The View from the Top
Posted by Eddy Elfenbein on December 31st, 2007 at 9:08 am

I went to yesterday’s Redskin’s game. I was in the second-to-the-last row which, at FedEx Field, is really, REALLY high up. As least I can say I had a seat on the 50-yard line.
Yesterday’s attendance was an all-time FedEx record of 90,910. Here’s a blurry view:

Those little dots on the field are the players. It was cold, wet and miserable. I had a blast and best of all, we’re going to the playoffs.

Moog (MOG-A)
Posted by Eddy Elfenbein on December 29th, 2007 at 7:02 am

I’m pleased to announce that Moog (MOG-A) will be final stock on the 2008 Buy List. This late addition is to replace Respironics (RESP) which recently announced that it’s being bought out.
I’ll start tracking the 20 stocks of the 2008 Buy List on Wednesday, January 2 which will be the first day of trading of the new year. Once trading begins, I can’t make any changes for the rest of the year.
Here’s a description of Moog from Hoovers:

Moog (rhymes with “rogue”) rules with its precision-control components and systems used in aerospace products, industrial machinery, and medical equipment. Servoactuators, Moog’s core product, receive electrical signals from computers and then perform specific actions. Using its servoactuators, Moog builds flight and control systems for commercial and military aircraft, hydraulic and electrical controls for plastic-injection and blow-molding machines, and control systems for satellites and spacecraft. The company also makes electric motors for sleep apnea equipment. Employees hold about 60% of Moog through stock ownership and retirement plans.

Here’s a look at the growth of Moog’s earnings-per-share:
Year………..EPS
1997………..$0.56
1998………..$0.67
1999………..$0.80
2000………..$0.84
2001………..$0.94
2002………..$1.11
2003………..$1.22
2004………..$1.45
2005………..$1.64
2006………..$1.97
2007………..$2.34
2008………..$2.72 (estimate)
2009………..$3.16 (estimate)
Pretty solid.
Here once again is the 2008 Buy List:
AFLAC (AFL)
Amphenol (APH)
Bed Bath & Beyond (BBBY)
Clarcor (CLC)
Donaldson (DCI)
Danaher (DHR)
FactSet Research Systems (FDS)
Fiserv (FISV)
Harley-Davidson (HOG)
Jos. A Bank Clothiers (JOSB)
Leucadia National (LUK)
Lincare (LNCR)
Medtronic (MDT)
Nicholas Financial (NICK)
Moog (MOG-A)
SEI Investments (SEIC)
Stryker (SYK)
Sysco (SYY)
UnitedHealth Group (UNH)
WR Berkley (BER)

Dividends Continue to Rise
Posted by Eddy Elfenbein on December 28th, 2007 at 8:27 pm

I often hear market bears describe the current market as “a bubble.” What I find interesting is that if this is a bubble, it’s got to be one of the few bubbles where stock prices have generally lagged growth in both earnings and dividends.
S&P just reported that dividends for the S&P 500 grew by 11.5% over last year. They’re also projecting a 9.3% growth for next year. This means that in the last four years, dividends have grown by 60%.
The overall dividend rate is still very low—less than 2%. But don’t overestimate how quickly these payments can add up. Over the last five-and-a-half years, dividends have contributed about 10% to the overall return of the S&P 500. That’s around 1,300 Dow points.
S&P also added five new stocks to its list of Dividend Aristocrats. These are companies that have increased their dividend every year for the last 25 years. The stocks are Avery Dennison, Exxon Mobil, Integrys Energy, Pitney Bowes and our very own AFLAC (AFL).
Here’s a complete list of Dividend Aristocrats. There’s also an ETF for the Dividend Aristocrats, symbol SDY.

Projected Earnings Growth
Posted by Eddy Elfenbein on December 27th, 2007 at 3:46 pm

The lads at Bespoke Investment Group have tracked projected earnings growth for the S&P 500. Or I should say, lack of growth. For Q4, analysts now expect a decline of 6.3%. In August, analysts were expecting 12.3% growth.
Q1 has been pared back to 5% growth and Q2 is now at 3.6%.

