Dell Hits $25
Posted by Eddy Elfenbein on November 2nd, 2006 at 10:19 am

Breifly. That’s the highest price in four-and-a-half months. Goldman upgraded the stock to neutral.

That said, in the absence of Dell restructuring — which we are not modeling into our assessment since there has been no inclination that Dell wants to do that — we think Dell’s choice is ultimately between growth and margins which in our model tops out at 7 percent normalized growth, 17 percent gross margin, and 6 percent operating margin, meaning that this is not the ‘Dell of old.’

Fair Isaac and Biomet
Posted by Eddy Elfenbein on November 2nd, 2006 at 9:18 am

After the bell yesterday, Fair Isaac (FIC) reported earnings of 60 cents a share. That was three cents higher than the Street was expecting. Charges related to stock-based compensation and one-time expenses pushed FIC’s net income down to 35 cents a share.

For the full fiscal year, net income fell to $103.5 million, or $1.59 per share, from $134.5 million, or $1.86 per share. Revenue rose to $825.4 million from $798.7 million.
Looking ahead, Fair Isaac said it expects first fiscal-quarter earnings per share of about 48 cents on revenue of about $210 million. The outlook includes stock-based compensation charges.
Analysts forecast quarterly profit of 59 cents per share on sales of $211.9 million.
For the full fiscal year, Fair Isaac said it expects earnings per share of about $2.10, including stock-based compensation expenses, on sales of about $870 million.
Wall Street expects full-year earnings of $2.44 per share on sales of $873.1 million.
Fair Isaac also said its board authorized a stock buyback program of up to $500 million.

The company also announced that its CEO, Thomas G. Grudnowski, has resigned.
The other big story is that Smith & Nephew has said that it’s in preliminary talks with Biomet (BMET) about a possible merger. Both companies have very similar market values. Interestingly, what may have lead Biomet down this path was then Dane Miller, the CEO, suddenly resigned earlier this year.

Atlas Shrugged
Posted by Eddy Elfenbein on November 1st, 2006 at 8:16 pm

toothpastefordinner.com
Did you know it’s pronounced EYE-n? I did…just wanted to make sure you knew that.

Gimmicks and the Housing Bubble
Posted by Eddy Elfenbein on November 1st, 2006 at 2:23 pm

The Washington Post looks at sellers are dealing with the fizzling NYC housing market:

“I count 40-plus construction projects in my neighborhood alone,” says Nouriel Roubini, a professor of economics at New York University’s Stern School of Business who lives in Tribeca. “There’s going to be a huge glut in six months here in New York, well above the national average. And unless you see a huge increase in hiring in the financial industry — and that is not going to happen — you have to wonder, who is going to buy all these units?”
One apparent answer: fans of Jade Jagger. Mick’s daughter, a designer and pioneer of something called “pod living,” created the combination kitchen-bathroom modules that sit in the center of the apartments on sale at Jade, a building in Chelsea. To the uninitiated, the pods look like something from the motor home of the future. But the owners calls them “jewel-like lacquered boxes that seem to float in each residence.”
One-bedrooms start at $945,000.

Economic Puzzle
Posted by Eddy Elfenbein on November 1st, 2006 at 1:14 pm

Here’s a puzzle I’ll throw open to the house. I’d welcome any feedback you might have.
The U.S. economy has grown at a remarkably stable rate for the past several decades. You wouldn’t know it from our political rhetoric, but the economy grows by an average of about 3.1% a year after inflation (or 3.08% to be more exact). Sometime we do better, sometimes worse. But we always come back to that 3.08% trend line.
Remember, the nasty recession of 1981-82, and the Reagan Recovery of 1983-84. From beginning to end…yep, 3.08%. Summer, spring, fall and winter, we always go back to 3.08%.
Except for once. Call it a brief shining moment. In the early-to-mid 1960s, the economy vaulted dramatically upward, and started to revert to a new and higher mean. Why? What happened? And most importantly, can we do it again?
I like this kind of puzzle because it makes you focus on data series and how to analyze them properly.
My first guess would be that it was something like the Fed or perhaps spending on the war in Vietnam. But then, how come we didn’t revert back to the old mean when those went away? Could they have had a one-time up boost, with no downside? Doesn’t seem likely.
The question we have to ask is, what changed for good that could have given us a one-time permanent economic boost. The best answer I can think of is that it’s due to the end of segregation. While I certainly believe that socialist race relations are immoral, I’d be partial to believing that it’s economic retardant. But here, I can’t fully trust myself. I know the world doesn’t work the way I would prefer.
But still, it’s intuitively makes sense. Using state power to hold people back isn’t just evil, it’s got to be costly. Unfortunately, I don’t have the GDP data broken down by each state. My other concern is Zodiacing. Perhaps, I’m looking to see a pattern that just isn’t there.
Here’s the data so you can judge for yourself.
This is GDP from 1951 to 2001. The yellow is GDP. The black is the trend line. The trend line increases at the same rate before and after the 1963-1966 “gap up.”

