• Lies, Damn Lies and Government Statistics
    Posted by on April 17th, 2010 at 2:24 pm

    Wall Street is a place that runs on numbers. But, as Carl Bialik explains in his most recent column, the numbers that we get from the government are far fuzzier than many people realize.
    For example, when the government tells us how many jobs were created or lost last month, it’s really just an estimate—and a very broad estimate at that. The most recent report said that 134,000 jobs were lost during February, but the Bureau of Labor Statistics really only says that it’s 90% confidence that actual number was somewhere between a loss of 500,000 and a gain of 200,000. That’s an enormous spread.
    A lot of people like to blame the government or cite a political agenda. Sure, that’s certainly there, but even without it, collecting economic stats is a tricky business. The national economy consists of millions and millions of people making many decisions every day. It’s hard to boil down something so complex to just a few hard numbers.
    There’s another issue of the government making countless revisions to its data. The GDP growth figure for the third quarter of 1983 has been revised ten times since it first came out. The most recent revision was just a few months ago.
    This is why the data I like to rely most is price data from the markets—stock prices, bond yields, spreads and commodity prices. Of course, marker prices have their own biases as well.
    When you face the fact that so much time and energy goes into debating the economy, and truthfully we can’t say what it’s doing with a high degree of confidence, it’s rather disquieting. Imagine watching a football game and neither you nor anyone else has any idea what the score it. That’s a lot of economics.

  • Friday Is Here
    Posted by on April 16th, 2010 at 4:41 pm

    OK, folks. I’ve had enough of Goldman Sachs, the SEC and CDOs for one day. The market is closed, the weather is great outside, time to enjoy the day.
    Who else but the Boss can cure your Friday blues?

  • G-Day Sell-Off
    Posted by on April 16th, 2010 at 4:34 pm

    Overall, I have to say that I’m not terribly impressed with the SEC’s case against Goldman Sachs (GS). Perhaps there’s more to it, but it seems pretty weak to me. My guess is that Goldman will eventually write a $200 million check to the feds, maybe less. To add some perspective, GS lost about $12 billion in market cap today. That could buy the New York Times (NYT) more than six times over.
    Today was another good day for the Buy List. By that, I mean we did less worse than the rest of the market. The S&P 500 dropped below 1,200 to close at 1192.13 for a loss of -1.61%. The 20 stocks on the Buy List lost an average of 0.91%. That’s a very nice outperformance for one day. For the year, the Buy List is up 13.05% (not including dividends) compared with the S&P 500’s gain of just 6.91%.
    Nicholas Financial (NICK) got to another new high of $8.67 although it closed down slightly. Of our 20 stocks, only Gilead Sciences (GILD) and Wright Express (WXS) were up today. Wright had been one of our laggards but it woke up this past week. The stock is at a new 52-week and it’s due to report earnings on April 27. Here’s a list of some of our upcoming earnings reports.

  • Hawkins Inc. (HWKN)
    Posted by on April 16th, 2010 at 1:30 pm

    I often encourage investors to seek out smaller, underfollowed companies. It’s hard to get an edge on Wall Street when you’re buying a stock that’s followed by 30 or more analysts. In fact, there are tons of high-quality companies that are completely ignored by Wall Street.
    If you do a little homework, you can be as well-informed as anyone on a small stock. Most investors never think of calling the company and asking questions. Well, you’re the owner! You’re certainly allowed. A lot of times, good companies are more than happy to discuss their business. (How often does someone call you asking about your job?)
    One company that I’ve followed for many years is Hawkins Inc. (HWKN). Talk about unloved! Barely anyone follows widdle Hawkins. Yet, this has been an outstanding stock for decades! (BTW, I’m not recommending the stock. I’m just using them as an example.)
    Hawkins is a specialty chemical company based in Minnesota. So if you’re in, say, Fargo and you need a shipment of sodium hydroxide, well..these are the boys to call. They’ve been around for many years and the company is largely in family hands. They do what they do, and they do it well.
    The odd thing about Hawkins is that they used to split their stock almost every, but by small amounts. You’d get a 10%, 15% or 20% stock dividend each year. As a result, the nominal share and dividend price didn’t move much, but the stock really did very well.
    Here’s a look at Hawkins’ long-term performance. That flat line is the S&P 500, meaning HAWK beat the market so badly that you can barely see it in comparison. For another comparison, the blue line is Coca-Cola (KO).
    big.chart041610a.gif
    20,000 Freakin’ Percent! In specialty chemicals! The historical return is even better since Hawkins has probably averaged a higher dividend yield over time. Yet, no one has heard of these guys.
    The stock has become a lot more popular recently, but even two years ago, the shares would occasionally spend an entire day without seeing a single trade. There was an 18-month stretch around 2004-05 when the stock didn’t leave $12 a share.
    Owning a stock like Hawkins is about as close as you can get to being in private equity but actually own a publicly traded stock. Shares of Hawkins trade very little and the volatility is exceptionally low. To many investors, that’s a bad thing. Not to me.

