Author Archive

• Nicholas Financial Earns 46 Cents Per Share
  Eddy Elfenbein, August 6th, 2013 at 11:38 am

  Nicholas Financial ($NICK) reports 46 cents per share for its fiscal Q1:

  Nicholas Financial, Inc. announced that for the three months ended June 30, 2013 net earnings increased 5% to $5,700,000 as compared to $5,407,000 for the three months ended June 30, 2012. Per share diluted net earnings increased 5% to $0.46 as compared to $0.44 for the three months ended June 30, 2012. Revenue was $20,476,000 for the three months ended June 30, 2013 as compared to $20,428,000 for the three months ended June 30, 2012.

  “Our results for the three months ended June 30, 2013 were positively affected by a non-cash gain related to interest rate swap agreements (mark-to-market) and were adversely effected by an increase in operating expenses,” stated Peter L. Vosotas, Chairman and CEO. During the June quarter we opened our fourth branch office in the South Florida market. “We will continue to develop additional markets and expect to open new branch locations during the remainder of our current fiscal year, which ends March 31, 2014.”

  These numbers look pretty good to me. It looks like NICK benefited about four cents per share after-tax thanks to the interest rate swap agreement. I can’t find the details yet because it looks like there’s been an accounting change which adds about $3 million to quarterly revenues. Overall, these results are basically what I was expecting, so that’s good news.

  Here’s a spreadsheet detailing detailing NICK’s last few quarters.

• Cognizant Beats By 10 Cents Per Share
  Eddy Elfenbein, August 6th, 2013 at 11:20 am

  The stock market is pulling back this morning. The S&P 500 is currently back below 1,700. Retail stocks are under heat today as American Eagle ($AEO) reported disappointing results. AEO is down about 16% on the day. Wall Street assumes that if one company in a sector is having trouble, then they all must be in trouble. As a result, shares of Ross Stores ($ROST) are also down today. ROST is currently down about 2%. The company will report its second-quarter earnings two weeks from tomorrow.

  The big economic news this morning is that the trade deficit dropped to $34.2 billion for June. That’s the lowest since October 2009. Exports rose 2.2% to $191.2 billion which is an all-time record. Imports fell 2.5% to $225.4 billion.

  This trade data will probably lead the number crunchers in the government to revise the Q2 GDP figures higher. The initial report said that the economy grew, in real terms, by a measly 1.7% for the June quarter. Today’s report suggests the GDP report could be revised as high as 2.5%. The next GDP report will come out at the end of the month.

  Dish Network ($DISH), the big rival of DirecTV ($DTV), reported lousy results for Q2. The company lost 78,000 customers in the quarter. There’s mounting pressure on DISH to sell itself to DTV. I don’t know if that will happen, but it’s definitely being talked about.

  The best news for us today is that Cognizant Technology Solutions ($CTSH) had a great earnings report, plus they raised full-year guidance. For Q2, CTSH earned $1.07 per share which was ten cents better than the estimates. Quarterly revenue rose 20.4% to $2.16 billion which was $30 million better than expectations.

  Cognizant now sees full-year earnings of at least $4.32 per share on revenue of $8.74 billion. That’s revenue growth of 19%. For Q3, CTSH sees earnings of $1.09 per share. Wall Street had been expecting $1.03 per share. Shares of CTSH are up about 2.86% today.

• Morning News: August 6, 2013
  Eddy Elfenbein, August 6th, 2013 at 6:23 am

  ECB Has Easing Bias, Not Out of Ammunition: Praet

  India’s Rupee Plunges to Record on Fed Concern; Bonds Decline

  RBA Shifts Toward Neutral After Cutting Rate to Record

  New Zealand Probes Fonterra Over Latest Tainted-Milk Scare

  Obama to Urge Congress in Speech to Shutter Fannie Mae and Freddie Mac

  Service Industries in U.S. Expand at Fastest Pace in Five Months

  MORGAN STANLEY: The Fed’s Decision To Taper In September Is Now Dependent On A Single Data Release

  Billionaires’ Latest Trophies Are Newspapers

  Sony Rejects Loeb’s Push For Spin Off Of Entertainment Unit

  Standard Chartered Net Income Falls 24% on Korea Writedown

  Munich Re Quarterly Profit Falls 35% on Disaster Claims

  Credit Agricole Rises; Profit Tops Estimate on Greek Exit

  Rich Milennials Think About Money Very Differently From The Rest of Us

  Cullen Roche: Following Gurus

  Joshua Brown: Where Are All the New Households?

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• The Long-Term CYC/SPX Ratio
  Eddy Elfenbein, August 5th, 2013 at 3:55 pm

  Last week, I pointed out that the ratio of the Morgan Stanley Cyclical Index to the S&P 500 was nearing a two-year high. On Friday, in fact, the ratio closed barely below its two-year high.

  How close? On Friday, the ratio closed at 0.75670; the ratio from this past March 18th was 0.75676. It’s hard to get much closer than that.

  What’s interesting is that a high ratio has traditionally meant trouble for the S&P 500. Since 1978, the entire gain of the S&P 500 has come when the Cyclical-to-S&P 500 ratio was below 0.6137 (the red line in the chart below). One-third of the time, the ratio has been above that mark, and the S&P 500 hasn’t, on net, made a dime over that time.

