Danaher Announces New Dental Company To Be Named Envista Holdings Corporation
Posted by Eddy Elfenbein on June 27th, 2019 at 10:50 am

Press release:

Danaher Corporation today announced that Envista Holdings Corporation will be the name of the separate company Danaher intends to create and take public via an initial public offering in the second half of 2019. Envista will be comprised of three operating companies within Danaher’s Dental segment: Nobel Biocare Systems, KaVo Kerr, and Ormco. These businesses have significant positions in dental implants, orthodontics, dental equipment and consumables, and include brands such as Nobel Biocare, KaVo, Kerr, i-CAT, Dexis, Metrex, Pelton & Crane, Ormco, Implant Direct, and Orascoptic. Envista will be led by Amir Aghdaei, who will become President and Chief Executive Officer. Mr. Aghdaei currently serves as Danaher Group Executive with responsibility for the Dental segment.

Mr. Aghdaei stated, “Envista’s name is a combination of two Latin root words: ‘en’, a prefix meaning to be within, and ‘vista’, meaning a view. Our logo of concentric circles represents our ability to collaboratively achieve endless possibilities ahead. The Envista brand reflects the forward-looking energy that embodies our company culture.”

Aghdaei continued, “Envista’s culture will be built on four core values: ‘Better Choices, Better Outcomes,’ ‘Relationships Built on Trust,’ ‘Innovation in Action,’ and ‘Continuous Improvement as a Competitive Advantage.’ Our Danaher heritage helped us shape these values and serves as a strong foundation for our business. The Envista Business System, which will be based on the Danaher Business System, will be our common operating model.”

Envista intends to apply to list its common stock on the New York Stock Exchange. The stock symbol will be NVST.

Envista will employ 12,000 people worldwide. The company’s website is www.envistaco.com.

Morning News: June 27, 2019
Posted by Eddy Elfenbein on June 27th, 2019 at 7:38 am

U.S., China Agree Tentative Trade Truce Ahead of G20 Summit

Happy Talk of Trump-Xi Truce Masks Twisting Path to a Trade Deal

Trump Redoubles Attack on Fed Chair, Saying `I Made Him’

What Micron Said

Amazon Prime Day for July 15-16 Sparks Deal Frenzy from Ebay and Target & Walmart Joins the Amazon Prime Day Sale Fray

Weaning U.S. Power Sector Off Fossil Fuels Would Cost $4.7 Trillion

A $1,800 Drop in Minutes: Bitcoin Volatility Is on Full Display

Boeing’s 737 Max Suffers Setback in Flight Simulator Test

Drugmaker Deals Are Near Record Pace in 2019, but Investors Don’t Love Them All

The Cars Are Newer, The Buyers Are Younger As Auto Collecting Moves Forward

The Charmed Life of a Young Tiger Cub With a $4.6 Billion Fortune

King of the Snitches: The Fashion Photographer Who Duped Drug Lords and the DEA

Ben Carlson: Gathering Investment Lessons From the Headlines & How to Win Any Argument About the Stock Market

Michael Batnick: Unlimited Upside & The Great Depression of 2073

Joshua Brown: My Take on the Bernie Sanders Plan to Wipe Out Student Loan Debt & How We Roll

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Morning News: June 26, 2019
Posted by Eddy Elfenbein on June 26th, 2019 at 7:12 am

China Hacked Eight Major Computer Services Firms in Years-Long Attack

Why ‘Maximum Pressure’ on Iran Could Backfire

Mnuchin: ‘We Were About 90% of the Way’ on China Trade Deal and There’s A ‘Path to Complete This’

Powell Says Economy Facing Growing Uncertainties

U.S. Prosecutors Join Multinational Crackdown on Insider Trading

A Drug Megamerger That’s Patently Interesting

FedEx Sues Trump Administration as Huawei and China Trade War Intensifies

U.S. Companies Find Legal Ways Around Trump’s Huawei Blacklist

Mitsubishi to Acquire Bombardier’s Regional Jet Unit for $550 Million

Regulators Have Doubts About Facebook Cryptocurrency. So Do Its Partners.

Justice Department Investigates Chicken Industry

Buy Low-Tops, Sell High-Tops: A Sneaker Exchange Is Worth $1 Billion

Nick Maggiulli: Are Smarter People Better Investors?

