Morning News: December 30, 2016
Posted by Eddy Elfenbein on December 30th, 2016 at 7:00 am

Euro Jumps 1.6% in Minutes as Algo Orders Surprise Market

China’s Yuan Suffers Biggest One-Year Loss Since 1994

China Vows to Ease Curbs on Foreign Investment in Finance

India Is Gearing Up To Recapitalise Its Big Banks

Oil, Metals Post Stellar 2016 Gains on Output Cuts, Demand Hopes

Minimum Wages Set to Increase in Many States in 2017

Wall Street’s Trump Bonanza Won’t Avert Job Cuts at Banks in ’17

Silicon Valley’s Obscure Unicorns Could Boost 2017 IPO Market

Twitter Seeks a Little Help From Its Users

Sears CEO to Open His Wallet Once Again to Keep Retailer Afloat

Takata Said to Be Close to Deal With U.S. Over Deadly Airbags

Run-DMC Sues Wal-Mart, Amazon for $50 Million

General Cable to Pay More Than $75 Million To Settle Bribery Charges

Jeff Carter: Objections In The Sales Process-Handle Them And You Are Awesome

Jeff Miller: Stock Exchange: How to Find New Trading Ideas

Be sure to follow me on Twitter.

All Quiet on the Wall Street Front
Posted by Eddy Elfenbein on December 29th, 2016 at 10:53 am

The stock market is pretty quiet this week. The Dow has come close to 20,000, but so far has refused to cross the line.

This morning we learned that jobless claims dropped to 265,000. That’s a good number. The next jobs report will be next Friday, January 6.

This morning, the government said that the trade deficit for goods widened to $65.3 billion last month. Bear in mind that the dollar has been rallying since the election.

I wanted to pass along a “Year in Review” look at Cerner (CERN) by the Kansas City Business Journal. This has been a very difficult year for Cerner, and the stock is down 20% YTD.

Still, I decided to keep the stock on the Buy List for next year. Oftentimes with stock-picking, you’re buying dented merchandise. The question to ask is, how severe and how fixable are the problems? I think Cerner is a good example of a company that ran into difficulties but is in a position to ride out the storm.

Morning News: December 29, 2016
Posted by Eddy Elfenbein on December 29th, 2016 at 7:13 am

Italy Government Not Indifferent to Vivendi’s Stake Building in Mediaset

China’s Currency Drops But Pressure Still Builds

China Warmly Welcomes a Giant Rooster With Trumpian Characteristics

What History Has to Say About the Economy Trump Will Inherit

The Golden Era of Hedge Funds Draws to a Close With Clients in Revolt

U.S. Refiners Face Severe Labor Shortage For Deferred Maintenance

Toshiba’s Looming Writedown Wipes Out Gain From 2016 Share Rally

Amazon Tries To Recreate Prime Day Magic With The First-Ever Digital Day Sales Event

Nvidia Falls as Citron Research Says Stock ‘Belongs at $90’

Panasonic to Invest Over $256 Million in Tesla’s U.S. Plant for Solar Cells

How China Built `iPhone City’ With Billions in Perks for Apple’s Partner

Trump Takes Credit for Sprint Plan to Add 5,000 Jobs in U.S.

Dentsu Chief Ishii Resigns Amid Mounting Pressure Over Employee’s Suicide

Cullen Roche: Modern Finance is (Still) a Rip-Off

Howard Lindzon: The Year 2016 in Stocks – Stocktwits Style

Be sure to follow me on Twitter.

Morning News: December 28, 2016
Posted by Eddy Elfenbein on December 28th, 2016 at 6:54 am

Vietnam Sees 2016 Growth At 6.2%, Aided By Building Boom

Mexico Gasoline Prices to Surge by the Most in Two Decades

Oil Nudges Higher as Output Cuts Near

Rising Consumer Confidence Is Driven by High Expectations for Trump

U.S. Accuses Chinese Citizens of Hacking Law Firms, Insider Trading

Qualcomm Faces $853 Million Fine From South Korea Over Alleged Antitrust Violations

Writedown Fears Wipe $5 Billion Off Toshiba’s Value As It Weighs Options

Delta Drops Boeing Dreamliner Order Inherited From Northwest

Airbus’s A380 Woes Deepen as Top Buyer Emirates Delays Jets

Here Comes The Sun: Elon Musk’s Ambitious Solar Panel Factory Vision Highlights The Challenges of a Globalized Economy

For the Trumps, `Made in U.S.A.’ May Be a Tricky Label to Stitch

As Populists Won 2016 Ballots, World’s Richest Made $237 Billion

Jeff Miller: Is Forecasting Always A Folly?

