Author Archive

  • Goldman’s Earnings
    , March 13th, 2007 at 10:00 am

    Goldman Sachs (GS) was supposed to report lower earnings today. This was supposed to be the quarter when the party ended for the big Wall Street houses. Well, it didn’t happen. Or at least, it hasn’t happened yet.
    Goldman’s earnings blew away the Street’s estimates. The company earned $6.67 a share compared with $5.08 a share last year. That’s just amazing. Let me put that into context for you. Wall Street was looking for a decline to $4.89 a share. In fact, the highest estimate of any analyst was for $5.60 a share. Goldman still beat that by more than a dollar. This is the seventh straight quarter that Goldman has beaten earnings.
    After the company reported earnings two quarters ago, the stock rose for 12 straight days. On the 13th day, it fell by a penny a share. Then it continued to rise for 12 of the next fourteen days.
    Here’s a look at how the Big Five firms on Wall Street have done over the past four years:
    Brokers2.gif
    Notice how all the stocks started to take a hit recently. Investors were clearly bracing themselves for bad news. Also, Guy Moszkowski, a high-profile analyst at Merrill Lynch, recently downgraded several stocks in the sector.
    (You can also see why investors were so unhappy with Phil Purcell at Morgan.)
    Goldman is now going for about 10 times next year’s earnings. Lehman (LEH) reports tomorrow.

  • UnitedHealth to buy Sierra Health
    , March 12th, 2007 at 3:11 pm

    UnitedHealth (UNH) is making a move:

    Health insurer UnitedHealth Group Inc. said on Monday it will acquire Sierra Health Services Inc. for more than $2.4 billion to expand in the fast-growing Las Vegas area and boost its Medicare business.
    The deal shows UnitedHealth, the largest U.S. health insurer by market value, is continuing to broaden its reach by gobbling up rivals — and could signal a renewed round of consolidation throughout the sector.
    Piper Jaffray analyst Melissa Mullikin said Sierra would help UnitedHealth fill a gap in Nevada.
    “We definitely think it’s a positive for (UnitedHealth),” Mullikin said. “That’s a really desirable geography.”
    The $43.50 per share deal represents a 21 percent premium over Sierra’s closing price of $35.90 on Friday. As of Feb. 23, Sierra had 55.76 million shares outstanding, giving the deal a value of about $2.43 billion.

    Best of all, the deal is all cash.

  • Dollar General Goes Private Equity
    , March 12th, 2007 at 1:51 pm

    Yet another company is leaving the stock. Kohlberg Kravis Roberts said it’s going to buy Dollar General (DG) for $6.9 billion.
    Up until a few years ago, the stock had been a terrific long-term winner. Thirty-two years ago, the stock was going for about three cents a share (adjusted for many, many splits). In 1999, DG got to $26 a share but had a rough go of it after that. Last year, the shares got down to $12. KKR’s offer is for $22 a share.
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  • FactSet Research Systems Hits New High
    , March 12th, 2007 at 10:19 am

    Please don’t tell FactSet Research Systems (FDS) that we’re in a bear market. The stock just hit a new 52-week high. I’m not sure if it’s a “healthy” new high though.
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  • WWTDRWD
    , March 12th, 2007 at 7:26 am

    As soon as the stock market started to break, the first question on my mind was “what would the Detroit Red Wings Do”? Fortunately, we have the Detroit Free:

    Chris Osgood
    What’s your approach to investing? Pretty passive. I don’t take too many risks. So (the market) going down 400 wouldn’t affect me as much as someone else. I don’t really take that many risks.
    Why are you so conservative? I don’t want to lose my money unnecessarily. Not do anything I would jeopardize losing money for a stupid reason when I don’t need to.
    Is anyone in the locker room a big Wall Street Journal kind of guy? Not really. We used to have Brent Gilchrist. Mike Vernon was, Steve Yzerman knew quite a bit about it. There used to be a lot of guys in the ’90s that knew quite a bit. I haven’t seen the Wall Street Journal all year.

  • Surowiecki on the Correction
    , March 11th, 2007 at 7:17 pm

    In the New Yorker, James Surowiecki looks at the stock market’s recent unpleasantness. He agrees that faulting China is a weak excuse. But he raises an interesting point in that investors aren’t very good at assessing the impact of new information:

    In one famous experiment by the psychologist Paul Andreassen, investors who selected a portfolio of stocks and then saw nothing but the stocks’ changing prices managed their portfolios significantly better than investors who were also given a stream of news about the companies they’d invested in. The reason, Andreassen suggested, was that the media’s tendency to overplay stories led investors to place too much weight on news that turned out to be of only transient importance.

    Sometimes asking why the market falls is a fruitless task. It’s not a comforting thought, but the stock market can fall suddenly for little or no reason.

  • Buy List Year to Date
    , March 9th, 2007 at 5:23 pm

    We’re holding up well. Through Friday, the Buy List is down 0.63% for the year, while the S&P 500 is down 1.09% (not including dividends).
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  • Today’s Jobs Report
    , March 9th, 2007 at 10:20 am

    The unemployment rate fell to 4.5% for February, although it’s still above the 4.4% it reached in October. In the last 50 years, the current jobless rate is the 102nd lowest of 600 months.
    image431.png
    The economy added 97,000 jobs last month, and the job growth numbers for December and January were both revised higher. Here’s a look at non-farm payrolls:
    image432.png

  • Think Our Market Is Volatile
    , March 8th, 2007 at 4:09 pm

    Check out the Indian Sensex (the blue line):
    Sensex.png

  • Fedipus Rex
    , March 8th, 2007 at 1:09 pm

    Bloomberg writes on the growing rift between the current Fed and the former chariman:

    Former Federal Reserve Vice Chairman Alan Blinder said Alan Greenspan may be distracting investors from the Fed’s forecast that growth will strengthen this year.
    Greenspan, who was Fed chairman for almost two decades until Ben S. Bernanke took over 13 months ago, said at least three times in the past two weeks that a recession is possible. He didn’t say one was likely.
    “It is a little bit of a problem,” Blinder, now a professor at Princeton University in New Jersey, said in an interview. “He is sort of stepping on the message. The Fed’s message is things look pretty good and in particular we are not at all worried about a recession.”
    Current Fed officials are stressing that they don’t predict a recession, even after last week’s global equities plunge and a run of weaker-than-forecast economic data. Chicago Fed President Michael Moskow said in a speech today that he’s not prepared to significantly alter his forecast for a pickup.