Morning News: December 22, 2021
Posted by Eddy Elfenbein on December 22nd, 2021 at 7:04 am

Omicron Is Turning Europe’s Busy Season Silent

Europe’s Energy Crunch Continues as Gas and Power Prices Soar

Turkey’s President Hails Steps to Help Depositors, as Lira Steadies

Just A Year of Brexit Has Thumped U.K.’s Economy and Businesses

Booming U.S. Economy Ripples World-Wide

Wall Street Ends Crazy Year With Existential Angst and Big Bonuses

Crypto’s Wild 2021 Will Go Down as One for the Ages

Credit Scores for Car Insurance? Regulators Are Taking Aim

Lingering Virus, Lasting Inflation: A Fed Official Explains Her Pivot

Why a Chinese Company Dominates Electric Car Batteries

‘Hands Off’: Why Some U.S. Investors Are Pulling Meme Stocks from Brokerages

Maersk Buys Asian Warehouse Giant LF Logistics for $3.6 Billion

Self Storage Is the Pandemic’s Hot Property

If You Find Lego Under the Tree This Year, They Might Be Worth More Than Gold One Day

CES Insists Tech Conference Will Go On Despite Big-Name Cancellations

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CWS Market Review – December 21, 2021
Posted by Eddy Elfenbein on December 21st, 2021 at 7:44 pm

(This is the free version of CWS Market Review. I’m going to unveil our 2022 Buy List this Friday, December 24 in our premium issue. To see the new list, make sure you’re a premium subscriber. You can get the premium newsletter for $20 per month or $200 for the whole year.)

Oracle to Buy Cerner for $95 per Share

Great news for our Buy List. This week, Oracle (ORCL) said it’s going to buy Cerner (CERN) for $95 per share. This is a huge win for us.

Earlier, we knew that the companies had been discussing a potential deal, but that became official yesterday. This will be Oracle’s largest deal ever. The deal is all-cash and it includes Cerner’s debt.

The story initially broke in the WSJ on Thursday evening. Shares of Cerner had closed at $79.49 that day. The stock soared on Friday and eventually closed at $89.77. That was a gain of nearly 13%.

It’s even more impressive when you consider that Cerner had been rallying going into the announcement. As recently as December 1, shares of Cerner closed at $70.01 per share. If you include that, then the stock has gained close to 30% in a few weeks.

If you look closely, you can almost make out when the news broke:

The deal comes to $28.3 billion. While Oracle will pay $95 per share for Cerner, the stock will probably drift around in the low $90s until the deal closes. Once the lawyers get involved, it takes time to get the deal done.

There are also regulatory hurdles to deal with. There’s also the possibility that the deal will fall through. It’s unlikely, but it does happen. Sometimes shareholders revolt and enough of them can get their way. Until then, shares of Cerner will trade like a low-quality bond that will mature at some point at $95 per share.

From Bloomberg:

Oracle Chief Executive Officer Safra Catz said the acquisition should be “immediately accretive to Oracle’s earnings” on an adjusted basis in the first full fiscal year after closing and contribute “substantially more to earnings in the second fiscal year and thereafter.” The transaction is expected to close next year, the companies said.

Oracle, the second-biggest software maker by revenue, is best known for legacy database products. The company has struggled in recent years to gain ground in cloud computing, in which companies rent data storage and analytic power from large server centers, trailing far behind market leaders such as Amazon.com Inc. and Microsoft Corp.

The deal for Cerner gives Oracle a huge foothold in technology for the health care industry — a sector expected to spend $15.8 billion on cloud infrastructure and software by 2023, according to market researcher IDC — given Cerner’s robust user base, which includes many of the top U.S. hospital systems. And as Oracle moves more of Cerner’s systems onto its own cloud infrastructure, the company gains an important case study to help future sales.

This deal caught some people off guard because Cerner’s new CEO started only a few weeks ago. As much as I like Cerner, the stock had not been a terribly strong performer for us this year.

