Archive for 2009

  • A Great Earnings Season
    , November 12th, 2009 at 3:54 pm

    At Zacks, Dirk Van Dijk notes what a good earnings season it’s been:

    It’s almost time to close the books on a fantastic earnings season. With almost 90% of reports in, there have been 339 that have exceeded expectations while only 62 have fallen short — a ratio of 5.47. While it is true that most companies will normally try to under-promise and over-deliver, this quarter the beats are beating the misses by about twice the normal margin of 3:1.
    Nor have all the surprises only been by a penny or two, but there have been lots of companies that simply crushed their earnings estimates. The median surprise is a very high 7.11%. Over the last five years, a median surprise of about 3.0% has been normal. Part of the reason is that expectations were set very low going into the earnings season.
    For most companies, their earnings are still below year ago levels, just not as far down as people thought they would be. Only 193 firms have posted positive year-over-year growth, versus 251 that have fallen short of year-ago levels — a ratio of 0.77.
    The disparity between firms beating estimates but having negative year-over-year earnings growth is particularly noticeable in Tech, where the earnings surprise ratio is an awesome 9.25. However, the growth ratio (# of firms with positive growth/# of firms with negative growth) is just 0.49. A similar situation, but not quite as extreme, is true for Materials. Staples and Medical have been both growing earnings and beating expectations.
    On the top line, it has also been a successful season so far (relative to expectations), but in terms of actual year-over-year growth it has been downright ugly The total revenues of the 444 firms that have already reported are 13.4% below year-ago levels. A total of 241 firms have reported higher-than-expected revenues, versus 176 that have disappointed, for a ratio of 1.37. On the other hand, only 127 actually had higher sales than a year ago, versus 314 with lower revenues, a ratio of 0.40. Put another way, only 28.6% of all firms reporting so far have had higher sales than a year ago.
    In other words, cost-cutting has been the major force driving earnings and earnings surprises. However, the costs to one company are either the revenues of another company or someone’s paycheck, which is then spent to create revenues for firms. The bottom-up data coming out of all these individual firms seems to confirm what we have been getting from the government’s macro statistics. The economy is growing due to increases in productivity. Higher GDP with fewer workers.

  • 10 States Facing Budget Disasters
    , November 12th, 2009 at 10:01 am

    I’ll spare you the suspense — California is one.

  • Why Lord Why
    , November 11th, 2009 at 6:00 pm

    The Wall Street Journal reports:

    Hewlett-Packard Co. agreed

    me running slow motion

    to acquire

    waving my arms

    networking-equipment maker 3Com Corp.

    screaming

    in a deal the companies valued

    NOOOOOOOOOOOO….

    at $2.7 billion.

    OOOOOOOOOO…..

  • The Humpy Pattern Lives
    , November 11th, 2009 at 5:29 pm

    The S&P 500 closed at its highest level in 13 months. During the day, we got as high as 1105.37, but we haven’t been able to hold 1,100 going into a close yet. The S&P 500 was down slightly yesterday but the Dow was up. In fact, the Dow has been up every day this month.
    I still cling to my Humpy Pattern Thesis. This chart below of the S&P 500 CLEARLY shows a rising pattern of surges—humps if you will. I have no idea what it means for the future but I’m passing it on to you.
    image871.png

  • Thanks Vets
    , November 11th, 2009 at 9:42 am

    a200406071141.jpg

  • NICK Announces Stock Split
    , November 10th, 2009 at 1:42 pm

    I’m not sure why this is needed, but Nicholas Financial (NICK) has just announced a 10% stock dividend which will be paid on December 7 for shareholders of record of November 20. Think of it as an 11-for-10 stock split.
    In other Buy List dividend news, Baxter International (BAX) has raised its quarterly dividend to 29 cents a share from 26 cents. Don’t brush off these regular dividend increases, it’s often a sign of a strong company.

  • The Buy List Hits New High
    , November 9th, 2009 at 5:45 pm

    The Buy List jumped 2.25% today. We’re now up 38.66% for the year, which is a new high for the year (not including dividends). The S&P 500 is 21.02% for the year.

  • A Fed Rate Increase By June?
    , November 9th, 2009 at 11:17 am

    The futures market thinks so:

    U.S. Federal Reserve Chairman Ben S. Bernanke may start to increase borrowing costs in June, according to Fed funds futures prices compiled by Bloomberg. Traders assign a 54 percent chance of an increase to at least 0.5 percent at the end of the Federal Open Market Committee’s meeting on June 23, when the American economy is forecast to be in its fourth straight quarter of expansion, according to estimates compiled by Bloomberg.

  • Barron’s Highlights Altria
    , November 9th, 2009 at 10:26 am

    Tobacco companies are hated by the public but the stocks are very tempting financially. Over the weekend, Barron’s looked at Altria (MO):

    At around 18.50, Altria has one of the lowest price/earnings ratios in the global cigarette industry. It also has one of the highest dividend yields: 7.3%. The stock trades for 10.6 times projected 2009 profits of $1.77 a share and 10 times estimated 2010 earnings of $1.87. Even Reynolds American (ticker: RAI), with weaker brands, sports a slightly higher P/E on a 2010 basis.
    At its current price, Altria’s stock appears to have little downside and significant appreciation potential. One of the company’s prime assets is a 27% stake in international brewer SABMiller (SAB.U.K.), which is worth $11.5 billion, or 30% of Altria’s current market value.
    Altria has lost some cachet in the investment community since the 2008 separation of its international tobacco operations. The faster-growing spinoff, Philip Morris International (PM), trades around 49, or for 15 times projected 2009 profits, a sizable premium to Altria.

    Those are very solid numbers. I’d add that the company has consistently met or beaten earnings for the past few quarters, so it may be going for even less than 10 times next year’s earnings.

  • Herb Brooks’ Pre-Game Speech from Miracle
    , November 7th, 2009 at 3:32 pm


    Kurt Russell also did a version.