Middleby Soars
Posted by Eddy Elfenbein on May 27th, 2020 at 10:06 am

The stock market is having another good day. Yesterday the S&P 500 cracked 3,000 although it couldn’t close above it. This morning, the index has been as high as 3,021. Hopefully we can close above 3,000 today.

The Russell 2000 index of small-cap stocks is doing especially well while the Nasdaq Composite is down for the day.

The European Commission just unveiled a very large stimulus package aimed at helping countries struggling through the economic slowdown. The plan still needs to be approved but the total price tag could be 750 billion euros.

We’ve seen a growing split in this market. “High Beta” stocks, meaning those with greater risk, have been performing much better than the rest of the market. That’s to be expected in a rising market, but it’s been especially dramatic lately. This tells me that the market is becoming more open to risk-taking which is a good thing.

One stock that’s been doing very well lately has been Middleby (MIDD). That’s interesting because it had been such a poor performer before now. At one point, MIDD was down 60% on the year. Since then, it’s up over 70%. That’s still a big YTD loss, but it’s certainly a lot better than before.

Morning News: May 27, 2020
Posted by Eddy Elfenbein on May 27th, 2020 at 7:03 am

EU Plans $823 Billion Fiscal Stimulus Package to Fund Recovery

Dismal Earnings, Bullish Stock Investors and the Fed’s Invisible Hand

The Fed Boldly Saves Markets. Now It’s Worrying About Main Street Business

Hedge Funds Pay Up in U.S. to Poach From Rivals Stung by Turmoil

Salaries Get Chopped for Many Americans Who Manage to Keep Jobs

How Zoom Downed the Airlines

Volkswagen In Final Talks to Seal Biggest M&A Deals In China EV Sector

Renault and Nissan Rule Out Merger As They Unveil Survival Plan

Tesla Cuts Prices By As Much As 6% in North America to Boost Demand

HBO Max Wants to ‘Crush’ Netflix. Is It Too Late?

Tired of Plastic? These Businesses Have Ideas for You

Nick Maggiulli: Nobody Knows Nothing

Ben Carlson: The Diversification Drag & The Management of Luck

Joshua Brown: Pop Culture As An Edge In Business

Howard Lindzon Welcoming Ross Hoffman – Venture Partner at Social Leverage

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The S&P 500 Breaks 3,000….Again
Posted by Eddy Elfenbein on May 26th, 2020 at 10:49 am

I hope you had a relaxing Memorial Day weekend. Wall Street, apparently, needed some time to regroup. The S&P 500 opened this morning above 3,000. This is the first time in nearly three months that the index has traded above 3,000.

The NYSE also reopened its trading floor today. Governor Cuomo rang the opening bell.

Today looks to be a good example of what’s called a “counter-trend” day. That’s a fancy way of saying that the stocks that had been doing terribly are doing the best, and the ones that had been doing well are now lagging the pack.

It’s not necessarily a bad omen. It simply means that there’s some pushback against the dominant theme. The S&P 500 is also above its 200-day moving average. That’s a key technical indicator that a lot of chart-readers like to follow.

Morning News: May 26, 2020
Posted by Eddy Elfenbein on May 26th, 2020 at 7:09 am

BOE Isn’t Close to Implementing Negative Rates, Haldane Says

Treasury Yields Rise As Coronavirus Vaccine Hopes Drive Risk-On Sentiment

U.S. Small Firms Leave $150 Billion in Coronavirus Stimulus Untapped

Wealthiest Hospitals Got Billions in Bailout for Struggling Health Providers

‘How About Next June?’ Small Meat Processors Backlogged As Virus Idles Big Plants

‘This Could Be The One That Gets Me,’ Says Oilfield Service Veteran

A Florida Toy Importer Braces For Retail Upheaval

Remember the MOOCs? After Near-Death, They’re Booming

Latin America’s Largest Airline, LATAM, Files for Chapter 11 Bankruptcy

Scared Americans Desperate to Travel Are Buying Up ‘Covid Campers’

Travel And Leisure Stocks Rejoice On Summer Holiday Hopes

German Court Orders VW to Compensate Customers Over Diesel Emissions Scandal

Can’t You Just Fire Me? Man Paid to Do Nothing Wanted $2 Million

‘King of Gambling’ Who Propelled Macau Past Las Vegas Dies at 98

Joshua Brown: Under Pressure

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Thanks Vets
Posted by Eddy Elfenbein on May 25th, 2020 at 9:16 am

Morning News: May 25, 2020
Posted by Eddy Elfenbein on May 25th, 2020 at 7:08 am

German Economy Enters Recession As GDP Falls 2.2%

Gold Falls As Potential Japan Stimulus Boosts Risk Appetite

China Strongly Condemns U.S. Blacklisting Dozens of Its Firms

Big Short in U.S. Stocks Needs Watching, Says One Market Veteran

U.S. Grants Tentative OK for 15 Air Carriers to Suspend Service to 75 Airports

Pay Cuts Become a Tool for Some Companies to Avoid Layoffs

Hertz Files for U.S. Bankruptcy Protection as Car Rentals Evaporate in Pandemic

The Artisans Behind Italian Fashion Tremble at Their Future

The New Model Media Star Is Famous Only to You

Bayer Reaches Deals on Big Share of 125,000 Roundup Weedkiller Suits

Ben Carlson: Bubble Behavior During a Depression

Michael Batnick: Talk Your Book: Investing in Commercial Real Estate & 10 Reasons Why Stocks are More Dangerous than Sports

Roger Nusbaum: Bring Me Fama’s Head

Jeff Miller: Weighing the Week Ahead: A Search for Balance in the Great Reopening

Howard Lindzon: Momentum Monday – Flatten the Nasdaq Curve?

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Morning News: May 22, 2020
Posted by Eddy Elfenbein on May 22nd, 2020 at 7:10 am

Fed Chair Warns This Is a ‘Downturn Without Modern Precedent’

Rudderless After A Rally, Stock Markets Look For Next Catalyst

Many Jobs May Vanish Forever as Layoffs Mount

Millions of PPP Loan Forgiveness Requests Are About to Rain on Banks

U.S. Strikes At A Huawei Prize: Chip Juggernaut HiSilicon

Disease Is Ravaging the $25 Billion Banana Industry

As Reports Swirl, What Could Amazon Want From JCPenney?

A Drug Company Wagers the U.S. Won’t Dare Charge It With Crimes

Real Estate’s Demise Creates a Graveyard for Fools

Ben Carlson: The Best Source of Investment Income?

Michael Batnick: How Sectors are Driving Value and Growth

Jeff Carter: Professor Steve Blank Follows the Data

Roger Nusbaum: Twitter War!

Howard Lindzon: The Three Sides Of Risk

Joshua Brown: Ten Rules for Retirement Investing

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Ross Stores Reports a Big Loss for Q1
Posted by Eddy Elfenbein on May 21st, 2020 at 4:16 pm

Ross Stores (ROST) just released its fiscal Q1 earnings results. Well, they would be earnings if they had been open. Since the company closed all of its stores, they had a big operating loss.

For the 13 weeks ending on May 2, Ross Stores lost 87 cents per share. That’s down from a profit of $1.13 per share one year ago.

On May 14, Ross began a phased reopening process. So far, approximately 700 stores have reopened. That’s good to hear. Ross has also halted its dividend.

Total Q1 sales were $1.8 billion. That’s down from $3.8 billion for the same quarter one year ago. Q1 also includes a one-time charge of $313 million or 58 cents per share resulting from the extended period of store closures.

Barbara Rentler, Chief Executive Officer, commented, “Our first quarter results reflect the unprecedented impact the COVID-19 pandemic has had on our business, which led to the closure of all stores and our first quarterly operating loss in more than 30 years. Operating margin for the period was negatively affected by the significant revenue decline from stores being closed for approximately half of the quarter and the aforementioned one-time, non-cash inventory valuation charge.”

Ms. Rentler added, “In response to the economic disruption created by this global health crisis, we quickly took decisive actions to increase our liquidity and financial flexibility. These included drawing down $800 million under our revolving credit facility, completing a $2.0 billion public bond offering, suspending our stock repurchase program, and aggressively cutting costs throughout the Company, including ongoing expenses and capital expenditures. Today we are announcing several additional actions, which include the suspension of our quarterly dividend program and reduced new store openings for the year.”

Looking ahead, Ms. Rentler said, “We have a deep bench of proven and experienced leaders throughout the business as well as a very strong financial foundation with over $3.0 billion in liquidity, which in addition to our cash balances includes a new $500 million revolving credit facility. All of this makes us confident in our ability to successfully navigate through these challenging times. We look forward to gradually reopening all of our stores fairly soon when we can return to our mission of providing compelling bargains in a safe environment for our associates and customers.”

Ms. Rentler concluded, “The reopening of our stores will be largely dependent on guidance from health officials as well as government directives. Given the lack of visibility created by COVID-19 and the unknown extent of the impact the virus will have on consumer demand and store productivity, we are not providing second quarter and 2020 full year sales and earnings guidance.”

Shares of Ross were up 6.58% in today’s trading.

Hormel Foods Earns 42 Cents per Share
Posted by Eddy Elfenbein on May 21st, 2020 at 1:58 pm

This morning, Hormel Foods (HRL) reported fiscal Q2 earnings. It was a tough quarter for the Spam folks. Organic sales rose 6% but EPS fell to 42 cents. The latter matched Wall Street’s consensus.

Hormel has withdrawn its guidance. For Q2, the company’s operating margin fell from 13.3% to 12.1%. That’s not a good sign.

Hormel said it absorbed about $20 million in “incremental supply chain costs,” including employee bonuses and more cleaning expenses. Comparable sales volumes increased by 7%.

“Our financial results this quarter demonstrate the value of our balanced business model and our team’s ability to react to a rapidly changing environment,” Snee said. “We continue to excel and gain market share in channels that are open and available to us, namely the retail channel. We know consumers are looking for trusted brands, and we will continue investing in our leading brands such as SPAM®, SKIPPY®, Jennie-O®, Hormel® Natural Choice® and Applegate®. Our strong balance sheet and stable cash flows give us the confidence to lean into our business and make the right long-term decisions for our team members, suppliers, customers and shareholders. Even though the COVID-19 pandemic has caused a dramatic shift in consumer behavior, operational disruptions and extreme volatility in raw material markets, we remain financially strong and well-positioned to weather the pandemic.”

Here’s the breakdown by segment:

Refrigerated Foods
Segment profit down 17%
Organic volume down 1%

Grocery Products
Segment profit up 22%
Organic volume up 19%

Jennie-O Turkey Store
Segment profit up 54%
Volume up 19%

International & Other
Organic volume down 1%
Segment profit up 62%

Hormel currently has over $600 million cash on hand. The company is in a strong financial position with limited debt and consistent cash flows. Total debt is $315 million, up from $250 million at the beginning of the year.

Morning News: May 21, 2020
Posted by Eddy Elfenbein on May 21st, 2020 at 7:07 am

Wanted: New Head of WTO. Must Thrive Under Global Pressure and Conflict

China’s ‘Crude Oil Treasure’ Promised Riches. Now Investors Owe the Bank.

China’s Got a New Plan to Overtake the U.S. in Tech

Another Grim Tally of U.S. Unemployment Is Expected

In Fink We Trust: BlackRock Is Now ‘Fourth Branch of Government’

U.S. Raises Ante in Vaccine Race With $1.2 Billion for Astra

Coronavirus Shut Down the ‘Experience Economy.’ Can It Come Back?

While U.S. Economy Slides, Heartland Auto Dealers Cry Out For More Trucks

Americans Use Their $1,200 Stimulus Checks to Splurge at Walmart and Target — Here’s What They’re Buying

In SoftBank Slides, Tofu, a Goose and Unicorns Underpin Sales Pitch

Pandemic-Baking Britain Has an ‘Obscene’ Need for Flour

Ben Carlson: Is the Stock Market Overvalued?

Michael Batnick: Animal Spirits: Is the Stock Market Wrong?

Roger Nusbaum: This Is The Next Black Swan

Howard Lindzon: Old Bears, Young Bulls and Middle Aged Bearistas

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