• Looking for a Conference Call Transcript
    Posted by on December 6th, 2005 at 2:11 pm

    Seeking Alpha has them.

  • S&P 500 Over 1270
    Posted by on December 6th, 2005 at 1:40 pm

    The market looks very good today, almost every sector is up. The S&P 500 hasn’t closed above 1270 since June of 2001. Energy stocks are doing well, but so are the transports. Expeditors (EXPD) isn’t far from a new high. Our best stock today is St. Jude (STJ), which is up about 3.8%. So far, the Buy List has a slight lead over the market.
    Thor Industries (THO) said that it saw a 22% increase in its orders at the Louisville Recreational Vehicle Show. Dell (DELL) has been rising steadily and may soon close in on $32 a share.
    I’ve written about Tradesports before, the site that let’s investors speculate on real world events. It turns out that there’s been an insider trading scandal at another site, Sportsbook.com. There was unusually heavy betting on “Mother Nature” for Time Magazine’s Person of the Year, and Tom Brady for Sports Illustrated’s Sportsperson of the Year. The trades were coming from e-mail addresses of a PR firm linked to Time Warner (TWX). That may be one of the dumbest moves ever.
    Please keep those e-mails coming! As always, I’m happy to give my opinion on any stock, but I can’t give personal portfolio advice. Also, I’d love to hear about any great bargains that you see on your radar.

  • NYSE to Go Public
    Posted by on December 6th, 2005 at 12:07 pm

    This is the beginning of a new era. After 213 years, the New York Stock Exchange will become a for-profit publicly traded business. Today, the 1,366 exchange members are set to vote in favor of the NYSE’s deal to buy Archipelago (AX), an electronic trading company.
    There’s a small, but vocal, group opposed to the deal, but they just don’t have the votes. Once passed, this deal will help the exchange compete with rivals like the Nasdaq (NDAQ), which is already publicly traded. Some of the publicly traded exchanges have done very well recently like the Chicago Mercantile Exchange (CME). The Chicago Board of Trade (BOT) also went public recently.
    NYSE seatholders will get 70% of the new company, plus a cool $300,000. Sometime in January, Archipelago will change its name to NYSE Group Inc. The shares will be listed on the NYSE (surprise) under the symbol NYX.

  • J&J Keeps Bid for Guidant
    Posted by on December 6th, 2005 at 11:12 am

    This is getting fun. Johnson & Johnson (JNJ) now says that it’s not going to raise its bid for Guidant (GDT). If you’re keeping score, Boston Scientific (BSX) is offering $25 billion for Guidant compared with J&J’s bid of $21.5 billion.
    Boston Scientific is so much smaller than J&J. I’m not really sure how they plan to pull this one off. According to the WSJ:

    The price is a hefty one for Boston Scientific, which has a market capitalization of $22.4 billion. The Natick, Mass., company would have to shoulder $10.5 billion in new debt and issue significantly more shares to pay for Guidant, of Indianapolis. And that could be just the start. Johnson & Johnson has a market capitalization nine times the size of Boston Scientific, and far deeper pockets to fund a bidding war. Among the 10 largest deals receiving counterbids this year, only two have succeeded, according to Thomson Financial.

    On top of that, there’s the problem of the recalls. This would be a fight over a company that neither should want. This reminds me of the Churchill quote about a turncoat Tory MP, it was the only instance of a rat swimming towards a sinking ship.
    BSX’s deal is for half in cash and half in stock. I was shocked to see that Boston Scientific’s stock didn’t fall much yesterday. I see that it’s slightly higher today. Either the market thinks there’s real potential here, or they don’t think BSX has a serious chance of nabbing Guidant.
    If Johnson & Johnson can emerge from this unscathed, I think it could be an excellent buy. Stay tuned. This ain’t over.

  • Productivity Soars
    Posted by on December 6th, 2005 at 8:57 am

    The government reported this morning that productivity growth for the third quarter soared to 4.7%. That’s the fastest growth in two years. This is important because it tells us that American workers are doing more with less. That’s the heart and soul of a healthy economy. Increased productivity also helps keep inflation down and may lead the Federal Reserve to suspend its interest rate hikes early next year.
    IBD has more on King Copper. The metal is up 180% since June 2003. Here’s a stat for you: The average house contains 400 pounds of copper. Also, TheStreet.com looks at Google Base, and thinks it’s overrated.

