• From the NYT, September 14, 2008
    Posted by on September 12th, 2018 at 11:50 am

    Here’s a lede you don’t see often.

    In one of the most dramatic days in Wall Street’s history, Merrill Lynch agreed to sell itself on Sunday to Bank of America for roughly $50 billion to avert a deepening financial crisis, while another prominent securities firm, Lehman Brothers, filed for bankruptcy protection and hurtled toward liquidation after it failed to find a buyer.

    This was from the New York Times on September 14, 2008.

  • Morning News: September 12, 2018
    Posted by on September 12th, 2018 at 7:07 am

    There’s Never Been a President This Unpopular With an Economy This Good

    Record U.S. Job Openings, Quits Rate Boost Wage Growth Outlook

    The Global Economy Is Still Feeling the Lehman Fallout 10 Years Later

    The Epicenter of the Housing Bust Is Booming Again. (That’s a Warning Sign.)

    The Recovery Threw the Middle-Class Under a Benz.

    Crypto’s 80% Plunge Is Now Worse Than the Dot-Com Crash

    The Wall Street Power Lunch is Back, With Martinis and Impunity

    Apple’s Newest iPhone Could Have Big Screen, Big Price

    In Tesla’s Shadow, China’s NIO Raises $1 billion From IPO

    FCC Pauses 180-Day Clock on T-Mobile and Sprint Merger for Additional Review

    Amazon Has Quietly Taken a Big and Fast-Growing Stake in a $7 Trillion Market

    Subway Kills The $5 Footlong — And Franchisees Stand To Gain

    Lawrence Hamtil: Valuable Lessons from Peter Lynch

    Ben Carlson: Wage Growth vs. The Stock Market

    Roger Nusbaum: The Two ETF Portfolio Gets More Diverse

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  • Stryker is Buying Invuity
    Posted by on September 11th, 2018 at 1:42 pm

    Stryker (SYK) is in a buying mood. This time, they’re buying Invuity (IVTY) for $7.40 per share. That’s about $190 million.

    Invuity is the leader in advanced photonics and single-use, lighted instruments that deliver enhanced visualization for a wide variety of clinical applications including orthopaedic and spine surgery, general surgery, and women’s health procedures, and is a recent entrant into the enhanced energy market. Founded in 2004, and headquartered in San Francisco, California, Invuity’s portfolio of innovative products is highly complementary to the Surgical portfolio of Stryker’s Instruments business.

    “Invuity’s innovative products in the single-use lighted instrumentation and enhanced energy markets provide best in class illumination and help make surgery safer,” stated Spencer S. Stiles, Group President, Neurotechnology, Instruments and Spine. “I look forward to the work we will do together to advance Stryker’s mission of making healthcare better.”

    Under the terms of the agreement, Stryker will commence a tender offer for all outstanding shares of common stock of Invuity for $7.40 per share, in cash. The boards of directors of both Stryker and Invuity have approved the transaction. The closing of this transaction is subject to the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and other customary closing conditions. The transaction is expected to close in the fourth quarter of this year and is expected to have an immaterial impact to net earnings in 2018.

  • Crossing Wall Street 17 Years Ago
    Posted by on September 11th, 2018 at 9:32 am

  • Morning News: September 11, 2018
    Posted by on September 11th, 2018 at 7:10 am

    From Trump to Trade, the Financial Crisis Still Resonates 10 Years Later

    Trump’s Sanctions on Iran Could Push Oil Prices Above $100 Per Barrel

    Renesas to Buy Chip Maker Integrated Device Technology for $6.7 Billion

    Tencent Folds’Em, Shutting Down Another Videogame as Beijing Tightens Grip

    Sonos Can’t Miss a Beat

    Ford Says Despite Trump’s Tweet, Focus Active Won’t Be Produced In U.S.

    Winklevoss Twins’ Gemini Trust Launches World’s First Regulated Stablecoin

    Salomon Ski Owner Gets $5.5 Billion Chinese Bid Ahead of Games

    American Eating Habits Are Changing Faster than Fast Food Can Keep Up

    The New American Dream Job Is Pretty Dull

    CBS Board Tries to Move Past Moonves Crisis With New Directors

    $10.4-Billion Lawsuit Over Diesel Emissions Scandal Opens Against Volkswagen

    Nick Maggiulli: Nothing Into Something

    Michael Batnick: Making Private Public

    Jeff Carter: Who’s The Biggest Anarchist of All-Time?