  

  We’re well above 0.6137 right now but I don’t believe this is a signal that the stock market is in trouble. For one, I hardly think the ratio is a good timing device. I think this is more of a sign that the very easy gains are gone. The lesson is that cyclicals get a double-whammy effect — they outperform in strong markets, and underperform in weak ones.

• Ford Can’t Make Its Cars Fast Enough
  Eddy Elfenbein, August 5th, 2013 at 8:11 am

  Despite the weaker-than-expected jobs report on Friday, the S&P 500 managed to close higher and make another all-time high close. The futures so far indicate a flat open for the major indexes. Stocks in Europe rose for the sixth day in a row.

  There’s been some interesting news in the bond market. Interestingly, it was exactly two years ago today that S&P made its foolish decision to cut the credit rating of the United States.

  But what’s caught my attention recently is that the spread between yields on the five- and ten-year Treasuries is the widest it’s been in two years. If the dollar were falling this would probably be troublesome, but with a stronger dollar the wider spread probably suggests that the market is expecting stronger growth in the U.S.

  Think of it this way: Treasuries will suffer as investors finally start to go back into riskier asset classes. That’s only natural. Bloomberg notes that “the cost to insure against default is the lowest since 2009, the dollar has risen the most since 2008 and the S&P 500 Index reached a record on Aug. 2.”

  

  At TheStreet.com, Ted Reed notes that Toyota outsold Ford in the U.S. last month because Ford can’t build its cars fast enough:

  In July, for the first time since March 2010, Toyota led Ford in U.S. auto sales, one more sign that Ford can’t make vehicles fast enough.

  Ford has inventory shortages of the Fusion and the Escape, top sellers in the midsize sedan and utility segments, and plans to resolve them with production increases this fall. Until then, the automaker is losing an uncounted number of sales because it doesn’t have enough product.

  In July, when U.S. light-vehicle sales rose 14%, Fusion sales fell 12% to 20,522 units and sales of Escape, the best-selling utility vehicle this year, rose just 3.6% to 22,343. During the month, Toyota — with light-vehicle sales in July of 193,394 — beat out Ford light-vehicle sales of 193,080.

• Morning News: August 5, 2013
  Eddy Elfenbein, August 5th, 2013 at 4:45 am

  China Services to Manufacturing Suggest Slowdown Stabilizing

  Berlusconi Turmoil in Italy Poses Threat to Euro-Crisis Lull

  Norway’s $740 Billion Oil Fund May Be Restructured, Solberg Says

  Topix Finds Friend in Bernanke as Abenomics Rally Slows

  Miners Return to Hedging as Gold Prices Lose Shine

  iPhone Reprieve Seen Aiding Apple Sales, Hurting Samsung

  GM China Sales Growth Accelerates to 11.1% on Demand for Buicks

  Embassies Hard Hit as HSBC Dumps Clients

  The Last Temptation of Tina Brown

  In Germany, Union Culture Clashes with Amazon’s Labor Practices

  Analysts: Time Warner-CBS Blackout Could Last Until September

  Bond Salesman Who Wasn’t Reveals RBS Human Errors

  Thinking With Waves

  John Hempton: The Bad Guys Won One This Time…

  Jeff Miller: Weighing the Week Ahead: A Vacation Snoozefest?

  Be sure to follow me on Twitter.

• Wise Words from Warren
  Eddy Elfenbein, August 4th, 2013 at 6:21 pm

• A Look Back at August 2011
  Eddy Elfenbein, August 2nd, 2013 at 11:57 am

  Here’s a look at what the market was doing two years ago from Gary Alexander:

  As we enter a new month this morning, we can look back at a healthy (+5%) July, year-to-date gains of nearly 20% and an astounding 154% rise in the S&P 500 since March 9, 2009. But perhaps the most amazing measuring rod is the 51% gain since the market collapsed so sharply in August of 2011.

  On August 2, 2011, Congress ended their month-long highly-contentious debt-ceiling debate when President Obama signed the Budget Control Act of 2011. The Dow fell 265.87 that day. Then, the Dow fell another 512.76 points on August 4, based on fears of the S&P downgrade of America’s credit rating. Then, over the next week, the Dow rose or fell by 423 points or more points in four consecutive days:

  Manic-Depressive Market Mood Swings, August 8-11, 2011
  Monday, August 8, Down 644.76, -5.55%
  Tuesday, August 9, Up 429.92, +3.98%
  Wednesday, August 10, Down 519.83, -4.62%
  Thursday, August 11, Up 423.37, +3.95%

  The S&P debt downgrade may explain the knee-jerk 645-point drop on Monday, August 8, but it does not explain the euphoria represented by two days of 420+ point gains on Tuesday and Thursday that week.

• Cyclical Index to S&P 500 Ratio Near Two-Year High
  Eddy Elfenbein, August 2nd, 2013 at 10:39 am

  

• We’re At the Peak of the Election Cycle
  Eddy Elfenbein, August 2nd, 2013 at 10:24 am

  I recently downloaded the entire history of the Dow going back to 1896 in order to compute what the average four-year election cycle looks like. The chart below is the result.

  The Dow has historically peaked on August 4th of each post-election year (a Sunday this year, and President Obama’s 52nd birthday). The low point has historically come on September 30th of the mid-term year. Over that 14 month span, the Dow has lost an average of 4.10%. During the other 34 months, the Dow has gained an average of 37.93%.

  

  Let me add that I would never base any investment decision on this kind of data. I merely think it’s interesting from an historical perspective.