  • The Market Today
    Posted by on December 5th, 2005 at 9:25 pm

    Enter Boston Scientific (BSX). Just when I thought that the Johnson & Johnson/Guidant deal was done, Boston Scientific jumps in and raises the price. The coated stent market is growing by 20% a year, plus it has gross margins around 80%. You can see why everyone wants a piece of the action.
    I have to give Boston Scientific some credit; they’re taking on a giant. J&J is huge (market cap of $180 billion). Boston Scientific is roughly the same size as Guidant, actually a little smaller. If J&J really wants Guidant, they’d have no trouble outbidding Boston Scientific. But the question now is “how much is J&J willing to pay.”
    I’ve been critical of this deal from the start. I don’t see how you can simply forget months of rancor. I think the J&J people felt misled. Guidant was even willing to sue Johnson & Johnson to get the company to buy them. Please. J&J can do without Guidant, and I hope Boston Scientific has given them an exit strategy. Let them be someone else’s headache.
    The S&P 500 fell 0.24% today and our Buy List dropped 0.22%. Fiserv (FISV) fell 4.2% due to an analyst downgrade. Our big gainer today was St. Jude Medical (STJ) which rallied on the news of Boston Scientific’s offer for Guidant.

  • The Pension Crisis
    Posted by on December 5th, 2005 at 2:24 pm

    Here’s your scary article for the day. If companies were forced to account for their pensions properly, it would knock $250 billion, or about 7%, off the shareholder equity of the S&P 500.
    Credit Suisse estimates that only 21% of the $1.3 trillion in S&P 500 pension fund assets are currently reported on balance sheets. Here’s a little-known fact: While companies have to tell the Pension Benefit Guaranty Corp. (and by extension, Congress) what their pension liabiliites, Congress is prohibited, by law, from telling shareholders or employees. Not only might we be facing a pension crises, we don’t know what we don’t know.

  • Calpine to be Delisted
    Posted by on December 5th, 2005 at 1:09 pm

    In three years, shares of Calpine (CPN) went from $2 to $58. Pretty soon, the company had to restate its earnings for three years. Later, the CEO and CFO resigned without comment. Now the stock is down to 21 cents. The NYSE has had enough and will delist the shares tomorrow.

  • Too Much for Whole Foods
    Posted by on December 5th, 2005 at 6:28 am

    I’m a big fan of Whole Food Market (WFMI), but this stock is way, WAY over-priced. Last quarter, the company missed earnings by a penny a share. In the past few weeks, Wall Street has lowered this fiscal year’s consensus earnings estimate to $2.86 a share, and the stock is still trading at 53 times that. That’s almost as much as Google (GOOG)!
    Look, I like organic kumquats as much as the next guy, but let’s be reasonable. Whole Foods’ earnings will probably grow by about 17%-20%. Not bad at all. The stock, however, is already up over 60% this year.
    A stock can’t go up faster than its earnings indefinitely. At some point, something’s gotta give. That’s not finance, it’s physics. Right now, the stock is going up because it’s going up. The price and fundamentals have politely parted company. On Friday, shares of Whole Foods closed at another all-time high.
    My guess is that 2006 will not be a good year for shares of WFMI.

  • The Week Ahead
    Posted by on December 5th, 2005 at 5:43 am

    Historically, December is the best month of the year, although the market took a breather last week after five straight up weeks. There shouldn’t be too much news this week. A few milestones could fall. The Dow has a shot of breaking 11000. Also, oil might hit $60 a barrel. Next week will have another Federal Reserve meeting, but a rate hike is fully expected. Here’s what’s on tap for this week:
    • Cisco Systems holds a three-day analyst conference beginning Monday; chipmaker Altera holds a two-day analyst meeting starting Monday as well.
    • On Monday, the Institute for Supply Management releases its November read on the services sector of the economy. The index is expected to have fallen to 59.3 in the month, according to a consensus of economists surveyed by Briefing.com, from 60.0 in October.
    • October factory orders, due Tuesday, are expected to have risen 1.5 percent in the month after falling 1.7 percent in September.
    • Brocade, a maker of gear for computer data storage, reports earnings Tuesday morning. The company is expected to have earned 5 cents per share, according to First Call estimates, versus 7 cents a year ago.
    • Texas Instruments issues its mid-quarter update after the close Wednesday; rival Intel issues its mid-quarter update after the close Thursday.
    • Toll Brothers reports earnings Thursday morning. The homebuilder is expected to have earned $1.66 per share versus $1.11 a year ago.
    • The first read on December consumer sentiment from the University of Michigan is due Friday. The index is expected to have risen to 84.0 from 81.6 in November.
    • Wholesale inventories are expected to have risen 0.4 percent in October after rising 0.6 percent in September. That report is due on Friday.