• Natural Gas Prices Soar to Record
    Posted by on December 9th, 2005 at 10:17 am

    Thanks to a forecast for colder-than-normal weather, the price of natural gas soared to an all-time record high today. Natural gas for January delivery got up to $15.52 for 1,000 cubic feet. The price of oil is close to $61 a barrel. OPEC will be meeting next week, but production should remain high. As I see it, there’s no reason to stop now.
    In Russia, the lower house of parliament voted to allow foreign ownership in Gazprom, the country’s natural gas monopoly, and the largest natural gas company in the world.

  • Goldman Sachs Downgrades Frontier
    Posted by on December 9th, 2005 at 9:54 am

    Frontier Airlines (FRNT) was downgraded to in-line from outperform this morning by Goldman Sachs. The stock is down sharply and back below $8 a share. Also, two Playboy playmates were arrested for public intoxication onboard a Frontier flight from Denver to San Antonio. I’m not sure if these two stories are related, but you never know.
    Follow the link for the video of your judgmental local news broadcast.

  • Merck Deleted Data
    Posted by on December 9th, 2005 at 9:44 am

    Can the Merck (MRK) story get any worse? Apparently it can. Just as another Vioxx trial is going to the jury, the New England Journal of Medicine has accused the company of withholding key data is its research. As far as medical research goes, I don’t think it’s a good idea to get into a fight with the New England Journal of Medicine.
    The prestigious journal said that Merck deleted data regarding three heart attacks that made “certain calculations and conclusions in the article incorrect.” That doesn’t sound good.
    In the first two Vioxx trials, a key to Merck’s defense was that the company had always been upfront about its research. Right now, there are over 6,000 pending lawsuits on Vioxx. According to the Chicago Tribune: “Some analysts have estimated that Merck could be on the hook for up to $50 billion in potential liability stemming from Vioxx.”

  • Frontier Airline’s Customer Service
    Posted by on December 8th, 2005 at 9:03 pm

    Frontier’s customer service is noticed:

    Mr. Cottrell recently discovered that he had mistakenly selected the wrong date for travel when purchasing a Frontier Airlines ticket through a third-party Web site. He tried to correct the error through the company that sold the ticket, but was denied. “In a bit of a panic, I called Frontier and spoke with a customer-service rep. Not only did she change the date of travel for no charge, she offered to confirm me in a more-favorable seat. It surprised me to find such helpful customer service at an airline,” he said. “I have to hand it to Frontier — they have a customer for life.”

  • The Market Today
    Posted by on December 8th, 2005 at 6:12 pm

    Down, then up, then down, then a little bit up…the market was a bit indecisive today. Unfortunately, our Buy List was not in a happy place. The S&P 500 lost 0.12%, and our Buy List dropped 0.67%. Laggards included Biomet (BMET), Stryker (SYK) and CACI (CAI). Medtronic (MDT) reported that its implantable obesity device didn’t meet its goal.
    Oil cracked $60 a barrel again. I’m inclined to think this is a classic bear market rally. Although I have to admit that energy stocks have been surprisingly strong lately. The Dow Energy Index is up nearly 13% since mid-July. I’d be curious to see if it will hit a new high. Right now, I doubt it will.

  • Oops
    Posted by on December 8th, 2005 at 2:30 pm

    Today in Japan, Mizuho Securities wanted to place an order to sell one share of J-Com Inc for 610,000 yen. Unfortunately, a “typing error” caused the trade to go off as selling 610,000 shares for one yen.
    Oops.
    To put it in perspective, that trade was for over 40 times the number of J-Com shares outstanding. So a lot of folks got a super deal on J-Com. Also, everyone’s seriously pissed at Mizuho. The company said that it lost 27 billion yen, which sounds like a lot but it’s really only $224 million.

  • Buy What You Hate
    Posted by on December 8th, 2005 at 10:54 am

    Peter Lynch used to say, “buy what you know.” Daniel Gross says to buy what you hate:

    For the best-loved companies don’t always make good investments. Look at the companies topping the reputation chart. The top 10 are Johnson & Johnson, Coca-Cola, Google, UPS, 3M, Sony, Microsoft, General Mills, FedEx, and Intel. Of those, only Google, Federal Express, and Intel have outperformed the S&P 500 over the past three years. In the past year, only Google, Intel, and Johnson & Johnson have outperformed the S&P 500. Now look at the bottom of the reputation list. Of the six publicly traded companies in the last 11—Altria, Martha Stewart, Exxon Mobil, Royal Dutch/Shell, Tyco, and Halliburton—five have outperformed the S&P 500 over the past three years, and four have outperformed the index over the past year.

  • Bill Miller Goes for 15 in a Row
    Posted by on December 8th, 2005 at 10:51 am

    It looks like Bill Miller, the manager of the Legg Mason Value Trust mutual fund (LMVTX), will beat the S&P 500 for the 15th straight year. This is one of the legendary streaks on Wall Street, although Miller is cutting it very close this year (see the chart below).
    Miller likes to make very concentrated bets. Nearly half of his fund is in its top 10 positions. Even though the fund has value in its name, Miller has no fear of owning aggressive growth stocks. His largest holdings are Nextel, UnitedHealth, Tyco, AES, IAC/Interactive, Amazon, JPMorgan Chase, Google, Aetna and Sears.
    lmvtx.bmp

  • J&J May Look Elsewhere
    Posted by on December 8th, 2005 at 10:14 am

    Johnson & Johnson (JNJ) must be one of luckiest companies around. They were inches away from a rotten deal that got worse each day. It featured Guidant threatening to sue them unless J&J bought them out. Then after that, the two would have to work together.
    Well, it looks like Boston Scientific (BSX) is serious. They’re really going after Guidant (GDT). Of course, the deal will crush them, but I’ll give them points for bravery. The AP noted that the deal would cut BSX’s short-term earnings and quadruple their debt. Outside that, it’s a great deal! Oh, and the huge legal problems.
    Johnson & Johnson (JNJ) released a statement saying that they believe the current offer “represents full and fair value.” BA! You gotta love putting out a statement like that. It’s one of the few times you can tell people to go to hell and sound conciliatory at the same time. I’m sure it got plently of laughs at the office.
    Now what does J&J do? I definitely think they’re still game for a merger, and that leads them right to our Buy List. The most obvious purchase would be Medtronic (MDT), but they’re too big even for J&J. In fact, MDT could jump in and make a bid for Guidant. However, looking at Guidant’s price, I don’t think we’ll see anymore offers.
    A good idea for J&J would be to go after Varian (VAR), but I think the company wants to stay independent. With Guidant out of the way, the only company left that solely focuses on pacemakers and implantable defibrillators is St. Jude Medical (STJ). In every way, I think it’s a better deal for Johnson & Johnson. The only problem is that STJ is up 7.2% in the last six trading sessions. Which has been good news for us!

  • Toll Brothers’ Earnings
    Posted by on December 8th, 2005 at 9:17 am

    Toll Brothers (TOL) reported great earnings this morning, but it cut its forecast for next year. The company now sees next year’s earnings coming in around $4.79 to $5.27 per share. Toll also put its 2007 earnings outlook into doubt.