Archive for 2011

• 26 out of 26
  Eddy Elfenbein, March 2nd, 2011 at 2:08 pm

  Gary Alexander alerts me to a fascinating stat:

  March started with another market scare, but we’ve seen the same kinds of corrections in January and February with recoveries by month’s end. In January and February of this year, the S&P 500 rose a net 5.5%, including 2.3% gains in January and 3.2% gains in February. Since 1938, the S&P 500 has risen in both January and February 26 times. Since 1938, the full-year has been positive ALL 26 times in which the S&P rose in both January and February. The average annual gain in those 26 years was +20.73%.

  Historically, March is a good month and April is #1, so we could see another couple of rising months in our near future. Over the last 50 years, according to Bespoke Investment Group, the Dow has gained an average 1.09% in March. Over the last 100 years, the average March is slightly better, +1.12%. April is historically the best month of the year, so we can anticipate another spring forward in stocks by April 30.

• Morning News: March 2, 2011
  Eddy Elfenbein, March 2nd, 2011 at 7:28 am

  German Two-Year Yields Approach 18-Month High as Producer Prices Increase

  Banco Pastor Issues Convertible Bonds as Spain Tightens Bank Capital Rules

  Bernanke Signals No Rush to Tighten When Asset-Buying Ends

  Debt Market Rebounds From the Crisis, and So Does Risk

  Regional Fed Bank Names Economist as President

  Futures Higher as Oil Rises Above $100 Per Barrel

  Gold Holds Near Record as Mideast Simmers

  Cotton Jumps by Daily Limit, Rises for Fourth Day as Supply Remains Tight

  U.S. Car Sales Jumped in February, but Here Come Gas Prices Again

  Yahoo in Talks on $8 Billion Japan Exit

  Staples 4Q Net Up 17% On Fewer Charges; Sales Roughly Flat

  Costco Quarterly Earnings Rise 16%

  Joshua Brown: Guess Who No Likey the Oil Prices…

  Howard Lindzon: Social Leverage, Social Proof and ‘Vertical is the New Horizontal’

  Paul Kedrosky: TED Time: Mesopredator Release, Coyotes and Banks

• ISM Ties for Best Reading in 27 Years
  Eddy Elfenbein, March 1st, 2011 at 10:19 am

  Today’s ISM Index report showed a reading of 61.4. That ties the reading from May 2004 for the highest level since December 1983.

  This is the 19th-straight month that the ISM has been over 50.

  

• 45,000% Profit at Seaboard
  Eddy Elfenbein, March 1st, 2011 at 9:43 am

  One of the lessons I try to tell investors is that there are good stocks to buy everywhere and that they ought not confine themselves to the popular names like Apple (AAPL) or Google (GOOG).

  One of the off-beat companies I like to follow is Kansas-based Seaboard Corp (SEB). I’m not recommending it, but I want to show you how a stock that almost no one knows about has been an outstanding performer over the years.

  For starters, the stock closed yesterday at $2,320, so that high-price will scare folks away. My opinion is that the fewer people know about my stocks, the better. Secondly, there’s zero analyst coverage for this stock on Wall Street despite having a market cap of $2.8 billion. Seaboard’s daily volume is often a few hundred shares. Every so often the volume will exceed 3,000 shares per day. That’s a heavy day for them.

  So what does Seaboard do? Here’s the description from Hoovers:

  With pork and turkey from the US, flour from Haiti, and sugar from Argentina, Seaboard has a lot on its plate. The diversified agribusiness and transportation firm has operations in some 40 countries in the Americas, the Caribbean, and Africa. Seaboard sells its pork and poultry in the US and abroad. Overseas it trades grain (wheat, soya), operates power plants and feed and flour mills, and grows and refines sugar cane. Seaboard owns a shipping service for containerized cargo between the US, the Caribbean, and South America; it has shipping terminals in Miami and Houston and a fleet of 40 vessels (12 owned, others chartered) and ships to ports worldwide. Seaboard is run by descendants of founder Otto Bresky.

  See–it’s terribly exciting. Too many investors think a great investment has to be one that discovers the twelfth dimension or cures the Bubonic Plague. That’s just not so. You should be focused on how well companies operate instead of what they do.

  In April 2007, SEB got as high as $2,699 and by March 2009, it was at $785—that’s a stunning 71% decline. But Seaboard has rallied strongly and it’s not too far from making a new all-time high.

  In 1980, the stock was going for just $17, and back in the mid-1970s it went as low as $5-1/8. That’s a nice 45,000% profit.

  

• Morning News: March 1, 2011
  Eddy Elfenbein, March 1st, 2011 at 7:32 am

  EU Raises 2011 Growth Forecast, Sees Inflation Accelerating

  UK Manufacturing Activity Maintains Record Growth Pace

  Emirates Hikes Fares Due to Rising Oil Prices

  Crude Oil Climbs From One-Week Low as Iran Protests Add to Supply Concern

  Egypt Delays Expected Reopening of Stock Market

  China SAFEly Diversifies Reserves

  Futures Exchange Giant CME Launches Pre-emptive Attack on NYSE Liffe

  Bernanke Tempers Republican Criticism With Deficit-Plan Calls

  U.S. Plans for Trade Are Stalled

  Dollar Index Hits 3½ Month Low; Bernanke Awaited

  Centro Swaps Australian Malls for Debt After $9.4 Billion Blackstone Deal

  World’s Largest Drilling Contractor Transocean Up on Deepwater Drill Permit for Gulf of Mexico

  Buffett Adds Another Name to Successor List as Rose Completes First Year

  Paul Kedrosky: Gas Prices: Not as Worried vs. Too Soon

  James Altucher: 25 Unusual Methods for Making a Trillion Dollars

  Joshua Brown: Mideast Dictators: Talk to Chuck

• Chicago PMI at 22-Year High
  Eddy Elfenbein, February 28th, 2011 at 11:26 am

  Remember that Double Dip that was supposed to happen? Me neither.

  A gauge of Chicago manufacturing rose to a 22-year high in February, raising hopes for a national indicator due out Tuesday.

  The Chicago business barometer, which also is called the Chicago PMI, rose to 71.2 from 68.8 in January, a reading well above the 67.7 forecast by economists. The reading fell just below the 71.5 hit in July 1988.

  The big jump was led by a rise in production, and new orders also rose, though employment eased slightly from its high in January, to 59.8.

  Any reading above 50 indicates expansion.

  …

  The production subcomponent rose for the sixth straight month, up to 78.2 from 73.7.

  New orders edged up to 75.9 from 75.7, marking the highest level in 28 years.

  Employment slipped to 59.8 from 64.1 in January, which was a 27-year high.

  Prices paid fell slightly to 81.2 from 81.7. Prices paid readings in purchasing managers surveys typically reflect commodity prices, which have been surging.

  One respondent to the survey worried about the rising prices at a time of strong demand.

  “Costs continue to escalate. Tight inventories still slowing down supplier response and stretching out lead-times. Sales are robust causing challenging inventory balancing act when combined with the aforementioned lead-time issue,” the respondent said.

  Another pointed to the rising wage disparities. “Hiring is targeted to rock stars who make much much more than previously eliminated managers,” the respondent said.

• Berkshire Hathaway Hits New High
  Eddy Elfenbein, February 28th, 2011 at 10:40 am

  For the first time in over two years, Berkshire Hathaway (BRKA) traded at $130,000. Thirty years ago you could have picked up one share for $250. Berkshire has done so well that the S&P 500 looks like a flat line in comparison (it’s actually up over 1,100%).

  

• Hewlett-Packard Is Cheap, For Good Reason
  Eddy Elfenbein, February 28th, 2011 at 7:54 am

  I’ve long had a love/hate relationship with Hewlett-Packard (HPQ). In many ways, it’s a great company. They have their hands in nearly everything tech and they’ve grown to become the largest tech company in the world by revenue. I’m also a big fan of Mark Hurd’s business acumen (despite some of his personal, um…issues) and he engineered something you rarely see—a successful turnaround.

  Ultimately, Hurd had to leave HPQ due to inappropriate conduct with a porn actress who was, in fact, not his wife. I was sad to see Hurd go, but at the start of this year, I added his new home, Oracle (ORCL), to my Buy List and I’m glad I did.

  Since Hurd left HPQ, I’ve been down on the stock and fortunately I look smart today by telling investors to stay away six months ago. My concern is that the company’s aggressive acquisition plans may be doing more harm than good. HPQ has been going after IBM’s business in a big way and they’ve been shelling out major bucks to do it. I hated the 3Com purchase and the Palm acquisition still gives me nightmares. At the time, I gave Hurd the benefit of the doubt. Now that he’s gone, that benefit is also gone.

  It boils down to the question: “Can new CEO Léo Apotheker engineer a turnaround from the previous turnaround?”

  I say all of this in the context of last week’s earnings report. Hewlett-Packard reported earnings of $1.36 per share which was seven cents more than Wall Street’s forecast. Wall Street responded by tossing the shares in the garbage. The shares dropped nearly 10% on Wednesday. Since the stock is a Dow component, the plunge distorted the entire index.

  What freaked out Wall Street so much? Let’s dig into the numbers. The hitch was that quarterly revenue rose only 4% to $32.30 billion from $32.96 billion. Wall Street had been expecting $32.96 billion. In the wider scope of things, that’s really not a big miss, so what else was going on?

  Hewlett-Packard also gave guidance for Q2 and the entire year. For this quarter, HPQ said it expects revenues between $31.4 billion and $31.6 billion, and earnings-per-share between $1.19 and $1.21. Wall Street didn’t like that at all. The consensus was for revenues of $32.6 billion and earnings of $1.25 per share.

  HPQ’s full-year forecast (their fiscal year ends in October) was for total revenues between $130 billion and $131.5 billion. The consensus on Wall Street was for $132.91 billion. HPQ said it expects full-year earnings to range between $5.20 and $5.28 per share. The Street was expecting $5.23 per share, so I suppose that’s inline. HPQ has traditionally issued conservative forecasts so they can raise them later. Perhaps they’re doing that now to mask the poor Q2 guidance.

  So this seems odd. It appears that HPQ gave lousy near-term guidance but the long-term guidance is still what the Street expects. Yet the stock’s popularity is somewhere between Kim Jong-il and Diphtheria. (Did Hurd get out at the right time? Sure looks like it.)

  According to the company’s guidance, the stock is selling for just eight times earnings. The good sign is that their enterprise storage, servers and networking division saw its revenues increase by 22%. Also, the gross margins are up 1.5% to 23.4%.

  The stock is tempting, but I’m still steering clear.

  HPQ has a few problems to work through. They’re experiencing weakness in consumer PCs and services. I’m also not a big fan of the quality of their earnings. Always be wary when a company grows too much through acquisition. That’s often a sign of trouble. A company should be focused on making earnings not buying them.

  I should add that things may change soon. On March 14th, Apotheker will unveil his business plan for Hewlett-Packard. (BTW, Léo, that shouldn’t take six months to do). I’m curious to hear what he has to say, but I don’t have enough confidence to buy before then. Until then, HPQ is a sell.

  

• Morning News: February 28, 2011
  Eddy Elfenbein, February 28th, 2011 at 6:46 am

  Hang Seng Bank’s Full-Year Profit Climbs 14% as Fee Income Rises

  India Unveils $273-Billion Budget

  Saudi Aramco Says Ready to Make Up for Shortfall in Libyan Crude

  Banks Drag FTSE Lower as HSBC Results Disappoint

  Japanese Stocks Climb the Most in Two Weeks as Concern on Oil Price Eases

  China 2010 Energy Consumption Rises 5.9%, National Statistics Bureau Says

  South African Corn Advances, Tracking Gains by U.S. Benchmark

  Economists List U.S. Budget Deficit as No. 1 Worry

  Big February Sales Results on Tap for U.S. Autos

  J.P. Morgan Fund in Talks to Take Twitter Stake

  Groupon Starts China Service; Tencent, Alibaba’s Jack Ma Among Investors

  Li’s Hutchison Seeks $5.8B in Chinese Ports IPO

  Equinox Minerals Offers $4.9 Billion for Lundin

  Leigh Drogen: RIAs Must Follow Testimonial Rules On Social Networks

  Howard Lindzon: The US Dollar is Drek…And Getting Drekker!

  Joshua Brown: Top 10 Names for JPMorgan’s Venture Fund

• Warren Buffett’s 2010 Shareholder Letter
  Eddy Elfenbein, February 26th, 2011 at 11:37 am

  The 2010 shareholder letter from the Oracle of Omaha is online. Here’s a sample:

  Last year – in the face of widespread pessimism about our economy – we demonstrated our enthusiasm for capital investment at Berkshire by spending $6 billion on property and equipment. Of this amount, $5.4 billion – or 90% of the total – was spent in the United States. Certainly our businesses will expand abroad in the future, but an overwhelming part of their future investments will be at home. In 2011, we will set a new record for capital spending – $8 billion – and spend all of the $2 billion increase in the United States.

  Money will always flow toward opportunity, and there is an abundance of that in America. Commentators today often talk of “great uncertainty.” But think back, for example, to December 6, 1941, October 18, 1987 and September 10, 2001. No matter how serene today may be, tomorrow is always uncertain.

  Don’t let that reality spook you. Throughout my lifetime, politicians and pundits have constantly moaned about terrifying problems facing America. Yet our citizens now live an astonishing six times better than when I was born. The prophets of doom have overlooked the all-important factor that is certain: Human potential is far from exhausted, and the American system for unleashing that potential – a system that has worked wonders for over two centuries despite frequent interruptions for recessions and even a Civil War – remains alive and effective.

  We are not natively smarter than we were when our country was founded nor do we work harder. But look around you and see a world beyond the dreams of any colonial citizen. Now, as in 1776, 1861, 1932 and 1941, America’s best days lie ahead.