Morning News: November 10, 2017
Posted by Eddy Elfenbein on November 10th, 2017 at 7:03 am

China Moves to Open Market for Financial Firms in Historic Step

China Eases Limits on Foreign Stakes in Financial Firms

Trump Visits Vietnam, a Tiger Economy That Beats His Stock Rally

GOP’s Dueling Tax Overhauls Struggle to Pass a Key Red-Ink Test

Trump’s CNN Attacks May Hobble Legal Case to Block AT&T-Time Warner Deal

Investors Are Celebrating the Tech Revolution

Uber Drivers Aren’t Independent Contractors, UK Tribunal Rules

Chinese Media Giant to Buy Karaoke App Musical.ly for $800 Million

Ford, Ekso Team Up For `Bionic’ Auto Workers

Cathay Pacific Dropped From Hong Kong’s Hang Seng After Decades

Disney’s Profit Drops, But `Star Wars’ Saves the Day

Kobe Steel Blames Data Scandal on Focus on Profit, Lack of Controls

Joshua Brown: Why We Dig In

Mark Hines: Fearing Macro Headwinds? Try A Blended Approach

Jeff Carter: Some Thoughts Gleaned from the Fin Tech Incubator Presentation

Be sure to follow me on Twitter.

Q3 2017 Earnings Calendar
Posted by Eddy Elfenbein on November 9th, 2017 at 4:30 pm

Here’s a list of reporting dates, Wall Street’s consensus estimates and actual reported results:

I’ve included both CR Bard and Becton, Dickinson. The buyout is scheduled to happen sometime in Q4.

Morning News: November 9, 2017
Posted by Eddy Elfenbein on November 9th, 2017 at 6:56 am

The Saudi Purge Isn’t Just a Power Grab

China Steps Toward U.S. LNG Deal as Sinopec Inks Alaska Pact

A Few Beefy Trade Deals Won’t Solve Trump’s $300 Billion China Problem

U.S. Weighs Suit Against AT&T’s Deal for Time Warner

Bitcoin Surges on Hopes That Upcoming Split May Be Avoided

In 2017, Investors Can Either Buy Bubbles or Be Left Far Behind

America’s ‘Retail Apocalypse’ Is Really Just Beginning

Tencent Sees Video Games, More Ads in Snapchat’s Future

Roku Explodes in Premarket Trading After Blowout Quarterly Earnings Debut

21st Century Fox Discusses a Deal With Sky, but Not Disney

Boeing Signs Deal to Sell 300 Planes Worth $37 Billion to China

Panera Bread Founder Ron Shaich to Step Down as CEO

Ben Carlson: How to Deal With Market-Moving News

Roger Nusbaum: What Is Risk Allocation & Should You Invest In It?

Cullen Roche: Go FANG Yourself & Your Politics Are Hurting Your Investments

Be sure to follow me on Twitter.

Morning News: November 8, 2017
Posted by Eddy Elfenbein on November 8th, 2017 at 7:03 am

China’s Technology Ambitions Could Upset the Global Trade Order

Black Friday And Cyber Monday Trends For 2017

Snap Will Overhaul Its App Just Nine Months After Its IPO

Uber Partners With NASA In Flying Car Service, Predicts ‘Heavy Use Of Air Travel’ In L.A.

Our Driverless Future Begins As Waymo Transitions To Robot-Only Chauffeurs

This $290,000 ‘Robo-Taxi’ Is France’s Answer to Waymo

Someone Deleted Some Code in a Popular Cryptocurrency Wallet – $280 Million Locked Up

Tencent’s Sizzling Hot E-Books IPO Presages More Mega-Spinoffs

Nissan Cuts Operating Profit Forecast After Japan Recall

Sky Threatens to Shut News Channel for 21st Century Fox Deal

The Air Force Wants Fighter Jets With Lasers

Commerce Secretary Wilbur Ross Lied About His Wealth to Make Richest Americans List

Cullen Roche: The Balance of Payments in the USA

Ben Carlson: Considerations For Cashing Out Of The Stock Market

Josh Brown: Can Bitcoin Be Tamed?

Be sure to follow me on Twitter.

