• Fair Isaac Lower on Downgrade
    Posted by on December 13th, 2005 at 12:55 pm

    Fair Isaac (FIC) is trading lower today on a downgrade from JMP Securities.

    JMP Securities analyst Kevane Wong reduced his rating to a “Market Underperform” from a “Market Perform,” and called for a $43 price target within the next 12 months.
    “We believe the company is beginning to encounter increased competition in account management and a tougher operating environment for scoring,” Wong said in a report. “We understand that four credit-card issuers are expected to shift from Fair Isaac’s Triad account management system to Experian’s Probe system in the first part of 2006.
    Last month, Stephens analyst Brad Elchler said he believes rivals such as Experian, Equifax and TransUnion have focused on Fair Isaac’s business. He downgraded the company to an “Equal Weight” from an “Overweight,” and lowered his 12-month stock target to $53 from $49.
    Shares of Fair Isaac fell $2.23, or 4.8 percent, to $44.28 in midday trading on the New York Stock Exchange, and earlier changed hands as low as $43.22. The stock is still up about 21 percent so far this year.

  • Spot the Phony
    Posted by on December 13th, 2005 at 12:17 pm

    Two Swiss grad students are conducting a test to see if people can tell the difference between a real stock chart and a randomly generated one. I gave it a shot and hit three-for-three (Boo-Yah).
    That got me thinking. I wonder if people could tell the difference between a computer-generated concept for a reality TV show and an actual real reality TV show. Hmmm.
    (Via The Stalwart and Marginal Revolution.)

  • Lehman’s Earnings
    Posted by on December 13th, 2005 at 10:48 am

    Lehman Brothers (LEH) reported earnings today, and once again demolished Wall Street’s estimates. Fans of Lehman know that this is a quarterly habit for the firm. All told, Lehman raked in $2.76 a share, 14 cents more than estimates and 80 cents more than last year. This has been a terrific year for Wall Street.
    As phenomenal as those numbers are, Lehman has done this before. Last quarter, the company beat earnings by 57 cents a share, and in March Lehman beat earnings by 71 cents a share. If there’s a Google of Wall Street, Lehman is it.
    I still think of the company as a “little” firm on Wall Street, but its market cap is over $30 billion. And as amazing as Lehman’s performance has been, the stock has slightly underperformed the Amex’s Broker/Dealer Index (^XBD) over the long term. Just about every stock in that sector has been a market beater. Shares of Lehman still trade for less than 12 times this year’s earnings estimate (and we’ve seen how accurate those are), plus there’s a little dividend to boot.
    So how come I don’t love the stock? It pains me to say this, but I just don’t see the stock going much higher next year. Lehman is still primarily a bond shop. The company has done a very good job of diversifying over the past few years (Neuberger Berman was a great buy), but bonds are still the heart and soul of the company. With the yield curve so flat, I’m skeptical that the earnings surprises will keep coming.
    Half of the firm’s profits come from fixed-income trading which was up 22% over last year, but down 14% from last quarter. That may be a minor blip for Wall Street, but in Lehman’s case it’s too big a risk to ignore. I want to believe in the stock, but for now I’m content with being a spectator not an owner.

  • In the Year 2025
    Posted by on December 13th, 2005 at 6:42 am

    The government just released its annual energy report, and it says that oil will cost $54 a barrel in 2025.
    Last year, the same government report said that in 2025 oil will be $31 a barrel.
    My forecast is that in 2025, government forecasts will be worth the exact same amount they are today.

  • Pfizer Boosts Dividend
    Posted by on December 13th, 2005 at 5:35 am

    Pfizer (PFE) will have to do a lot to win me back. But raising their dividend by 26% is a good start.

  • The Market Today
    Posted by on December 12th, 2005 at 9:02 pm

    Here’s a very brief update on today’s market. Our Buy List lost 0.13% while the S&P 500 gained 0.08%. Fifteen of our stocks fell while just 10 went up. Our big gainer was eBay (EBAY). Progressive (PGR) and Golden West (GDW) were our biggest laggards. Since I’ve stuck my neck out on Dell (DELL), I’m happy to see that the stock is moving in the right direction. Shares of Dell closed today at their highest level in nearly two months.
    Outside our Buy List, Merck (MRK) fell slightly as the third Vioxx trial was thrown out. I’m beginning to think that the Texas trial was a fluke and the company is going to be very successful in court. Just a hunch though.
    Link o’the day: Daily Dose of Optimism. I go daily. I hope you do too!

