Corporate Profits and the Economy
Posted by Eddy Elfenbein on December 26th, 2006 at 9:40 am

Since September 2001, the U.S. economy has grown by about 31%, but corporate profits are up by 132%.

Corporate profits now represent over 12.4% of the national economy, which is the highest level in over 50 years. The average is usually around 9.5%.

Think of this as an economy-wide profit margin. Profits typically grow faster than the economy during a recovery, and fall faster than the economy during a recession.

Merry Everything!
Posted by Eddy Elfenbein on December 25th, 2006 at 7:36 am

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. I think I must have the best readers on the Internets. I simply could not run this site without your feedback. In the last 12 months, Crossing Wall Street has received over 800,000 hits. Imagine Woodstock, but everyone with a laptop pointed right here. Scary.
The Buy List is up over 10% for the year, which isn’t too shabby, especially considering all the bearish sentiment we’ve had to put up with. So if you followed my (free) advice, I made you over $1 million (assuming you had $10 million to start with).
I try to make this site as transparent as possible. My picks are here for the whole world to see. I try to be candid about my big winners (like FactSet, Harley and SEI Investments) as I am with my lousy picks (like Dell and UnitedHealth). Let’s hope 2007 will be another “up” year.
There are a few people I want to thank for their support. Barry Ritholtz not only runs a great blog, but he’s been very generous about “spreading the wealth” to me and other bloggers. James Altucher has also linked to me many times through his Daily Blog Watch at TheStreet.com. Also, Abornmal Returns (another great site) has generously linked to me, and so has Charles Kirk at the Kirk Report.
Seeking Alpha has also been a big supporter. John Carney and the gang at DealBreaker run one of my favorite sites, and they’ve been big supporters. I also can’t forget Howard, Lindsay and the crew at WallStrip for keeping investing fun.
Here’s an odd bit of trivia I’ve never revealed before. I came this close to calling the blog Fiscal Graffiti (get it), but I changed at the last minute. Here look, click on www.fiscalgraffiti.com. See! Same thing for Wall Street Crossing.
I’m frequently complimented on the layout and design of this site. I wish I could take the credit, but I had absolutely nothing to do with it. All the credit goes to the very talented Kristin Rule at Callisto Design Studio. Also, Michael Auger is the artist of the little cartoon guy at the top. And lastly, Mark Anderson has been my tireless hoster who has kept this running all year. Thank you all! If you ever need their services, I highly recommend them. Or you can just send them lots of money, they won’t mind.
Finally, I give you this.

Forbes Profiles W.R. Berkley
Posted by Eddy Elfenbein on December 24th, 2006 at 7:09 pm

Forbes takes a look at W.R. Berkley (BER), one of my new additions to the Buy List:

From its founding in 1967 commercial property casualty insurer W.R. Berkley (nyse: BER – news – people ) has thrived in a notoriously competitive business by going after underserved niche markets. “We didn’t have the resources to compete head-on with the big players,” says Chairman William R. Berkley. “This evolved into a corporate strategy.”
The Greenwich, Conn. company is now the ninth-largest commercial property casualty insurer in the U.S., operating in all 50 states. It has a five-year average annual earnings-per-share growth of 39% and a 24% return on equity for the past 12 months. Of the company’s 31 operating units, 25 were built from scratch internally; 6 were made through acquisitions.
Last year Berkley opened five new businesses, including one that specializes in aviation liability insurance for small regional airlines. That came after hiring a group of experienced aviation insurance experts. “Business opportunities lie in finding good people,” says Berkley.
Each operating unit runs autonomously and is based as close as possible to its customers. A Maine subsidiary, for example, sells liability insurance to fishing fleets and lumber companies. An Iowa unit insures grain elevators and farm supply stores.
Berkley, 61, says he has no plans to retire, but is grooming his son, W. Robert Berkley Jr., 34, to take over eventually. Meantime, the boss disdains complacency: “It’s a constant process of being dissatisfied with the status quo,” he says.

I’m Glad I Don’t Own This Stock
Posted by Eddy Elfenbein on December 24th, 2006 at 2:57 pm

A letter to the editor in today’s Washington Post:

The largest employer in the world announced on Dec. 15 that it lost about $450 billion in fiscal 2006. Its auditor found that its financial statements were unreliable and that its controls were inadequate for the 10th straight year.

Oh wait, I guess I do own this stock.

