Archive for 2013

• Morning News: July 10, 2013
  Eddy Elfenbein, July 10th, 2013 at 6:26 am

  Ruble to Real Roiled as No Brick in BRICs $13.9 Billion Lost

  Yen Advances With Oil as European Stocks Climb to 1-Month High

  China Trade Data Disappoint, As Exports Fall 3.1%

  Europe Tempers Power of Agency to Shut Troubled Banks

  IMF Raises UK Growth Forecast, but Lowers Outlook for Euro Zone

  FTC’s $3.2 Million Penalty Against Major Debt Collector May Curb Abuses By Companies

  Who Says Rising Rates Are The Kiss of Death For Bull?

  Fork in the Road for a Bookseller

  BlackBerry Chief Admits Release of New Phones in U.S. Was Flawed

  Kroger And Harris Teeter Announce Definitive Merger Agreement

  Tesla Motors Stock Joining Nasdaq 100 Index

  Burberry Surges in London as Quarterly Sales Top Estimates

  NYSE Euronext to Take Over Libor

  Joshua Brown: The Revenue Recession

  Roger Nusbaum: Can You Get It Done With Three Funds?

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• The Small-Cap Era
  Eddy Elfenbein, July 9th, 2013 at 11:03 am

  Since April 8, 1999, the S&P 500 is up 23% while the Russell 2000 is up 153%.

  

• Late to the Chinese Market, Ford Aims to Catch Up
  Eddy Elfenbein, July 9th, 2013 at 9:12 am

  From the AP:

  Ford wants to double its Chinese market share to 6 percent by 2015. To make that happen, the company is launching six new vehicles in China this year, including two small SUVs called the Kuga and the EcoSport, the Mondeo midsize sedan and the Explorer SUV, which is exported from Chicago. The Lincoln luxury brand will arrive next year.

  To meet its goals, the company has undertaken its most ambitious growth since Ford went on a post-war building spree in Michigan 60 years ago.

  Ford is spending $5 billion to build five plants — including three assembly plants, an engine plant and a transmission plant — that will more than double its Chinese production capacity to 1.7 million vehicles by 2015.

  “They used to be laggard, cautious. But now they’re all in,” says Michael Dunne, president of the automotive consulting group Dunne and Co. in Hong Kong. “They are saying, ‘We have confidence in the China market. We have confidence in our products. We can win here.'”

  Ford sold a company record 407,721 vehicles in China in the first six months of this year. But that was only a quarter of the vehicles GM sold. Volkswagen has six brands aimed at every type of buyer in the vast Chinese market, from the cheap Skoda to the ultra-luxury Bentley. Until Lincoln arrives, Ford has just one.

  There are other obstacles. Ford cars are expensive. In a market where 70 percent of vehicles sold cost less than $14,500, Ford’s cheapest car is the Fiesta, which starts at $13,300. The Explorer starts around $80,000 thanks to a 25 percent import duty and other taxes.

  Ford’s development costs are also steep compared with competitors’ because it still does much of the research and design for Chinese vehicles at its headquarters in Dearborn, Michigan, where costs are relatively high. Ford hopes to double its technical workforce in Nanjing to 1,500 people by 2015; GM already employs more than 2,000 people at its technical center in Shanghai.

• Intuitive Surgical Set to Drop 13%
  Eddy Elfenbein, July 9th, 2013 at 9:08 am

  The stock market wound up having a good day yesterday as the S&P 500 closed at 1,640.46, its highest close since June 18th. The index has now rallied for seven of the last nine sessions.

  The market got more good news when Alcoa posted good earnings after the close. Alcoa is traditionally the first Dow stock to report earnings each quarter. I should add that I’m puzzled as to why Alcoa has remained in the Dow. Despite being one of the 30 Dow stocks, the company makes up about 1/250th of the index’s weighting thanks to price weighting.

  Our Buy List had another very good day. We’re now up 18.88% for the year to 15.02% for the S&P 500. The change in performance has been quite dramatic. Since April 18th, we’re beating the S&P 500 by a margin of 13.16% to 6.41%. Several of our stocks like Ford ($F), Bed Bath & Beyond ($BBBY), FactSet ($FDS), Wells Fargo ($WFC) and Moog ($MOG-A) hit new highs.

  The futures indicate that the market is going to open higher today. One company expected to have a rough day is Intuitive Surgical ($ISRG). The company warned that sales for Q2 will be below expectations. The pre-market trading shows ISRG down 13%, or $65 to $435 per share. Last year, I listed ISRG as one of 13 stocks to avoid. At the time, ISRG was at $558 per share. Finding over-priced stocks isn’t that hard. The problem is waiting for the market to catch up to reality.