NICK Under $7 a Share
Posted by Eddy Elfenbein on December 27th, 2007 at 1:43 pm

I hope to have more about this sometime soon, but gosh darn it—Nicholas Financial (NICK) is cheap. The stock is priced as if it’s going out of business. NICK is currently priced well below book value which is $7.30 a share. Last quarter, NICK made 25 cents a share, and it made 27 cents in the quarter before that.
We’ll find out more when the company reports its third-quarter earnings next month. I think it’s very reasonable to assume that NICK will make $1 a share for this fiscal year. That means the P/E ratio is under 7.

10-Year-Old Cramer
Posted by Eddy Elfenbein on December 26th, 2007 at 9:06 pm

Watch out, Jim. He’s got your game.

Apocalypse When?
Posted by Eddy Elfenbein on December 26th, 2007 at 8:42 pm

As long-time readers of this site know, one of my pet peeves is the lack of balance in accountability between overly bearish and overly bullish predictions.
Simply put: You can say that the sky is about to fall until your blue in the face, and be completely wrong, and few people will hold you accountable. As long as you’re vague about time and stress the “about to” part.
On the other hand, if you’re bullish and wrong, you’ll be mocked until the cows come home. Or the bears, whichever comes first.
Nouriel Roubini is probably the most prominent bear on Wall Street. I like his analysis even if I don’t always agree with it. Of course, I don’t read people to have my views confirmed. I want them challenged.
I do want to point out that Roubini’s predictions haven’t exactly been spot on. In June 2006, he wrote:

So, this Q2 GDP report is as bad as it could be. I thus stick with my prediction that, by Q4, the growth rate will be close to zero and by early 2007 the U.S. will be in a recession. Panglossian optimists have been proven wrong again. They’d better start adjusting their wishful-thinking forecasts of H2 growth (still close to a 3% consensus) to a reality of an economy rapidly slipping into an nasty recession.

A wee bit off, no? To be fair, his views are more complicated than this bit suggests. I’m not trying to pick on him. Instead, my point is to show that it’s easy to get carried away with your hypothesis, and suffer from confirmation bias.
One of the problems is that even if you’re right, you still can be wrong. The U.S. economy is titanically complex. There are millions of consumers making several economic decisions every day. Still, the real economic growth rate for the past 40 years has been about 3%. To be a bit more refined, it’s about 3.07%. What’s truly surprising it how little it varies.
Here’s a look at GDP growth (blue) compared with a 3.07% trend line (red). I apologize that the table is lame but that’s my point.

So even when these “crisis” do come along, the overall economy is incredibly resilient. My prediction is that at some point, a recession will come along. It will be short and unpleasant, but after it, a recovery will follow.

Amazon’s Best Holiday Ever
Posted by Eddy Elfenbein on December 26th, 2007 at 10:39 am

Amazon.com just celebrated its best Holiday EVER. Jeff Mathews isn’t impressed. He finds that today’s press release kinda looks familiar:

12/26/2007 “Amazon Wraps Up Its 13th Holiday With Best Season Ever”
12/26/2006 “Amazon.com’s 12th Holiday Season is Best Ever”
12/26/2005 “Amazon.com, Inc. today announced that the 2005 holiday season finished as its best ever…”
12/27/2004 “Amazon.com’s Tenth Holiday Season is Best Ever…”
12/26/2003 “Amazon.com Wraps Up Its Ninth Holiday With Busiest Season Ever.”
12/26/2002 “Amazon.com today announced it has finished its busiest holiday season ever…”

Merry Everything!
Posted by Eddy Elfenbein on December 25th, 2007 at 12:08 pm

I want to wish everyone a Happy Holiday, and a healthy and profitable New Year.
I also want to thank all my readers for their support. Everyday, I get e-mail from readers all over the world. I try to respond to as much as I can, but unfortunately, I can’t get to it all. But I assure you that every e-mail is read and the correspondence helps me with my posts.
I don’t charge a dime to use Crossing Wall Street and I don’t run any ads. It’s all a labor of love. In fact, not only is this site free, but I give away market-beating advice. Through Monday, the Buy List is up 6.12%, and there were zero transaction costs throughout the year. So if you started with, say, $100 million to invest, then I made you $6.12 million. If you started with $100 billion, then I made you $6.12 billion.
Since I’m so generous, I’ll give you one more thing. This.

Inefficient Markets
Posted by Eddy Elfenbein on December 23rd, 2007 at 2:16 pm

More proof.