• 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.

  • Buffett’s Letter to Shareholders
    Posted by on March 6th, 2006 at 9:38 am

    This weekend, Warren Buffett released his annual letter to shareholders. Buffett often uses the letter to opine on different business topics. Here he is on executive pay:

    Comp committees should adopt the attitude of Hank Greenberg, the Detroit slugger and a boyhood hero of mine. Hank’s son, Steve, at one time was a player’s agent. Representing an outfielder in negotiations with a major league club, Steve sounded out his dad about the size of the signing bonus he should ask for. Hank, a true pay-for-performance guy, got straight to the point, “What did he hit last year?” When Steve answered “.246,” Hank’s comeback was immediate: “Ask for a uniform.”

    Buffett also said that the board of Berkshire has chosen a successor, but won’t reveal his identity. However, in disussing business results, Buffett dropped a clue: “Credit GEICO — and its brilliant CEO, Tony Nicely — for our stellar insurance results in a disaster-ridden year,” Buffett wrote. “If you have a new son or grandson in 2006, name him Tony.”

  • AT&T To Pay $67 Billion for BellSouth
    Posted by on March 6th, 2006 at 9:02 am

    Twenty-two years after Judge Greene broke up AT&T, BellSouth was the only Baby Bell left as originally conceived. Now the new AT&T will buy BellSouth for $67 billion.
    This isn’t a huge surprise since the two companies already own most of Cingular. As always, it all comes down to wireless.

    The acquisition would also give AT&T sole control of Cingular Wireless, the nation’s biggest wireless operator with more than 54 million customers. Wireless is the fastest-growing part of the communications business and critical to the success of U.S. phone companies. AT&T owns 60%, with BellSouth controlling the rest.

    The new AT&T was formed last year when SBC bought the old AT&T and took its name. AT&T will once again be one of the largest companies in the world.

    The combined company would serve 70 million local-phone customers and 10 million high-speed DSL Internet users. It would also have about 315,000 employees — though that number would surely fall after the merger — and combined revenue of $121 billion, based on Wall Street’s estimate of annual 2006 sales.