We added CERN to our Buy List in 2016. Since then, the company has performed well but the stock has been somewhat mediocre. Oracle had also been on our Buy List from 2011 to 2015.

FactSet Delivers Big Earnings Beat

This morning, we got an earnings report from FactSet (FDS). This is for its fiscal Q1 which ended in November. FactSet has been one of our best-performing stocks this year with a gain of 44% (including dividends).

The company reported fiscal Q1 earnings of $3.25 per share. That was up 12.8% over last year and it beat Wall Street’s forecast of $2.99 per share.

Quarterly revenues rose 9.4% to $424.7 million. Organic sales rose 9.1% to $423.2 million.

The key stat for FactSet is Annual Subscription Value (ASV) plus professional services. At the end of the quarter, that stood at $1.7 billion which is up from $1.6 billion a year ago.

Most importantly, the company reaffirmed its expectations for Fiscal 2022:

• Organic ASV plus professional services is expected to increase in the range of $105 million to $135 million over fiscal 2021.
• GAAP revenues is expected to be in the range of $1,705 million to $1,720 million.
• GAAP operating margin is expected to be in the range of 31% to 32%.
• Adjusted operating margin is expected to be in the range of 32.5% to 33.5%.
• FactSet’s annual effective tax rate is expected to be in the range of 14.5% to 15.5%.
• GAAP diluted EPS is expected to be in the range of $11.60 to $11.90. Adjusted diluted EPS is expected to be in the range of $12.00 to $12.30.

FactSet is also one of the newest members of the S&P 500. The stock gapped down this morning. At one point, shares of FDS were down 4.4%. Cooler heads prevailed and FDS later rallied. The shares were up today by 0.8%.

Nike Had to Cancel 130 Million Orders

Yesterday, Nike (NKE) reported very good earnings. The sneaker company made 83 cents per share which was 20 cents more than expectations. The stock rallied 6.15% today.

Despite the earnings beat, Nike has been experiencing weakness in China. Sales in North America have more than made up the difference.

The reason why I wanted to bring Nike to your attention is this amazing stat. Last quarter, Nike had to cancel 130 million units due to factory closures. The company said that those problems are being worked out.

Since the beginning of 1990, Nike has gained nearly 33,000%:

The Santa Claus Rally

Normally, I don’t place a great deal of faith in calendar effects and the stock market. After all, the stock market has been around for a long time. If you slice and dice the data long enough, you’re bound to find an oddball stat.

Still, I am impressed by the Santa Claus Rally. This is the phenomenon of the market performing well at Christmastime. The numbers are truly remarkable.

I’ve taken the entire history of the Dow Jones, which dates back from more than 125 years ago, and I’ve found that one-third of the stock market’s entire gain has come between December 22 and January 8.

Here are the numbers. The Dow has an average annualized gain (excluding dividends) of 7.85% per year. From December 22 to January 8, the Dow has an average gain of 2.82%. While that may not sound like a lot, it’s very large considering the short time span—it’s only about 5% of the year—and that’s an average of 125 years’ worth of data. For the rest of the year, the other 95%, the Dow has gained just 4.89% per year.

Here’s how the Dow has performed on average during the year:

Thank you, and I want to wish everyone a Merry Christmas and a happy and healthy holiday season. I’ll have more for you in the next issue of CWS Market Review.

– Eddy

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FactSet Earns $3.25 per Share
Posted by Eddy Elfenbein on December 21st, 2021 at 11:12 am

This morning, FactSet (FDS) reported fiscal Q1 earnings of $3.25 per share. That was up 12.8% over last year and it beat Wall Street’s forecast of $2.99 per share. Quarterly revenues rose 9.4% to $424.7 million. Organic sales rose 9.1% to $423.2 million.

The key stat for FactSet is Annual Subscription Value (ASV) plus professional services. At the end of the quarter, that stood at $1.7 billion which is up from $1.6 billion a year ago.

FactSet is also one of the newest members of the S&P 500.