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  • Torchmark Lowered to Sell by Goldman
    Posted by on September 10th, 2018 at 10:56 am

    Shares of Torchmark (TMK) are down about 4% this morning after the company was downgraded by Goldman Sachs.

    The stock is being lowered from neutral to sell. The analyst lowered his target price from $92 to $78. Personally, I’m not worried about TMK at all. It’s an excellent stock.

  • RPM’s Earnings Date
    Posted by on September 10th, 2018 at 10:47 am

    Here’s a quick follow-up.

    In Friday’s newsletter, I said that RPM International (RPM) hasn’t said when they’ll report earnings yet, but I guessed that the date would be October 3.

    This morning, the company announced that it will be October 3.

    The only two Buy List reports we will get until earnings season starts again in mid-October will be FactSet (FDS) on September 25, and RPM.

  • Morning News: September 10, 2018
    Posted by on September 10th, 2018 at 7:13 am

    China Sees Hints of a Past Threat: Inflation

    Bitcoin Tracker One and Ether Tracker One Suspended by U.S. SEC

    Crypto Wipeout Deepens to $640 Billion as Ether Leads Declines

    After Trump Tweets that the Ford Focus Can ‘BE BUILT IN THE U.S.A.,’ Ford Explains Why That Would Make No Sense

    Apple Supplier Shares Slide After Trump Tells Tech Giant to Make Products in U.S.

    Apple to Kick Off Product Blitz With iPhone Xs Line, New Watches

    Amazon’s Antitrust Antagonist Has a Breakthrough Idea

    Jack Ma’s Succession Plan Offers an Important Lesson in Leadership

    Fintech Start-up TransferWise Reports Second Year of Profit, Revenue Almost Doubles

    Volkswagen Trials Offers Hedge Funds a Chance to Settle Old Scores

    CBS’s Moonves Toppled by Harassment Allegations, Redstone Clash

    Ben Carlson: The Other Failure Risk in VC

    Joshua Brown: Instability is Stabilizing.

    Cullen Roche: Potential Problems with Narrow Banking

    Jeff Miller: Inflation Watch

    Be sure to follow me on Twitter.

  • The Economy Added 201,000 Jobs in August
    Posted by on September 7th, 2018 at 11:57 am

    Today’s jobs report showed that the U.S. economy created 201,000 net new jobs last month. That’s pretty much inline with the current trend.

    The unemployment rate was 3.9%. Looking at the decimals, the unemployment rate came very close to rounding down to 3.8%. The current unemployment rate is lower than every single month in the 1960s, 1970s and 1980s.

    In the last 102 months, the U.S. economy has created 9.5 million new jobs. In the last year, average hourly earnings are up 2.9%.

    A broad measure of unemployment and underemployment that includes Americans stuck in part-time jobs or too discouraged to look for work fell to 7.4% from 7.5% the prior month.

    Friday’s report showed job gains in the professional and business services sector, along with health care, wholesale trade and transportation. Employment fell in the manufacturing industry, and all levels of government subtracted 3,000 jobs from payrolls last month.

    The average workweek was unchanged at 34.5 hours in August.

  • CWS Market Review – September 7, 2018
    Posted by on September 7th, 2018 at 7:08 am

    “The natural-born investor is a myth.” – Peter Lynch

    Perhaps I should take newsletter breaks more often. While I was out relaxing, the stock market bounced up to another all-time high. Last week, the S&P 500 broke above 2,900, the Nasdaq Composite breached 8,000 and the Dow got over 26,000.

    The stock market has pulled back a bit since then, but I’m pleased to report that our 2018 Buy List is at a new high. Our Buy List is now up 9.28% YTD (not including dividends), and we’ve outpaced the overall market by a decent margin since the beginning of August. Best of all, we still haven’t made a single change to our portfolio this year. As usual, a little patience combined with low turnover and high-quality stocks wins the race.

    In this week’s CWS Market Review, I want to highlight some recent economic news. The good news is that there’s good news. In fact, I don’t see any major economic troubles headed our way in the near term. Still, this isn’t a time to be complacent. I’ll also bring you up to speed on news impacting our Buy List stocks. (We now have eight stocks that are up more than 19% this year!) Before we get to that, let’s look at some recent optimistic economic news.

