Sprint Nextel Is a Financial Black Hole
Posted by Eddy Elfenbein on March 29th, 2011 at 1:31 pm

Check out some of these numbers on Sprint Nextel ($S):

The company is a money-losing machine. Wall Street expects Sprint to lose another 80 cents per share this year and 59 cents per share next year.

Looking at the S&P 500’s Valuation
Posted by Eddy Elfenbein on March 29th, 2011 at 12:44 pm

Thanks to the mini-pullback following the Japanese earthquake, the S&P 500 hit a closing low of 1,256.88 on March 16th, which is a P/E Ratio of 14.62.

In the chart below, the S&P 500 and its earnings are scaled at a ratio of 16-to-1 since 16 seems to be the best value for a long-term earnings multiple. We actually haven’t been as high as 16 since last May.

For 2010, the S&P 500’s earnings were $83.76 which was a 47% increase over 2009. For 2011, Wall Street’s current consensus is for earnings of $96.23. With a P/E Ratio of 16, that gives us a year-end possible target of 1,539.28. That’s a 17.5% rally from yesterday’s close.

So That’s What It Got Us
Posted by Eddy Elfenbein on March 29th, 2011 at 12:10 pm

AP: March 29, 2011

Pentagon: Libya mission has cost US $550 Million so far

NYT: July 15, 2010

Goldman Pays $550 Million to Settle Fraud Case

The Yen’s Impact on the Stock Market
Posted by Eddy Elfenbein on March 29th, 2011 at 10:17 am

Here’s a look at the yen’s impact on the stock market. More correctly, I should say this is a look at how the yen is correlated with the U.S. stock market.

I looked at all the daily market activity from 1989 through 2010 and then I annualized what the stock market did on days when the yen rose against the dollar and on days when it fell against the dollar. The results are below.

As you might expect, the movement of the currencies has the least impact on domestic-oriented sectors like staples and healthcare, but it has a big impact on areas like tech and finance.

Today’s Case-Shiller Index
Posted by Eddy Elfenbein on March 29th, 2011 at 9:22 am

The latest Case-Shiller numbers came out this morning. This is a home-price index. There’s a bit of a lag in these numbers, so today’s report covers January.

The bottom line is that home prices aren’t doing much of anything. In fact, they’re backsliding some. Below are the seasonally-adjusted numbers for the Case-Shiller’s 10 City Index and for their 20 City Index. The 10-City numbers go back to 1987. Both indexes have declined for the last seven months in a row.

The 10-City Index is currently just 2.2% above its recent low from May 2009. The 20-City Index is less than 1% above its level from that same month.

Both indexes peaked in April 2006 and both are currently down 31% since then.

It’s odd, but I remember when folks thought the home price decline of the early 90s was severe. The chart shows us that this decline was nothing compared to what was going to happen.

Morning News: March 29, 2011
Posted by Eddy Elfenbein on March 29th, 2011 at 7:12 am

In Brazil, No Room for Leverage at Buyout Firms

Crude Oil Trades Near One-Week Low in New York as Libyan Rebels Make Gains

Gold Drifts Lower In Subdued Asian Trade

Amber Waves to Ivory Bolls

U.S. Stock Futures Rebound; Halliburton Drops on Middle East

Fed’s Bullard Says QE2 Exit Debate Likely ‘Key’ 2011 Issue

One Sign That The Housing Bust Could End Soon

World Events Affect Your Mortgage Rate

Exemptive Relief Update: Russell Pulls Out, Janus Pledges Transparency

AT&T Outguns Sprint in Lobbying

EBay scores over Amazon, Acquires GSI for $2.4-billion

Hutchison Profit Beats Estimates on 3G Sales, Retail Chains

Paul Kedrosky: Calling a Top to the Tech Bubble: June 17, 2013 at 10:17 a.m. (EST)

Joshua Brown: Bernanke Represent

Howard Lindzon: Ebay and The Telephone are Cool Again…WTF!

