’ve been amazed at how cheap this stock was. Of course we need to qualify all this news-nothing is definite. They’ve merely disclosed some plans.

If they do sell, I’m confident that NICK’s management will only sell for a good price. Obviously, I want a price as high as possible. Right now, I consider $14 to be fair but I don’t think it’s worth turning down any reasonable offer. Let’s stick with NICK and see how this plays out. I’m expecting another solid earnings report in a few weeks.

The other good news came after the close yesterday when Stryker ($SYK) reported sales of $1.995 billion for the fourth quarter. That’s an increase of 8.8% from one year ago and it’s in line with what Wall Street was expecting. For the year, sales were $7.32 billion, up 8.9%.

Stryker also said to expect full-year earnings (after charges) for 2010 to range between $3.31 and $3.33 per share which is slightly above their earlier guidance of $3.27 to $3.30 per share. That’s an increase of 12.2% to 12.9% over 2009′s EPS of $2.95.

For 2011, Stryker said to expect earnings-per-share between $3.73 and $3.65. Wall Street had been expecting $3.64. The fourth-quarter earnings report will come out on January 25.

This is very good news for Stryker and the stock rallied 6.03% today to close at $58. I should also stress that it’s very good to see our stocks give guidance for the next 12 months. Not many companies do that, so I take notice when high-quality companies do. I don’t expect the forecast to be perfect, but the company knows their business better than anyone else.

Thanks to Nicholas and Stryker, our Buy List gained 1.52% for the day compared with 0.37% for the S&P 500. Eight trading days in, we’re beating the S&P 500 3.22% to 1.34%.

Today was a great day for us. This is the kind of day that you get maybe once or twice a year, so let’s not lose our heads. We’re in for the long haul and what the market giveth, the marketh can taketh awayeth.

The next big event for us is JPMorgan‘s ($JPM) earnings report. The conference call will be Friday morning so the earnings report may come out Thursday after the bell or on Friday morning. Wall Street currently expects JPM to earn 99 cents per share for the fourth quarter. I think the Street is way off here. I keep running the numbers and I have JPM earning at least $1.10 per share, maybe a lot more.

There’s also a good chance the bank will announce a big dividend increase. Before the financial crisis, JPM paid a quarterly dividend of 38 cents per share. Once disaster hit, they cut it to five cents per share. In my opinion, JPM could bring their dividend up to 35 or 40 cents. They probably won’t go that high to allow them room for more dividend hikes later. But if they wanted to, they could.

That’s all for now. I’ll have more market analysis for you in the next issue of CWS Market Review!

Best – Eddy
Best – Eddy

Posted by on January 11th, 2011 at 5:16 pm

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.