• Stryker Earns $1.78 per Share
    Posted by on January 24th, 2017 at 4:27 pm

    Stryker (SYK) just reported Q4 earnings of $1.78 per share which beat the Street by two cents per share. Net sales grew 16.2% to $3.2 billion. That’s 16.8% growth in constant currency.

    For the year, Stryker earned $5.80 per share. They had previously given us a range of $5.75 to $5.80. Later they said they expected earnings at the top of that range. It turns out, they were right. Net sales for 2016 grew 13.9% to $11.3 billion. In constant currency, that’s growth of 14.3%.

    “I am pleased with our performance in both the fourth quarter and the full year 2016,” said Kevin A. Lobo, Chairman and Chief Executive Officer. “Fourth quarter organic sales growth of 6.7% versus a strong prior year is impressive and was balanced across Orthopaedics, MedSurg and Neurotechnology and Spine. In addition, we executed well on acquisitions and delivered leveraged adjusted earnings gains. We enter 2017 with good momentum across our businesses and look forward to building on this success.”

    Now let’s look at guidance. For Q1, Stryker expects earnings to range between $1.40 and $1.45 per share. Wall Street had been expecting $1.43 per share. For all of 2017, Stryker sees earnings between $6.35 and $6.45 per share. Wall Street had been expecting $6.39 per share.

    The company added that if forex rates hold, then they expect to see earnings dinged by $0.03 to $0.04 in Q1, and $0.10 to $0.12 for the year.

    The shares are unchanged after-hours.

  • Atrion (ATRI)
    Posted by on January 24th, 2017 at 12:39 pm

    Here’s the latest in our never-ending series of great companies no one knows about. Please meet Atrion (ATRI).

    The company has a grand total of 1.8 million shares outstanding. The current share price is $459 so that gives them a market value of $826 million. On average, ATRI trades about 5,000 shares each day. That’s very low.

    From their website, Atrion describe themselves as:

    Atrion Corporation is a leading supplier of medical devices and components to niche markets in the health care and medical industry. Atrion’s proprietary products, ranging from cardiovascular and ophthalmology products to fluid delivery devices, are sold to end-users, distributors and other manufacturers worldwide. As a developer and manufacturer of a diverse range of products, Atrion stays on the forefront of technology and manufacturing with products that meet the needs of its targeted markets.

    Now for the money shot. Here’s the stock’s history.

    The stock rose from just over $4 per share in 1989 to $459 today, and that’s down from a high of $522 a few weeks ago.

    The stock has actually been a little more impressive than its price gain indicates because ATRI has often paid a dividend. By my estimate, ATRI has averaged 20% per year since 1990.

    Not one analyst follows it.

  • Eight Alternating Days in a Row
    Posted by on January 24th, 2017 at 9:11 am

    Over the last eight days, the S&P 500 has closed up, down, up, down, up, down, up and down.

    The up-down streak is actually more impressive than it sounds because the day before it started we had a rare unchanged day. Prior to that, we had a four-day alternating streak.

    What this boils down to is that the first two trading days of the year were up. Since then, the market has failed to repeat the direction of the previous day.

  • Morning News: January 24, 2017
    Posted by on January 24th, 2017 at 6:57 am

    Eurozone Economy Slows Despite More Buoyant France

    China’s Efforts to Stem Capital Outflows Are Starting to Pay Off

    Fed Debate Over $4.5 Trillion Balance Sheet Looms in 2017

    Trump’s Move to Dump TPP Bucks Growing Dependency on Asia

    Trump to CEOs: Stay Here, And I’ll Wipe Out 75% of Regulations, Fast-Track Factories

    The CFPB Is In The Crosshairs, Exactly Where It Belongs

    Aetna’s $37 Billion Humana Takeover Blocked by Judge

    Yahoo Faces SEC Probe Over Data Breaches

    Top Execs of UAE’s Etihad to Quit But Airline Says Committed to Strategy

    BT Plunges After Cutting Outlook, Tripling Italy Writedown

    Goldman Fights Back in Suit Against Indonesian Businessman

    Hoping to Strike Gold Again, Silver Lake Leads Investment in Koubei

    U.S. Judge Approves Volkswagen Dealers $1.2 Billion Settlement

    Roger Nusbaum: This Indeision’s Bugging Me

    Cullen Roche: The Biggest Myths in Investing, Part 1 – The “Investing” Myth

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  • Winmark Corp. (WINA)
    Posted by on January 23rd, 2017 at 1:56 pm

    I’ve recently been looking at a fairly small company called Winmark Corp. (WINA). I’m not recommending it but it’s an interesting company to put on your radar screen.

