• Historical Footnote to Today’s Election
    Posted by on November 3rd, 2009 at 10:57 pm

    Today is Election Day in New York and after 34 years in office, 90-year-old Robert Morgenthau did not seek reelection as Manhattan’s District Attorney. It’s an understatement to say that Morgenthau is a legend in New York politics. Consider that he ran for governor 47 years ago when he lost to Nelson Rockefeller. Obama was a little over one-year old at the time! Morgenthau tried running again in 1970 but his campaign didn’t get far.
    Morgenthau also comes from a very prominent New York family. His father was FDR’s Treasury Secretary, and his grandfather was Wilson’s ambassador to—not Turkey—but the Ottoman Empire (or if you prefer, the Sublime Porte). Henry Morgenthau Sr. is probably best known for publicizing the Armenian Genocide.
    Also, on the TV show Law & Order, the elderly DA Adam Schiff is based on Robert Morgenthau.

  • Berkshire Hathaway to Split 50-for-1
    Posted by on November 3rd, 2009 at 10:47 am

    It finally happened. Warren Buffett’s Berkshire Hathaway (BRKB) announced that it will split 50-for-1. These are the B shares, not the A shares which are still around $100,000.
    The Class A and B shares usually trade at a ratio of 30-to-1. If you own the Class A shares, you can convert it into 30 B shares, but not the other way around. The B shares, however, only carry 1/200th the voting power of the A shares.
    In other words, post-split, the B shares will be about 1/1500th of the A shares. Going by today’s price, the B shares will be around $65.

  • Cognizant Technology Rises on Earnings
    Posted by on November 3rd, 2009 at 10:45 am

    One today after saying that I’m probably going to ditch Cognizant Technology (CTSH) at the end of the year, the company comes out with great earnings.
    For the third quarter, CTSH earned 48 cents a share which creamed Wall Street’s estimates of 41 cents a share. For the fourth quarter, the company sees EPS of 49 cents a share.
    The company now expects earnings for this year of $1.88 a share. That means that it’s going for 22 times earnings which is a bit rich for me.

  • Thoughts on Next Year’s Buy List
    Posted by on November 2nd, 2009 at 12:38 pm

    Around mid-December, I’ll unveil the Buy List for 2010. As usual, I’m only planning on making minor changes. My goal of this site is to prove that investors can beat the stock market by not doing much. With investing, your laziness is often your best friend.
    I try to make sure that my changes aren’t a big surprise so I’ll share with you some of my thoughts about the Buy List. Some of the stocks that I’m considering cutting are Amphenol (APH), Cognizant (CTSH), Donaldson (DCI), Danaher (DHR) and Moog (MOG-A). Both DCI and DHR have been on the Buy List since the beginning.
    Stocks I’m considering adding include Johnson & Johnson (JNJ), Pfizer (PFE), Abbott Labs (ABT) and WR Berkley (WRB). WRB was on the Buy List in 2006 and 2007. These are just ideas so I may change my mind before I make the 2010 Buy List official in a few weeks.

  • Sysco Beats by a Penny
    Posted by on November 2nd, 2009 at 10:55 am

    This morning, Sysco (SYY) reported fiscal Q1 EPS of 46 cents, one penny ahead of expectations. The results don’t include an 11-cent tax benefit.
    I like Sysco’s business because it’s remarkably stable. However, this is the fourth straight year-over-year decline for Sysco. In the comparable quarter from last year, they made 45 cents a share, so the decline isn’t that much.
    Since the earnings declines have been getting smaller, I think it’s very likely that this will be the last one. The stock is reasonably well-priced though it’s not an outrageous bargain.

  • Arnold Kling on the Bond Bubble
    Posted by on November 2nd, 2009 at 10:28 am

    Arnold debates the marekt:

    Markets: With so much unemployment and excess capacity, we cannot possibly have inflation.
    Kling: Do you not remember the 1970’s? Furthermore, you may be over-estimating the excess capacity. An excess capacity to sell houses and trade securitized debt may not help absorb demand in other sectors.
    Markets: The Fed has no plan to raise interest rates. Therefore, interest rates cannot rise.
    Kling: The Fed merely determines the composition of government debt. The amount of government debt is determined by fiscal policy, which the Fed does not control. At some point, the huge supply of government debt has to matter. If the public loses its appetite for government bonds, then the only way the Fed can absorb the supply is to print gobs and gobs of money. Prices will rise, and bond-holders will suffer a partial default in terms of purchasing power. Even if the Fed is relatively passive, I think that the high-inflation scenario is plausible.
    Markets: I can hold bonds for now. If inflation threatens to come back, I will see it in plenty of time to get out.
    Kling: That is how bubbles work. Everyone thinks that they have more protection from the bubble than they really have. Personally, in spite of the inflation bets in my portfolio, my big worry is that I do not have protection from the political risk and financial chaos that could come from a sovereign debt crisis.

  • I Liked Czar Better
    Posted by on October 30th, 2009 at 10:58 am

    Ken Feinberg’s official title is “The Special Master for TARP Executive Compensation.”

  • Disturbing Stat of the Day
    Posted by on October 30th, 2009 at 10:42 am

    I wasn’t aware of this: “Reinhart cited Robert Shiller to the effect that house prices rose more from 2000 to 2006 than in the previous 100 years put together.” Yikes!

  • NICK Earned 22 Cents a Share
    Posted by on October 29th, 2009 at 12:35 pm

    Nicholas Financial (NICK) just came out with earnings and it was another good quarter. The company earned 22 cents a share compared with just eight cents a year ago.
    It really is remarkable how cheap this stock is. For the first six months of their fiscal year, NICK earned 43 cents a share. For Q4 of last year’s fiscal quarter, they made 20 cents a share, so that’s 63 cents for the last three quarters. The big issue to watch for NICK is percentage for credit losses and that fell to 5.84% from 9.86% a year ago. This is the second quarter in a row of declining year-over-year numbers. In other words, things are most likely to get better for them.
    Whoever sold out last week was probably expecting some bad news. Well, it didn’t come. NICK’s book value is now $8.54 a share.

  • Aflac Keeps Its Real
    Posted by on October 29th, 2009 at 10:44 am

    I like this stock. I really do:

    Aflac Inc., the world’s largest seller of supplemental health insurance, said third-quarter profit more than tripled as investment losses narrowed and a stronger yen magnified revenue from Japan.
    Net income rose to $363 million, or 77 cents a share, from $100 million, or 21 cents, in the same period a year earlier, the Columbus, Georgia-based insurer said today in a statement. Operating income, which excludes some investment results, was $1.25 a share, beating the $1.20 average estimate of 17 analysts surveyed by Bloomberg. The stronger yen boosted quarterly profit by 9 cents a share, Aflac said.
    Aflac, which gets most of its revenue from Japan, is counting on earnings there and in the U.S. to support capital as the recession pressures the value of investments held to back policies. Chief Executive Officer Daniel Amos is diversifying holdings to reduce potential losses from defaults. Realized investment losses in the third quarter shrank 42 percent to $226 million from a year earlier, Aflac said today.
    “They’re still working through some of their issues, but the results look pretty impressive,” said Bill Smead, who helps manage $160 million, including Aflac shares, as chief investment officer of Seattle-based Smead Capital Management. “It’s the beginning of a long process” of improving earnings.

    So I guess the world wasn’t really going to end for them a few months ago. My only concern is that I didn’t load up when the shares were at $11.
    The CEO said they’re on track to make $4.75 to $4.83 a share for this year and their objective is to grow earnings 9% to 12% next year. That’s roughly $5.20 to $5.40 a share. Not bad for a stock going for $42.