Amazon Hits $1 Trillion
Posted by Eddy Elfenbein on September 4th, 2018 at 12:14 pm

First, Apple made the $1 trillion market cap club. Now Amazon has joined.

Here’s a remarkable stat about Amazon. Since the IPO, the stock has gained 1%, on average, every 258 hours for 21 years. And what’s even more amazing is that that includes a 95% price crash.

Here’s an article I wrote on Amazon for their 21st birthday.

Amazon.com went public 20 years ago today. There was so much demand for Jeff Bezos’s “online bookstore,” as it was then referred to, that the underwriters raised the offering price twice. They settled on $18 per share.

There was some concern whether an online bookseller could truly compete with industry stalwarts such as Barnes & Noble and Borders. Would people really buy books on the Internet? The idea seemed farcical. But two decades later, Amazon has done pretty well for itself.

On Friday, the shares closed at $961.35. And that doesn’t include three stock splits totaling 12-for-1. In 1997 terms, one share of Amazon is currently worth $11,536.20.

In simpler terms, the stock has vaulted 640.9-fold in 20 years. If you had invested $16,000 in Mr. Bezos’s little project, you would now be sitting on a cool $10 million.

ISM Hits 14-Year High
Posted by Eddy Elfenbein on September 4th, 2018 at 10:24 am

Buried in the news today was a very strong ISM report. The number came in at 61.3 which is the highest in 14 years. This tells us that the economy continues to hum along.

Institute for Supply Management’s factory index jumped 3.2 points to 61.3, topping the consensus for 57.6 and exceeding all estimates. ISM manufacturing readings above 50 indicate expansion. The new orders measure leapt 4.9 points to 65.1; the production index increased to 63.3 from 58.5. The export orders gauge fell to a 10-month low of 55.2 from 55.3 while the imports index dipped 0.8 point to 53.9, lowest since last September.

Key Takeaways

The report shows factories remained solid in the third quarter and adds to signals that the nearly decade-old expansion will hold up well in the second half of 2018. The rise in the employment gauge also suggests manufacturers may record another month of strong payroll gains in Labor Department figures due Friday.

The gauges of exports and imports also may indicate that months of intensifying tensions are taking a toll on trade. Negotiations with Canada to modernize the North American Free Trade Agreement ended without a deal by Friday’s deadline, though talks are scheduled to resume Wednesday.

President Donald Trump wants to move ahead with tariffs on $200 billion of Chinese imports as soon as a public-comment period concludes Sept. 6, Bloomberg News reported last week, citing six people familiar with the matter.

The next big report will come on Friday when the government releases the August jobs report.

The Nike Boycott
Posted by Eddy Elfenbein on September 4th, 2018 at 9:58 am

Nike (NKE) recently announced that they’ll be using Colin Kaepernick in their advertising campaign. This has upset many people, and there are calls for a boycott. Some folks are even burning their Nike apparel.

That seems a bit unusual to me, but I’ll stay out of the fray. Instead, we can look at the financial aspect of what happens when a prominent company offends/pleases different segments. Shares of Nike are down about 3% this morning. That’s not really that much. Basically, that brings NKE back to where it was a few days ago. There’s something to be said about a brandname that people are willing to burn things they’ve already bought from them.

Let’s look at the long-term. Over the last 31 years, shares of Nike are up 59,632%. In plain English, you would have made about 600-fold on your money following the 1987 crash.

Morning News: September 4, 2018
Posted by Eddy Elfenbein on September 4th, 2018 at 7:10 am

Oil Prices Jump As Gulf of Mexico Rigs Evacuated

China Explores Megamerger of Mobile-Phone Carriers

Buy Turkey and Argentina? Emerging Markets Aren’t Bargains They Seem

Factories Feeling the Pinch from Escalating Trade Conflict

Why Doesn’t the Unemployment Rate Ever Drop Well Below 4%?

A 25% Yielding Hyper-Growth Stock With Market-Crushing Potential

Hard Lessons (Thanks, Amazon) Breathe New Life Into Retail Stores

Amazon Sets Its Sights on the $88 Billion Online Ad Market

Boeing 737 Production Meltdown

Ford Says It Plans to Upgrade Mondeo Family Car, Not Kill It

Salesforce Management Highlights 2 Growth Drivers

SocGen Expects to Pay About $1.3 Billion in Penalties Tied to U.S. Sanctions

Ben Carlson: Revisiting the Melt-Up Scenario

Michael Batnick: What Does it Mean to be a Financial Expert?

Jeff Carter: The Promise of Crypto

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Warren Buffett Interview
Posted by Eddy Elfenbein on August 31st, 2018 at 1:47 pm

Morning News: August 31, 2018
Posted by Eddy Elfenbein on August 31st, 2018 at 7:51 am

Lira Gets a Helping Hand as Turkey Raises Tax on Dollar Deposits

What’s a Peso Worth? All Bets Are Off as Argentina Pain Spreads

Too Many Chinese Children Need Glasses. Beijing Blames Video Games.

