• The Market Is Closing in on a New High
    Posted by on February 22nd, 2006 at 1:22 pm

    The market is looking good today. If the S&P 500 closes above 1294.18, it will be our highest close in 57 months. Right now, we’ve very close.
    Over the past few years, small stock indexes have done much better than the S&P. In fact, they’ve hit all-time highs in recent weeks, however, small stocks have underperformed the market since the beginning of the year.
    One of the important lessons of investing in the stock market is that stocks don’t move rationally. At least, not in the short-term. We have all these hi-tech toys that are used to analyze things that really don’t make much sense on closer inspection.
    Trends are often much stronger and longer-lived than you think. For example, Home Depot (HD) had a good earnings report and the stock basically ignored it. Medtronic (MDT) also had a good report, and the stock is weaker today.
    As long as the earnings are good, I’m not concerned about those stocks. Their time will come. Remember, if the Dow were to accurately reflect its underlying value, it would move about four or five points each day.
    Expeditors (EXPD), Danaher (DHR) and Donaldson (DCI) are all at new highs today. As much as I like Expeditors (which is a lot), I have to admit that its shares are fairly pricey. Yet, the stock keeps going up. Who am I to say stop?
    On the other hand, we have Bed Bath & Beyond (BBBY) which is very cheap, and its shares seem to be going nowhere. It’s time will also come. I don’t know when, but I’m holding on.
    Dell (DELL) postponed an analyst meeting. I don’t think it’s anything to worry about. I noticed this factoid from the article: “Concerns about growth have held back Dell’s shares, which trade at about 15 times estimated fiscal earnings per share for the coming year, the same as No. 2 PC maker Hewlett-Packard Co. That is a discount, since Dell’s estimated long-term growth rate is about twice that of HP, according to Sanford C. Bernstein analyst Toni Sacconaghi.”
    Twice the long-term growth rate, yet it trades with the same P/E ratio. Like I said, this isn’t always rational.
    For the year, our Buy List is up 2.98% versus 3.57% for the S&P 500.

  • America Movil
    Posted by on February 22nd, 2006 at 12:17 pm

    Here’s an interesting article on America Movil (AMX). The company is the largest cellphone company is Latin America. Carlos Slim, who’s the fourth-richest man in the world, bought TelMex from the Mexican government in the early 90s. A few years later, he spun-off America Movil. The company now has over 90 million subscribers, including six million in the U.S.
    The company is hugely profitable in Mexico and it’s used its success there to move into other Latin American markets. In the last three years, shares of AMX are up 650%.
    amx.bmp

  • Medtronic Reports Inline Earnings
    Posted by on February 21st, 2006 at 4:20 pm

    After the bell, Medtronic (MDT) reported earnings of 55 cents a share, matching Wall Street’s forecast:

    Medtronic, Inc. today announced record revenue for the quarter ended January 27, 2006, of $2.770 billion, a 9 percent increase over the $2.531 billion recorded in the third quarter of fiscal year 2005. On a constant currency basis, growth was 12 percent with a negative currency translation impact of $72 million or 3 percent.
    As reported, third quarter net earnings were $670 million or $0.55 per diluted share, an increase of 23 percent and 22 percent respectively over the prior year third quarter. Excluding the litigation charge included in the prior year third quarter, net earnings and earnings per share increased 20 percent.
    “Solid overall growth was again led by our two largest product lines, implantable defibrillators and spinal products. These two product lines accounted for about 45 percent of the corporation’s revenue and, on a constant currency basis, they collectively grew 22 percent compared to the prior year third quarter,” said Art Collins, chairman and chief executive officer of Medtronic. “This year’s growth reflects the impact of ongoing investments; for example, during this quarter R&D expenditures increased 16 percent to $280 million.”

  • TheStreet.com Initiates Dividend
    Posted by on February 21st, 2006 at 12:04 pm

    Good news! TheStreet.com (TSCM) has announced its first-ever quarterly dividend! The company is going to pay out 2.5 cents a share. Booyah! That works out to $2.5 million a year.
    Hold up! Where exactly will this money come from? Aren’t dividends supposed to be from profits?
    Well, the company isn’t exactly profitless. After several years of gushing money, TheStreet finally registered a profit in 2005. A whopping $246,000. Or a penny a share (slightly less actually). That’s about what a 7-11 makes.
    Due to discontinued operations, that EPS number jumps to 23 cents, but it’s still hardly comforting. First, they’re discontinuing operations. They shuttered their brokerage and research businesses last year. Now they’re focusing on subscriptions for revenue, and that rose by 3% last year.
    The company still has over $30 million in cash so they can pay dividends for a while. But I hope they don’t think they’re fooling anyone.