    The company franchises five different types of retail stores: Style Encore, Plato’s Closet, Once Upon a Child, Play It Again Sports and Music Go Round.

    While the five stores are different, they share a common theme: they buy and sell slightly-used merchandise. Winmark also provides leasing for its business partners.

    Because of the company’s unusual structure, they do about $70 million in sales despite having about 100 full-time employees.

    From 2000 to 2016, Winmark was led by John Morgan, who turned the ship around. It’s difficult to describe this company. I suppose it’s like what eBay would be if they had stores.

    Here’s a chart since 2009:

  • Volatility Now Versus the Summer
    Posted by on January 23rd, 2017 at 11:32 am

    It’s hard to describe how low the market’s volatility is. Here’s another way to see it. This is the daily changes of the S&P 500 over the last 24 days compared with a 24-day stretch from the middle of last year. I’ve used the same vertical axes.

    Here’s last summer:

    And this is now:

  • FLOTUS and AFLAC
    Posted by on January 23rd, 2017 at 11:18 am

    Here’s an ad from one of our Buy List stocks featuring the new First Lady of the United States:

  • Morning News: January 23, 2017
    Posted by on January 23rd, 2017 at 7:04 am

    Chinese Banks Told To Issue Dollar-Denominated Debt-Sources

    Japan’s PM Says Will Keep Seeking Trump’s Understanding on TPP

    OPEC and Friends Agree on Way to Monitor Oil Cut to End Glut

    Kuwait State Oil Company Says Onshore Oil Leak Contained

    Chevron Slams Canadian Backdoor in $9.5 Billion Pollution Fight

    The Rising Risk of Central Bank Instability

    HUD Suspends FHA Mortgage Insurance Rate Cut An Hour After Trump Takes Office

    Retail Malaise Puts Pressure on Chains to Shutter More Stores

    AIG to Pay Buffett’s Berkshire About $10 Billion In Insurance Deal

    Xiaomi, Chinese Phone Maker, Losing Its Global Face as Hugo Barra Exits

    Apple-Supplier Foxconn Weighs $7 Billion U.S. Display Plant

    Japan’s First Jet Delayed Again Raising Concerns About New Sales

    Snapchat Discover Takes a Hard Line on Misleading and Explicit Images

    Jeff Miller: Will Policy Uncertainty Increase Stock Volatility?

    Howard Lindzon: Post Alt Fact World

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  • CWS Market Review – January 20, 2017
    Posted by on January 20th, 2017 at 7:08 am

    “Obama’s Radicalism Is Killing the Dow” – WSJ, 13,000 Dow Points Ago

    Dear Lord, this has been a dull, dull, dull market. The S&P 500 has now gone six weeks without having a single daily move, up or down, of more than 1%. Compare that to last summer, when we had six straight days of moves greater than 1%.

    The Trump Rally has apparently given way to the Ambien market. Folks, Wall Street is fast asleep. Here’s a stat for you: Since December 12, the Dow has closed every single day within a range of 230 points. That’s a little over 1%. You can expect that kind of range for one day, but over a month?

    Things may change soon. Fourth-quarter earnings season is under way, and we’ve already had our first Buy List earnings report. Signature Bank beat consensus estimates by two cents per share. This bank has had a phenomenal rally since the election, but, like everybody else, it’s chilled out. I’ll go over the earnings report in a bit.

    I’ll also preview the five earnings reports coming our way next week. But first, let’s look at why the Ambien market may not last, and why I’m cautious about stocks over the next few weeks.

    Expect a Rougher Market This Winter

    The new president is going to be sworn in in a few hours. Whenever there’s a new president, you’ll hear lots of breathless commentary about how he’ll ruin or save Wall Street. I tend to shy away from these predictions (see this week’s epigram). As Warren Buffett said, forecasts tell you more about the forecaster than they do about the future.

