Author Archive

  • Good Day for BBBY
    , April 7th, 2011 at 9:55 am

    Bed Bath & Beyond ($BBBY) opened at $54 per share.

  • AFLAC’s Silent Movie
    , April 7th, 2011 at 9:42 am

    I saw this commercial last night. It’s a smart way to continue with the ad campaign when the duck is voice-less.

  • Morning News: April 7, 2011
    , April 7th, 2011 at 7:05 am

    Euro Falls as Portugal Bailout Overshadows Rate-Increase Outlook

    Banks Rally as Portugal Seeks Aid, Talks Seen Quick

    German Industrial Production Rose More Than Forecast in February

    Bank of England Governor King Faces Isolation in Europe as ECB Prepares to Raise Rate

    The Dominoes Fall, As Spain’s Economic Minister Declares A Bailout Is “Absolutely Ruled Out”

    U.S. and Colombia Near Trade Pact

    Safe Haven Dubai Gains as Middle East Turmoil Disrupts Lives

    World Food Prices Seen Rebounding to Record After Grains Rally, UN Says

    Crude Oil Falls In Asia But Supply Concerns Persist

    Gold Down In Asia But Stays In Bull Mode

    Andreessen Horowitz Raises $200 Million Co-Investment Fund

    Cisco: What Went Wrong and What Needs to Be Fixed

    Blockbuster Auction Draws Liquidators

    The Money Network

    Joshua Brown: Long or Short Capital’s New Inflation Index

    Howard Lindzon: The TRUTH About Warren Buffett…GREAT Rolodex and Deep Pockets Always Win!

  • Bed Bath & Beyond Earned $1.12 in Q4
    , April 6th, 2011 at 4:25 pm

    Wow! Bed Bath & Beyond ($BBBY) had an outstanding earnings report for the fourth quarter. The company earned $1.12 per share which was much higher than their earlier guidance of 91 cents to 95 cents per share. It was also much higher than I had been expecting. Sales rose 11.6% to $2.505 billion.

    For the fiscal year ended February 26, 2011, the Company reported net earnings of $3.07 per diluted share ($791.3 million), an increase of approximately 33% over net earnings of $2.30 per diluted share ($600.0 million) a year ago. Net sales for fiscal 2010 were approximately $8.759 billion, an increase of approximately 11.9% from net sales of approximately $7.829 billion in the prior fiscal year. Comparable store sales for fiscal 2010 increased by approximately 7.8%, compared with an increase of approximately 4.4% last year.

    For fiscal 2011, the Company is modeling net earnings per diluted share to be approximately $.58 to $.61 for the fiscal first quarter and to increase by approximately 10% to 15% for the full year.

    Bed Bath & Beyond earned 52 cents per share in last year’s Q1, so today’s forecast translates to a growth rate of 11.5% to 17.3%.

    If earnings grow this year at a 10% to 15% rate, that comes out to a full-year forecast of $3.38 to $3.53 per share. Wall Street had been expecting $3.33 per share.

    Year-over-year operating margins and net margins have increased for eight straight quarters. Here’s BBBY’s trailing four-quarter EPS, with the company’s forecast in red.

    Here’s a look at BBBY’s quarterly numbers for the past few years:

