• Dow Oil & Gas Index
    Posted by on August 23rd, 2006 at 11:33 am

    DJUSEN.bmp
    I’m not one for technical analysis, but I thought this chart was interesting. Since April, the Dow Jones Oil & Gas (^DJUSEN) Index has tried four times to break 500, and it’s failed each time. It looks like we may soon see a fifth.

  • Medtronic’s Earnings
    Posted by on August 23rd, 2006 at 11:23 am

    Three weeks ago, Medtronic (MDT) spooked Wall Street by saying that earnings will come in lower than expected. The company gave a range of 53 cents to 55 cents a share. The Street had been expecting 57 cents. After the bell, MDT reported earnings of 55 cents a share so it wasn’t as bad as it could have been.
    Last October, the company raised guidance for 2006, 2007 and 2008. I was pretty impressed by that. Medtronic is no slouch. The company has raised its dividend for 28 straight years. Now the company is backing off its 2007 and 2008 calls. Medtronic sees 2007’s earnings coming in at $2.30 to $2.38, and $2.65 to $2.75 for 2008.
    Based on those numbers, that makes the stock look pretty expensive.

  • What Do Ireland and GM Have in Common?
    Posted by on August 23rd, 2006 at 9:31 am

    In the New Yorker, Malcolm Gladwell looks at the dependency ratio, how many people are supported by your current work force. It works for companies and countries:

    A second common assumption is that fading industrial giants like G.M. and Bethlehem are victims of their own managerial incompetence. In various ways, they undoubtedly are. But, with respect to the staggering burden of benefit obligations, what got them in trouble isn’t what they did wrong; it is what they did right. They got in trouble in the nineteen-nineties because they were around in the nineteen-fifties—and survived to pay for the retirement of the workers they hired forty years ago. They got in trouble because they innovated, and became more efficient in their use of labor.

  • Is Google Following Oil?
    Posted by on August 22nd, 2006 at 5:01 pm

    I’m not sure, but you can judge for yourself. Here’s the Oil ETF (USO) against Google (GOOG) since May:
    oil and google.bmp

  • Expeditors 8-K Gets a Bad Review
    Posted by on August 22nd, 2006 at 2:48 pm

    Every few months, the folks at Expeditors International (EXPD) answer investor questions in their 8-K report. It’s a great company but their answers sound like they’re written by bratty seventh graders.
    Soooo…one analyst took it upon himself to edit the Q&A session and send it back to the company. Expeditors was not amused:

    21. I have been a hands-on securities analyst on Wall Street since 1962 [44 years]. During that time, I have read many thousands of different Management Descriptions & Analysis in 10Ks and elsewhere. I must say that I am otherwise quite impressed with your management’s performance, and am considering investing in Expeditors. But —granted that some of the selected inquiries that you invited were not especially sophisticated or relevant — as a new reader of Expeditors’ CEO & CFO’s responses to investor questions I find your management’s tone to be astonishingly smug and condescending, and I find your wise-cracking style unnecessary and un-professional and insulting to me, an interested investor. Attached is my copy of your May 23 rd 8K, which I cleaned up to make it more focused and less disrespectful to those investors you invited to query management. If I had been one of the inquirers and read your wise-ass response to me, I would be quite offended. Contemplate cleaning up the inappropriate standup comedy act: it ain’t funny!

    Read more…

  • Rising Oil Prices
    Posted by on August 22nd, 2006 at 11:43 am

    The real reasons from The Onion:

    Increased demand from oil collectors
    More people starting to realize how delicious it tastes
    Lack of dinosaurs dying en masse
    Paris Hilton seen at red-carpet gala wearing nothing but crude petroleum
    Urban children opening oil hydrants to cool down
    Wife keeps driving to Kroger’s every day for some goddamn thing
    Oil paintings sold in Holiday Inn Express lobbies finally earning respect of art world
    Worldwide barrel shortage

  • Wachovia Raises Dividend
    Posted by on August 22nd, 2006 at 11:02 am

    I haven’t talked much about Golden West Financial (GDW) since the merger announcement with Wachovia (WB). It’s sort of a dull company and doesn’t generate much excitement.
    At the end of this month, GDW shareholders will vote to approve the merger. Most of the criticism has come from WB shareholders who think the deal is worth too much. That stock has dropped about 6% since the deal was announced. Assuming all goes well, our GDW shares will soon be exchanged for 1.051 shares of WB, plus $18.65 in cash.
    For track record purposes, I’ll assume that all the cash was invested in Wachovia stock. Today, Wachovia announced a 10% increase to its quarterly dividend, from 51 cents a share to 56 cents a share.

  • The Long Tail
    Posted by on August 22nd, 2006 at 10:54 am

    Here’s an interesting interview with Chris Anderson, the author of The Long Tail.

  • One Wall Street Inc.
    Posted by on August 22nd, 2006 at 10:09 am

    I know this is cynical, but as soon as I read the beginning of this WSJ story, I knew where it was going:

    The SEC complaint, filed yesterday in U.S. District Court for the Eastern District of New York, accused One Wall Street Inc. and its chief executive, among others, of selling securities to at least 64 investors, falsely promising that the company would soon conduct an initial public offering and that it was preparing to merge with E*Trade Financial Corp.

    You know it’s coming.

    Instead, the SEC said, Chief Executive Donte Jarvis used the proceeds as “a personal piggy bank,”

    Not yet.

    paying for jewelry,

    Almost.

    gambling

    A little more.

    and “adult entertainment” services.

    Bingo!

    The 31-year-old also was accused of giving his wife, La Shondra Hatter, at least $166,000 in checks drawn on the One Wall Street account. One Wall Street allegedly raised money by issuing unregistered securities starting in March 2003.

    This further confirms the “Elfenbein Hypothesis,” which states that the securities and porn industry are slowly converging.

  • David Phillips on Biomet
    Posted by on August 22nd, 2006 at 9:46 am

    David Phillips at 10-Q Detective looks at Biomet (BMET), one of our Buy List stocks:

    Biomet is in the midst of several major product launches and management anticipates that the Company will continue to be rolling out instruments at least early into fiscal 2007.
    Looking ahead, Biomet said it remains “comfortable” with analysts’ sales and earnings estimates of $513 million to $530 million and 43 cents to 45 cents per share for the first quarter of fiscal 2007, and $2.15 billion to $2.22 billion and $1.85 to $1.95 per share for fiscal 2007.
    The Company’s valuation looks attractive. The Common Stock’s valuations are priced at multi-year lows. For example, BMET’s P/E is only 17.5 times forward May 2007 consensus estimates of $1.87 per share [low end]. This is a 38.5% discount to its trailing five-year mean multiple of 28.5 times earnings. And with an estimated forward five-year EPS growth rate of 15.0%, the Company’s PEG multiple is an attractive 1.2 times [in line with its peer group multiple, which includes Stryker Corp., Zimmer Holdings, and Smith & Nephew].
    Value investors might also note the predictable 30% operating margins, and the 20.4% return on capital (compared to its cost of capital of 5.8%).
    Tempering these valuations, however, is the boring—in your face—thesis that there are few catalysts on the event horizon to expand valuation multiples (such as a turnaround in its EBI operations or margin improvement gains).
    Patient investors with a longer-term view might consider the current price as an entry point, but (with a dividend yield of 0.90%) we prefer to put our dollars to work elsewhere.
    In April 2006, the Company confirmed that it hired investment banker Morgan Stanley to help explore future strategies, including a possible move to put itself up for sale. Analysts have cited Medtronic and Smith & Nephew as potential buyers. The asking price for Biomet, should it decide to sell, could be more than $10 billion—or approximately $44.40 per share.