  • Reader Comments: Market Timing
    Posted by on December 12th, 2005 at 8:44 pm

    Just a comment on your site. I like it. You come up with interesting daily comments I find enjoyable. The only thing I just noticed I disagree with is your investing philosophy you describe in FAQ section:
    “Be prepared for bear markets. A lousy market can strike at any time without warning. All stocks go down. It doesn’t mean the stock is broken. Stocks are volatile by nature. That’s the price you pay for superior returns. If you can ride out the bad times, you’ll be rewarded. If you can’t bear to see your portfolio drop by 50%, do not invest in the stock market.”
    I couldn’t think of a worst philosophy especially after a 3 year year market we’ve recently had. If that didn’t convince you that ‘buy and hold’ is a failure, nothing will. Buy and hold worked through out the 90’s. But that was a unique time we will likely not see again in our life time.
    I believe that there are times to be in the market and times to be out. It is crazy to see the market going down daily in little or large amounts only to watch your hard earned gains disappear. I find there is nothing worse than helplessly watching yourself lose money. There are numerous ways to follow the major trend of the market and catch the trend, whether up or down. Following a few technical facets of the market daily or relying on services that have long term good records in doing so is a far better way. Subscribing to IBD is but one of many examples of where one can find sufficient data to know when the trend in the market is changing, more than just a couple down days. The market moves in cycles and catching a significant portion of both the ups and downs is FAR superior than just buy what you feel are ‘good stocks’ and riding through no matter what the market brings you.
    To accept a 50% decline in your portfolio is not only avoidable, it is totally insane. To assume ‘well it just comes with the territory of investing’ is very foolish. Avoiding being invested during down markets or better yet, buying funds that take advantage of the downtrends, is a far better way with less risk. Being a great stock picker is only half the battle. When the market is tanking, and most often it isn’t a surprise and there was plenty of warning if you are watching closely, great stocks don’t care. But I do.
    Thanks for your time and otherwise keep up your nice site.

    Thanks for your thoughtful comments. I greatly appreciate this kind of feedback.
    First let me say that I absolutely agree with you that there are times to be in the market and time to be out. My problem is when. Speaking for myself, I’ve never seen conclusive evidence of a system that can consistently time the market over the long-term.
    Perhaps it’s just me. I freely admit that I can’t time the market. I’ve tried. (Oh boy, have I tried!) But I always found out that the market never does what it’s supposed to.
    A bear market doesn’t prove to me that buy-and-hold has failed. I know that bear markets will come along. Some will be quite nasty. However, the historical evidence is absolutely clear that the long-term trend of the market is up. In fact, 99% of the time the market is net flat. All the profits come on just one day in 100. My strategy is to assume that the market will go up every single day, and I act accordingly.
    Even after the worst bear market in seven decades, the S&P 500 index with dividends reinvested is higher than it was except for a few months right near the market’s peak. If a Rumpelstiltskin had invested in the market 10 years ago, gone to sleep and woken up today, he would have doubled his money. Not bad for the worst bear in market in seven decades.
    I truly wish all market timers the best of luck. But for me, I’m sticking with buy-and-hold.

  • Fed May Alter Statement
    Posted by on December 12th, 2005 at 2:24 pm

    Fed watchers beware. Greenspan & Co. may alter the language in tomorrow’s post-meeting statement:

    Lehman Brothers Inc. and Banc of America Securities LLC are among 12 of the 22 primary dealers of U.S. government securities that say the central bank will stop saying interest rates provide “accommodation,” meaning they are low enough to spur economic growth. All 22 expect the Fed to lift its key rate to 4.25 percent from 4 percent.
    Removing that one word from the Fed statement explaining policy decisions may fuel the debate between economists and investors over whether the central bank is almost finished raising rates, setting the stage for a rally.
    “The message they want to convey is that they are still concerned about inflation and that they will continue to raise rates until inflation pressures subside,” said Joseph Abate, a senior economist at Lehman in New York. “It’s not difficult to reconcile the Fed keeping the ‘measured’ language in there but altering the accommodative language.”
    Fifteen dealers predict policy makers will repeat rates are likely to rise at a “measured” pace, citing the potential for faster inflation.

    Here’s more on what the Fed needs to consider.

  • Welcome to the Global Economy
    Posted by on December 12th, 2005 at 1:23 pm

    One of Brazil’s fastest-growing companies is a home-grown Arabic fast-food chain.

  • Stock Options: Old Game, New Tricks
    Posted by on December 12th, 2005 at 11:29 am

    Business Week looks at the game of stock options accounting. One of the variables of the Black-Scholes pricing formula is volatility. Now that companies have to account for employee stock options, their volatility assumptions are magically falling:

    Time Warner’s lowering of its expected volatility in 2004 cut its options expense by $72 million, a 28% drop, according to New Constructs. Wireless service provider Nextel Partners slashed estimated options expenses from $41 million to $33 million. A Time Warner spokeswoman says the new calculation accurately reflects the more stable range in which the company’s stock now trades. Nextel Partners declined to comment.
    Another tactic hundreds of companies have used is accelerated vesting. Options traditionally become effective over a period of years after they’re granted and are canceled if the recipient leaves the company. By making options vest in 2005 rather than in future years, companies can bury the cost in the footnotes of their 2005 paperwork. That boosts earnings in 2006 and beyond.
    The number of companies employing the practice has almost doubled since midyear, from 234 in July to 439 by late November, according to Bear Stearns. The activity has slashed $4 billion from expenses for 2006 and later years. Senyek of Bear Stearns projects that 600 companies could speed up vesting by the end of 2005, boosting future profits by over $5 billion.