Jeff Carter: Value, Public vs Private

My View On: Student Debt Forgiveness

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FactSet Earned $2.62 per Share
Posted by Eddy Elfenbein on June 25th, 2019 at 7:19 am

FactSet (FDS) released a very good earnings report today. For its fiscal Q3, the company made $2.62 per share. That beat estimates by 26 cents. Quarterly revenues rose 7.2% to $364.5 million. Organic revenue grew 7.3% to $366.3 million. Operating margin increased to 34%.

A key stat for FDS is Annual Subscription Value or ASV. Last quarter, that rose to $1.45 billion. The organic growth rate, which excludes the effects of acquisitions, dispositions, and foreign currency, was 5.6%.

Adjusted diluted EPS rose 20.2% to $2.62 compared with $2.18 in the prior period driven primarily by stronger operating results. Also, the Board of Directors approved a $210 million increase to the existing share repurchase program.

“FactSet’s ability to perform well this year amid sector and industry headwinds serves as a proof point that our long-term strategy is working,” said Phil Snow, FactSet CEO. “We are encouraged that our smarter, connected data and technology solutions continue to resonate with clients as we help them drive efficiency and increase value in an ever-changing environment.”

Here are their expectations for 2019:

Organic ASV plus professional services is now expected to increase in the range of $70 million and $75 million over fiscal 2018.

GAAP revenue is now expected to be in the range of $1.42 billion – $1.44 billion.

GAAP operating margin is now expected to be in the range of 30.0% – 30.5%.

Adjusted operating margin is now expected to be in the range of 32.5% – 33.0%.

FactSet’s annual effective tax rate is now expected to be in the range of 16% – 16.5%.

GAAP diluted EPS is now expected to be in the range of $8.90 – $9.00. Adjusted diluted EPS is now expected to be in the range of $9.80 – $9.90. The mid-point of this guidance represents a 15% growth over the prior year.

FDS is up 1.7% in pre-market trading. As of yesterday’s close, it’s up 46.57% for us this year.

Morning News: June 25, 2019
Posted by Eddy Elfenbein on June 25th, 2019 at 7:08 am

The Economy Is About to Hit a Record. Trump Says the Fed ‘Blew It.’

Pain From Trump’s China Tariffs Spreads, Reshaping Global Trade

Robots Can Now Decode the Cryptic Language of Central Bankers

‘Storm Approaching’: Firms Fear for Deliveries in Shipping Shakeup

FedEx Sues US Commerce Department Over Export Restrictions that Affect Huawei

Huawei’s U.S. Research Arm Builds Separate Identity

Natixis’s H2O Lost $3.4 Billion in Three Days of Carnage

AbbVie to Buy Allergan in $63 Billion Deal

Lyft and Uber Were Duds, but the I.P.O. Market Is Having a Great Year

Forget Tanning Beds. College Students Today Want Uber Parking.

WarnerMedia Names Ann Sarnoff as CEO of Warner Bros

Carlos Ghosn’s Lawyers Push for Reason Why Nissan’s Hiroto Saikawa Wasn’t Charged

Howard Lindzon: The Trend Is Your Friend…and Kerplunk!

Michael Batnick: Unlimited Upside

Roger Nusbaum: Solving Life’s Problems & Bitcoin Is Back Baby!

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Morning News: June 24, 2019
Posted by Eddy Elfenbein on June 24th, 2019 at 7:18 am

Lira Rally Eases as U.S. Sanctions Risk Tempers Turkey Bulls

Bitcoin: Could 100K Be New 10K?

Facebook Won’t Launch Its Cryptocurrency Wallet in Its Biggest Market

A Message From the Billionaires’ Club: Tax Us

Daimler’s New Leaders Confront Old Issues as Diesel Bites Again

Glare Falls on Nissan’s C.E.O. as Ghosn Fallout Spreads

FedEx Slashes Prices to Fill Its Planes

What Happens After Amazon’s Domination Is Complete? Its Bookstore Offers Clues

5 Lessons From Microsoft’s Antitrust Woes, by People Who Lived It

Eldorado Resorts to Merge with Caesars Entertainment in $17.3 Billion Deal

FedEx Confirms Huawei Mail Ban as New ‘Mistake’ Reignites Chinese Ire

Here’s Some Money Advice: Just Buy the Coffee

Jeff Miller: Weighing the Week Ahead: Can US/China Trade Talks Save the Global Economy?

