Archive for 2008

  • More Earnings
    , April 18th, 2008 at 10:18 am

    Two more earnings reports to pass along. After the bell, Stryker (SYK) reported earnings of 70 cents a share, one penny better than estimates. This is such a great company; they deliver solid earnings like clockwork. Sales rose 14.7% to $1.63 billion from $1.43 billion. The company also forecast full-year earnings of $2.88 (no range?) which was inline with the Street. I think the stock is slightly overpriced here but not dramatically so.
    Harley-Davidson (HOG) has a rotten earnings report yesterday. The company earned 79 cents a share compared with 74 cents a share last year. Last year’s first quarter was impacted by the strike.
    The worst part was that Harley lowered its forecast. The company now sees an earnings pullback of 15% to 20% instead of the 4% to 7% it predicted before. BusinessWeek has a good article on the challenges facing HOG. This is one I’m not happy with.
    This is probably a case of my Buy List rule of not being able to sell until the end of the year will probably help me. Honestly, I’d be tempted to sell HOG right now.

  • Merrill Loses Fight on Gem Sale
    , April 17th, 2008 at 12:39 pm

    It’s not been a good day for Merrill Lynch (MER), with the $2 billion quarterly loss, the Moody’s review. Oh, and a few thousand more job cuts. But today just got even worse.

    Merrill Lynch & Co.’s plan to auction what Christie’s International called “one of the greatest jewelry collections” was thwarted by jeweler Ralph O. Esmerian in a 48- hour showdown in three courts.
    The sale, which Christie’s scheduled for April 15 and then delayed to yesterday amid the legal wrangling, “will not take place,” said Helen Chaitman, one of Esmerian’s lawyers, after a U.S. bankruptcy court hearing yesterday in Lower Manhattan.
    Chaitman’s statement followed a private meeting between the lawyers of Esmerian, 68, and Merrill in the chambers of Judge Robert Drain, who didn’t issue a formal ruling.
    Chaitman said Esmerian, a fourth-generation jeweler, got his wish to sell his family heirlooms through Fred Leighton Inc., the retailer he bought in 2006. Merrill had lent Esmerian $178 million, in part to buy Fred Leighton, and in October declared the loan in default. Merrill then sought to sell its collateral, Esmerian’s antique jewelry, through Christie’s.
    Esmerian argued he could get far more for the jewels through private sales — and thus pay the debt by selling fewer pieces. Merrill spokesman Bill Halldin said the bank is grateful Leighton and other Esmerian entities will be under court supervision as a result of Leighton’s bankruptcy petition this week.
    “We look forward to an expedited resolution of these matters and a full repayment of all funds due to us,” he said.
    Christie’s said in a statement that it was “obviously disappointed not to proceed with the auction.”

  • Former CEO Tell Truth, Apologizes
    , April 17th, 2008 at 11:07 am

    Jack Welch on Jeffrey Immelt yesterday:

    I’d be shocked beyond belief and I’d get a gun out and shoot him if he doesn’t make what he promised now.

    We begin counting now. One, two, thr…

    GE’s Welch Defends Immelt, Says Remark Misinterpreted

  • More Earnings Reports
    , April 17th, 2008 at 10:11 am

    There are a few earnings reports to pass along this morning. Danaher (DHR) earned, after adjustments, 89 cents a share. That’s a good number since the Street was looking for 88 cents per share. Previously, the company said that its range for Q1 was 84 to 89 cents per share, so I guess they knew what they were talking about.
    The Q1 result is a 15.5% increase over last year’s first quarter, and sales rose by 20%. The company has also said that it’s looking for $4.30 to $4.40 for the full year.
    Danaher makes the Craftsman line of tools. So far, the housing slowdown hasn’t had a noticeable impact on its bottom line. At least, not yet. At the current price, the stock seems to be correctly priced.
    Amphenol (APH) reported earnings of 54 cents a share, two pennies about the Street’s estimate. The company also guided higher for Q2 and the full year. APH now sees this quarter coming in at 57 to 59 cents a share (the Street was at 55 cents), and $2.26 to $2.31 for the year (the Street was at $2.23).
    This is a nice increase in guidance. In January, the company said Q1 was looking to come in at 50 to 52 cents, and $2.18 to $2.25 for the year. The stock seems slightly over priced right now, but not by much.

  • Market Quiz
    , April 16th, 2008 at 2:17 pm

    What Omaha-based stock has the best long-term performance?
    Yep, it’s Berkshire Hathaway (BRK-A), which is a stock everyone has heard of. But do you know about Valmont Industries (VMI)? The company is also based in Omaha, and while it’s not the amazing success that’s Berkshire, Valmont’s performance is still quite impressive.
    The company reports after the bell today and the shares have, for the first time, ever crack $100 a share. Three years ago, you could have picked up VMI for just $22 a share. If you were around in 1970, you could have got it for just 25 cents a share.
    VMI.gif

  • Top Hedge Fund Earners for 2007
    , April 16th, 2008 at 11:11 am

    From Alpha magazine:
    1 John Paulson Paulson & Co. $3.7 billion
    2 George Soros Soros Fund Management $2.9 billion
    3 James Simons Renaissance Technologies Corp. $2.8 billion
    4 Philip Falcone Harbinger Capital Partners $1.7 billion
    5 Kenneth Griffin Citadel Investment Group $1.5 billion
    6 Steven Cohen SAC Capital Advisors $900 million
    7 Timothy Barakett Atticus Capital $750 million
    8 Stephen Mandel Jr. Lone Pine Capital $710 million
    9 John Griffin Blue Ridge Capital $625 million
    10 O. Andreas Halvorsen Viking Global Investors $520 million
    Of course, that’s pre-tax.

  • No Comment
    , April 16th, 2008 at 10:55 am

    From The Inquirer:

    Women give out passwords for chocolate

  • The Education of Warren Buffett
    , April 16th, 2008 at 10:29 am

    Here’s an interesting article looking at why Warren Buffett has quietly walked away from the coal business. The article contains this tidbit:

    A final clue to Buffett’s change of direction on coal comes from looking at his history on other controversial issues, especially his decision in the early 1990s to revise his investment policies regarding tobacco. In 1987, Buffett told John Gutfreund of Salomon, “I’ll tell you why I like the cigarette business. It costs a penny to make. Sell it for a dollar. It’s addictive. And there’s fantastic brand loyalty.”
    By 1994, however, Buffett was ready to drop his tolerance of tobacco lucre, telling Berkshire Hathaway’s annual meeting that tobacco investments are “fraught with questions that relate to societal attitudes and those of the present administration … I would not like to have a significant percentage of my net worth invested in tobacco businesses.”
    The upshot: Buffett keeps his finger in the wind and reacts quickly when he feels society shift. For this reason, his reversal on coal, though it may have been largely forced upon him, is significant nevertheless. As usual, Buffett has made the “smart move” a bit faster than some of his colleagues. Let’s hope they take note and follow his lead.

  • Not Getting Predictions Market
    , April 16th, 2008 at 9:46 am

    James Ledbetter at Slate brings up one of my pet peeves today. He’s about the 600th writer to ask why are predictions markets so often wrong.
    The answer is simple: They’re not predictions markets, they’re really odds-setting markets. Just because the event with the highest odds didn’t come to pass, doesn’t mean that the market is somehow wrong.
    The Giants beat the point spread in the Super Bowl. Did Vegas fail? No, it’s called an upset.
    Nearly four years ago, Google went public at $85. Did the stock market get it wrong? Of course not, Google proved its worth to shareholders over time. Over the last six months, the reverse is happening. The markets adjust.
    As I’ve said many times, I don’t take these markets too seriously. They’re for fun and most of the standard complaints are accurate (too small, too partisan).
    Another aspect that people must understand about these markets is that they’re futures markets. This means there’s a very large dispersion of returns. In other words, you get all or nothing. That’s a little different from your standard stock market. As a result, these markets can be far more volatile than what you may normally be used to.
    By the way, John McCain’s contract to win the GOP nomination is going for 94.1/94.3. Hmmm. That could be a good money market substitute until the convention this summer.

  • Nominal GDP Growth
    , April 16th, 2008 at 9:36 am

    Continuing on yesterday’s post about debt levels and interest rates, I wanted to look at nominal (meaning, not adjusted for inflation) GDP growth. Here’s how it looks on a trailing 12-month basis going back to 1986:
    image643.png
    These are, of course, the government’s numbers, so use at your own risk. But you can clearly see where the recessions are, and I expect that for the immediate future, the line will droop down.
    What I find interesting is that long-term Treasury yields have still trended below GDP growth. Will all those foreigners dump their Treasuries? I doubt it, but if they do, it’s not because we’re unable to pay them back.