New High for JOSB
Posted by Eddy Elfenbein on March 28th, 2011 at 10:31 am

The stock market is up in early trading so far. It seems like a fairly quiet day on Wall Street. One of our Buy List stocks, Jos. A Bank Clothiers ($JOSB), is doing quite well and is at a new 52-week high. JOSB is a 20% winner for us on the year so far.

Reynolds American ($RAI) is also doing well; the stock came within three pennies of hitting a new 52-week high this morning. Even with the higher share price, RAI still yields 6.2%.

We had some decent economic news this morning. Consumer spending rose 0.7% last month which was an increase from 0.3% in January. Personal income rose by 0.3% so people are saving less.

It’s still early but the S&P 500 may close today at a three-week high.

Morning News: March 28, 2011
Posted by Eddy Elfenbein on March 28th, 2011 at 7:05 am

European Central Bank’s Nowotny Sees Monetary Policy ‘Normalization’

Most European Stocks Rise as Alcatel, Nokia Climb; Porsche Drops

Ireland Seeks to Force Losses on Banks’ Senior Bondholders

Egypt Rallies Most Since 2009 on Speculation Drop Overdone

People’s Bank of China to Sell 99 Billion Yuan 1-yr Bills, Most In a Year

Once Again, World Markets Are Rallying, And Totally Ignoring All The Crises

Oil Drops for a Third Day Following Victories By Libyan Rebels

Dollar Strengthens Before Spending Data on Fed Easing Concern

Investing Like It’s 1999

Sinopec 2010 Net Rises 14%, Curbed by State Anti-Inflation Efforts on Fuel

Glencore to Seek Hong Kong IPO Approval This Week

Philips Loss From Television Swells as Price Pressure Mounts

Porsche, Schaeffler Sell $9.6 Billion in Stock to Reduce Debt

Howard Lindzon: The ONLY ‘Bubble’ is at The Government and Federal Reserve

Joshua Brown: Reality Check for the Big Bounce

Buffett In India
Posted by Eddy Elfenbein on March 27th, 2011 at 1:00 pm

The investing guru is touring India and charming them with his folksy wisdom:

At one point, Mr. Buffett said Berkshire Hathaway kept about $10 billion in cash on hand just in case “Ben Bernanke runs off to South America with Lindsay Lohan,” a remark that of course drew laughter. “We have to be prepared for anything.”

Barron’s on Oracle
Posted by Eddy Elfenbein on March 26th, 2011 at 6:39 pm

In today’s Barron’s, Miriam Gottfried explains why Oracle ($ORCL) kicks ass:

Fourth-quarter guidance was strong with management forecasting above-consensus revenue, new software licenses and earnings for the seasonally strong close to the year. Analysts say margins could come in at peak levels of 51%—reached before the 2010 acquisition of Sun Microsystems—over the next several years as businesses continue to ramp up spending. That Sun acquisition appears to be paying off, much to the surprise of numerous skeptics, driving sales of hardware without damaging margins.

Oracle offers a squeaky clean balance sheet with $9.7 billion, or $1.87 a share, in cash. And to top it off, shares trade at a reasonable 14.5 times projected-forward earnings.

“Oracle’s engineered systems are resonating (50% sequential-Exadata growth), enterprise application spending is firmly back, and gross and operating margins continue to positively surprise,” wrote Ross MacMillan, an analyst with Jefferies & Co.

(…)

Oracle shares have historically outperformed in June as investors anticipate strong fourth-quarter results, according to Citigroup analyst Walter H. Pritchard.

“Shares trade at a 10% premium to the S&P versus a historical ceiling of 20%, leaving some room for multiple expansion,” he wrote in a note. “We’d continue to buy as we see trends as sustainable, seasonal strength on tap and headroom to valuation.”

We would follow that advice and snap up some Oracle shares on the promise of a profitable, growth-fueled future.