Harley’s Earnings Preview
Posted by Eddy Elfenbein on April 11th, 2006 at 5:50 pm

Harley-Davidson (HDI) reports tomorrow morning. This stock could easily go for $60 a share. I wouldn’t be surprised to see HDI earn 88 cents a share.

EXPECTATIONS: Analysts polled by Thomson Financial expect the Milwaukee-based company to earn 86 cents per share in sales of $1.29 billion.
ANALYST TAKE: “Based on our positive view of first quarter retail sales, we believe Harley will report a solid quarter,” Edward Aaron of RBC Capital Markets, wrote in a note to investors. He predicted Harley would match the consensus prediction,
“On balance, we estimate high single-digit U.S. retail growth on a slightly negative comparison in quarter one.”
Robin M. Farley of UBS Investment Research agreed that the first quarter’s warmer weather could drive its sales up, but questioned how much of that gain will take away from sales later in the year.
Farley predicted earnings of 84 cents per share for the quarter.
QUARTER DEVELOPMENTS: In March, Harley named Thomas E. Bergmann as its chief financial officer and vice president. He takes over for vice president and treasurer James Brostowitz, the acting financial chief since April 2005.
Bergmann was most recently chief executive of USF Corp., a transportation and logistics company which was acquired by another company in May 2005.
Also in March, Harley announced plans to open its first dealership in China. Beijing Harley-Davidson, partnered with dealer Beijing Feng Huo Lun, opened Saturday in the country’s capitol city.
The store will sell several Harley models, parts, accessories, merchandise and collectibles. It will offer rider training and events including organized rides.
COMPETITORS: Harley competes with Germany’s Bayerische Motoren Werke AG, or BMW, along with the motorcycle division of Honda Motor Co.
STOCK PERFORMANCE: Harley shares have risen 2.9 percent since the beginning of the year. On Tuesday, shares closed up 2 cents at $52.97 on the New York Stock Exchange.

Medtronic to Offer $4 Billion in Debt to Buy Back Stock
Posted by Eddy Elfenbein on April 11th, 2006 at 4:36 pm

Medtronic (MDT) hit a new 52-week low today. Apparrently, the company thinks the stock is a good value. They’re going to the debt market to raise funds to buy back the stock.

Health Care Stocks Plunge
Posted by Eddy Elfenbein on April 11th, 2006 at 3:37 pm

The jury in Atlantic City awarded John McDarby $9 million in punitive damages in the Vioxx trial. The entire health care sector is feeling the pain.
Since mid-March, the health care sector has sold off sharply, and today is really bad. Here’s the Dow Health Care Index (^DJUSHC) versus the S&P 500 over the last 12 months.

Over the last three years, the S&P 500 is up about 50% while the drug index is off 10%. Of the majors, Johnson & Johnson (JNJ), Merck (MRK) and Bristol-Myers (BMY) have the lowest P/E ratios. They each trade at roughly 16 times earnings.

Muhammad Ali Sells Rights to His Name, Image for $50 Mln
Posted by Eddy Elfenbein on April 11th, 2006 at 1:57 pm

Will the 90’s ever end?

Muhammad Ali, ranked by sports experts as the greatest athlete of the 20th century, won his biggest purse 25 years after retiring from the boxing ring.
The former three-time world heavyweight champion sold the rights to his likeness, name and image for $50 million to CKX Inc., which also controls Elvis Presley’s music and mansion.
Ali, 64, will keep a 20 percent stake in the rights, which will be managed through a newly formed company named GOAT LLC, for the “Greatest Of All Time.” The name, image and likeness of Ali has generated as much as $7 million in annual revenue over the past five years, CKX said in a Securities and Exchange Commission filing.

Chuck Wepner couldn’t be reached for comment.

Ken Lay’s #1 Fan
Posted by Eddy Elfenbein on April 11th, 2006 at 11:39 am

Although the world may hate Ken Lay, he has a big fan in Lee Perry. Mr. Perry can regularly be found outside the courthouse in Houston with his handmade signs cheering on the smartest guy in the defendant’s chair.
Here’s Perry with Lay on April 3.

And again on March 9.

Well…who is this guy?
The Houston Chronicle made an early attempt in January:

A man who identified himself as Lee Perry held up a homemade sign proclaiming Lay’s innocence. Perry said he did independent auditing of the company in its heyday and that everything was on the up and up.

A man who identified himself as?? Yeesh, that’s not a confidence builder. Come to think of it, neither is “independent auditing of the company.”
Perry has said that doesn’t know Lay personally, but as the trial has gone on you’d think he’s become Lay’s consigliere.
Here they are yesterday:

And again on March 27:

These photos were taken two weeks apart, and Lay has the same suit, tie and BFF. The good news for Perry is that in that caption for the above photo, he’s been upgraded to “author and former Enron auditor.”
So not only does Ken Lay have 18 homes, but he also has his own personal author and cheering section. See, these are the parts of the New Economy I like best.

Some Stocks Worth Watching
Posted by Eddy Elfenbein on April 11th, 2006 at 10:40 am

Here are a few stocks that have caught my attention recently. I’m not adding them to the Buy List (I only do that once a year), but I think these stocks are good values right now.
First up is Mylan Labs (MYL). Mylan is one of the best generic drug stocks around. Generics tend to be counter-cyclical, meaning they do well when times are rough. Mylan’s sales have been flat recently and the stock got pounded. Shares of Mylan dropped from $28 to $15, but they’ve been steadily recovering since then.
The shares still look pretty inexpensive. In February, the company said that it’s expects to earn between $1.20 and $1.40 a share for Fiscal ’07 (ending in March 2007). That means that the stock is currently going for 16 to 19 times next year’s earnings.
Another interesting stock is Lowe’s (LOW). Frankly, this one surprises me. Although I decided to put Home Depot on this year’s Buy List, I can’t help but notice how good its main competitor looks. Make no mistake: Lowe’s is an earnings machine. Also, I don’t buy the idea that Lowe’s or Home Depot should follow the housing market. Both companies have clearly shown that they can thrive in all types of environments.
For the fourth quarter, Lowe’s earned 87 cents a share, seven cents more than Wall Street was expecting. The company also announced that it expects earnings for this year of $4.03 to $4.13 a share. I think it’s interesting that some investors will comb through all this crazy research on a stock, when sometime all you need to do is listen to what the company is saying. That’s also how I feel about Dell (DELL). I’ve been reading all these articles about how Dell’s business model is broken and out-of-date, yet the folks running the business keep telling us not to worry. Guess who I’m going to listen to?
Another good stock is Cintas (CTAS). This may be the best stock you’ve never heard of. They make workplace uniforms. No, I’m not making this one up. It’s hugely profitable. They’re even in the S&P 500.
Cintas was a big stock during the 1990’s, but it’s been flat for most of this decade. The company missed earnings a few times recently, which has weighed on the stock. But in January, Cintas raised its dividend by 9%. The company said that it expects to earn $1.92 to $1.96 a share this year, which is a nice improvement over the $1.74 it made last year.
There are also a few small banks and savings & loans I like to watch. These are great stocks to follow. There are lots of wonderful companies out there that almost no one knows about. Four of my favorites are Northern Empire Bancshares (NREB), Harleysville National (HNBC), NewMil Bancorp (NMIL) and Coastal Financial (CFCP). The first two are banks, the latter two are thrifts. Best of all, not a single analyst on Wall Street covers any of them.
To give you an example, here are Northern Empires’ EPS for the last few years.
2001 $0.77
2002 $0.85
2003 $1.01
2004 $1.23
2005 $1.59
Northern Empire is the holding company for Sonoma National Bank and is based in Santa Rosa, CA. The bank has eleven branches and 150 employees.

$5 a Gallon for Gasoline
Posted by Eddy Elfenbein on April 10th, 2006 at 2:32 pm

Scary stories are usually signs that a market has topped.

Probable $3-a-gallon gasoline, possibly going up to $5 a gallon, painted a bleak picture Monday for lovers of the open road.
Bloomberg News says crude oil costs, lack of refineries and an anticipated shortage of ethanol are likely to push gasoline prices to more than $3 a gallon this summer. Analyst Brian Hicks of U.S. Global Investors in San Antonio said $5-a-gallon gasoline is a possibility.
The national average for regular unleaded is now $2.59 a gallon. In Indianapolis, regular unleaded gas is $2.70 a gallon compared to $2.32 a year ago, according to AAA.

Here’s a chart of gas prices for the last nine months (from GasBuddy.com):

The Morning Market
Posted by Eddy Elfenbein on April 10th, 2006 at 11:01 am

The market is slightly higher this morning. This is another good day for energy stocks. What I find interesting is that while oil is up to $68 a barrel, the Dow Oil & Gas Index is still below its January high, even though the broader market has been making new highs. I’m curious if there’s a message in that.
Today is also another good day for commodities. Copper and Zinc are at all-time highs. In the past year, the Goldman Sachs Commodity Index is up 20%, twice that of the S&P 500. Copper continues to be the gold standard. A strike at a Mexican producer has aided the rally. Aloca (AA), the world’s largest aluminum producer, will report earnings later today.
On our Buy List, Biomet (BMET) was downgraded by Banc America Securities. Harley-Davidson (HDI) will report its earnings on Wednesday. The Street’s current estimate is for 86 cents a share, which I think Harley will easily beat.
UnitedHealth (UNH) said that a committee of independent directors would look at how it has granted stock options. Many of the option were granted right before the stock rose, which may indicate that the options were “backdated.”
In France, Jacques Chirac announced that he’s caving in to the protestors and he’s ditching the youth labor law. Also, the market will be closed on Friday for Good Friday.
Finally, here are some very cool pictures from the Mars Reconnaissance Orbiter.

Dell’s Growth in Foreign Markets
Posted by Eddy Elfenbein on April 10th, 2006 at 8:45 am

I think I must be the last person who hasn’t given up on Dell (DELL). Here’s an article highlighting the company’s growth in foreign markets.

Sales in Brazil, for example, almost doubled in Dell’s 2006 fiscal year ended February 3, Parra said. Michael Dell, 41, last month announced plans to double the company’s Indian staff to about 20,000 in the next three years.
Dell also added a second plant in Xiamen, China, doubling capacity in the world’s fastest-growing economy and helping boost computer shipments there by 37 percent. China now is Dell’s fourth-largest market outside the United States.
Those efforts contributed to a 21 percent surge in revenue in the Asia-Pacific region last year, pushing the region’s share of Dell’s total revenue to 12 percent. Dell’s revenue outside the United States reached 43 percent of the total last year.
Meanwhile, Dell has high hopes for myriad new product initiatives, including pushing its three-year-old printer business.
“The value proposition for customers is easy,” Parra said. “If you’re using a Dell printer and you’re about to run out of ink, with three clicks you can order the print cartridge you need.”

I can’t believe this stock isn’t $35, much less $30.

Cramer on Google
Posted by Eddy Elfenbein on April 10th, 2006 at 7:13 am

From Mad Money’s Web site, here’s Jim Cramer’s incoherent advice for Google (GOOG).
December 20…..Hold…..$429.74 (sell at $446)
January 3……….Buy…….$435.23 (going to $500)
January 4……….Buy…….$445.24 (going to $500)
January 13……..Buy…….$466.25 (going to $600)
January 23……..Buy…….$427.50
January 25……..Buy…….$433.00 (take profits)
February 2……..Buy…….$396.04
February 6……..Sell.. ….$385.10 (sell at $400)
February 14……Buy…….$343.32
February 27……Buy…….$390.38 (going to $500)
March 6………….Sell…….$368.10 (going down $15)
March 7………….Buy…….$364.45
March 13………..Sell…….$337.06
March 21………..Sell…….$339.92
March 23………..Buy…….$341.89
March 29………..Sell…….$394.98
Did anyone else’s head just explode?