The ‘Wow’ Factor
Posted by Eddy Elfenbein on December 24th, 2006 at 12:44 pm

Eleven months ago, Ford (F) unveiled its “The Way Forward” restructuring plan. Today, George Will takes a look at how things are going:

Mulally’s vision for Ford is forward-looking nostalgia. He wants to restore Ford to the role it had in “the middle America that we grew up with.” But to “spiff up the blue oval” — Ford’s trademark — he must market cars designed on the assumption that gasoline prices “are staying up.” He talks about the need to “take the hard decisions” and “rationalize our product family” with a “simplified product portfolio.” He stops short of talking — yet — about scrapping brands. But why is the company still making the Mercury, the average age of whose buyers is 55? Perhaps because it cost General Motors $1 billion — payments to dealers, etc. — to eliminate the Oldsmobile brand.
Mulally says production efficiencies can solve half the company’s economic problem. That will not suffice unless Ford efficiently produces exciting products. Mulally, a quick study, already has a rudimentary grasp of Detroit-speak: He says Ford must develop new products “with curb appeal — the ‘wow’ factor.”
But in 2001, with much fanfare, Ford rolled out a new version of a 1950s success, the Thunderbird. It was underpowered, handled badly and is no longer in production. Recently, the company heavily advertised the Lincoln Zephyr. But now it is called the MKZ. Why? This is the behavior of a company whose left hand does not know what its other left hand is doing.

CEO Tells Truth, Apologizes
Posted by Eddy Elfenbein on December 22nd, 2006 at 1:23 pm

Seagate CEO: I help people “watch porn”
We begin counting, now. One, two, thr…
Seagate CEO apologizes for porn remark

Dow Flirts with 12,500, Gets Number, Never Calls
Posted by Eddy Elfenbein on December 22nd, 2006 at 10:51 am

Yawn. Talk about light volume, not a trader is stirring. The market is down again today after coming oh-so-close to breaking the elusive 12.5K barrier on Wednesday.
Walgreen (WAG) is up on an impressive earnings report. I like WAG a lot. It’s a great company, but I think the shares are a bit pricey here. The stock pulled back earlier this year, and it seems to have bounced off $40. Ideally, I’d like to see it go lower before I’d be interested.
I strongly considered adding Progressive (PGR) to the Buy List, but in the end, I went with WR Berkley (BER). I’m happy with my choice, but make no mistake, Progressive is another great company. But I’m not so positive on the company’s outlook for this year. Either way, this is one to keep an eye on.
In case you missed it, here’s my Buy List for 2007:
AFLAC (AFL)
Amphenol (APH)
Bed Bath & Beyond (BBBY)
Biomet (BMET)
Donaldson (DCI)
Danaher (DHR)
FactSet Research Systems (FDS)
Fair Isaac (FIC)
Fiserv (FISV)
Graco (GGG)
Harley-Davidson (HOG)
Jos. A Bank Clothiers (JOSB)
Medtronic (MDT)
Nicholas Financial (NICK)
Respironics (RESP)
SEI Investments (SEIC)
Sysco (SYY)
UnitedHealth Group (UNH)
Varian Medical Systems (VAR)
WR Berkley (BER)
I’ll start tracking these stocks on the first day of trading of 2007.

“Cramer” on WallStrip
Posted by Eddy Elfenbein on December 22nd, 2006 at 10:19 am

Lindsay has a special guest audition.

“Shirt on.”
Here’s another Cramer outtake.

The Stock Market in 3D
Posted by Eddy Elfenbein on December 22nd, 2006 at 7:43 am

From Information Aesthetics:

an artistic 3D visualization of New York stock exchange data. “I Deal Solution” uses the spiral metaphor for its ability to translate 1-dimensional data into 3-dimensional space. in practice, the sphere size corresponds to the stock price, color to change, vibration to relative change, sphere position on spiral to volume, & sound to total percentual change. “the point is not to transmit a particular meaning but rather to express the power of energy concentrated in space information”.

Plus, it weirdly aligns with the Wizard of Oz.

Coastal Financial Soars on Buyout
Posted by Eddy Elfenbein on December 21st, 2006 at 1:36 pm

As long-time readers know, periodically I’ll write about little-known stocks that have strong businesses, but are unheard of on Wall Street. I’ve never understood why everyone wants to own the next Google or Apple, instead of investing in proven, well-run businesses.
Last year, I mentioned three micro-cap financial stocks; NewMil Bancorp, Northern Empire Bancshares (NREB) and Coastal Financial (CFCP). These are all great stocks, just no one knew about them.
Well, someone found out. In April, NewMil was bought out for a 41% premium. Then in September, Northern Empire agreed to a buyout for a 22% premium. The only one left was little Coastal. I was still a fan. A few weeks ago, I even mentioned CFCP as a contender for the 2007 Buy List.
Today Costal announced that it’s being bought by BB&T (BBT) for $395 million or $17.04 a share. That’s an 18% premium to yesterday’s close.