Watching Disney’s Earnings
Posted by Eddy Elfenbein on November 7th, 2017 at 2:59 pm

Despite a potential deal with 21st Century Fox, Disney earnings might be dragged down by ESPN from CNBC.

Morning News: November 7, 2017
Posted by Eddy Elfenbein on November 7th, 2017 at 7:02 am

Hedge Funds Push the Price of Bitcoin to New Highs

Saudi Crackdown Is Said to Widen as More Bank Accounts Frozen

Trump Ditches Swamp-Draining Playbook for Do-No-Harm Fed Picks

Multinationals Scurry to Defuse House Tax Bill’s ‘Atomic Bomb’

After a Tax Crackdown, Apple Found a New Shelter For Its Profits

Qualcomm Takeover Reports Are A Rocket Catalyst

Toyota Lifts Profit Forecast on Surging RAV4 Sales

Tesla’s Dangerous Sprint Into the Future

Starbucks’ Next Move: Italian Restaurants

Google Cloud Just Joined Amazon as a ‘Preferred’ Storage Provider For Salesforce

Unable to Beat Them, Cabbies Join Uber and Lyft in Ride Sharing

Sky Falls as Report of Disney-Fox Talks Increase Deal Uncertainty

Cullen Roche: You’re Doing it Wrong – Deficit Edition

Roger Nusbaum: Bitcoin Graduates From Mania to Hysteria

Jeff Carter: How Foreign Regulation Finds Its Way Across Borders

Be sure to follow me on Twitter.

Trading a calm market as volatility sinks to new lows
Posted by Eddy Elfenbein on November 6th, 2017 at 9:47 pm

Trading a calm market as volatility sinks to new lows from CNBC.

Snap-on Raised Dividend 15.5%
Posted by Eddy Elfenbein on November 6th, 2017 at 9:39 am

Good news this morning from Snap-on (SNA). The company raised its quarterly dividend by 13.5% to 82 cents per share. The dividend is payable on December 8 to shareholders of record on November 17.

“Snap-on’s dividend is an essential component of our approach to capital allocation, as demonstrated by our payment of consecutive quarterly cash dividends, without interruption or reduction, since 1939,” said Nick Pinchuk, Snap-on chairman and chief executive officer. “This eighth consecutive annual dividend increase reflects our ongoing strong financial position and robust cash generation which enable us in returning capital to our shareholders and in continuing to strategically invest, both organically and through acquisitions, along our defined runways for growth and improvement.”

Based on Friday’s close, the new dividend yields 2.07%. That’s a little more than a five-year Treasury.

Morning News: November 6, 2017
Posted by Eddy Elfenbein on November 6th, 2017 at 6:56 am

Euro-Area Economic Boom Spurs Fastest Job Creation in a Decade

Investors Worldwide Size Up Palace Intrigue in Oil-Rich Kingdom

Billionaire Olayan Family Said to Put Saudi IPO Plan on Hold

China is Finally Going After Click Farms and Fake Online Sales

Amazon Has a Risky Strategy for Cutting Prices This Holiday Season

Altice Jumps Into U.S. Wireless Business in Deal With Sprint

Qualcomm Braces for a $100 Billion Fight With Broadcom

Rebuffed by American Airlines, Qatar Airways Buys Into Cathay Pacific

Failure of U.S. Deal Hits Deutsche Telekom Shares, Growth Prospects

Anthem Names Industry Veteran Gail Boudreaux as New CEO

Zara Customers Find Notes From Employees Inside Clothing

Donors Use Bitcoin for Tax Benefits and to Keep Tabs on Spending

Jeff Miller: Is This As Good As It Gets?

Howard Lindzon: The Future – No Facts, Only Opinions

Ben Carlson: What If You Only Bought at Below Average P/E Ratios?

Be sure to follow me on Twitter.

CWS Market Review – November 4, 2017
Posted by Eddy Elfenbein on November 4th, 2017 at 9:07 pm

“Necessity never made a good bargain.” – Charlie Munger

Earlier this week, I was at the Evidence-Based Investing Conference sponsored by Ritholtz Wealth Management. The conference was a lot of fun, and I got to see many great speakers (see here and here for recaps). Unfortunately, my busy travel schedule forced me to write this week’s newsletter a bit later than usual. That actually worked to my advantage, since this was an action-packed week for Wall Street and for us.

There’s a lot to get to, so let’s start with Jay Powell. President Trump has nominated Mr. Powell to be the new Federal Reserve Chairman. I don’t have much to say about Powell except that he’s very much a part of the establishment. I doubt an observer would be able to notice any difference between a Powell- or Yellen-led Fed.

This may be a shrewd choice on President Trump’s part because Powell is a registered Republican who was nominated by President Obama—twice, in fact. This is Mr. Powell’s third nomination in the last five years (note that the nomination to Fed chairman is separate from being a Fed member). I doubt he’ll have much trouble winning confirmation in the Senate. I also except to see a continuation of the Fed’s current policies. Wall Street seems pleased.

We got a good jobs report on Friday. The unemployment rate fell to 4.1% which is the lowest in nearly 17 years. Nonfarm payrolls rose by 261,000. Some of these figures were still impacted by the severe weather we had. The bad news is that wages dipped slightly last month. This is another reason why I’m not terribly concerned about inflation.

The Federal Reserve met this week. As expected, the central bank didn’t raise interest rates. However, it’s widely believed that another rate hike is coming next month. The weak wages last month won’t change their mind. I don’t see the need for higher rates, but I can’t say they’ll be very damaging. At least, not yet.

This week, the Conference Board said that consumer confidence was at its highest in 17 years. Last Friday, the government said that the U.S. economy grew by 3% in the third quarter. That’s a good number, and it comes after a decent number for Q2, but I’m not ready to celebrate. The current expansion has had a difficult time stringing together three quarters in a row of decent growth. We seem to be stuck on a 2% trend. I hope this time will be different.

Now let’s get to our Buy List stocks.

Axalta Soars on Merger Talks

The biggest news for us, by far, came last Friday when Akzo Nobel, a Dutch company, was reported to be in merger talks with Axalta Coating Systems (AXTA).

Let me stress that there’s no deal yet, nor is there a guarantee that a deal will come. But we do know that both companies are discussing the topic. Last Friday, shares of AXTA soared as much as 21%. The stock has recently settled around $33 per share.

This is good news for us, but let’s recall some recent history. Earlier this year, shares of AXTA got a bump after Akzo Nobel shot down a buyout offer from PPG. The thinking was that PPG might next turn to Axalta. Instead, the suitor was Akzo Nobel.

Please bear in mind that this could fall apart at any moment. Investors should never bet on buyout deals. They’re nice when they happen (like with CR Bard), but a lot things can go wrong. For now, let’s stick with Axalta and see what happens.

Fiserv Misses Earnings Again

On Tuesday, we got an earnings miss from Fiserv (FISV). The company reported Q3 earnings of $1.27 per share, which was four cents below Wall Street’s estimate. This is their second miss in a row.

“Fiserv continued to execute well, delivering double-digit adjusted-earnings-per-share growth despite pressure from lower periodic revenue in the quarter,” said Jeffery Yabuki, President and Chief Executive Officer of Fiserv. “Sales were solid in the quarter, providing momentum for a strong close to the year.”

The miss is unpleasant, but the more important news is that Fiserv narrowed its full-year guidance from $5.03 to $5.17 per share to $5.05 to $5.12. That represents growth of 14% to 16% over last year. That means Q4 earnings should range between $1.34 and $1.41. That’s not so bad. Wall Street had been expecting $1.36 per share.

Shares of Fiserv dropped sharply at Wednesday’s open. FISV came close to falling below $120 per share, but the stock regained its composure later in the week and closed Friday at $127.03 per share. This is a good stock. Fiserv remains a buy up to $131 per share.

Earnings Beats from Cognizant and Ingredion

We got two more Buy List earnings reports on Wednesday. First up, Cognizant Technology Solutions (CTSH) reported Q3 earnings of 98 cents per share. Previously, the company had told us to expect Q3 earnings of at least 95 cents per share.

CTSH also raised its full-year guidance from at least $3.67 per share to at least $3.70 per share. Now the bad news. That implies Q4 earnings of 95 cents per share, which is below the 98 cents Wall Street had been expecting. On the revenue side, Cognizant expects revenues between $3.79 billion and $3.85 billion. Wall Street had been expecting $3.76 billion.

