The Buy List Year-to-Date
Posted by Eddy Elfenbein on May 31st, 2006 at 6:01 am

Here’s how the Buy List has done year-to-date versus the S&P 500:

Through Tuesday, we’re down -0.99% and the S&P 500 is up 0.93% (not including dividends). The Buy List’s daily volatility is 6.1% greater than the S&P 500.

More on the Return of Volatility
Posted by Eddy Elfenbein on May 30th, 2006 at 4:13 pm

The S&P 500 was down over 1.5% today. In the past 12 months, the S&P 500 has dropped by more than -1.1% eight times. The last four have happened since May 11.

David Phillips on Bed Bath & Beyond
Posted by Eddy Elfenbein on May 30th, 2006 at 2:18 pm

David Phillips, the 10-Q Detective, takes a look at Bed Beth & Beyond (BBBY) and likes what he sees:

On its 4Q:05 Earnings Conference Call, management was comfortable—based on its most recent real-estate analysis—in updating the store openings [square footage] that will fuel this growth: “We now anticipate that we can grow to approximately 1,300 Bed Bath & Beyond stores in the United States [ed. note. before saturation becomes a concern], in addition to continuing the expansion and integration of our Christmas Tree and Harmon store concepts…. expanded information technology capabilities, new merchandising initiatives and developing concepts significantly adds to our potential to create a much larger, more successful retailing business.”
Corporate has issued guidance calling for FY 2006 EPS to grow by approximately 13% to about $2.17 per share, based on the following planning assumptions:
1. The Company’s fiscal 2006 store opening program is expected to include approximately 80 BBB stores, six CTS stores and the continuing development of its Harmon concept. The Company’s new store openings are expected to add approximately 2.5 million square feet of store space.
2. Bed Bath & Beyond new stores are expected to generate net sales of between $160-185 per square foot in the first 12 months of operation. Consolidated comp sales are expected to increase from 3-5% and net sales, including the 53rd week, are expected to increase between 13% and 14%.
3. Based on the current interest rate environment, interest income is expected to be somewhat higher than in FY ’05.
4. The effective income tax rate for FY 2006 is presently being estimated at about 36.6 percent.
5. Average diluted shares outstanding for full FY ’06 is estimated to be 288 million.
6. FY ’06 will be a 53-week year.
The Company has deployed a total of $950 million for share repurchases since December 2004. In our opinion, this demonstrates the impressive cash generating ability of the Company. Aside from initiating a cash dividend payout, the trailing twelve-month ROE of 25.65% suggests that management believes that share buybacks are a prudent investment—and will probably continue as a practical course of action in coming months.
In our opinion, now may be a good time to start accumulating shares in Bed Bath & Beyond. The stock price has already discounted any potential retail slowdown, with the forward P/E of 14 times 2007 consensus estimates of $2.49 is near the stock’s historic trough. Any sales or EPS guidance nudged upward by management will serve as the necessary catalyst to expand the P/E multiple and push the stock to a target value of $45.00 per share.

The Midday Market
Posted by Eddy Elfenbein on May 30th, 2006 at 1:41 pm

Thanks to Kinder Morgan, the energy sector got off to a strong start this morning, but now it’s been dragged lower with the rest of the market. Of the 100 Dow industry groups, 93 are currently down for the day. The S&P 500 just dipped below the -1% mark for the day.
For a fleeting moment last week, the 10-year Treasury yield fell below 5%, which is the Fed’s target rate for overnight lending. The inversion didn’t last long. Yields are up all across the yield curve. The 10-year came close to breaking 5.1% today.
On the Buy List, Home Depot (HD) and Danaher (DHR) are both down over 2%. Dell (DELL) is back up to $25 a share. Medtronic (MDT) is taking a rest after its recent run. I wouldn’t be surprised to see Medtronic make a run at $55 a share.

Eat Up
Posted by Eddy Elfenbein on May 30th, 2006 at 11:36 am

From Daniel Gross’ Slate column “Snow’s Job:
Why no Wall Street CEO wants to be the new Treasury secretary.”

John Snow will have a replacement, and he may very well come from the corporate world. But if it’s an A-list Wall Street CEO, I’ll buy a copy of Dow 36,000 and eat the first chapter.

This is why journalists shouldn’t make predictions. Come to think of it, so is Dow 36,000.

Private Equity Strikes Again
Posted by Eddy Elfenbein on May 30th, 2006 at 11:19 am

Kinder Morgan (KMI) is buying bought out by…Kinder Morgan. Who needs a stock market anyway?
If this goes off, the buyers will assume about $14.5 billion in debt. This is a huge deal. In 17 years, no one has ever topped KKR’s buyout of RJR Nabisco.
Doesn’t stuff like this usually happen at market peaks?

Bill Gross: Admitted Philatelist
Posted by Eddy Elfenbein on May 30th, 2006 at 10:49 am

Not only is Bill Gross, the “Buffett of Bonds,” but he’s also an admitted philetelist. Gross’ stamp collection is worth tens of millions of dollars. He owns every stamp made by the U.S. from 1847 to 1869.
Ever wonder what it’s like to be a Master of the Universe? Here’s how Gross describes a typical day (scroll down a bit):

Michael Dell Buys $70 Million in Stock
Posted by Eddy Elfenbein on May 30th, 2006 at 9:41 am

Last week, Michael Dell bought nearly three million shares of Dell (DELL) at 23.99 a piece. He’s already made a nice profit. The stock is over $25 this morning.

Bush Taps Paulson to be Treasury Secretary
Posted by Eddy Elfenbein on May 30th, 2006 at 9:28 am

From the Washington Post:

The White House named Henry Paulson, Chief Executive Officer of Goldman Sachs, as the new Treasury Secretary this morning to replace John W. Snow.
President Bush made the announcement at 9:15 this morning from the Rose Garden.
Snow informed the White House last week that he wouldl resign after three years as the nation’s chief economic officer. The secretary’s decision was intended to bring finality to a process that has played out awkwardly in public over months as Snow’s job security has been a regular source of Washington speculation.
The new appointee would be Bush’s third treasury secretary. Paul H. O’Neill, his first, left in December, 2002.

It looks like Lloyd Blankfein will take over as Goldman’s new CEO. Here’s a Business Week profile of Blankfein.
Wall Street Folly finds Blankfein’s 1983 wedding announcement.

Thanks Vets
Posted by Eddy Elfenbein on May 27th, 2006 at 6:08 am