Here are FactSet’s expectations for Fiscal 2022:

• Organic ASV plus professional services is expected to increase in the range of $105 million to $135 million over fiscal 2021.
• GAAP revenues is expected to be in the range of $1,705 million to $1,720 million.
• GAAP operating margin is expected to be in the range of 31% to 32%.
• Adjusted operating margin is expected to be in the range of 32.5% to 33.5%.
• FactSet’s annual effective tax rate is expected to be in the range of 14.5% to 15.5%.
• GAAP diluted EPS is expected to be in the range of $11.60 to $11.90. Adjusted diluted EPS is expected to be in the range of $12.00 to $12.30.

Morning News: December 21, 2021
Posted by Eddy Elfenbein on December 21st, 2021 at 7:05 am

Extreme Bidding Wars Are Raging in One of World’s Riskiest Housing Markets

JPMorgan’s Paris Traders Are Only Part of the Threat to London

Global Retail’s Battle With Covid Actually Saved Its Stores

Retailers Find TikTok a ‘Sunny Place’ for Advertising

Crypto Funds Explode in Boom Year Marked by First U.S. Bitcoin ETF

How the 2020s Economy Could Resemble the 1980s

Deal With Ted Cruz Sets Stage for Russia Pipeline Fight in Early 2022

Coal Miners Urge Manchin to Rethink Opposition to Spending Bill

E.P.A. Announces Tightest-Ever Auto Pollution Rules

What We Lose if We Don’t Build Back Better

Boeing and Airbus want Biden Administration to Delay Rollout of 5G Cell Service, Citing Safety Concerns

Embraer Flying Taxi Unit Eve, Valued at $2.9 Billion, to List on NYSE

Biogen Cuts Price for Alzheimer’s Drug Aduhelm by Half

Jack Dorsey Stirs Uproar by Dismissing Web3 as a Venture Capitalists’ Plaything

How the Copy Cats Came for Clubhouse

Nikola Corp Agrees to Pay $125 Million to Settle SEC Charges of Defrauding Investors

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Oracle to Pay $95 per Share for Cerner
Posted by Eddy Elfenbein on December 20th, 2021 at 10:51 am

This morning, we’re getting more details on the Oracle (ORCL)/Cerner (CERN) deal. Oracle is expected to pay more than $30 billion for Cerner. The deal will be all cash at $95 per share. The deal includes Cerner’s debt. Currently, Cerner is trading for $90.63 per share which is up about 1%.

The stock market is down this morning. Some commentators are pointing fingers at the failure of President Biden’s Build Back Better plan. On Sunday, Senator Joe Manchin announced his opposition to the bill.

The stock market has been down as much as 1.74% this morning. As I write this, the High Beta Index is off by 2.32% while Low Vol is down by 1.09%.

Morning News: December 20, 2021
Posted by Eddy Elfenbein on December 20th, 2021 at 7:11 am

Davos Postponed Over Omicron Uncertainty

Global M&A Activity Smashes All-Time Records to Top $5 Trillion in 2021

Crypto Barrels Toward 2022 After Adding $1.5 Trillion in Value

Nagel Returns to Bundesbank as Boss, Likely to Maintain House View

The Fed’s Pivot Is the Opposite of Hawkish

Paul Volcker, the Fed, and ‘Tight Credit.’ The Myth That Won’t Die.

The Path Ahead for Biden: Overcome Manchin’s Inflation Fears

Going To Cash Can Be As Costly As A Market Crash

Drones Take Center Stage in U.S.-China War on Data Harvesting

Oracle Is Said Expected to Acquire Cerner for Mid $90s/Share

Bank of Montreal to Buy BNP Paribas’s U.S. Unit

A $550 Million Springsteen Deal? It’s Glory Days for Catalog Sales.

‘Spider-Man: No Way Home’ Ensnares Audiences and Refills Studio Coffers

Zegna’s I.P.O. Path Raises Question: Is This the Next Big Fashion Trend?

