Archive for 2013

  • The Sensational Success of Small-Cap Stocks
    , October 23rd, 2013 at 11:12 am

    Roben Farzad writes on the amazing success of small-cap stocks:

    Zero in, for example, on the Russell 2000. It’s up 30 percent this year and has delivered a total return of 242 percent since the market hit its crisis low in March 2009, smartly ahead of the 183 percent total gain provided by the S&P 500. From 1926 through 2012, small-cap stocks averaged an annual return of 11.9 percent, compared with 9.8 percent for large caps, according to Morningstar (MORN) Ibbotson data—turning an original $10,000 investment into $158 million, compared with $31 million in large companies.

  • Morning News: October 23, 2013
    , October 23rd, 2013 at 6:14 am

    ECB Sets Tougher Bank Health Tests

    Spain Exits Recession, Inches Back to Growth in Third Quarter: Bank of Spain

    U.K. Gilts Rise a Second Day as BOE Says Lower Rates Aid Growth

    Oil Prices Fall On Weak US Jobs and Likely High Stockpiles

    Jobs Report Tells Us the U.S. Economy Still in Desperate Need of Electroshock

    Weak Job Gains May Cause Delay in Action by Fed

    U.S. Stocks Rise as S&P 500 Annual Gain Nears Biggest Since 2003

    Twitter Secures $1 Billion Credit Line Ahead of IPO

    JPMorgan Nears $6 Billion Settlement With Investors

    Heineken Cuts Profit Outlook as Central European Sales Slide

    Broadcom Third-Quarter Profit Rises 44%; Shares Off on Outlook

    Carl Icahn Cuts Netflix Stake, Pockets $800 Million Profit

    Amazon Raises Free Shipping Minimum to $35

    Jeff Carter: Anecdotes for The Bears

    Cullen Roche: Warren Buffett on the Role of Luck

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  • CR Bard Earns $1.50 Per Share
    , October 22nd, 2013 at 4:35 pm

    For Q3, CR Bard ($BCR) reports earnings of $1.50 per share which is 10 cents more than consensus.

    C. R. Bard, Inc. today reported 2013 third quarter financial results. Third quarter 2013 net sales were $758.0 million, an increase of 5 percent over the prior-year period on a reported basis. Excluding the impact of foreign exchange, third quarter 2013 net sales increased 4 percent over the prior-year period.

    For the third quarter 2013, net sales in the U.S. were $500.3 million, an increase of 3 percent over the prior-year period. Net sales outside the U.S. were $257.7 million, an increase of 8 percent over the prior-year period on a reported basis. Excluding the impact of foreign exchange, third quarter 2013 net sales outside the U.S. increased 6 percent over the prior-year period.

    For the third quarter 2013, net income was $93.2 million and diluted earnings per share were $1.15, a decrease of 28 percent and 23 percent, respectively, as compared to third quarter 2012 results. Adjusting for items that affect comparability of results between periods as detailed in the tables below, third quarter 2013 net income was $122.3 million and diluted earnings per share were $1.50, a decrease of 14 percent and 9 percent, respectively, as compared to third quarter 2012 results.

    Timothy M. Ring, chairman and chief executive officer, commented, “We are pleased with the results this quarter, exceeding expectations on both the top and bottom line. Consistent with our plan, we continue to focus on shifting the mix of the portfolio to faster revenue growth through targeted investments and acquisitions. Our business development activities, together with the results this quarter and other recent events, represent important steps in helping us improve the growth profile of the business going forward.”

    The shares are up 2.4% in the after hours market.

  • The Success of Colgate-Palmolive (CL)
    , October 22nd, 2013 at 10:57 am

    One of my pet peeves about the financial media is the intense concentration on popular stocks while boring stocks are widely ignored. Right now, the investment world is going nuts for the earnings report from Netflix ($NFLX). You realize there are lots of stocks out there?

    Study after study has shown that boring stocks, ones that are less volatile, do better in the long run. Yet investors always seem uninterested in the boring issues. The simple fact is that there’s a lot of money to be made in the duller areas of the economy.

    I think a great example is Colgate-Palmolive ($CL). The company is in the exciting business of soap, toothpaste, deodorant and other household products. Sure, they’re not inventing the new cellphone or electric car, but they make stuff everyone uses every day. Check out the long-term stock chart. CL has been an astounding performer and it’s crushed the S&P 500.

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    Over the last 33 years, Colgate is up an amazing 12,500% while the S&P 500 is up 1,220%. That means that CL has lapped the market nearly 10 times.

    But what’s particularly impressive about Colgate’s run is the steadiness of the gains. There are a lot of stocks that have done very well but it’s because they were market darlings for a year or two. Colgate, however, has continually churned out the gains for many years. An investor in CL would have creamed the vast majority of hedge funds.

    Here’s CL divided by the S&P 500. I’ve added a 6.5% trend line. You can see that CL has consistently beaten the market for many years.

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    Colgate will report its earnings tomorrow. Unfortunately, I think the stock is overpriced here. But if the stock were to come down a lot, this is one I’d love to add to our Buy List.

  • The S&P 500 Hits 1,757
    , October 22nd, 2013 at 10:28 am

    The market is having a very good reaction to today’s jobs news. The S&P 500 is up to 1,757 which is another all-time high. Shares of Medtronic ($MDT) are up to 56.80 which is the highest in six years.

    AFLAC ($AFL) is at a five-year high, and it’s not far from a new all-time high. Fiserv ($FISV), Ross Stores ($ROST), Harris ($HRS) and Stryker ($SYK) are also at new highs today.

  • September NFP = +148,000
    , October 22nd, 2013 at 9:55 am

    As a result of the government shutdown, September’s jobs report was delayed until today. This delay is particularly frustrating because these reports are very important in determining the Federal Reserve’s policies.