  • Radio Shack’s CEO resigns
    Posted by on February 21st, 2006 at 10:58 am

    As we celebrate George Washington’s birthday, we should remain that our nation’s first chief executive didn’t go to college. Likewise, David J. Edmondson, Radio Shack’s chief executive, also didn’t earn a college degree.
    Unlike Edmonston, Washington didn’t lie about it. The good news is that Edmonston will get a $1.5 million severance package.

  • Home Depot Tops Earnings
    Posted by on February 21st, 2006 at 10:03 am

    The stock is up this morning on a good earnings report. The company beat the Street’s forecast by four cents a share:

    Home Depot Inc., the world’s largest home-improvement retailer, said fourth-quarter profit rose on sales of major appliances and cabinets.
    Net income climbed to $1.29 billion, or 60 cents a share, from $1.04 billion, or 47 cents, a year earlier. Sales in the period ended Jan. 29 increased to $19.5 billion from $16.8 billion, the Atlanta-based retailer said today in a statement sent by PR Newswire.
    Profit was helped as U.S. consumers spent more on refrigerators, cabinetry and faucets to remodel their kitchens and bathrooms. Chief Executive Robert Nardelli is also seeking to boost sales to professional contractors with last month’s $3.19 billion acquisition of Hughes Supply Inc.
    Home Depot is “going after the larger contactors and infrastructure-related businesses,” said Peter Jankovskis, director of research at Oakbrook Investments LLC, which has $1 billion under management, including about 760,000 Home Depot shares. “It’s given them greater exposure to large homebuilders and municipalities as well and that’s a much more steady source of income.”
    Shares of Home Depot were unchanged at $41.86 on Feb. 17 in New York Stock Exchange composite trading. They fell 5.3 percent last year, while rival Lowe Cos.’s gained 16 percent.
    Home Depot made more than a dozen acquisitions in the past year to build its supply business into a unit with $12 billion in revenue. The company, which has more than 2,000 stores, is increasing sales to professionals and expanding in Mexico, Canada and China to keep pace with the faster growth at Lowe’s.
    Forecast
    Piper Jaffray & Co. analyst Michael Cox expected Home Depot to earn 56 cents a share in the quarter, the same as the average estimate of 22 analysts surveyed by Thomson Financial. Minneapolis-based Cox is the top-ranked analyst for Home Depot by StarMine Inc. Thomson declined to disclose the parameters for the estimates in its average.
    Last month, Home Depot affirmed its fiscal 2005 earnings forecast of $2.64 to $2.67 per share. The average estimate of 21 analysts surveyed by Thomson is $2.67. The company projected an 11 percent sales gain for last year.
    Analysts are estimating Home Depot will earn $3.03 this year, one cent below Cox’s estimate.
    Nardelli, 57, said last month that he will slow the company’s retail expansion. Home Depot will open as many as 500 stores through 2010, about 75 less than in recent years.
    ‘Growth Company’
    “While the looming saturation of home-improvement retail boxes in this country is bringing a natural slowdown in the rate of new store growth, Home Depot remains a growth company,” Cox wrote in a research note on Jan. 20.
    U.S. spending on home remodeling increased 4.3 percent both in the fourth quarter and for all of 2005, according to the Harvard Joint Center for Housing Studies.
    The company said on Jan. 19 annual sales will grow as much as 17 percent over the next five years and earnings per share will rise as much as 14 percent.
    Home Depot’s sales have gained an average of 11 percent a year over the past three years. Revenue for Lowe’s, which has about 1,200 stores, increased an average of 16 percent over the same period.
    Lowe’s reports fourth-quarter earnings on Feb. 27.
    Home Depot met or exceeded analysts’ estimates in the four prior quarters. Of the 24 Home Depot analysts tracked by Bloomberg, 16 recommend buying the shares, eight suggest holding them and one has a “sell” rating.

  • Royal Philips cancels $700M Dell contract
    Posted by on February 20th, 2006 at 2:16 pm

    From Reuters:

    Royal Philips Electronics NV canceled a $700 million contract with Dell Inc.
    The contract called for Dell to provide desktops and other hardware, managed services and software packaging to Philips Electronics (NYSE: PHG) over five years. The contract was signed in December 2004.
    According to Reuters, a Philips spokesman says the companies concluded that the contract “did not sufficiently guarantee success for completion.”
    In morning trading, Dell’s stock was down 4.94 percent to $30.38 a share.
    Based in the Netherlands, Royal Philips Electronics is one of the world’s largest electronics companies. Round Rock-based Dell is one of the world’s largest computer manufacturers.