• Morning News: July 9, 2013
  Eddy Elfenbein, July 9th, 2013 at 6:41 am

  China Faltering Demand Underscored as Producer Prices Sink

  Latvia Upbeat On Euro-Zone Entry, Despite Tough Environment

  U.K. Factory Output Puts Damper on Recovery

  Munich Re Sees Insured Market Loss Caused By CEE Floods Above EUR3B

  Consumers Boost Borrowing

  Nomura: Storm Clouds Are Gathering in Spain Again

  The Most Profitable Two Seconds on Wall Street

  S&P Raises Puffery Defense Against U.S. Ratings Case

  Alcoa Sees Aluminum Demand Growth; Markets Tightening

  Barnes & Noble Edges Closer to Breakup as CEO Quits Amid Losses

  Energy Giant Shell Names Ben van Beurden As New Chief

  Big Seal of Approval for Dell Founder’s Buyout Bid

  The Twinkie Returns, With Less Baggage

  Cullen Roche: Warren Buffett’s Father Was a Raging Gold Bug

  Credit Writedowns: Much Ado About Nothing

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• Stocks and Bonds Become Friends
  Eddy Elfenbein, July 8th, 2013 at 3:25 pm

  Here’s an interesting change that’s happened recently in the market. Stocks and bonds used to move in opposite directions. Here’s a look at the S&P 500 ETF ($SPY) along with the Long-Term Treasury ETF ($TLT). This chart covers April 12th to May 21st:

  

  But after May 21st, things suddenly changed as stocks and bonds moved together.

  

  The correlation coefficient went from -0.90 to +0.85. To be fair, this relationship is no stranger to big swings but I’m not aware of one so dramatic in such a short period in several years.

  I cut Friday off the chart because that was a reversion to the negative correlation — stocks did well and bonds did not. Today seems to be more of that.

  So what does this mean? It’s hard to say exactly, but my guess is that financial markets went from arguing one point — strong economy, yes or no; to hashing out another point — are we having a financial crisis, yes or no.

  Now, apparently, we’re back to discussing the strength of the economy, and the bulls are winning (for the moment).

• BBBY = $73.87
  Eddy Elfenbein, July 8th, 2013 at 10:23 am

  Bed Bath & Beyond ($BBBY) is up to $73.87 which is a new high. Remember this stock was at $57 in March.

  This looks to be another good day for the Buy List. Wells Fargo ($WFC) got up to $42.73, and WEX Inc. ($WEX) hit $82.03. Ford ($F) just got to within seven cents of $17.

• IBM Is Looking Cheap
  Eddy Elfenbein, July 8th, 2013 at 10:06 am

  One thing investors hate is stocks with high nominal prices. This is a fear they should learn to overcome. With the advent of discount brokers, acquiring a small number of shares in a high-priced stock is hardly a burden.

  I’m beginning to like IBM ($IBM). Despite its $195 stock price, IBM is quite reasonable. The stock is currently going for less than 11 times next year’s earnings estimate. IBM was punished earlier this year after the company missed earnings for the first quarter.

  IBM has largely sat out the phase of the rally that began in October 2011. Over that time, the S&P 500 is up 49% while IBM is up just 12%. Check out this chart below and notice how IBM’s P/E Ratio (the bottom box) has trended downward while the rest of the market’s valuation has risen.

  

• Dollar Rises to Three-Year High Ahead of Bernanke
  Eddy Elfenbein, July 8th, 2013 at 9:11 am

  The stock market had an odd reaction to Friday’s strong jobs report. The S&P 500 opened higher, then lost ground, gained back some territory and rallied into the close. The index finished at 1,631 which is the highest close since June 18th. That was the day before Bernanke said that the Fed would start tapering, assuming the economy meets the Fed’s forecast.

  A number of Wall Street firms said that due to the jobs report, they expect the Fed to start tapering its bond buying at their September meeting. I had previously said this was unlikely, so I need to walk that back.

  According to the futures, the stock market looks to go higher this morning. Alcoa will kick off earnings season when it reports today. On Thursday, our big bank stocks, JPMorgan and Wells Fargo, are due to report. This Thursday, we’ll get a look at the minutes from the Fed’s meeting last month. The dollar, however, is getting a jump on the news by rising to a three-year high.

  This earnings season will be very important for the markets and the economy. Bloomberg notes that earnings growth for the S&P 500 rose 1.8% last quarter which was down from the 8.7% growth that has been expected six months ago.

  What’s interesting is that while Wall Street has been lowering earnings estimates, price targets have actually been rising. That translates to higher multiples which is often a function of confidence. If the Fed does in fact taper in September, they’ll only do it on the expectation that the economy will do well in 2014. Even after a furious four-year rally, valuations are still rather tame.

• Morning News: July 8, 2013
  Eddy Elfenbein, July 8th, 2013 at 6:46 am

  IMF’s Christine Lagarde Says May Trim Global Growth Forecast

  Japan’s Strong Bank Lending Can’t Mask Economic Challenges

  Quebec Rail Disaster Shines Critical Light On Oil-By-Rail Boom

  Oil Prices Higher in Asian Trade

  Losing $317 Billion Makes U.S. Debt Safer for Mizuho to HSBC

  Compliance Deadlines Loom for U.S. Global Tax Evasion Law

  Perry Capital Sues U.S. Treasury Over Fannie Mae Takeover

  SoftBank Cut to Junk by S&P After FCC Approves Sprint Deal

  Shazam Announces $40 Million Investment by America Movil

  Dell’s Leveraged Buyout With Silver Lake Backed by ISS

  A New Tool Aims to Help Facebook Users Dig Deep

  Glaxo Probes Complaint on China Sales of Botox

  Douglas J. Dayton, Target Stores’ Founding President, Dies at 88

  Jeff Miller: Weighing the Week Ahead: Will Earnings Measure Up?

  Howard Lindzon: Alpha in Your Eyes and Your Feet…

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