Traders sent the stock down 7% Wednesday morning, but as with Fiserv, the selling was quickly reversed and the shares only suffered a minor hit. In fact, CTSH closed Friday two cents per share above its closing price from seven trading days before.

I’m not concerned about this report. CTSH’s numbers are fine. Cognizant Technology Solutions remains a buy up to $74 per share.

For Q3, Ingredion (INGR) reported earnings of $2.21 per share. That beat the Street by 19 cents, and it was a nice increase over $1.96 per share from a year ago. The company raised the low end of its full-year guidance by 15 cents per share. Ingredion now expects 2017 earnings of $7.65 to $7.80 per share. That implies Q4 earnings of $1.67 to $1.82 per share.

This has been a tough year for Ingredion, so it’s nice to see some good news. The shares are up 3.7% in the last three days. This week, I’m lifting our Buy Below on Ingredion to $134 per share.

BDX and ICE Beat the Street

Becton, Dickinson (BDX) isn’t a Buy List member, but it may be one soon after the merger with CR Bard (BCR) is complete. This week, the medical-device manufacturer reported fiscal Q4 earnings of $2.40 per share, two cents above expectations.

For the year, BDX made $9.48 per share. For the current fiscal year, which ends next September, Becton, Dickinson expects earnings between $10.55 and $10.65 per share. Wall Street had been expecting $10.46 per share.

Shares of BDX jumped 7.7% on Thursday which helped BCR edge up 2.7%. Remember that the deal is in cash and stock, so any rise in BDX helps BCR. The merger should happen before the end of the year.

Also on Thursday, Intercontinental Exchange (ICE) reported earnings of 73 cents per share. That beat the Street by three cents per share. The company also approved a new share-buyback program of $1.2 billion. The stock gained 3.7% on Thursday.

Unfortunately, on Friday, the company reported light trading numbers for October. That caused the stock to give back nearly all of Thursday’s gain Don’t worry about it. ICE is still a buy up to $66 per share.

Friday’s Earnings from Cinemark and Moody’s

On Friday morning, Moody’s (MCO) said they made $1.52 per share for Q3. That beat Wall Street’s estimate of $1.41 per share.

“Moody’s strong third-quarter financial results were driven by record revenue in Moody’s Investors Service, with corporate and structured finance contributing the largest gains, double-digit organic revenue growth in Moody’s Analytics, and the addition of Bureau van Dijk,” said Raymond McDaniel, President and Chief Executive Officer of Moody’s.

Moody’s shelled out a lot to get Bureau van Dijk, a Belgian data provider. The company expects the acquisition to help boost earnings soon.

Moody’s also increased its full-year range to $5.85 to $6 per share. This is the second time Moody’s has raised its full-year guidance. This means the company expects Q4 earnings of $1.28 to $1.43 per share. Wall Street had been expecting $1.38 per share. Shares of Moody’s gained almost 2% on Friday. The stock is now our biggest winner YTD, with a gain of 55%.

The poor box-office environment was bad news for Cinemark (CNK), but the company is managing it as well as can be expected. The movie-theater chain earned 33 cents per share for Q3. That’s a miss of two cents per share, and it’s down from 56 cents per share for last year’s Q3. The good news is that CNK continues to gain market share. So it was a tough quarter, but it was even worse for other theaters.

The stock pulled back 2.3% in Friday’s trading. I’m lowering my Buy Below price on Cinemark to $38 per share.

Next Week’s Earnings Report and New Buy Below Prices

Next Thursday, Continental Building Products (CBPX) will issue our final Buy List earnings report of this cycle. The stock has been in a nice uptrend since the summer even though they missed earnings in August. The consensus for Q3 is for 29 cents per share.

Lastly, I want to lift my Buy Below prices on two other stocks. I’m raising Stryker’s (SYK) to $165 per share and Danaher’s (DHR) to $99 per share. Both stocks had very good earnings this season.

That’s all for now. Next week probably won’t be as action-packed as this week. I expect President Trump’s tax plan will get most of the coverage. We still have more earnings reports to hear. Tuesday is Election Day though it’s mostly minor races since this is an off year. Also on Tuesday, we’ll get the consumer credit report. On Thursday, we’ll see the latest jobless claims report. This series recently touched a multi-decade low. 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