  • Ten Straight Years of Earnings Growth
    Posted by on February 19th, 2006 at 5:07 pm

    The following 34 stocks have grown their earnings for 10 straight years:
    NVR NVR
    Apollo Group-Cl A APOL
    Moog-Cl A MOGA
    Dollar Tree Stores DLTR
    Bed Bath & Beyond BBBY
    Compass Bancshares CBSS
    City National CYN
    Donaldson DCI
    Ross Stores ROST
    SEI Investments SEIC
    Expeditors Intl Wash EXPD
    Toll Brothers TOL
    Patterson Companies PDCO
    Lincare Holdings LNCR
    Home Depot HD
    Health Mgmt Assoc HMA
    Knight Trans KNX
    Harley-Davidson HDI
    Paychex PAYX
    Applebee’s Intl APPB
    Brown & Brown BRO
    O’Reilly Automotive ORLY
    Hilb Rogal & Hobbs HRH
    Heartland Express HTLD
    Capital One Financial COF
    Copart CPRT
    Walgreen WAG
    Sysco SYY
    Wal-Mart Stores WMT
    D.R. Horton DHI
    Synovus Financial SNV
    General Electric GE
    Cathay Gen Bancorp CATY
    Trustco Bank Corp/NY TRST

  • All Hail the Dollar
    Posted by on February 19th, 2006 at 4:53 pm

    From some reason, the news media seems unable to report on issues regarding international currencies. I’m not sure why this is, but once people start talking “dollars” and “euros,” everyone’s eyes start to glaze over. Otherwise fine reporters become a mixture of alarmism and incoherence. It’s as if currencies are like, say, very large hurricanes.
    Daniel Gross has an article on today’s New York Times on the growing trend of Latin American countries abandoning their sovereign currencies for the U.S. dollar. Is this a good thing, or a bad thing? I think Dr. Roubini answers the question well.

    “If you have sound economic policies in a country, you don’t need dollarization,” said Nouriel Roubini, professor of economics at New York University’s Stern School of Business. “And if you follow poor policies, I don’t think dollarization will solve your problems.”

    Currencies themselves don’t produce wealth, or the lack thereof. Currencies are only as strong as the economies they support. Disraeli said (rightly): “Our gold standard is not the cause, but the consequence of our commercial prosperity.”

  • Earnings Preview: Home Depot
    Posted by on February 19th, 2006 at 4:10 pm

    From the AP:

    Home Depot Inc. reports earnings for the fourth quarter on Tuesday, Feb. 21 before the market opens. The following is a summary of key developments and analyst opinion related to the period.
    EXPECTATIONS: The world’s biggest home improvement retailer in January forecast fiscal 2005 earnings between $2.64 and $2.67 per share, on sales of at least $81 billion.
    Wall Street expects Home Depot to post earnings of 56 cents per share, the mean estimate of 22 analysts surveyed by Thomson Financial, on $18.74 billion in sales.
    ANALYST TAKE: “We remain very positive on the home improvement sector and Home Depot’s prospects, particularly given current valuation levels,” Lehman Brothers analyst Alan Rifkin wrote in a client note. “Home Depot shares are currently trading in line with the five-year historic low forward price-to-earnings ratio, based on consensus estimates.”
    QUARTER DEVELOPMENTS: Home Depot in January said it would acquire Hughes Supply, one of the nation’s biggest sellers of construction, repair and maintenance products, for $3.19 billion, its biggest ever acquisition.
    Also in January, Home Depot said it would scale back new store openings over the next five years, as it shifts from the retail business in favor of the wholesale commercial and industrial markets. The company, which currently operates 2,043 stores in the United States, Canada and Mexico, said it will open 400 to 500 stores through 2010, down from the 941 it opened since late 2000.
    Earlier this month, the Financial Times reported Home Depot was in talks to buy up to 49 percent of Orient Home, a Chinese retail chain, for more than $200 million. The company declined to comment on the report.
    COMPETITORS: Home Depot competes with Lowe’s Cos., the nation’s No. 2 home improvement chain, which on Feb. 1 said it would bolster its current share buyback program by up to $1 billion. The company is scheduled to report its quarterly results later this month.
    STOCK PERFORMANCE: Home Depot shares are up 3 percent so far this year and trading near a 52-week high of $43.98 it hit in July 2005.