• The North Koreans Shoot Down the Dow
    Posted by on July 5th, 2006 at 2:17 pm

    The North Korean missile launch has rattled the markets. The launch was a dud but it managed to hit all the major indexes today. The bond market is also trading lower.
    Once again, I’m surprised by the strength of the energy sector. The Dow Jones Oil and Gas Index (^DJUSEN) is now up to 483. Just three weeks ago, the index closed at 421.72. Oil is back over $75 a barrel.
    On our Buy List, Expeditors (EXPD) is feeling the most pain. The stock was downgraded by Stephens. Bed Bath & Beyond (BBBY) continues to baffle me. The stock reached a new 52-week low today despite its decent earnings report from two weeks ago. Many of the retailers are weak today. As strange as BBBY, Home Depot (HD) is getting ridiculous. The stock also made a new 52-week low, and it’s going for close to 11 times next year’s earnings.

  • Earnings Reports
    Posted by on July 5th, 2006 at 11:18 am

    Thirteen of our Buy List stocks ended their quarter in June. Here’s when those stocks are due to report earnings, and Wall Street’s current estimate:
    Harley-Davidson……….17-Jul………$0.91
    UnitedHealth……………19-Jul………$0.68
    Danaher………………….20-Jul………$0.78
    Golden West……………20-Jul………$1.29
    AFLAC……………………..25-Jul………$0.71
    Fiserv……………………..25-Jul………$0.60
    Varian……………………..26-Jul………$0.43
    Expeditors……………….1-Aug………$0.26
    Sysco…………………….14-Aug………$0.42
    Brown & Brown………….TBA………..$0.29
    Fair Isaac………………….TBA………..$0.53
    Respironics……………….TBA………..$0.39
    SEI Investments………..TBA………..$0.55

  • Rosneft’s IPO: “A Sale of Stolen Goods”
    Posted by on July 5th, 2006 at 10:55 am

    The lawyer representing, Mikhail Khordorkovsky, the founder of Yukos, is claiming that Rosneft’s IPO is a sale of stolen goods. It’s hard to disagree with him.
    Yukos was essentially looted by the Kremlin and turned over to Rosneft. George Soros agrees and he think the IPO should be blocked:

    “I think that Russia is working as a monopoly supplier and it is essential for Europe to have a coordinated energy policy to be able to stand up as equal partners in negotiating with Russia,” Soros said.

    The IPO is scheduled for next week.

  • Instant FOMC Statement
    Posted by on June 30th, 2006 at 1:22 pm

    Paul Kedrosky has built a Fed press release generator. Every time you click the photo Bernanke, you get new words of wisdom from the FOMC.
    Here’s a sample:

    The Federal Open Market Committee decided to increase its target for the federal funds rate by 50 basis points to 5 3/4 percent.
    The Committee used to think that a more restrictive than ever stance of monetary policy, coupled with baffling underlying growth in high-beta stocks, is providing cautionary support to economic activity. However, the whizzy change of geopolitical tensions has increased softwood prices, moderated Mad Money ratings, and damaged debt markets. These developments, along with the neutral stance of monetary policy and ongoing whizzy change in high-beta stocks, should foster decreased economic stability over time.
    Although the extent of that decline remains uncertain, the Committee perceives that over the thirty-three seconds the upside and downside risks to the attainment of sustainable growth are roughly equal. The Committee believes that, taken together, the balance of risks to achieving its goals is weighted toward mild growth for the foreseeable future.

    Hey, why not?

  • Wow!
    Posted by on June 29th, 2006 at 4:06 pm

    We didn’t have a 2% up day in over 2-1/2 years. Today we had our second 2%+ day of the last two weeks! How’s that for volatility?
    Expeditors (EXPD) jumped nearly $4 a share, or 7.7% to another all-time high. SEI Investments (SEIC) was up 4.1%, also a new all-time high.

  • The Fed Raises Rates
    Posted by on June 29th, 2006 at 3:03 pm

    And the market loves it.

    Here’s the Fed’s statement:

    The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 5-1/4 percent.

    Recent indicators suggest that economic growth is moderating from its quite strong pace earlier this year, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices.