    Jobless Claims Fall to a 49-Year Low

    Later today, the government will release the employment figures for August, and I suspect it will be another good report. Nonfarm payrolls will probably be about 180,000, give or take. There’s even a chance that the unemployment rate could dip down to a multi-decade low. It’s not so outlandish. On Thursday, the jobless claims report came in at 203,000, which is the lowest number since December 1969. This week’s ADP report showed an increase in private payrolls of 163,000 during August. That was a bit lighter than expectations.

    We also had two economic reports this week that really surprised me. On Tuesday, the ISM Manufacturing Index came in at 61.3. That’s the strongest number in 14 years. I like to pay attention to this report for two reasons. It comes out on the first business day of the month. A lot of key economic reports come after a generous lead time. I prefer getting the info fast. Also, the ISM Index has a good track record of lining up with recessions. I’ve found that any number around 45 or below usually signals a recession. We’re not even close.

    On Thursday, we got a look at the ISM Non-Manufacturing Index, which came in at 58.5. That’s also very good, and it’s up 2.8 from July. I was curious to see how the bond market would react, but it seems as quiet as ever. The yield on the 10-year Treasury is still below 2.9%. I’d be concerned by any sudden jump in bond yields.

    When we look at the stock market to see if it’s too expensive, the first question to ask is “compared to what?” A good proxy, in my opinion, is the 10-year TIPs. That’s the inflation-protected bond. The 10-year TIPs currently yield just 0.80%. I’ve found that the stock market performs well as long as the 10-year TIPs yield less than 2.43%. I’m not claiming that’s an iron rule for markets, but it’s a good reminder that higher stock valuation can be justified with lower bond yields.

    On the Friday before Labor Day, the government revised Q2 GDP growth up to 4.2%. That’s only a slight change from the original report, which was 4.1%. How does Q3 look? That’s tough to say just yet, but it could be pretty good. The Atlanta Fed now says it expects Q3 GDP growth of 4.4%.

    The bottom line for us is that the economy continues to do well. I’d be concerned if bond yields were rising or the housing market was breaking down, but we’re not there yet. This is also an excellent environment for corporate profits. Investors should continue to focus on a diversified portfolio of high-quality stocks such as you’ll find on our Buy List. Two names that look particularly good right now are Torchmark (TMK) and Alliance Data Systems (ADS). And remember to pay attention to our Buy Below prices!

    Welcome the Communications Services Sector

    There’s an important change coming soon to Wall Street. Standard & Poor divides the S&P 500 into 11 different sectors. This is a handy way to keep track of what’s doing well and what isn’t. The problem is these sectors kinda match reality, but not exactly. Personally, I’ve never liked the Telecommunications Sector. It’s basically AT&T and Verizon, and that hardly makes a sector.

    Apparently, someone at S&P agrees with me. They’ve decided to rebrand Telecom as the Communications Services Sector. The change will go into effect at the close of business on September 28. The new sector will have AT&T and Verizon, plus some big-name stocks will be migrating there from other sectors. For example, Facebook, Google and Netflix will go in. So will Disney. Also, the Information Technology Sector will now be known as the Technology Sector. S&P will divide the Communications Services Sector into two industry groups: Media & Entertainment and Telecommunications.

    These changes may sound like an overly technical part of investing, and to some extent, they are. However, there’s an important lesson for investors here. How does a company describe what business it’s in? That’s not as simple as it looks. With modern investing, a company’s industry is becoming harder to pin down.

    When I was a kid, AT&T was the phone company. Ma Bell. Now AT&T owns Time Warner. So what industry are they in now? I dunno. Media? Maybe. Entertainment? I guess. Content? I really don’t know. The same can be said of Disney, which now owns Fox. The world has changed, and both of those companies have to compete with their digital rivals. As a result, the precise definition for what they do is blurred. This is more common than many investors realize. The business world is in constant flux, and you should always remember that an innovation can upend the ways things have always been. Now let’s look at some of our Buy List stocks.

    Buy List Updates

    Speaking of lessons, here’s a good one on why we focus on high-quality stocks and ignore short-term drama. In our last newsletter, I discussed the fiscal Q2 earnings report from Ross Stores (ROST). The numbers were quite good, and as usual, Ross gave conservative guidance. I wasn’t bothered at all.