    The Labor Department reported that the economy created 148,000 jobs last month which was well below Wall Street’s estimate of 180,000. The unemployment rate ticked down to 7.2% which is the lowest in nearly five years.

    How can the unemployment rate fall despite sluggish jobs growth? The answer is that the labor force participation rate is very low. Simply put, fewer Americans are looking for work. For September, only 63.2% of Americans were in the jobs market. That matches the lowest rate in 35 years.

    We’re in an odd situation with the jobs report because bad news from that actually points towards good news for stocks. The market is currently up this morning—the S&P 500 just broke through 1,750. Traders are guessing that the sluggish jobs numbers will cause the Fed to delay any taper ideas until next year. Of course, that’s when Janet Yellen will be at the helm.

    In his press conference from last month, Ben Bernanke was very clear that the Fed isn’t following any calendar time table or some magic number that will trigger a taper. Instead, they’re looking at the broad trends in the economy. The Fed meets again next week.

    fredgraph10222013

  • Morning News: October 22, 2013
    , October 22nd, 2013 at 6:10 am

    Europe Breakup Forces Mount as Union Relevance Fades

    China September Home Price Growth at Near Three-year High

    Beautiful China Tourism Pitch Misfires Amid Smog

    China Inc. Battles Big Oil for Century’s Biggest Find

    An Odd Alliance in Patagonia

    Efficiency, Natural Gas Keep Pushing U.S. Carbon Emissions Down

    Holder Demand for JPMorgan Plea Signals Hard-Line Shift

    Famous Morgan Stanley Strategist Returns, And He Has A Big Warning To The Investment Community About Inequality

    Netflix Soars as Hastings Seeks to Damp ‘Euphoria’

    McDonald’s Forecasts Tough Fourth Quarter

    Texas Instruments Reports 20% Profit Decline

    Reckitt Benckiser Reviews Pharma Unit, Could Sell It

    J.C. Penney Scales Back Martha Stewart Partnership

    Howard Lindzon: The Year 2014 – MegaDeals…$35 Smartphones….and $35 Sandwiches

    Marc Chandler: The Investment Climate in Six Points

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  • S&P 500’s P/E Ratio Close to 3.5-Year High
    , October 21st, 2013 at 1:04 pm

    The Price/Earnings Ratio for the S&P 500, based on trailing earnings, recently topped 17. It’s very close to reaching its highest point since May 2010.

    Just over two years ago, on October 3, 2011, the S&P 500’s P/E Ratio bottomed out at 11.61. That was the lowest ratio in 22 years. Going by Friday’s close, the S&P 500 has advanced 58.7%. But 45.6% of that is solely down to multiple expansion. Earnings are up only 9.4%.

    This is a bit misleading because we’re working off a very low P/E Ratio. I think it’s more accurate to say that the P/E Ratio went from being very low back to a more normal range.

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  • Harris Breaks $60
    , October 21st, 2013 at 12:31 pm

    Shares of Harris have been dancing near $60 per share for the last few weeks, but the stock hasn’t been able to break through. That is, until today. HRS is finally trading in the 60s.

    We first added the stock on our 2012 Buy List at $36.04. We have a nice 66% gain in less than two years. The next earnings report is due one week from tomorrow. Wall Street currently expects earnings of $1.13 per share.

    big10212013

  • JPMorgan $13 Billion Settlement
    , October 21st, 2013 at 9:53 am

    It looks as if JPMorgan Chase ($JPM) has reached a $13 billion deal with the Federals to settle all of the investigations into their mortgage loan business before the financial crisis. The deal doesn’t release them from any criminal liability.

    The record settlement could help resolve many of the legal troubles the New York bank is facing. Earlier this month JPMorgan disclosed it had stockpiled $23 billion in reserves for settlements and other legal expenses to help cover the myriad investigations into its conduct before and after the financial crisis.

    The deal is being hammered out by some of the most senior officials at the Department of Justice and the largest U.S. bank. Attorney General Eric Holder and JPMorgan Chief Executive Jamie Dimon spoke on the phone on Friday night to finalize the broad outlines of the broad deal, the first source said.

    The bank’s general counsel Stephen Cutler and Associate Attorney General Tony West are negotiating a statement of facts that will be part of a final agreement, the source said.

    Long considered one of the best-managed banks, JPMorgan has stumbled in recent years, with run-ins with multiple federal regulators as well as authorities in several states and foreign countries over issues ranging from multibillion-dollar trading losses and poor risk controls to probes into whether it manipulated a power market.

    In September, as the Justice Department prepared to sue the bank over mortgage securities that the bank sold in the run-up to the financial crisis, JPMorgan tried to reach a broader settlement with DOJ and other federal and state agencies to resolve claims over its mortgage-related liabilities stemming from the bust in house prices.

    Dimon went to Washington to meet with Holder on September 25, and discussed an $11 billion settlement at that point.

    Some of the problems relate to mortgage bank Washington Mutual and investment bank Bear Stearns, two failing firms that JPMorgan took over in 2008.

    The bank and the Justice Department have been discussing a broad deal that would resolve not only the inquiry into mortgage bonds it sold to investors between 2005 to 2007 that were backed by subprime and other risky residential mortgages, but also similar lawsuits from the Federal Housing Finance Agency, the National Credit Union Administration, the state of New York and others.

    The broader settlement is a product of a government working group created nearly two years ago to investigate misconduct in the residential mortgage-backed securities market that contributed to the financial crisis. Officials from the Justice Department, the New York Attorney General and others helped to lead the group.

    Reuters reported late Friday that JPMorgan and FHFA had reached a tentative $4 billion deal. That agreement is expected to be part of the larger $13 billion settlement.

    Shares of JMP are up 24 cents this morning.