• We’ll Be Together Again
    Posted by on February 17th, 2007 at 2:39 pm

    “Let’s face it. We tenor saxophonists would all play like him, if we could.” — John Coltrane on Stan Getz

  • A Triple High
    Posted by on February 16th, 2007 at 2:21 pm

    Due to my Capitol Hill Odyssey, I neglected to mention Wednesday’s triple high.
    For the first time in nine years, the Dow Industrials, Utilities and Transports all closed at all-time record highs. This is only the fourth time this has happened in the last 20 years.
    The Dow Jones Industrials (^DJI) closed Wednesday at 12741.86. The Dow Jones Utility Average (^DJU) closed at 477.07. And the Dow Jones Transportation Average (^DJT) closed at 5117.27.

  • Banco Bilbao buying Compass Bancshares
    Posted by on February 16th, 2007 at 1:12 pm

    It happened again! Another one of my favorite banks is getting bought out. Banco Bilbao (BBV) is buying Compass Bancshares (CBSS) for nearly $10 billion.
    Just to set the record straight, a Spanish bank is buying out an Alabama bank. Let’s pause and read the sentence again.
    Not only is Compass a Dividend Aristocrat, but it’s also in the 10 straight years of increased earnings club. The only other stocks in both groups are Wal-Mart (WMT), Walgreen (WAG) and Synovus (SNV). (Note: There could be a trend here. Synovus is based in Georgia and Wal-Mart hails from Arkansas.)
    BBV is offering a 16% premium for Compass. Let’s see if another bidder steps forward.
    CBSS.gif

  • Top Stocks for the Loooooong Haul
    Posted by on February 16th, 2007 at 12:17 pm

    At the TheStreet.com, James Altucher profiles some stocks that have been around for over one hundred years.
    If you haven’t done so yet, I urge you to check out James’ new Stockpickr site, the latest in social networks and stock-picking.

  • CAPM: RIP
    Posted by on February 16th, 2007 at 10:59 am

    Here’s a good article from the Financial Times on the demise of CAPM, the Capital Asset Pricing Model. This model tried to explain the trade-off between risk and return in financial markets.
    The verdict is that as a theory, it’s all swell. But in practice, CAPM doesn’t explain much. Studies have shown that low-risk stocks (meaning low beta) have done better than they should, and riskier stocks have continually come up short.
    Of course, this is hardly the first time that an academic theory has got its ass handed to it by reality. What I find interesting, however, is the use (and abuse) of the concept of risk.
    Although we’ve become used to language of risk, it’s actually a rather bizarre idea. Consider that we have just one word for it, but “risk” is used to describe many different things. For example, risk is reflexively assumed to be bad. But what about the risk of missing a great stock? That’s something that I’m always concerned with.
    If there’s a trade-off between risk and return, then there’s an assumption that all investors measure risk the same way. The return part is fairly obvious. We can all agree what a 10% move is. But risk is subjective. What I might consider risky, you might not.
    Another example is gold. Is gold very risk, or not risky at all? Going by its daily volatility, gold has often been very risky. Gold’s beta, however, is usually negative. I’ve always thought the allure of gold is that it has the least risk of losing its intrinsic value. After all, if we find ourselves living in the post-apocalypse, stocks and bonds aren’t going to be worth much, but gold will still have value (don’t laugh, there are investment advisors who say these things).
    Once again, we have one word that’s used to describe many things, and everyone sees it differently.

  • Dividend Aristocrats
    Posted by on February 16th, 2007 at 8:32 am

    Coca-Cola (KO) raised its quarterly dividend from 31 cents a share to 34 cents a share. Coke has now raised its dividend for 45 straight years.
    While capital gains are my first true love, dividends are like a friend with benefits. S&P has a list of its Dividend Aristocrats, stocks that have increased their dividend every year for the last 25 years.
    Here’s the current list:
    Abbott Labs (ABT)
    Archer-Daniels-Midland (ADM)
    Automatic Data Processing (ADP)
    Avery Dennison (AVY)
    Bank of America (BAC)
    BB&T Corporation (BBT)
    Bard (C.R.) Inc. (BCR)
    Becton, Dickinson (BDX)
    Anheuser-Busch (BUD)
    Chubb (CB)
    Compass Bancshares (CBSS)
    Cincinnati Financial (CINF)
    Clorox (CLX)
    Comerica (CMA)
    Century Telephone (CTL)
    Dover (DOV)
    Consolidated Edison (ED)
    Emerson Electric (EMR)
    Family Dollar Stores (FDO)
    First Horizon National (FHN)
    Fifth Third Bancorp (FITB)
    Gannett (GCI)
    General Electric (GE)
    Grainger (W.W.) Inc. (GWW)
    Johnson Controls (JCI)
    Johnson & Johnson (JNJ)
    KeyCorp (KEY)
    Kimberly-Clark (KMB)
    Coca Cola (KO)
    Leggett & Platt (LEG)
    Lilly (Eli) & Co. (LLY)
    Lowe’s (LOW)
    McDonald’s (MCD)
    McGraw-Hill (MHP)
    3M Company (MMM)
    Altria (MO)
    M&T Bank (MTB)
    Nucor (NUE)
    PepsiCo (PEP)
    Pfizer (PFE)
    Procter & Gamble (PG)
    Progressive (PGR)
    PPG Industries (PPG)
    Regions Financial (RF)
    Rohm & Haas (ROH)
    Sherwin-Williams (SHW)
    Sigma-Aldrich (SIAL)
    SLM Corporation (SLM)
    Synovus Financial (SNV)
    Questar (STR)
    State Street (STT)
    Supervalu (SVU)
    Stanley Works (SWK)
    Target (TGT)
    U.S. Bancorp (USB)
    V.F. Corp. (VFC)
    Walgreen (WAG)
    Wal-Mart (WMT)
    Wrigley (WWY)
    The Dividend Aristocrats Index has not only outperformed the S&P 500, but it’s been less risky as well. Since 1990, the Dividend Aristocrats Index is up over 414%. Throw in dividends and it’s up 725%. The S&P 500 is up 312%, and 485% with dividends. The daily volatility of the Dividend Aristocrats Index has been about 11% less than the S&P 500.
    Here’s how the two indexes have performed since 1990 (not including dividends).
    image414.png