Here are the two lines divided by each other:

Guy Kawasaki
Posted by Eddy Elfenbein on October 31st, 2006 at 8:48 pm

Amanda Congdon has a fascinating interview with Guy Kawasaki, a Silicon Valley venture capitalist. The interview has a light-hearted tone, but his answers are very interesting.
Here’s part two.

The Biggest Secret on Wall Street
Posted by Eddy Elfenbein on October 31st, 2006 at 1:10 pm

Here’s an investing secret that many Wall Street professionals know about, but few individual investors are in on. Promise not to tell anyone.
OK, here goes. Most investors think the succesful investing is about buying shares in some company that’s about to invent the Eight Dimension. Sure, we all know the story about our neighbor’s aunt’s best friend who knew this guy who went to high school with one of the Google guys, and now he’s like totally loaded. Goody for him, but that’s not what investing is really about.
In reality, some of the best profits can be made in the dullest of industries. In my view, the duller the better. A great example is insurance. For those who don’t know it, insurance can be insanely profitable. It’s disgusting, really (I love it!). Think about it: Insurance is a low-risk business, it has tacit state protection (try driving a car without car insurance) and it can’t easily be replaced.
Here’s how some insurance stocks have performed over the last 30 years:
Progressive (PGR)………………………………………….95,548%
WR Berkley (BER)…………………………………………..30,069%
AFLAC (AFL)…………………………………………………..23,184%
Loews (LTR)…………………………………………………..12,597%
Cincinnati Financial (CINF)………………………………..8,490%
American International Group (AIG)……………………7,916%
Selective Insurance Group (SIGI)……………………….7,444%
Protective Life (PL)…………………………………………..4,617%
First American (FAF)………………………………………….4,055%
Old Republic International (ORI)…………………………3,947%
Meanwhile, the S&P 500 is up about 1,230%.
I should add that I don’t mean all insurance stocks are great investments. But the cream of the industry is about the best you can do.
Oh, and I nearly forgot to mention Warren Buffett. Insurance forms the basis of his entire fortune. Over the last 30 years, Berkshire is up nearly 160,000%.

Playboy Stock-Picking Contest
Posted by Eddy Elfenbein on October 31st, 2006 at 10:47 am

With the end of October, I’d thought I’d update the 2006 Playboy Stock-Picking Contest. Right now Courtney Culkin, Miss April 2005, is in the lead. Her portfolio is up 47.01% for the year. Courtney’s best stock is Steven Madden (“one of my favorite dress shoe brands”) which is up over 120%.
Amy Sue Cooper, the Cyber Girl of the Year, is in second at 28.96%. What impresses me about Amy’s portfolio is that she actually gives good arguments for her selections.

Amgen (AMGN), the world’s largest biotechnology company, and Abgenix (ABGX), a company specializing in the discovery, development and manufacture of human therapeutic antibodies, announced that they have signed a definitive merger agreement under which Amgen will acquire Abgenix for approximately $2.2 billion in cash plus the assumption of debt. This merger could possibly benefit this company tremendously. I am a nurse so this only makes sense.

That’s beats a screaming bald man.
Here’s how the other contestants stack up. If I were participating, I’d be on top of Lindsey Vuolo and underneath Kara Monaco:
Courtney Culkin……………….47.01%
Amy Sue Cooper………………28.96%
Deanna Brooks………………..21.44%
Kara Monaco…………………..15.17%
Me………………………………….8.47%
Lindsey Vuolo……………………4.6%
Pennelope Jimenez……………-0.41%
Christine Smith…………………-1.78%
Jillian Grace……………………..-3.56%
Pilar Lastra………………………-5.16%
Amy McCarthy………………….-32.74%
Amy McCarthy is Jenny’s younger sister.

Does This Look Irrational to You?
Posted by Eddy Elfenbein on October 30th, 2006 at 3:37 pm

Not to me.

Sysco’s Earnings
Posted by Eddy Elfenbein on October 30th, 2006 at 10:45 am

Sysco (SYY) reported earnings today of 37 cents a share, which beat Wall Street’ consensus by a penny a share. Due to some accounting charges, net earnings fell to $189 million, or 30 cents per share.
Also, Lindsay & Co. at Wall Strip take a look at Harley-Davidson (HOG). The stock is up about 40% from its June low.