    Having said that, I think the market is looking tired right now. The Dow ran into 20,000 and could go no further. Let me be clear: I’m hardly forecasting doom. Rather, I think some minor pullbacks are in order over the next few weeks. Nothing to be too concerned about. In fact, I would expect our stocks to weather any storm better than the overall market.

    This is a key moment for the economy. Next week, we’re going to get our first look at the fourth-quarter GDP report, and I think it will be a good one. The report for Q3 was 3.5%, but here’s the thing—the U.S. economy has had a difficult time stringing together two or three good quarters in a row. I think this is our best chance to break that.

    This week, for example, we learned that industrial production grew by 0.8% last month. That’s quite good. That beat expectations, and it was the biggest increase in more than two years.

    We also got another CPI report telling us that inflation is well contained. The news reports noted that inflation rose by 2.1% last year, which was the largest increase in five years. Well, yes, that’s correct, but it glides over the fact that we came close to deflation over those five years. So this year, inflation has climbed all the way to “low.” This is another reason I doubt the Fed will raise interest rates three times this year.

    This week’s Fed’s Beige Book said that labor markets are getting “tight.” That’s econo-talk for “workers want more money.” They may get it. The initial claims report came within a whisker of touching its lowest point since the Nixon administration. Plus, last Friday, the Census Bureau released a decent retail-sales report for December. On Wednesday, Janet Yellen said the economy is close to full employment.

    I prefer to listen to the market’s opinion over that of economists, and I’m pleased to see the bond market pull back some. It shouldn’t be too easy for bond investors to outpace stock investors. The bond folks need to be kept on their toes. The 10-year yield got up to 2.5% this week. That’s about double the yield from six months ago. This is part of an ongoing rotation as money leaves safe assets and is gradually finding a home in riskier ones. That could be a major theme this year.

    Now let’s look at our first Buy List earnings report for Q4.

    Signature Bank Earned $2.11 Per Share

    On Thursday, before the opening bell, Signature Bank (SBNY) reported Q4 earnings of $2.11 per share. That was two cents more than Wall Street’s consensus. Overall, this was another good quarter for Signature.

    For the year, the bank earned $7.37 per share. That was only 10 cents more than 2015’s total, but remember that they took a 70-cent charge in Q3 related to their medallion loans. Still, they were to top 2015’s result, which made 2016 their ninth record year in a row. The numbers for last year were pretty impressive. Total deposits grew 19% on the year. The key stat I like to watch is net interest margin, and that came in at 3.30%. That’s quite good.

    I was also pleased to see Signature improve its fiscal condition this year by raising money from the capital markets. They had a common stock offering that brought in $320 million, plus a debt offering that took in $260 million.

    Signature Bank Chairman of the Board Scott A. Shay, noted: “Signature Bank has produced yet another record year of earnings and solid financial performance. We are proud that — even from the depths of the financial crisis — we maintained a rapid growth pace while remaining a pillar of strength for our clients during those uncertain times.

    “As the Bank continues to grow, we retain our strong discipline and follow the hedgehog theory of business – doing a few things, but doing each of them very well. In our case, that means maintaining our unrelenting commitment to depositor safety and service and conservative lending posture. We look forward to the New Year and to embracing many opportunities as we have built a platform poised to serve an expanding roster of clients,” Shay concluded.

    Shares of SBNY weren’t doing much until the election. Then, out of the blue, the stock jumped 21% in four days. It’s always interesting how stocks can suddenly rally right about when you’ve given them up for dead. Once SBNY got to $150 per share, the rally started to peter out, and that’s about where the stock is today. I continue to rate Signature a buy up to $165 per share.

    Next Week’s Buy List Earnings Reports

    Stryker (SYK) is due to report its Q4 earnings on Tuesday, January 24. The orthopedics company had a good earnings report in October. In fact, they felt confident enough to raise the low-end of their full-year guidance by five cents per share. Stryker now expects 2016 earnings to range between $5.75 and $5.80 per share. That translates to Q4 results of $1.73 to $1.78 per share.

    I’ll be curious to hear their forecast for 2017. Wall Street expects $6.39 per share. I suspect Stryker will offer conservative guidance.