  • Breaking: Goldman Plunges on SEC Investigation
    Posted by on April 16th, 2010 at 10:56 am

    Shares of Goldman Sachs (GS) are getting smacked on the news that the SEC is investigating the firm. Here’s the complaint from the SEC. Can you guess when the news came out?
    big.chart041610.gif
    I’ve looked through this and it’s not nearly as bad as it appears. At most, I’m guessing Goldman will have to pay a fine. I share Henry Blodget’s take.

  • Friday Morning News
    Posted by on April 16th, 2010 at 8:43 am

    BofA reports earnings of $3.2 billion. They’re getting better but they’re far from strong.
    GE beat their estimates! Their horrible, horrible estimates.
    UnitedHealth’s CEO bags $100 million from stock options. Yes, $100 million!
    Oracle (ORCL) is buying Phase Forward (PFWD). Expect more of these buys. Larry has $17 billion in cash to play with.
    Barbie pushes Mattel (MAT) to a profit of seven cents a share. They lost 14 cents a share a year ago. Math is apparently getting easier.
    Good news: Sony Ericsson makes profit of 21 million. Bad news: In euros.
    Goldman Sachs (GS) director is stepping down.Too insider tradery.
    Housing permits rose more than expected last month.

  • Money Magazine’s Best Buy-and-Hold Blogger
    Posted by on April 16th, 2010 at 8:05 am

    Money Magazine has just come out with a list of the 100 Best Moves You Can Make With Your Money. I’m honored to be named at #5 — the Best Buy-and-Hold Blogger.
    If you’re new to the site, you can read more about us here, and be sure to check out our Buy List here. We’re well on our way toward beating the market for the fourth straight year! You can also follow us on Twitter here.

  • Proxy Battle Forming at Denny’s
    Posted by on April 15th, 2010 at 2:39 pm

    I have to admit that I’m not a big fan of Denny’s (DENN), but I’m almost always sympathetic to any proxy battle. There aren’t nearly enough of these.
    Stock certificates aren’t just pieces of paper, they’re legal ownership in a company. If the owners don’t like how the company is being run, they have every right to try and make a change. The incumbent board usually acts offended by a proxy battle which I never understand.

    Spartanburg-based Denny’s Corp. issued a scathing response Wednesday to a group of investors waging a proxy fight against the company’s executive leadership.
    In a letter to shareholders, Denny’s slammed members of the Committee to Enhance Denny’s, saying they are “playing fast and loose with the truth,” and pursuing their own personal interests rather than the company’s.
    On Tuesday, the group issued its own letter to shareholders more than a month after first publicizing its views in a news release. The letter blasted leadership on a number of issues, including the company’s declining stock price, drop in guest traffic, failure to grow system-wide restaurants and ceding the top market spot to competitor IHOP.
    “To this date, there still has been no formal communication from this group despite the fact that the company proactively reached out to them directly in response to their public filings,” Denny’s said in its letter. “Instead, these very recent stockholders chose to launch a costly and distracting hostile proxy contest in the hopes of changing the company’s course to pursue actions that we believe serve only their own narrow interest and not those of Denny’s stockholders.”
    Led by investment firms Oak Street Capital Management and Dash Acquisitions, the group owns 6.3 percent of the company’s outstanding shares.
    Shareholder voting rights allows for investors to state their case for change once they obtain 5 percent interest.

  • The New Fortune 500 List Is Out
    Posted by on April 15th, 2010 at 2:05 pm

    Walmart (WMT) edges out ExxonMobil (XOM) for the #1 spot. Here are the Top 100 ranked by revenues:

    1 Wal-Mart Stores 408,214.00
    2 Exxon Mobil 284,650.00
    3 Chevron 163,527.00
    4 General Electric 156,779.00
    5 Bank of America Corp. 150,450.00
    6 ConocoPhillips 139,515.00
    7 AT&T 123,018.00
    8 Ford Motor 118,308.00
    9 J.P. Morgan Chase & Co. 115,632.00
    10 Hewlett-Packard 114,552.00
    11 Berkshire Hathaway 112,493.00
    12 Citigroup 108,785.00
    13 Verizon Communications 107,808.00
    14 McKesson 106,632.00
    15 General Motors 104,589.00
    16 American International Group 103,189.00
    17 Cardinal Health 99,612.90
    18 CVS Caremark 98,729.00
    19 Wells Fargo 98,636.00
    20 International Business Machines 95,758.00
    21 UnitedHealth Group 87,138.00
    22 Procter & Gamble 79,697.00
    23 Kroger 76,733.20
    24 AmerisourceBergen 71,789.00
    25 Costco Wholesale 71,422.00
    26 Valero Energy 70,035.00
    27 Archer Daniels Midland 69,207.00
    28 Boeing 68,281.00
    29 Home Depot 66,176.00
    30 Target 65,357.00
    31 WellPoint 65,028.10
    32 Walgreen 63,335.00
    33 Johnson & Johnson 61,897.00
    34 State Farm Insurance Cos. 61,479.60
    35 Medco Health Solutions 59,804.20
    36 Microsoft 58,437.00
    37 United Technologies 52,920.00
    38 Dell 52,902.00
    39 Goldman Sachs Group 51,673.00
    40 Pfizer 50,009.00
    41 Marathon Oil 49,403.00
    42 Lowe’s 47,220.00
    43 United Parcel Service 45,297.00
    44 Lockheed Martin 45,189.00
    45 Best Buy 45,015.00
    46 Dow Chemical 44,945.00
    47 Supervalu 44,564.00
    48 Sears Holdings 44,043.00
    49 International Assets Holding 43,604.40
    50 PepsiCo 43,232.00
    51 MetLife 41,098.00
    52 Safeway 40,850.70
    53 Kraft Foods 40,386.00
    54 Freddie Mac 37,614.00
    55 Sysco 36,853.30
    56 Apple 36,537.00
    57 Walt Disney 36,149.00
    58 Cisco Systems 36,117.00
    59 Comcast 35,756.00
    60 FedEx 35,497.00
    61 Northrop Grumman 35,291.00
    62 Intel 35,127.00
    63 Aetna 34,764.10
    64 New York Life Insurance 34,014.30
    65 Prudential Financial 32,688.00
    66 Caterpillar 32,396.00
    67 Sprint Nextel 32,260.00
    68 Allstate 32,013.00
    69 General Dynamics 31,981.00
    70 Morgan Stanley 31,515.00
    71 Liberty Mutual Insurance Group 31,094.00
    72 Coca-Cola 30,990.00
    73 Humana 30,960.40
    74 Honeywell International 30,908.00
    75 Abbott Laboratories 30,764.70
    76 News Corp. 30,423.00
    77 HCA 30,052.00
    78 Sunoco 29,630.00
    79 Hess 29,569.00
    80 Ingram Micro 29,515.40
    81 Fannie Mae 29,065.00
    82 Time Warner 28,842.00
    83 Johnson Controls 28,497.00
    84 Delta Air Lines 28,063.00
    85 Merck 27,428.30
    86 DuPont 27,328.00
    87 Tyson Foods 27,165.00
    88 American Express 26,730.00
    89 Rite Aid 26,289.50
    90 TIAA-CREF 26,278.00
    91 CHS 25,729.90
    92 Enterprise GP Holdings 25,510.90
    93 Massachusetts Mutual Life Insurance 25,423.60
    94 Philip Morris International 25,035.00
    95 Raytheon 24,881.00
    96 Express Scripts 24,748.90
    97 Hartford Financial Services 24,701.00
    98 Travelers Cos. 24,680.00
    99 Publix Super Markets 24,515.00
    100 Amazon.com 24,509.00

  • Happy Tax Day
    Posted by on April 15th, 2010 at 10:56 am

    Here are some Tax Day deals to enjoy:
    Subway is coming to the rescue with Customer Appreciation Day. Buy one footlong sandwich and get one for FREE today.
    PF Chang’s is giving you a break by taking 15% off your food bill today.
    Bring in your own reusable mug and Starbucks will fill it up for FREE with their brewed coffee
    Cinnabon is giving out 2 FREE cupcake bites to every customer from 6pm to 8pm on Tax Day (while supplies last).
    Staples is offering 30 pages of FREE tax return copies. Staples is also offering free on-line expert tax advice.
    Whole Foods is offering to pay customers’ sales tax. The tax-free shopping day is a first-time event for the Southern region.
    Barry Ritholtz points us to a document from the IRS detailing what the taxes the Top 400 earners pay. To make the cut in 2007, you needed a minimum income of $138.8 million.