Elon Musk Says He’ll Pay Over $11 Billion in Taxes This Year

China Hits Top Influencer With $210 Million Fine Over Taxes

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Oracle/Cerner is Happening
Posted by Eddy Elfenbein on December 19th, 2021 at 9:19 pm

Oracle expected to announce acquisition of Cerner tomorrow morning in all cash deal for "mid 90's" per share, according to sources. $ORCL, $CERN WSJ reported talks late last week.

— David Faber (@davidfaber) December 20, 2021

WSJ: Oracle in Talks to Buy Cerner
Posted by Eddy Elfenbein on December 17th, 2021 at 4:05 pm

Great news! Yesterday evening, the Wall Street Journal reported that Oracle (ORCL) is in talks to buy Cerner (CERN) for “a deal that could be worth around $30 billion.”

A $30 billion valuation would give Cerner a share price of $102. The stock closed Thursday at $79.49 per share. This is very good news for us and our Buy List.

An agreement could be finalized soon, some of the people said, assuming the talks don’t fall apart or drag out. Should a deal come together, it would rank as the biggest ever for Oracle, which has a market value of more than $280 billion.

Kansas City, Mo.-based Cerner designs software that hospitals and doctors use to store and analyze medical records and other healthcare data. It has a market value of around $23 billion. With a typical takeover premium, a deal would be expected to value the company at something like $30 billion, though exact terms being discussed couldn’t be learned.

Neither company has made an announcement. I expect to hear something official next week.

Shares of Cerner jumped nearly 13% today to close at $89.77 per share. At one point, Cerner traded as high as $92.34 per share today.

It took us a while but we finally hit it big with Cerner.

Morning News: December 17, 2021
Posted by Eddy Elfenbein on December 17th, 2021 at 7:04 am

Inflation Is Near a 40-Year High. Here’s What It Looks Like.

Omicron Is an Economic Threat, but Inflation Is Worse, Central Bankers Say

Japan’s Central Bank Shuns Tightening Trend, Citing Lack of Inflation

The Risk of Avoiding Emerging Markets

What Congress Traded in 2021

Green-Energy Race Draws an American Underdog to Bolivia’s Lithium

Reddit IPO to Test Social Media Platform’s ‘Meme’ Stock Hype

Judge Overturns Purdue Pharma’s Opioid Settlement

S&P Dumps Chinese Property Giant Evergrande Into Default

Chinese Workers Are Saying Enough Is Enough, and Xi Is Not Amused

Oracle in Talks to Buy Cerner

Amazon And UPS Are Betting This Electric Aircraft Startup Will Change Shipping

How McDonald’s Made Enemies of Black Franchisees

GM Bids a Brusque Farewell to the CEO of Cruise

Family Business Deals Help Fuel Carvana’s Explosive Growth

Today’s 8th Graders Won’t Have to Take the SAT If They Apply to Harvard

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Morning News: December 16, 2021
Posted by Eddy Elfenbein on December 16th, 2021 at 7:04 am

Turkish Lira Slumps to New Low After Interest Rate Cut

Top Central Banks Go Their Own Ways Into 2022

BOE Surprises With First Hike in Crisis to Curb Inflation

Fed Shifts to Inflation Battle, Winding Down Pandemic Support

Why Jerome Powell Pivoted on Inflation

How to Soften the Bullwhip Effect

Holiday Retail Sales Weaker Than Expected Amid Inflation Concerns

A Hostile Takeover of the FDIC

A Wild, Emotional Year Has Changed Investing—Maybe Forever

Shareholder Group Pressures U.S. Banks to Drop Fossil Fuels Faster

N.Y.C.’s Gas Ban Takes Fight Against Climate Change to the Kitchen

Netflix Slashes India Prices in Battle with Amazon, Disney

Reddit Files Confidentially for IPO

Jobless for a Year? That Might Be Less of a Problem Now.

Fired JPMorgan Trader Shows It Pays to Win Your Old Job Back

Money Manager Vanishes With $313 Million From China Builder

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