    Quarter Sales Gross Profit Operating Profit Net Profit EPS
    May-99 $356,633 $146,214 $28,015 $17,883 $0.06
    Aug-99 $451,715 $185,570 $53,580 $33,247 $0.12
    Nov-00 $480,145 $196,784 $50,607 $31,707 $0.11
    Feb-00 $569,012 $238,233 $77,138 $48,392 $0.17
    May-00 $459,163 $187,293 $36,339 $23,364 $0.08
    Aug-00 $589,381 $241,284 $70,009 $43,578 $0.15
    Nov-01 $602,004 $246,080 $64,592 $40,665 $0.14
    Feb-01 $746,107 $311,802 $101,898 $64,315 $0.22
    May-01 $575,833 $234,959 $45,602 $30,007 $0.10
    Aug-01 $713,636 $291,342 $84,672 $53,954 $0.18
    Nov-02 $759,438 $311,030 $83,749 $52,964 $0.18
    Feb-02 $879,055 $370,235 $132,077 $82,674 $0.28
    May-02 $776,798 $318,362 $72,701 $46,299 $0.15
    Aug-02 $903,044 $370,335 $119,687 $75,459 $0.25
    Nov-03 $936,030 $386,224 $119,228 $75,112 $0.25
    Feb-03 $1,049,292 $443,626 $168,441 $105,309 $0.35
    May-03 $893,868 $367,180 $90,450 $57,508 $0.19
    Aug-03 $1,111,445 $459,145 $155,867 $97,208 $0.32
    Nov-04 $1,174,740 $486,987 $161,459 $100,506 $0.33
    Feb-04 $1,297,928 $563,352 $231,567 $144,248 $0.47
    May-04 $1,100,917 $456,774 $128,707 $82,049 $0.27
    Aug-04 $1,273,960 $530,829 $189,108 $120,008 $0.39
    Nov-05 $1,305,155 $548,152 $190,978 $121,927 $0.40
    Feb-05 $1,467,646 $650,546 $283,621 $180,980 $0.59
    May-05 $1,244,421 $520,781 $150,884 $98,903 $0.33
    Aug-05 $1,431,182 $601,784 $217,877 $141,402 $0.47
    Nov-06 $1,448,680 $615,363 $205,493 $134,620 $0.45
    Feb-06 $1,685,279 $747,820 $304,917 $197,922 $0.67
    May-06 $1,395,963 $590,098 $148,750 $100,431 $0.35
    Aug-06 $1,607,239 $678,249 $219,622 $145,535 $0.51
    Nov-07 $1,619,240 $704,073 $211,134 $142,436 $0.50
    Feb-07 $1,994,987 $862,982 $309,895 $205,842 $0.72
    May-07 $1,553,293 $646,109 $154,391 $104,647 $0.38
    Aug-07 $1,767,716 $732,158 $211,037 $147,008 $0.55
    Nov-08 $1,794,747 $747,866 $203,152 $138,232 $0.52
    Feb-08 $1,933,186 $799,098 $259,442 $172,921 $0.66
    May-08 $1,648,491 $656,000 $118,819 $76,777 $0.30
    Aug-08 $1,853,892 $739,321 $187,421 $119,268 $0.46
    Nov-08 $1,782,683 $692,857 $136,374 $87,700 $0.34
    Feb-09 $1,923,274 $785,058 $231,282 $141,378 $0.55
    May-09 $1,694,340 $666,818 $142,304 $87,172 $0.34
    Aug-09 $1,914,909 $773,393 $222,031 $135,531 $0.52
    Nov-09 $1,975,465 $812,412 $245,611 $151,288 $0.58
    Feb-10 $2,244,079 $955,496 $370,741 $226,042 $0.86
    May-10 $1,923,051 $775,036 $225,394 $137,553 $0.52
    Aug-10 $2,136,730 $874,918 $296,902 $181,755 $0.70
    Nov-10 $2,193,755 $896,508 $305,110 $188,574 $0.74
    Feb-10 $2,504,967 $1,076,467 $461,052 $283,451 $1.12

  • The Middies Rule!
    , April 6th, 2011 at 12:48 pm

    Here’s something odd. The top-performing size category has been the mid-caps.

    On the chart below, the black line is the S&P 400 Mid-Cap Index ($MID). The middies have outpaced the blue line which is the S&P 600 Small-Cap Index ($SML). The monster-cap S&P 100 ($OEX) in red trails everyone.

    I say that this is odd because the middies are rarely at the extreme. They can usually been found mid-way between whatever the large-caps and small-caps are doing.

  • Trading Volume at Citigroup
    , April 6th, 2011 at 11:17 am

    If you ever want to check some insane numbers on Wall Street, look at trading volume for Citigroup ($C). This is the usually the most-traded stock each day. The trading volume isn’t just high, it’s amazingly high.

    There are two main reasons for Citi’s huge volume. One is that the share price is low (currently $4.51, though it once was $57) and the other is that Citi has 29 billion shares outstanding. This makes Citi a favorite for day traders and high-frequency traders.

    Average daily volume for Citi usually runs around 500 million shares. Since the financial crisis broke, Citi’s volume has topped one billion shares in a single day 60 times. Last December, when the government said it was ditching the last of its Citi stock, the total volume topped 3.2 billion in a single day. Over a trading day, that’s an average of 140,000 shares per second.

    The trading bonanza must come to a close soon as Citi said it will have a 1-for-10 reverse stock split. This means that shareholders will have one-tenth as many shares but the price will increase by ten-fold.

    I’ll be curious to see if trading volume drops by far more than one-tenth. I bet it will.

  • Rising Inflation Expectations
    , April 6th, 2011 at 10:29 am

    One of the criticisms we hear from bearish investors is that the Federal Reserve has set us up for massive inflation. Personally, I tend to be pragmatic on these issues. If there is inflation coming, it’s certainly hiding itself well. While commodity prices are on the rise, we have yet to see a large surge in consumer prices. That may change soon.

    But I’m not concerned with the political implications of inflation — hyper or not. I’m much more concerned with inflation’s impact on equity prices.

    The danger of inflation is that it hurts bond prices and that, in turn, hurts stock valuations. Generally speaking, inflation doesn’t impact the stock market until it reaches a 5% annualized rate.

    Once inflation passes 5%, stocks have historically been lousy investments. The only thing worse than inflation is deflation. What the market likes best is a low, boring rate of inflation.
    One of the goals of the Fed’s policies has been to increase the market’s inflation expectations. The chart below shows the spread between the yield on the 10-year Treasury bond and the yield on the 10-year TIPs. In other words, this is the market’s view on the inflation premium.

    Since last summer when the Fed announced QE2, the inflation premium has risen about 100 basis points. That’s a big rise. According to the market, however, inflation is far from being problem. For now.

    I’m not always willing to accept the market’s judgment as correct. I find it very curious that the market doesn’t see much acceleration in the inflation premium.

    While the spread between the 10-year Treasury and the 10-year TIPs is about 256 basis points, at five years, it’s only 232 basis points. That means the market expects inflation of 2.32% for the next five years and then 2.8% for the five years after that. That seems very optimistic.

  • Morning News: April 6, 2011
    , April 6th, 2011 at 7:26 am

    Euro Appreciates Before ECB Rates Meeting; Yen Falls on BOJ Stimulus Bets

    Basel Develops Method to Identify Banks Posing Systemic Risk

    European Central Bank: This Time, Politicians Content With Rate Rise

    Toyota May Be Downgraded by Moody’s After Japan Earthquake

    Contrarian Adding Bets in Mideast

    Gold Climbs to Record in ‘Flight to Safety’ as Silver Reaches 31-Year Peak

    Bernanke Faces Possible Fed Split on Maintaining Stimulus

    Treasurys Rise Amid Debate On Fed; FDIC Rule Adds To Buying

    Global Miner Rio Tinto Secures 49.49% Stake in $4 Billion Bid for Riversdale Mining

    Pringles: Once a Great Flop, Now Sold for Billions

    Dish Network Wins Blockbuster Auction With $320 Million Bid

    Commerzbank to Repay $20.4 Billion of German Bailout

    Chambers Vows ‘Fix’ as Cisco Stumbles

    Sbarro Files for Chapter 11 Protection

    Joshua Brown: So Many Black Swans that Only the White Ones are Rare

  • Nicholas Financial Opens Two New Branches
    , April 5th, 2011 at 11:05 am

    Here’s the latest press release:

    Nicholas Financial, Inc. today announced the opening of two (2) new branch offices located in St. Louis, Missouri and Villa Park, IL, a Chicago area suburb. The new offices are Nicholas Financial’s first entries in both major metropolitan areas and continues the Company’s planned expansion of its branch office network, which now includes, fifty-six (56) offices in Florida, Alabama, Georgia, Kentucky, Indiana, Maryland, Michigan, North Carolina, Ohio, South Carolina, Tennessee, Virginia, Illinois and Missouri.

    Nicholas employees have been working to develop business in each area for several months prior to the opening of the new locations. Each of the offices is a full-service lending and collection facility. Nicholas Financial acquires and services automobile and light truck installment sales finance contracts that it purchases from new and used car dealers.

    According to Douglas Marohn, Senior Vice President, “We are reaping rewards from the performance of our branch business model in the Midwest. We intend to add additional branches in our new Missouri and Illinois markets as soon as they can be developed. Our success in Ohio, Michigan and Indiana has convinced us that the opportunity for successful growth in these markets is excellent.”

    NICK’s business is traditionally heavily weighted towards Florida. The company is somewhat limited in its ability to expand since state laws vary on permissible chargeable interest.

  • Oracle’s Weighting Will Double in Nasdaq 100
    , April 5th, 2011 at 10:27 am

    The Nasdaq 100 Index ($QQQ) is one of the most important indexes for tech investors. The index represents the 100 largest non-financial stocks on the Nasdaq. One of the problems with the Nasdaq 100 is that Apple ($AAPL), which I believe is some sort of fruit company, currently represents more than one-fifth of the entire index.

    Such a heavy weighting isn’t good for any index and it’s greatly disproportionate to Apple’s market value. As a result, the Nasdaq has announced that it’s rebalancing the Nasdaq 100.

    This rebalancing will shift Apple’s weighting from 20.49% to 12.33%. This will have a big impact on the market since tons of ETFs own Apple, and the $QQQ ETF is one of the most popular investments on Wall Street.

    While Apple will be a big loser in the rebalancing, one of the big winners will be our very own Oracle ($ORCL). The Nasdaq 100’s weighting for Oracle will more than double from 3.3% to 6.7%. You can see the full details of the rebalancing here.