Joshua Brown: Yes, Of Course Trump Could Fire the Fed Chairman

Ben Carlson: Gathering Investment Lessons From the Headlines

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CWS Market Review – June 21, 2019
Posted by Eddy Elfenbein on June 21st, 2019 at 7:08 am

“Many FOMC participants now see that the case for somewhat more accommodative policy has strengthened.” – Federal Reserve Chairman Jerome Powell

That little statement above sparked a party on Wall Street. What it means, basically, is that the Fed is leaning towards cutting rates. Wall Street responded with a big rally. On Thursday, the S&P 500 closed at a brand-new all-time high.

Our Buy List also closed at an all-time high. We have a nice lead over the market as well. We’re now up over 21% on the year and 2019 isn’t even halfway done.

In this week’s CWS Market Review, we’ll take a closer look at what the Fed’s plans are. I’ll also preview next week’s earnings report from FactSet. This stock has been a rock star for us this year. It’s our #1 stock this year, with a 50% gain.

I also have some updates for our Buy Below prices. Thanks to the recent rally, our stocks keep busting past their Buy Belows. But first, let’s look at what the Fed had to say this week. Or more accurately, what they’re no longer saying.

The Fed Is Patient No More

The Federal Reserve met on Tuesday and Wednesday of this week. This was an important meeting because there’s been growing pressure on the Fed to help out the economy. The central bank decided against lowering interest rates.

Going into this meeting, there was some speculation that the Fed could surprise us with a rate cut. Alas, that didn’t happen, but the Fed appears to be more open to cutting rates in the future. In fact, one member, St. Louis Fed President James Bullard, voted to cut rates immediately.

In their policy statement, the Fed noted the overall strength in the economy. Importantly, the Fed removed a key sentence. The words “In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal-funds rate may be appropriate to support these outcomes” were absent from this statement. Previously, the “patience” referred to the need to raise interest rates.

The statement contained this sentence: “The Committee continues to view sustained expansion of economic activity, strong labor-market conditions and inflation near the Committee’s symmetric 2 percent objective as the most likely outcomes.” And it added: “but uncertainties about this outlook have increased.”

That’s telling. The FOMC debates these words carefully. There are clearly Fed members in addition to Bullard who want to see rates go down soon.

The Fed also released its economic projections for the coming few years. Here’s where things get interesting. Despite the market’s desire for rate cuts, a slim majority at the Fed sees no need to cut rates this year. After that, they only see one rate cut coming next year.

Wall Street is far from this view. Very far. According to the latest futures prices, a cut at next month’s meeting is a foregone conclusion. I’m not exaggerating. The futures market has the odds of a cut priced at 100%. You can’t get much more certain that that! One month ago, the odds were at 20%.

On top of that, they see the odds of a cut at the following meeting, in September, at 87%. I’m puzzled by this level of certainty. In fact, futures traders see a third rate cut coming before the end of the year.

While it’s true that the Fed appears to have shifted its stance towards being more open to rate cuts, I think the market is greatly overestimating the Fed’s willingness to cut rates once, or even a few times. Whenever there’s a disagreement between market prices and a committee of economists, it’s usually a good idea to take the market’s opinion with greater weight. This time, I’m not so sure. It’s one thing to take back a wrongheaded rate hike in December. It’s quite another to cut rates by 1% over the coming year.

For their part, the bond market is all on board for rate cuts. This week, the yield on the 10-year Treasury dipped below 2%. The yield is now back to where it was before President Trump was elected more than two-and-a-half years ago. In the last seven months, the yield has dropped 120 basis points.

What this means is that the financial markets are very concerned about the sustainability of the economy. The most interesting part of the yield curve is the area around two to three years ago. Yields here have plunged very low in anticipation of Fed rate cuts. But it appears that investors aren’t expecting a prolonged cycle of lower rates. The yield curve starts to rise again after three years out.

On Thursday, the price of gold had its best day in three years. Gold is now at a six-year high.

Wall Street seems convinced on three points: we need three or four rate cuts, the Fed will oblige us and these cuts will be successful. Frankly, I’m a doubter on all three.

