• Gold Versus Stocks
    Posted by on July 9th, 2007 at 10:59 am

    Gold bugs like to point out that gold has risen against the major stock indicies. A better comparison, however, is to look at gold versus the Wilshire 5000 Total Return Index (^DWCT), which includes almost all stocks and their dividends.
    Here’ a look at gold (the gold line, right scale) against the Wilshire 5000 (the blue line, left scale). I made it so both scales match at 12 to 1.
    image492.png
    Gold has indeed done well, but stocks have certainly held their own. Plus, you can see how much less volatile stocks are. Gold is down about 10% from its peak of last year. The peak almost perfectly coincided with this New York Times article. I should have known.

  • Biomet’s Earnings Fall
    Posted by on July 9th, 2007 at 9:13 am

    Since the company is headed to go private, this doesn’t matter very much, but Biomet’s earnings took a tumble last quarter:

    Medical device maker Biomet Inc. (BMET) reported a fall in quarterly earnings, hurt by lower sales in spinal and fixation products segments and a charge related to re-negotiation of some distribution agreements.
    The company, which is being taken private by a group of equity firms for $11.4 billion, posted fourth-quarter earnings of $41.5 million, or 17 cents a share, compared with $100.4 million, or 41 cents in the year-ago quarter.
    Excluding certain items, the company earned 39 cents a share compared with 46 cents in the year-ago quarter.

  • The Original Gilligan’s Island Theme Music
    Posted by on July 7th, 2007 at 3:18 pm

  • Today’s Jobs Report
    Posted by on July 6th, 2007 at 11:22 am

    Today’s employment report was another disappointment. The economy created 132,000 jobs last month, which is just about the pace of population growth, perhaps a bit slower.
    The unemployment officially stayed the same at 4.5%, but to be very precise, it climbed from 4.46% to 4.53%.

  • Nasdaq At 6-Year High
    Posted by on July 5th, 2007 at 10:46 am

    image490.png
    Even though the S&P 500 is off its highs, the Nasdaq keeps moving along.

  • Blackstone & Hilton
    Posted by on July 5th, 2007 at 9:46 am

    Steve Schwarzman is reading my blog! Consider the evidence. Just a few days after I highlighted Hilton’s (HLT) performance over the past few years, Blackstone (BX) announces a $20 billion buyout of the hotel chain.
    Coincidence? Not likely.
    Here are some details    :

    Blackstone will pay $47.50 for each share, Hilton said in a statement. That’s 32 percent more than its closing price yesterday. Barron Hilton, the son of founder Conrad Hilton and co-chairman of the Beverly Hills, California-based company, will get $990 million for his 20.8 million shares.
    The purchase is a record for the hotel industry. Blackstone, the owner of the La Quinta lodging chain, joins Apollo Management LP and Texas Pacific Group in targeting hotel companies for their cash flow and real estate. Worldwide, hotel acquisitions more than doubled in the first half of this year, to $81.4 billion.
    “It’s a classic Blackstone play: the size, the asset class, the management and the brand,” said Michael Pralle, who ran General Electric Co.’s GE Real Estate unit, with $59 billion in assets, before resigning in June to pursue other interests.
    Including the assumption of debt, the transaction totals $26 billion. Hilton, second in the U.S. to Marriott International Inc., has more than 2,800 locations.

    What I find interesting is that going forward, the main mover of BX’s stock will probably be merger announcements, not earnings reports. I would also guess that the market will react negatively initially to most merger announcements from BX, not matter how favorable they are. That’s an unusual drive of a share price, but we may need to learn to expect it.

  • Early Close
    Posted by on July 3rd, 2007 at 10:46 am

    Not much to blog about this week. Volume is very light. Everyone, it seems, is at the beach.
    The market closes at 1 p.m. today. You’ll have to pardon me, I’m having trouble typing while holding my Mimosa.
    Ta!

  • Danaher Hits New High
    Posted by on July 2nd, 2007 at 11:37 am

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    They don’t come much steadier than Danaher (DHR). I’ll leave the technical stuff for the charting folks, but stock broke out to a new high above $76 this morning.

  • The Case for Harley
    Posted by on July 1st, 2007 at 12:23 am

    From the WSJ:

    But it isn’t hard to see why the company attracts attention. It throws off heaps of cash and has a clean balance sheet. Last year Harley posted $1.8 billion in earnings before interest, taxes, depreciation and amortization on $5.8 billion of sales.
    Numbers like that should make potential buyers salivate. But squeezing much additional profit from a company that posts net margins of nearly 18% would be hard for either a strategic acquirer or buyout shop.
    Still, there are other reasons to own Harley’s stock. Its earnings this year have been hit by a strike in February at its York, Pa., factory. Yet analysts expect profit growth of nearly 12% next year. And international sales, which account for about a fifth of its business, are booming in Europe and Japan. The company has barely scratched the surface in emerging markets such as China.
    Moreover, Harley has doubled its dividend in the past two years. With a current valuation roughly in line with the market, solid earnings growth and a healthy balance sheet, Harley could support a share price of $80 — a third higher than now. There’s clearly room for this hog to run.

    As I mentioned before, HOG has been the worst-performing stock on the Buy List this year. It was our third-best stock last year. The next earnings report, which is due on July 19, will be very interesting to see. The market currently expects $1.13 a share, which seems low.

  • The Buy List’s Performance for the First Half
    Posted by on June 29th, 2007 at 4:56 pm

    We’re halfway done with 2007 (and three-fourths done with this decade), so let’s look at how the Buy List is doing.
    The Buy List is up 3.05% for the year while the S&P 500 is up 6.00%. Obviously, I’m not happy to lose to the overall market, but we’re in the black and we’ve closed the gap recently. Also, the Buy List is somewhat conservative. The daily volatility is 4.7% less than the S&P 500.
    Adding in dividends, the Buy List is up 3.33% and the S&P 500 is up 6.96%. The annual yield of the Buy List is 0.53%.
    Here’s a chart:
    image488.png
    As you can see, I totally missed the S&P’s cyclical surge in April and May. I purposely underweighted cyclicals at the beginning of the year (though we have a few good ones like Graco and Donaldson), and I’m even more leery of those sectors today.
    Ten stocks are up, ten stocks are down. The best is Jos. A Banks (JOSB) which is up 41.29%. The worst is Harley-Davidson (HOG) down -15.41%.