    Readings on core inflation have been elevated in recent months. Ongoing productivity gains have held down the rise in unit labor costs, and inflation expectations remain contained. However, the high levels of resource utilization and of the prices of energy and other commodities have the potential to sustain inflation pressures.

    Although the moderation in the growth of aggregate demand should help to limit inflation pressures over time, the Committee judges that some inflation risks remain. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information. In any event, the Committee will respond to changes in economic prospects as needed to support the attainment of its objectives.

    Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Jack Guynn; Donald L. Kohn; Randall S. Kroszner; Jeffrey M. Lacker; Sandra Pianalto; Kevin M. Warsh; and Janet L. Yellen.

    In a related action, the Board of Governors unanimously approved a 25-basis-point increase in the discount rate to 6-1/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, and Dallas.

  • Waiting for the Fed
    Posted by on June 29th, 2006 at 11:00 am

    We’re all standing by waiting for the Fed announcement. I think another 25 basis points is a foregone conclusion. There’s some talk of 50 basis points, which I doubt, but that could come at a future meeting. The long-end of the bond market has not been in a good mood for the past two weeks, and that’s the ultimate driver of Fed policy.
    I’ve been surprised by the resurgence of the energy sector lately. Every time I think the group is flat on its back, it comes to life again. The Dow Jones Oil and Gas Index (^DJUSEN) tried to break 500 three different times. I’m not a chart guy, but that may have been a warning sign. The index quickly fell to 420 around mid-June. Today, it’s back up to 470.
    I still like defensive stocks, like consumer staples and health care. Although I noticed that General Mills (GIS) lowered its forecast today. The company reported earnings that were in line with expectations.
    It looks to be another nice day on Wall Street. Almost all of our stocks are up. On our Buy List, Medtronic made some minor adjustments to its earnings report for last year. The adjustment reduced revenues by $11 million, and earnings by $6.6 million. This won’t have any impact on its future business.
    I’m starting to get annoyed with Home Depot (HD). The company made a big mistake with its recent shareholder conference, plus it stopped providing sales reports. Since its March high, the stock is down nearly 18%. Lowe’s (LOW), by comparison, is down about 8%.
    I still like HD a lot, and it had a very good earnings report last quarter. The stock is going for less than 12 times this year’s earnings, which is very cheap. But I’d like to see management be a bit more shareholder friendly.
    The mega-cap stocks are trailing the market again today. I noticed that of all the stocks will market values of $100 billion or more, Cisco (CSCO) had the highest P/E ratio, but it’s followed by General Electric (GE), Amgen (AMGN), Procter & Gamble (PG) and Coca-Cola (KO). That’s an odd mix. I wouldn’t have expected to see so many consumer names. This is a very weird market.

  • GDP Grew By 5.6%
    Posted by on June 29th, 2006 at 9:09 am

    The first-quarter saw the fastest growth in 2-1/2 years. In real terms, the economy has grown by 23.1% over the last 13 quarters.

  • Courier Corp.
    Posted by on June 28th, 2006 at 2:46 pm

    Here’s a cool little company that’s not widely known, Courier Corp. (CRRC) of North Chelmsford, MA. It has a market cap of just $450 million. It’s not even in the Russell 3000. Only one analyst covers it.
    The company is a speciality book publisher. They mostly publish niche market books like education and religion. Check out these financials:
    Date……….Sales…………EPS
    1995………$125.2………$0.24
    1997………$131.4………$0.42
    1998………$151.6………$0.70
    1999………$164.0………$0.75
    2000………$188.3………$0.93
    2001………$211.9………$1.13
    2002………$202.2………$1.35
    2003………$202.0………$1.58
    2004………$211.2………$1.67
    2005………$227.0………$1.77
    That’s not particularly fast, but it’s consistent. Here’s the stock chart:
    CRRC.bmp

  • J. Crew Goes Public
    Posted by on June 28th, 2006 at 1:19 pm

    Shares of J. Crew (JCG) had a fashionably understated but tasteful IPO. In 2004, the company lost over $100 milllion, but it eeked out a tiny gain last year. J. Crew netted $3.8 million on sales of $953 million.