What to do now? The Fed’s policy change has been very good for share prices. So far, this has been the best June for the S&P 500 since 1955. Despite my skepticism regarding the Fed’s willingness to help us out, we’ve been doing very well.

There’s been a shift in the rally. Starting in June, the low-vol sectors started to lag. This comes after a few weeks of trouncing the market. In June, tech has done well, while areas like financials have lagged. This makes sense as banks like higher interest rates.

Investors should continue to focus on high-quality stocks like those we have on our Buy List. Pay particular attention to stocks that pay nice dividends. This includes stocks like Hershey (HSY), Hormel Foods (HRL) and AFLAC (AFL). Now let’s look at a Buy List stock that recently raised its dividend for the 14th year in a row.

Look for Good Earnings Next Tuesday from FactSet

We’re now in the slow period for Buy List earnings reports. On Tuesday, June 25, FactSet (FDS) is due to report. After that, we won’t see our next earnings report until mid-July when the Q2 earnings season starts.

FactSet has been on a tear for us this year. It’s our top-performing stock, with a YTD gain of more than 50.3%. On a side note, FactSet is one of our off-cycle stocks. Their last quarter ended in May. We have one other stock on the same fiscal cycle, RPM International (RPM), but they won’t report for another month.

Business is going very well for FactSet. Three months ago, FDS reported fiscal Q2 earnings of $2.42 per share. That was nine cents better than Wall Street’s consensus. Quarterly revenue rose 5.9% to $354.9 million, and organic revenue rose 5.7%.

The key stat for FactSet is Annual Subscription Value, or ASV. In Q2, ASV rose to $1.44 billion. I was also pleased to see FactSet increase its adjusted operating margin to 33.2% from 31.4% a year ago. That’s a good sign.

As of the end of Q2, FactSet has a client count of 5,405. That’s an increase of 108. The user count increased by 6,854 to 122,063. Annual client retention is greater than 95% of ASV.

In March, FactSet also updated its financial guidance. The company expects revenue to range between $1.41 billion and $1.45 billion. They see adjusted operating margin between 31.5% and 33.5%. They see full-year earnings between $9.50 and $9.65 per share. That was an increase of five cents to the low end.

More good news came last month when FactSet raised its dividend by 12.5%. The quarterly payout increased from 64 to 72 cents per share. The stock keeps churning higher. Last week, FDS broke above $300.

The consensus on Wall Street for next week’s earnings report is $2.36 per share. Look for another beat. I’ll probably increase our Buy Below on FDS, but I want to see the earnings report first.

Buy List Updates

I have some comments on a few other stocks. This week, the Verge ran an expose on the content monitors at Facebook. It’s a disturbing story about how they have to watch graphic content on the Internet for hours on end. While the employees work at Facebook, they work for Cognizant Technology Solutions (CTSH).

I want to be clear that there are no specific allegations of wrongdoing, but it’s not a flattering story. Cognizant is wisely staying ahead of the news. The company released a statement reiterating their support for workplace safety.

This shouldn’t have any impact on the company’s financial health, but I wanted to make you aware of the latest news.

There’s not much to add after the fallout from the Raytheon (RTN)/United Technologies (UTX) deal. In Barron’s, Andrew Bary said that the deal has pulled off a rare feat: it’s upset both sets of shareholders. He’s right. If someone pulled the plug on the deal, both stocks would rally.

If there’s a silver lining, it’s that the recent dip in share price has made RTN a good value here. According to Bill Ackman, UTX is using their undervalued shares to buy us out. I don’t see a way that the merger can be called off. We’re stuck with it.

With the market’s recent surge, I want to adjust a few of our Buy Below prices. Hershey (HSY), for example, has been rallying steadily for a few weeks. Since April 24, shares of HSY are up more than 18%. The chocolatier is a good example of a defensive stock. It does best when people are scared. I’m raising our Buy Below to $145 per share.

Stryker (SYK) is now a 30% winner for us this year. This is one of the most consistent long-term winners you’ll find. The stock got up to a new 52-week high on Thursday. More good earnings news should come next month. I’m raising our Buy Below to $208 per share.