    I didn’t know what the market’s reaction would be, but we had a clue since Ross was down 5%, placing it near $90 per share in Thursday’s after-hours market. Of course, that’s just after-hours; there’s no law that says that’s where the stock will open.

    In the newsletter, I said that reaction “seems overdone to me.” I was right. The stock gapped up and down after the earnings report, but it’s now settled down, and Ross is well above where it was prior to the earnings report. On Thursday, shares of ROST got as high as $98.24 per share, which is a new all-time high.

    This has been a very good stock for us. Last August, I told you that Ross is “a good value here.” The stock is up nearly 80% since then. This week, I’m raising our Buy Below on Ross to $104 per share.

    A few small items. JM Smucker (SJM) completed the divestiture of its Pillsbury baking division. That brings in $375 million for Smucker. There were two recent merger deals involving our Buy List stocks. 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 deal is expected to close in Q4.

    Also, Stryker (SYK) is buying K2M Group Holdings (KTWO) at $27.50 per share. That works out to $1.2 billion. KTWO is a big player in the spinal biz. According to the WSJ, “Stryker said the deal wouldn’t affect earnings this year. It expects to report adjusted earnings of $7.22 to $7.27 this year.”

    Of the 25 stocks on our Buy List, two stocks had quarters that ended in August: RPM International (RPM) and FactSet Research (FDS). These will be our only two earnings reports until the Q3 earnings season gets going in mid-October. FactSet is due to report on September 25. On Thursday, shares of FDS hit a new all-time high of $233.71. This week, I’m lifting our Buy Below on FactSet to $242 per share. RPM International hasn’t said yet when they’ll report, but it will probably be around October 3.

    Hormel Foods (HRL) did almost an exact repeat of Ross Stores, only perhaps more so. Two weeks ago, the stock dropped 3% after its earnings report. It’s up more than 10% since then, including six up days in a row. On Thursday, Hormel hit another new high. I’m lifting my Buy Below on Hormel Foods to $44 per share.

    In addition to Ross Stores, FactSet and Hormel, we also had new highs on Thursday from Church & Dwight (CHD), Fiserv (FISV) and Sherwin-Williams (SHW).

    That’s all for now. The August jobs report is due out later this morning. I expect to see more good results, but we need to see better numbers on wages. There’s not much in the way of economic reports next week. On Wednesday, the Beige Book comes out. On Thursday, the CPI figures are released. So far, inflation has been largely contained. I suspect this will continue. The retail-sales report comes out on Friday. 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

    Syndication Partners

    I’ve teamed up with Investors Alley to feature some of their content. I think they have really good stuff. Check it out!

    3 Recession Proof High-Yield Dividend Stocks

    As the stock market indexes continue with history’s longest bull market, investors are becoming concerned that the bull is on its last legs and they need to start preparing for the next bear market. I am not predicting the end of the bull market. Nobody can. What you can do is start to add stocks to your portfolio that are more resistant to economic recession and stock market bear markets.

    It’s important to understand that a stock market bear market will take down the value of all stocks, with very few exceptions. The companies you want to own are the ones whose businesses will continue to operate, generate strong revenue, and grow through a recession or bear market. These companies can continue to pay dividends and the share prices will recover after the down turn. You as an income focused investor continue to collect dividends while other investors worry about how they are going to recover from their losses.

    Our search for recession/bear market resistant dividend stocks focuses on the business operations. We want companies whose operations should at least stay level and hopefully thrive in all economic conditions. These will be more conservative income stocks, with the trade off of lower current yields. Here are three for your further research.

    Buy These 3 Growth Stocks on Robinhood and Pay NO Commission

    As editor of Growth Stock Advisor, I’m always on the lookout for disruptors…trends that will change forever the way things are done. And of course, the companies that are at the forefront of the disruption and that will benefit from it.

    One such disruption is occurring right now in my former field of employment – the brokerage industry and commission-free trading. It is perhaps apropos that the first disruptor in the sector is a company called Robinhood, which sent shockwaves through the brokerage industry in 2015 when it launched, offering free stock trades.

    Robinhood is adding 250 ADRs (American depositary receipts of companies from Japan, China, Germany, the U.K. and elsewhere. ADRs are stocks of foreign companies that trade and settle in the U.S. market in dollars, allowing investors to avoid having to transact in a foreign currency. Here are three ADRs that I like right now….