  • Erin Burnett, CNBC All-Star
    Posted by on February 16th, 2007 at 7:51 am

    ErinBull2.standard
    And second team all-conference in field hockey.*
    But first team of our hearts!
    * Those sticks scare the fuck out of me. Seriously, I carry one in my car.

  • Buffett Buys 1 Million Shares of UnitedHealth
    Posted by on February 15th, 2007 at 3:03 pm

    From Reuters:

    Warren Buffett’s Berkshire Hathaway Inc bought 1 million shares of insurer UnitedHealth Group in the fourth quarter of 2006, according to a regulatory filing.
    Berkshire detailed its holdings for the quarter ended Dec. 31, 2006 in a filing with the U.S. Securities and Exchange Commission late on Wednesday.
    In the third quarter, Berkshire did not own any shares of UnitedHealth, the largest U.S. health insurer by market value. The company has overhauled corporate governance procedures and changed its management structure, but still faces a federal investigation into its dating of stock options.

    Shares of UNH are up over 4% today.

  • Laugh & Learn Bunny: Harmless Children’s Toy or Rampaging Drug-Addled Psychopath?
    Posted by on February 15th, 2007 at 12:49 pm

    11021691.jpg
    J’accuse.

    Fisher-Price recalls Laugh & Learn Bunny toys
    Some half million “Laugh and Learn” Learning Bunny Toys are being recalled because of a potential choking danger.
    The Consumer Product Safety Commission says the pink pom-pom nose (Alcohol? Coke??) on the toys can come off, posing a danger to young children. The recall does not cover Learning Bunny Toys with noses that are flat or embroidered.
    The yellow toy bunny is ten inches high. One ear’s green, the other orange, and it has musical and counting sound effects.

    Fisher-Price is owned by Mattel (MAT), which is a stock that’s been catching my eye lately.
    First, some background. Shares of Mattel plunged over 80% in 1998 and 1999. The company was nearly ruined by its former CEO, Jill Barad, who led Mattel through the horrible idea of acquiring The Learning Company. Barad finally resigned (not without a very large severance package), and the new CEO, Robert Eckert, has engineered an impressive turnaround.
    Despite this little rabbit-killing-kids issue, it’s actually Barbie that’s responsible for 30% of Mattel’s profits. That probably led the company to get a female CEO in the first place. When Barad was first hired, I’ve rarely seen a CEO get better press. Fortunately, female CEOs are more common now than when she got the top job.
    In the past year, the stock has nearly doubled. In November, the company raised its dividend by 30% (50 cents a share to 65 cents a share). For the fourth-quarter, the company earned 75 cents a share, eight cents more than expectations. I am concerned about the high level of debt, though. Mattel’s long-term debt is more than twice last year’s profit. I’d like to see that come down some. But there is value here. Shares of MAT now go for about 16 times 2008’s earnings.

  • Buy What You Hate
    Posted by on February 15th, 2007 at 11:41 am

    Peter Lynch used to advise investors to “buy what you know.” Several months ago, Daniel Gross wrote an article called “Buy What You Hate.” He noticed how many highly-profitable companies did poorly in a poll on corporate reputation.
    The head of the poll said, “When we do detailed analysis of public perception, we find that a significant portion of the ranking is negatively affected when companies do too well.” I guess the public is pro-profits, but anti-profiteering. But I’m not sure where the line is drawn.
    A new study pushes this idea further. It finds that stocks of admired companies haven’t fared as well as the less-admired. “Stocks of Admired Companies and Despised Ones” by Deniz Anginer, Kenneth Fisher and Meir Statman looks at the stock performance of companies in Fortune Magazines poll of most admired companies (BTW, UnitedHealth was ranked #1 in the 2006 survey).
    The researchers found that over a 23-year stretch, the stocks of companies in the lower half of reputation (the despised companies) outperformed the admired half, 17.50% to 15.68%.
    Before you go out and load up on shares of Initech (BOBS) or Tyrell Corp. (REPL), making money with this type of strategy isn’t so easy. CXO Advisory writes:

    Relative returns of the stocks of admired and despised companies vary considerably from year to year and even from decade to decade. During 1983–1995, the mean annualized return of the most admired (top 10%) is 9.9% higher than that of the most despised (bottom 10%). But during 1996–2006, the mean annualized return of the most despised is 9.2% higher than that of the most admired. Overall, during 1983-2006, the mean annualized return of the most despised is 4.0% higher than that of the most admired. Moreover, the effect is not reliably consistent across the spectrum from most admired to most despised.