• Google Agrees to Settle ‘Click Fraud’ Case
    Posted by on March 9th, 2006 at 6:23 am

    From the AP:

    Google Inc. has agreed to pay up to $90 million to settle a lawsuit alleging the online search engine leader overcharged thousands of advertisers who paid for bogus sales referrals generated through a ruse known as “click fraud.” (Are the scare quotes really necessary?)
    The proposed settlement, announced by the company Wednesday, would apply to all advertisers in Google’s network during the past four years. Any Web site showing improper charges dating back to 2002 will be eligible for an account credit that could be used toward future ads distributed by Google.
    The total value of the credits available to advertisers will be lower than $90 million because part of that amount will be used to cover the fees of lawyers who filed the case last year in Arkansas state court. The proposed settlement still requires final court approval.

  • Q&A: Investing Recommendations
    Posted by on March 8th, 2006 at 3:02 pm

    Dear Eddy,
    Firstly thanks for your blog. I read it faithfully several times a day and find it very helpful.
    My question relates to NSTK. It lost 8.55 today after Merck pulled out of deal. However, prior to his passing, Kennedy Gammage recommeded the stock heavily noting it as a once in a life time opportunity.
    Also after such a hammering it seems these stock rebound quite well (ex. BCRX and ENDP). What would be your thoughts on NSTK? I bought it around 14.80 [Sep 2005] and jsut got stopped out around 14.90.
    Also would you please recommed two books to read, maybe two periodicals and if possible, two newsletters you think are worth subscribing to [although I think in the past you wrote on newsletters, I’ll need to look that up].
    Thank you again. My family and I appreciate your efforts.

    Thanks for the kind words!
    First off, let me say: Never listen to anyone who says there’s a once-in-a-lifetime opportunity in the stock market. There are once in a lifetime opportunities in many places, but the market is not one. The fact is there are many, many great stocks out there, and investors have many opportunities to buy them.
    To show you what I mean, let’s look at AFLAC (AFL). Twenty years ago, you could have bought it for $1.50 a share (split-adjusted). So there’s your once in a lifetime chance, right? But ten years later it was going for $8 a share. (Twice in a lifetime??) The stock soared, but it was still a huge bargain. Even if you were late to the party, you still could have made a big profit. This return creamed the vast majority of mutual funds and hedge funds. The opportunities are always there.
    Or Golden West Financial (GDW). This stock is about as boring as they come. In 1982, it was going for (split-adjusted) 30 cents a share. Let’s say you ignored it. In 1990, it was still going for $3 a share. Today, it’s at $70, and that doesn’t include dividends!
    I don’t know much about Nastech Pharmaceuticals (NSTK), but let’s look at the basics. They don’t make money. In the world of high-powered finance, we call that “a bad thing.” Actually, they haven’t made money is several years. That’s even worse than my March Madness brackets!
    I also have to admit that I don’t know much about Nastech’s business (intranasal drug delivery). It sounds interesting, but what do I know? I begin my analysis not by predicting things that might happen, but instead by admitting my ignorance. Fortunately, I have a lot to work with.
    I don’t know what the Fed will do, what will happen with the economy or what Google will do. The price of oil? Beats me. But what I can do is find stocks that have consistent track records of delivering high returns-on-equity. Sure, AFLAC could blow up tomorrow and lose all its value. Same with Fiserv (FISV) or Brown & Brown (BRO). But I think the odds are fairly remote. The important point is that I can’t eliminate risk, but I can work to control it. My view is, never take risks you don’t need to.
    The stocks on my Buy List all have great track record, and I assume that in due course, the market will reward them. Nastech could have the most fabulous amazing invention ever, but I wouldn’t know, and I couldn’t know. I wish them well. But I won’t go near them until they prove they can make money in good times and bad. That’s the difference between investing and speculating.
    Two books I would recommend are “One Up on Wall Street” by Peter Lynch. Lynch is the legendary manager of Fidelity Magellan. The book is about 20 years old, but in my opinion, it hadn’t been topped. Another good book is “The Essays of Warren Buffett,” which is a collection of his writings over the decades.
    As far as periodicals, trust me, periodicals aren’t necessary to becoming a good investor. In fact, they probably harm a lot of investors. I assure you, reading Fortune never made anyone rich.
    For newsletters, I’d recommend “Richard Band’s Profitable Investing.” I’ve known Richard for many years. He’s an outstanding writer and he has a sharp mind for all things financial. Another excellent letter is “The Prudent Speculator,” which is now written by John Buckingham. The late Al Frank wrote it for many years. They have a deep value approach that has beaten the market for many years.
    Thanks for your e-mail, and happy investing!

  • Danaher Boosts Low End of Guidance
    Posted by on March 8th, 2006 at 10:54 am

    Good news today from Danaher (DHR). The company raised the low-end of its guidance. The original forecast for the first quarter was 59 cents to 64 cents a share. Now, it’s 61 cents to 64 cents a share.
    Don’t overlook these items on your stocks. It’s always good to see companies provide additional guidance or simply to “reaffirm” earlier forecasts.
    Anyone can make a bold prediction at the beginning of the year, but better stocks usually provide more guidance between earnings reports. That’s usually a good sign of a well-managed company.
    Just a few weeks ago, Danaher reaffirmed its forecast of $3.02 to $3.12 a share for this year. That’s about one-third of what Google will do, and DHR is going for one-sixth the price. (You do the math.)
    Danaher is one of best run companies out there. Forbes agrees.
    Twenty-five years ago, you could have picked up shares of Danaher for 32 cents a share. Now, it makes that in half a quarter. Since 1981, the stock is up roughly 19,000%.
    Sometimes a stock chart says it all. Note the consistently rising earnings, and the falling P/E ratio. This chart should be in the Investor’s Encyclopedia under “exactly what to look for.”
    DHRchart.bmp

  • The NYSE Group Is Now Public
    Posted by on March 8th, 2006 at 9:37 am

    After 214 years, the NYSE (NYX) is now a for-profit business.
    BTW, the exchanges have been fantastic stocks. Check out the charts for the Merc and the Nasdaq. Not too shabby.

  • Google Losing Steam
    Posted by on March 7th, 2006 at 7:49 pm

    From The Onion:

    Google recently suffered a 13% percent drop in stock price, the sharpest drop in the history of the company. What do you think?
    Greg O’Neill,
    Receptionist
    “I foresaw the company’s imminent collapse when I searched for ‘Dakota Fanning nude’ and only got 673 hits.”
    Bob Nouveau,
    Jewelers Apprentice
    “Maybe if they didn’t spend all their money revamping the logo for every obscure holiday, they wouldn’t be in this mess.”
    Kate Carolan,
    Seamstress
    “This surely proves what I’ve been saying all along about the Internet being a passing fad.”

    I’m with you, Kate.

  • The Market Today
    Posted by on March 7th, 2006 at 4:30 pm

    Today was another rotten day for energy stocks. This was also a day when the Dow told us nothing about today’s action. The Dow closed up 0.20%, while the S&P was down -0.19%.
    The market is clearly worried about higher long-term interest rates. The movement of the long-end of the yield curve has a huge impact on equity prices (see this post from last month for more details). When long-term yields fall, the market does about twice as well as it normally does. When rates rise, stocks get punished.
    The Fed, gold, Iran, none of the matters in comparison with the movement of long-term interest rates.
    Even though the Buy List hasn’t been doing that well recently, I’m not at all upset. There are lots of good values out there like Dell (DELL), Bed Bath & Beyond (BBBY) and Fiserv (FISV). I’m still surprised by the weakness is high-quality stocks. Is there are reason why Sysco (SYY) should be 20% off its high?
    The Buy List had a decent day. We outperformed the S&P 500 for the second day in a row.
    Our next earnings report will come from Biomet (BMET) on March 21. The stock has been clobbered over the past 18 months, but the earnings still look good. The company has reported record sales and earnings every year since it went public in 1977.

  • The Most Arrogant Guys in the Room
    Posted by on March 7th, 2006 at 2:03 pm

    In the Enron trial, the rats are turning against each other. Fastow is on the stand today. Personally, I think he was the real ringleader. Tomorrow is the “cross,” which could be high drama.
    It looks like the Enron board wasn’t as lax as I thought. My opinion is that Lay will get off light, but Skilling will go to jail.

  • GM’s Pensions
    Posted by on March 7th, 2006 at 12:09 pm

    It goes from bad to worse.

    General Motors Corp., reeling from five straight quarterly losses, said it will replace the current defined-benefits pension for many of its 36,000 salaried workers with a less expensive defined-contribution plan starting next year.
    The change will save GM, the world’s largest automaker, about $420 million on a pretax basis next year, and reduce the Detroit-based automaker’s year-end 2006 pension liability by about $1.6 billion. GM will take a $120 million pretax charge related to the reduced pension liability. Employees will switch to the new plan based on their hiring dates.
    GM said Feb. 7 that it would make changes to the pension plan to reduce spending on salaried workers. GM Chief Executive Officer Rick Wagoner also said earlier this month that he will slash his own compensation in half and trim pay by 30 percent for his three top lieutenants. GM also agreed to cut its $2-a-share annual dividend in half and reduce health-care benefits.
    Employees hired before Jan. 1, 2001, will stop accruing benefits under a phased-in plan starting next year. Workers hired on or after that date will stop accruing credits under their plan and receive a contribution to their 401(k) from GM of 4 percent of annual base salary. GM said additional 401(k) contributions for those employees will boost costs by about $15 million a year.

  • The 10-Year Yield Soars
    Posted by on March 7th, 2006 at 12:03 pm

    The yield on the 10-year Treasury bond is at the upper end of its range. The yield hasn’t touched 5% in nearly four years.
    TNX.bmp
    William Poole, the head of the St. Louis Fed, said that the Fed may have to raise interest rates a few more times. The next item to watch is the unemployment rate which will come out on Friday.

  • Dell CEO sees sales rising to $90-$100 bln
    Posted by on March 6th, 2006 at 1:01 pm

    This doesn’t sound like a company that’s in trouble to me:

    Dell, the world’s biggest maker of personal computers, sees its annual sales almost doubling to as much as $100 billion, its chief executive told Germany’s Sueddeutsche Zeitung newspaper.
    “We will reach our great goal, 80 billion dollars in sales — and more. I have absolutely no doubt that we can manage 90 or 100 billion dollars,” Kevin Rollins said in an interview released on Monday ahead of publication on Tuesday.
    Rollins has been trying to stem a slide in revenue growth at Dell after the company lowered prices on entry-level consumer computers last year and twice missed analysts’ sales forecasts.
    He told the newspaper that Dell’s future remained with sales to businesses, which accounted for about 85 percent of last year’s $55.9 billion in sales.

    Rollins added this:

    Rollins also predicted that Dell would be one of a handful of PC makers including Hewlett-Packard and Lenovo Group Ltd. who would survive a wave of consolidation in the industry amid stiff price competition.
    “The list of victims of the price war is already long: Compaq, IBM, Vobis, Escom, Gericom — to name just a few. But I expect that the end of consolidation is still a long way off,” Rollins told the newspaper.