Trump Makes Clear EU Won’t Escape His Ire Over Trade for Long

Coke Makes $5.1 Billion Bet on Coffee Market With Costa Purchase

Apple, Oracle Dump Bonds and Create $300 Billion Hole in Market

Stryker Agrees to Buy Spinal-Device Maker K2M

Walmart Wants to Replace Toys ‘R’ Us

Dollar Tree Is No Dollar General

Elon, What Were You Thinking?

Modi’s Cash Crackdown Failed, Indian Bank Data Shows

Why Helios and Matheson Stock’s Latest 22% Surge Is Truly Ridiculous

Cullen Roche: Why Political Extremism Will Get Worse

Howard Lindzon: Men Who Wear Hats and LULU

Blue Harbinger: Stock Exchange: You Can Make It As A Trader, If You Do It Right

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Personal Income and Spending
Posted by Eddy Elfenbein on August 30th, 2018 at 12:25 pm

We don’t have much in the way of data for Q3, but we got a nice hint today with the personal income and spending data for July. This data usually comes right after the GDP report.

The BEA said that personal income rose by 0.3% last month while personal spending rose by 0.4%. Those are pretty good numbers, but bear in mind that it only covers the first third of the third quarter.

Here’s the recent history:

The New York Fed’s Nowcast sees Q3 GDP growth coming in at 1.96%. The Atlanta Fed is at 4.1%.

Buyout Thursday
Posted by Eddy Elfenbein on August 30th, 2018 at 10:47 am

Apparently, the Thursday before Labor Day is a popular time to make strategic acquisitions. Two of our Buy List stocks announced deals today.

First up, Moody’s (MCO) said they’re buying Reis (REIS), a firm that deals in real estate data. It’s an all-cash deal that values Reis at $278 million or $23 per share. The stock closed yesterday at $17.40 per share.

The transaction will be funded through a combination of cash on hand and commercial paper. Moody’s expects the acquisition of Reis to be accretive to earnings per share on a GAAP basis in 2020. On an adjusted EPS basis, which excludes purchase price amortization, the transaction will be accretive in 2019. Moody’s continues to expect share repurchases for 2018 to be approximately $200 million, subject to available cash, market conditions and other capital allocation decisions.

The deal is expected to close in Q4.

Today’s other deal is that Stryker (SYK) is buying K2M Group Holdings (KTWO) at $27.50 per share. That works out to $1.2 billion. KTWO closed yesterday at $21.82 per share.

Stryker said K2M Chief Executive Eric Major will become head of the division upon the completion of the deal.

Stryker said the deal wouldn’t affect earnings this year. It expects to report adjusted earnings of $7.22 to $7.27 this year.

Earlier this year, Stryker completed its acquisition of Entellus Medical Inc., a manufacturer of devices for various ear, nose and throat diseases.

K2M, which was founded in 2004, has become a prominent player in the $10 billion spinal market, Stryker said, through its development of minimally invasive and complex spinal support systems.

Morning News: August 30, 2018
Posted by Eddy Elfenbein on August 30th, 2018 at 6:29 am

Macron and Merkel Are Signaling They’ve Finally Had Enough of Trump

The Biggest Legacy of the Financial Crisis Is the Trump Presidency

Trump’s Tariffs on Canadian Newsprint Are Overturned

Bernie vs. Bezos: Amazon and Sanders Are Duking it Out Over Warehouse Working Conditions

Roku Is the Latest Victim of the “Amazon Effect”

Ford Teeters Toward Junk With Moody’s Warning of Restructuring Risks

Coca-Cola’s Got Moxie, the Quirky New England Soda

Toyota Joins Uber On Its Tortuous Journey to Robocars

The Long, Monstrous Reign of the Red Delicious Apple is Ending

Pressures on Didi Intensify After Latest Passenger Killing

`Overtourism’ Worries Europe. How Much Did Technology Help Us Get There?

Papa John’s Independent Board Members Dispute Founder’s Claims

Joshua Brown: Defeating Short-Termism with More Data, Not Less

Michael Batnick: Animal Spirits: When Hitler Took Cocaine

Jeff Carter: California Tells Publicly Traded Companies to Submit or Leave

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Q2 GDP Revised to 4.2%
Posted by Eddy Elfenbein on August 29th, 2018 at 10:32 am

This morning, the Feds revised upward their estimate for Q2 GDP growth. They now say the economy grew in real annualized terms of 4.2% during the second three months of the year. The initial report, released a month ago, said the economy had grown by 4.1%. The report will be revised again in late September.

From the WSJ:

The second-quarter growth rate’s revision partly reflected stronger business investment than earlier forecast and a slight downward revision to consumer spending. The 4.2% rate still marked the strongest pace of growth in nearly four years.

That followed a growth rate of 2.2% in the first quarter. Output expanded 2.9% in the second quarter compared with the same quarter a year earlier.

Growth in U.S. corporate profits moderated in the second quarter compared with the first, according to the government’s initial broad estimate of profits at U.S. companies in the second quarter.

After-tax corporate profits with inventory valuation and capital consumption adjustments, a measure of profits from production that quarter, rose 2.4% in the second quarter from the prior quarter after rising 8.2% in the first quarter. After-tax profits without inventory valuation and capital consumption adjustments rose a seasonally adjusted 3.7% from the prior quarter after rising 8.5% in the first quarter.

Here’s a look at the year-over-year change in nominal GDP: