Author Archive

  • Bed Bath & Beyond’s Earnings Report
    , June 21st, 2010 at 10:47 am

    This Wednesday, Bed Bath & Beyond (BBBY) is due to report its first-quarter earnings. This will be for the quarter that ended with the month of May.
    I’m a little anxious about this report. Up until last Wednesday, the stock had had a pretty good run. During the financial crisis, the shares got to as low as $16 in November 2008. They hit a peak of $48 earlier this year.
    The company is doing very well and BBBY has creamed earnings for the last few quarters, particularly the last five. But at this price, I can’t say that the stock is a screaming bargain. It’s a very good stock at a fair price, not a great price.
    The current consensus on Wall Street is that BBBY will earn 48 cents a share for Q1. That’s probably low but not by much. In April, the company gave a range of 44 to 48 cents per share. That’s a lowball. My expectation is that BBBY will earn 52 to 54 cents a share. I’m curious what they’ll say for Q2 expectations.

  • What’s the Best Stock of the Last 5 Years?
    , June 21st, 2010 at 10:35 am

    It’s up more than 10-fold.
    I’ll give you a hint: Shatner is involved.

  • The Cold War Is Officially Over
    , June 21st, 2010 at 9:40 am

    The BBC reports:

    Russia to drop capital gains tax to attract investment
    Russia will scrap capital gains tax on long-term direct investment from 2011, President Dmitry Medvedev has said.
    Mr Medvedev said that in terms of improving Russia’s investment climate “we, I hope, are moving forward”.
    He also said the number of “strategic” firms, in which foreign investment is restricted and which cannot be privatised, would fall from 280 to 41.

  • The Onion: White House Jester Beheaded For Making Fun Of Soaring National Debt
    , June 21st, 2010 at 9:33 am

    The rest of the media missed this one:

    WASHINGTON—After serving 12 years in the position, Motley, the official White House Jester, was beheaded Tuesday after delivering a poorly received jape about the spiraling national debt before President and Mrs. Obama.
    “For crimes of great arrogance and cheek, His Idiocy the White House Jester has been sentenced to a swift demise,” White House Press Secretary Robert Gibbs said following the death sentence. “Let it be heard over every city and suburb of this land that the National Debt is no topic for frivolity, and the mailed hand of Obama shall smite all offenders.”
    Motley, who used his last words to beg in vain for Obama’s mercy, was executed on the North Lawn at the strike of noon.

    (more…)

  • JoS. A. Bank Clothiers Declares 50% Stock Dividend
    , June 21st, 2010 at 9:19 am

    Joe Banks (JOSB) announced today a 50% stock dividend. In other words, that’s a three-for-stock stock split. If you own 200 shares, you’ll get another 100 and you can expect the share price to drop by 33% (yes, a 50% increase followed by a 33% drop brings you back to where you started).
    Ultimately, a stock split doesn’t mean anything to shareholder value. Companies say that do it to increase liquidity but that didn’t hold back Berkshire Hathaway (BRKA) for many years. In reality, these are nice press releases companies like to put out throughout the year. And JOSB has done well.

  • Market Looks to Rally on Yuan News
    , June 21st, 2010 at 9:14 am

    Good news this morning. The market will most likely get a lift today thanks to China agreeing to let the yuan rise against the dollar. I know currency news is as dull as dirt, but this time it matters. The Chinese currency is now at its highest level in two years and it had its biggest one-day gain in five years.
    Let me explain: China keeps a very tight leash on the yuan. Even though this was the biggest move since 2005, the rally was a lousy 0.42%. The Chicoms keep the yuan artificially low and that doesn’t sit well with the rest of the world, including me. One dollar will get you 6.7976 yuan. My take is that this was a just a nice gesture from China ahead of the next G-20 meeting.
    The good news for us is that Asian markets like the news a lot. Not surprisingly, the major airline stocks inside China some very good gains. The downside is that oil rose. This makes sense since investors think it will spur greater demand from China.
    Reuters lists some of the winners and losers from today’s move. The winners include automakers, consumers and tech, foreign heavy machinery makers, luxury firms and Chinese financials. The losers are foreign financials and commodity firms.
    fredgraph062110.png

  • No Follow Through
    , June 16th, 2010 at 9:11 am

    The frustrating thing about this market is that there’s zero follow through. Every time we try to rally, we seem to give it all back the next day. For 13 of the last 17 sessions, the market has closed in the opposite direction from the day before.
    From April 29 through June 1, the S&P 500 rose just eight times. The following day, every single time, the market closed lower. Since then, only two of the last five rallies have been followed by rallies and both were very modest (about 0.4%).
    The S&P 500 hasn’t had a three-day win streak in two months. It looks like we’re going have a lower open. Again.
    The only bright spot is over the last nine down days, seven have been followed by rallies.

  • Today’s Close
    , June 15th, 2010 at 5:58 pm

    We did it! The S&P 500 barely closed above the 200-DMA. The index is also up for the year — +0.012%!! With dividends, it’s up +0.93%.

  • Fighting the 200 DMA
    , June 15th, 2010 at 1:58 pm

    I’ve said before that I’m not a big fan of technical analysis. I make one small exception for looking at the market’s 200 day moving average.
    This is the simply the average of the closes for the previous 200 days. The 200 DMA does have a decent track record — when the market is above the 200 DMA, it tends to rally, below it, not so much.
    I think this is a good example of a dumb rule that works well (or well enough) for very smart reasons. The key is that the market tends to be a very trend friendly data series. Once things are set in motion, they tend to continue. At least, until they stop.
    I think the stock market is pretty cheap right now (but I caution you that my broad market calls aren’t so good), but it looks like investors aren’t ready for a rally. The S&P 500 has tried a couple of times to break out above its 200 DMA but each attempt has sputtered out.
    We just peaked above it again today. Let’s see if this is our turning point.
    big.chart061510.gif

  • “We Can Have the Financial Solvency To Take Hits If We Need To”
    , June 15th, 2010 at 12:33 pm

    In the interest of full disclose, I’ll tell you that I recently bought some shares of AFLAC (AFL) at a price of $42.77. I’ve said that I think it’s very underpriced so that shouldn’t be a big surprise.
    The stock is down on, I believe, overblown worries about its exposure to Europe. AFLAC’s CEO Dan Amos recently spoke with the crew at Motley Fool.

    Aflac’s bottom line is highly correlated with the returns it gets from investing the proceeds from its insurance business. Market volatility makes deciding where to invest a challenge.
    As a general rule, Amos said, the company tries not to invest more than $250 million in any one company or country — taking currency fluctuations into account. He said Aflac’s largest investment is in Japanese government bonds. The company invests roughly $20 million per day in Japan within its overall portfolio. (One out of every four households in Japan has an Aflac policy and 80% of Aflac’s earnings and invested income stems from Japan.)
    However, Japan doesn’t really have a market for long-dated maturities. “You can find them, but 20-year dated maturities are almost impossible to find,” said Amos. “So to match assets against liabilities, we ultimately had to go other places.”
    As such, Amos said, the company does have exposure to Europe via companies and country bonds, including the PIIGS countries: Portugal, Italy, Ireland, Greece, and Spain. Aflac owns shares in the top three banks in England, including Barclays (NYSE: BCS); the top three banks in Germany, including Deutsche Bank (NYSE: DB); and banks in other countries such as Spain. (You can view a list of Aflac’s European exposure here.)
    “So, we’ve spread our risk,” said Amos. “[But] it puts us in the light a lot of times because if someone says, ‘Do you own Greece?’ Yes, we own Greece. It’s part of the European common market. We thought that would be safe. So that’s what we’ve done.”
    But Amos said his main focus is whether a business’s or country’s bonds will continue to pay. “There can’t be what I call a ‘run on the bank’ in our business,” he said. “There are no cash values. So as long as those bonds are going to pay, then ultimately we’re in a very good position. And we can have the financial solvency to take hits if we need to because we made over $2 billion in profits this year.”

    Let me also add that Nicholas Financial (NICK) is currently going for $7.88 a share which is more than 5% below its book value.