• Earnings from AFLAC and Fiserv
    Posted by on January 30th, 2006 at 10:33 pm

    After the bell, two of our Buy List stocks reported earnings. AFLAC (AFL) said that it netted of 59 cents a share (excluding charges) for the fourth quarter. This was slightly below Wall Street’s forecast of 63 cents a share. However, AFLAC lost three cents a share due to currency translation. The company does most of its business in Japan.
    AFLAC is one of my favorite stocks. It’s one of those stocks that consistently delivers. The company also reiterated its EPS growth forecast of 15%-16% for this fiscal year, and raised its dividend from 11 cents to 13 cents a share.
    Don’t let the earnings miss fool you, this was a good quarter for AFLAC. Assuming AFLAC earns $2.92 a share for this year, the stock is going for a very reasonable 16 times earnings, which is in line with its growth rate. This is a solid, steady grower. I wish I knew how to quit this stock.
    The other stock, Fiserv (FISV), reported earnings of 81 cents a share. Discounting the company’s newly acquired check-processing operations Fiserv earned 56 cents a share which was in line with analysts’ estimates. The company said that it expects to earn $2.46 to $2.53 a share for this year, so it’s trading around 18 times earnings. This is another high-quality stock.
    In today’s market, Sysco (SYY) finished 6.2% higher. Only five of our 20 stocks rose, but Sysco’s big day helped the Buy List eek out a 0.03% gain. The S&P 500 rose 0.12%.
    Our next earnings report is SEI Investments (SEIC) which is due on Wednesday. Expeditors (EXPD) is also due soon, but they haven’t said what day.
    And finally, CNN reported:

    The latest Census Bureau report shows median prices for new residences sold in December fell 1.5 percent from the previous month to $221,800. Half of the homes sold for more than the median, the rest for less.

  • Earnings Guidance
    Posted by on January 30th, 2006 at 1:26 pm

    From Hoku Scientific (HOKU):

    Based upon projections, the Company expects net income to be in the range of a loss to break even or slightly profitable.

    I’m glad that’s all cleared up.

  • Today is All about Energy Stocks
    Posted by on January 30th, 2006 at 12:50 pm

    Energy stocks are rallying and everything else is barely moving. This has become typical of the market in the past few years. Energy stocks either lead the market or trail it badly, while the rest of the market bounces along.
    Here’s how the sector ETFs are performing today:
    Energy (XLE) +2.52%
    Tech (XLK) +0.37%
    Materials (XLB) +0.22%
    Industrial (XLI) +0.19%
    Discretionary (XLY) +0.06%
    Staples(XLP) -0.13%
    Finance (XLF) -0.12%
    Health care (XLV) -0.15%
    Utility (XLU) -0.46%

  • Sysco is up 5%
    Posted by on January 30th, 2006 at 11:03 am

    Thanks to ExxonMobil (XOM), today is another big day for the energy sector. Interestingly, ExxonMobil launched a preemptive public relations blitz and took out ads in several newspapers defending its profits.
    Incidentally, Friday was another good day for the Buy List. We followed up Thursday’s impressive rally, which was our best day of the year, with our second-best day of the year.
    For today, only five stocks on the Buy List are higher, but thanks to big rallies from Sysco (SYY) and Expeditors (EXPD), the Buy List as a whole is slightly in the black so far. Sysco is up nearly 5%, and Expeditors is at a new high.

  • Risk is Relative
    Posted by on January 30th, 2006 at 10:34 am

    In the New York Times, Virginia Postrel had an interesting article on risk. She notes the work of Professor Shane Frederick of MIT who’s studied how people have different conceptions of risk. Risk truly is in the eye of the beholder.
    Professor Frederick devised a simple math test in which all the answers are counter-intuitive. He found a very strong correlation between test answers and a person’s perception of risk.

    “Even when it actually hurts you on average to take the gamble, the smart people, the high-scoring people, actually like it more,” Professor Frederick said in an interview. Almost a third of high scorers preferred a 1 percent chance of $5,000 to a sure $60.
    They are also more patient, particularly when the difference, and the implied interest rate, is large. Choosing $3,400 this month over $3,800 next month implies an annual discount rate of 280 percent. Yet only 35 percent of low scorers — those who missed every question — said they would wait, while 60 percent of high scorers preferred the later, bigger payoff.
    Men and women also show different results. “Expressed loosely,” he writes, “being smart makes women patient and makes men take more risks.”