Danaher (DHR) will report its Q2 earnings in July 18. The company expects earnings to range between $1.13 and $1.16 per share. Earlier, Danaher lowered its full-year guidance from $4.75 – $4.85 per share to $4.72 – $4.80 per share. This reflects the share dilution to buy GE Biopharma. The deal should close sometime in Q4. This week, I’m raising my Buy Below on Danaher to $150 per share.

That’s all for now. Next week is the final trading week of the first half of the year. We’ll get a few important economic reports. On Tuesday, the new-home sales report comes out along with consumer confidence. On Wednesday, we’ll get the latest report on durable goods. On Thursday, the government will update the Q1 GDP numbers. The last report showed that the U.S. economy grew, in real terms, at a 3.1% clip in the first quarter. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!

– Eddy

Morning News: June 21, 2019
Posted by Eddy Elfenbein on June 21st, 2019 at 6:40 am

Brexit’s Fearmongers May Finally Be Right⁠

Does Trump Have the Legal Authority to Demote the Federal Reserve Chairman?

Foxconn’s Billionaire Founder Urges Apple to Move Plants From China

With Slack’s Buzzy IPO, Email Takes Another Hit

Boeing Shocks With 737 MAX Announcement

GE’s Viral Gaffe: To Reset Smart Bulb, Turn Off, On, Off, On…

A ‘Sorceress’ in Brazil, a ‘Wink’ in India: Walmart Pleads Guilty After a Decade of Bribes

Gold Bursts Past $1,400 as Bulls Buoyed by Dovish Central Banks

Delta Invests In Korean Air To Defend Their JV And The Cho Dynasty

Goldman Slashes Tesla Price Target by $42 on Demand Concerns

DISH’s Biggest Risk Factor May Disappear Next Week, Stock Could Surge

Seeking $2.1 Million After a College Chain’s Collapse (to Repay Its Guardian, not Students)

Roger Nusbaum: No, You Won’t Retire To A Van Down By The River

Ben Carlson: Which is Harder to Follow: Fitness Advice or Financial Advice? & Why Do We Need Inflation?

Michael Batnick: When All You Feel Is Reward & The Paradox of You

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Morning News: June 20, 2019
Posted by Eddy Elfenbein on June 20th, 2019 at 7:09 am

China, U.S. to Resume Trade Talks But China Says Demands Must Be Met

Powell Gave, But the Markets Want Much More

Banks to Fight Over $18 Trillion Held By the Poorest of the Rich

American Airlines Just Ordered 50 New Airbus Planes — A Huge Blow to Boeing

Launching a Global Currency is a Bold, Bad Move for Facebook

Google CEO’s Sunny New Message: We Want to Be Helpful

Oracle’s Revenue Beats Targets in Latest Quarter

T-Mobile Prepares for Boost Auction if Dish Network Talks Stall

Data ‘R’ Us: Alibaba, JD.com Seek to Lock in Merchant Loyalty With New Services

It’s Slack’s Non-I.P.O. Day!

Deutsche Bank Faces Criminal Investigation for Potential Money-Laundering Lapses

What’s Wrong With Modern Buildings? Everything, Starting With How They’re Made

Jeff Miller: Stock Exchange: Brilliant Trading Or Is The Market Just Up?

Howard Lindzon: What Makes A Great Investor & Art Over Science or Science Over Art? Just Have a Plan

Joshua Brown: FAQ: Where Should a New Investor Begin? & Changing the Ratio

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No Change
Posted by Eddy Elfenbein on June 19th, 2019 at 2:03 pm

The Fed didn’t cut rates. Here’s the statement:

Information received since the Federal Open Market Committee met in May indicates that the labor market remains strong and that economic activity is rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although growth of household spending appears to have picked up from earlier in the year, indicators of business fixed investment have been soft. On a 12-month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation have declined; survey-based measures of longer-term inflation expectations are little changed.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 2-1/4 to 2-1/2 percent. The Committee continues to view sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective as the most likely outcomes, but uncertainties about this outlook have increased. In light of these uncertainties and muted inflation pressures, the Committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Charles L. Evans; Esther L. George; Randal K. Quarles; and Eric S. Rosengren. Voting against the action was James Bullard, who preferred at this meeting to lower the target range for the federal funds rate by 25 basis points.

Here are the economic projections.

St. Louis Fed President James Bullard voted this meeting in favor of a quarter-point rate cut. The median forecast shows the Fed not changing rates this year, and only one cut next year.