    Just a reminder that one year ago, Stryker said to expect 2016 earnings of $5.50 and $5.70 per share, and they’ll clear that with room to spare. This is why we like high-quality stocks. Here’s the annual EPS trend for Stryker: $2.95, $3.33, $3.72, $4.07, $4.23, $4.73, $5.12, and $5.75 to $5.80 for last year. That’s very impressive.

    On Tuesday of this week, Alliance Data Systems (ADS) said it stands by its 2016 FY forecast of $16.90 per share in core earnings on revenue of $7.2 billion. That translates to Q4 guidance of $1.9 billion in revenue and core EPS of $4.64. My numbers say that sounds about right. ADS will report its earnings on Thursday, January 26.

    CR Bard (BCR) has enjoyed a few upgrades recently from Wall Street. I started to get very bullish on this stock during the fall. On CNBC, they asked me for a candidate to beat earnings for Q3, and I said CR Bard. The company gave guidance of $2.51 to $2.55 per share, and I said that was too low. I was right. Bard made $2.64 per share, but the stock didn’t start to rally until last month.

    Bard also increased their 2016 EPS range to $10.23 – $10.28 per share. That implies Q4 earnings of $2.70 to $2.75 per share. Keep an eye on my $230 Buy Below price. Don’t chase BCR. I’ll raise my Buy Below if the numbers are strong.

    Microsoft (MSFT) also reports on Thursday. Not much to add about the software giant. The company has been churning out very good earnings. They beat the Street three months ago by eight cents per share. The consensus on Wall Street is for 78 cents per share. The stock has had a very good run over the last six months.

    Sherwin-Williams (SHW) is one of our new stocks this year. The company gave a Q4 range of $2.13 to $2.23 per share; Wall Street expects $2.21.

    Buy List Updates

    Good news for Moody’s (MCO). The credit-ratings agency has agreed to pay $864 million to settle with the government over its ratings leading up to the financial crisis. The agreement calls for Moody’s to pay $437.5 million to DOJ and $426.3 million to the states. The news helped the stock bounce above $100 per share, despite being downgraded by UBS and Barclays last week.

    Barclays struck again. This time, they downgraded Cerner (CERN). Interestingly, Cerner was one of our worst-performing stocks last year, and it’s our best so far this year. Weird how that happens! Earnings are due out on February 9.

    SunTrust initiated coverage on HEICO (HEI) with a buy rating and a price target of $85. Also, Institutional Investors named HEICO’s CEO, Laurans Mendelson, the best CEO in defense/aerospace.

    Deutsche Bank initiated coverage on Danaher (DHR) with a Buy rating. They gave the stock a price target of $88 per share.

    That’s all for now. The news next week will probably be dominated by earnings news, but there will be some key economic reports. The most important will be the first look at Q4 GDP. Growth for Q3 was 3.5%, but we’ve had a lot of difficulty getting two good quarters back to back. Let’s see if we can do it this time. 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: January 20, 2017
    Posted by on January 20th, 2017 at 6:00 am

    Davos Elites See an `Abyss’: The Populist Surge Upending the Status Quo

    China’s Growth in 2016 Slumps as Trump Trade Struggle Looms

    Trump’s Dollar Confusion

    Yellen Backs Gradual Rate Rises as Fed Not Behind the Curve

    Steven Mnuchin, Treasury Nominee, Failed to Disclose $100 Million in Assets

    Soros Says Markets to Slump With Trump, EU Faces Disintegration

    IBM Posts Earnings Beat In Q4 And Raises Guidance For 2017, But Stock Plunges

    Netflix Beats Subscriber Count Target By 36% As Growth Strategy Pays Off

    Uber to Pay $20 Million to Settle FTC Charges on Earnings Claims for Drivers

    Heineken in Discussions With Kirin to Double Down in Brazil

    Telecommunications Company Avaya Files for Bankruptcy

    Robot Crop Pickers Limit Loss of U.S. Farm Workers to Trump Wall

    ChemChina Seeks U.S. Anti-Trust Approval for Syngenta Deal

    Josh Brown: QOTD: Bob Shiller on the Trump Illusion

    Jeff Carter: Venture Capital Is The Red Headed Stepchild, But It Shouldn’t Be

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