    You can see Professor Frederick’s original article here.

  • Sysco’s Earnings
    Posted by on January 30th, 2006 at 9:48 am

    Today will be another busy day for earnings. ExxonMobil (XOM) reported that it earned $10 billion for the fourth quarter. According to Reuters, the company’s profit last year was larger than the economies of 125 countries.
    Sysco (SYY) reported that it earned 33 cents a share, but had a charge of four cents a share due to stock options. Including that charge, Wall Street was expecting 37 cents a share. Sales also came in above expectations.
    AFLAC (AFL) and Fiserv (FISV) will report after the close.
    Dell’s (DELL) CEO said that its sales will grow faster than the market’s. The company is going to hire another 5,000 people in India, bringing its total in that country to 15,000.

  • A Look at the Long Term
    Posted by on January 27th, 2006 at 2:18 pm

    Here’s a question for you.
    Including dividends and inflation, what’s the average rate of return for the broad stock market?
    12%?
    15%?
    Not even close. Over the last 80 years, the real return of equities is just 7.1%. Pretty small. At that rate, you’ll double your money every 10.1 years.
    I don’t think most investors realize how small the historical rate of return is.
    Below is an interesting graph I made, but bear with me, it takes some explaining. I took the 80-year real return data and divided it by a line growing at 7% a year. By doing this, the unusual bull and bear periods stand out a lot better.
    (If you’re confused, think of it this way: When this line is moving straight, equities are growing at 7% a year. Also, the line roughly begins and ends at 1.0.)
    Interestingly, the 1987 crash only appears as a rather minor blip. From 2000-2002, the line gave back everything it gained from 1995 to 2000. Six years ago, it was hard to tell people that this isn’t normal. Now I think you can see what an outlier that period was.
    It looks like there’s only been three truly great bull markets: one in the late-20’s, another in the early-50’s and another from 1982-2000.
    I also think it’s interesting that the peaks and troughs are fairly symmetrical (1942 and 1982, 1966 and 2000).
    graph1.bmp

  • Happy 250th Birthday Mozart
    Posted by on January 27th, 2006 at 12:45 pm

    Mozart.jpg
    Wolfgang Amadeus Mozart was born in Salzburg on January 27, 1756. During his life, he wrote over 600 works. His output was astounding; 41 symphonies, 21 operas, 15 masses, 12 violin concertos, 27 concert arias, 17 piano sonatas, 26 string quartets and much, much more. He did it all in 35 short years.
    Tom Lehrer said, “when Mozart was my age, he had been dead for two years.”

  • Biomet Up 6%
    Posted by on January 27th, 2006 at 11:34 am

    Another good day for us. Biomet (BMET) is soaring. The shares are up over 6% today. Varian Medical (VAR) is up another 4% today. The stock is up 19% for us this year. Donaldson (DCI) is up to a new 52-week high, and Fiserv (FISV) is up over 3%. There’s still 4-1/2 hours of trading but this is a nice finish to week.

  • GDP Report
    Posted by on January 27th, 2006 at 9:55 am

    Today, the government released its first report on fourth-quarter GDP growth. They released a GDP report at the end of each month, so this report will be revised twice more.
    According to today’s report, the economy grew by 1.1% (annualized) for the last three months of 2005. That’s pretty bad and it’s about half of what economists were expecting.
    Until now, the economy had delivered over 3.3% growth for ten straight quarters. So I guess we shouldn’t be too greedy. Also, this was positive growth so we can say that the economy isn’t receding.
    The economy has grown at a faster rate over the last 3-1/2 years than it did during the 1990’s.
    Reuters is declaring: “GDP growth at weakest in three years.” That’s accurate, but that headline can be used, on average, once every three years. For any set of 12 quarters, one will have to be the weakest. Of course, only three quarters ago we were being warned about the “Slowest GDP growth in 2 years.”