Roger Nusbaum: 2016 Looks to Finish With Double Digit Gains

Jeff Carter: Filtering By Risk

Be sure to follow me on Twitter.

George Acs on BBBY (and Us)
Posted by Eddy Elfenbein on December 27th, 2016 at 10:56 am

George Acs, one of my favorite Twitter follows, said some very nice things about Crossing Wall Street:

If you follow Crossing Wall Street, you know that its founder, Eddy Elfenbein, is one of the most transparent stock pickers out there and one of the most credible.

He is a true buy and hold investor and his new ETF, AdvisorShares Focused Equity ETF (NYSEARCA:CWS) is based upon his annual buy list that has had a long term record of market out-performance.

While for many Bill Miller is the name that pops up when thinking long term out-performance, I think of Eddy. He is also a great Twitter follow because he is funny, self-effacing and shares relevant data and facts more readily than anyone I’ve ever seen, read or heard.

I believe that in an era where quantitative easing is no longer in effect and thereby no longer indiscriminately propping up most everything, true diligence will make the difference between one stock picker and the next.

You just don’t get more diligent than Eddy Elfenbein.

This year’s buy list has been released and Bed Bath and Beyond is no longer a part. Elfenbein describes it as one of the most frustrating stocks that he has owned and I continue to feel that pain.

But following this past week’s washout of an earnings report, I’m taking another look, but unlike Elfenbein, for whom diligent stock picking validates a buy and hold strategy, I have only short term interest in adding those shares and no interest in doing my due diligence.

For me, all the due diligence that I needed was seeing that its shortfall in earnings was less than the 20% off they offer on any single item with their frequent coupon mailings to my home.

I do see some continued downside risk, perhaps to the $39 level, but I would be very happy to see Bed Bath and Beyond shares tread water for a while as I would seek to serially sell call options on those shares at the $40-$42 level.

Morning News: December 27, 2016
Posted by Eddy Elfenbein on December 27th, 2016 at 7:33 am

Outrage Over the Economy Doesn’t Explain Surge in Global Populism

Oil Prices Edge Up as Investors Remain Positive

Saudi Royal Family Is Still Spending in an Age of Austerity

Monte dei Paschi Rescue Cost Jumps as Deposits Fall

Dollar’s Rise Threatens Manufacturing Recovery

Fear of Trump Triggers Deep Spending Cuts by Nation’s Second Largest Union

Toshiba Flags ‘Billions of Dollars’ Loss on U.S. Nuclear Acquisition

Tesla, Panasonic to Begin Solar Panel Production in New York

Boeing Is Flying Toward a Cloudy 2017

Tepco, Investors Discussing First Bond Sale Since Fukushima

Global Diamond Business Roiled as Cash Crunch Hits Indian Stone Cutting

Prying Eyes Are Watching Airbnb Customers as Tenants Fight Back

Clean Brexit Is The Way To Go, Saving UK £24 Billion A Year – Thank You, Goodbye, We’re Gone

Josh Brown: How I Got My Readers Through 2016

Cullen Roche: Don’t Get Trumped in 2017

Be sure to follow me on Twitter.

Morning News: December 26, 2016
Posted by Eddy Elfenbein on December 26th, 2016 at 7:16 am

How JPMorgan Could Not Save Italy’s Problem Bank

Arun Jaitley’s Correct – India Needs A Lower Level Of Taxes

Kuroda Defends BOJ’s Yield Curve Control, Upbeat On Global Outlook

20,000 in 2016? Dow Chases Milestone as Consumer Confidence Data Comes

Banks Just Can’t Quit Charging You Overdraft Fees

Brands Start Planning for Unexpected Criticism by Trump

To Stop Price Spikes on Prescription Drugs, a Widening Radar

Snapchat Has Quietly Acquired An Israeli Startup For a Reported $30 to $40 Million

Blindsided by SUV Boom, Hyundai Trims Costs, Perks

`Suplex’ in Chinese? Professional Wrestling Tries a Big New Market

Iran Says It Sealed Boeing Plane Deal at Half Price

For Fact-Checking Website Snopes, a Bigger Role Brings More Attacks

Power Surge: Chinese Electric Car Battery Maker Charges For Global Market

Howard Lindzon: Authenticity, Style, and Scarcity…and Peak Yelling

Roger Nusbaum: Being Disciplined ¾ of the Time Won’t Work

Be sure to follow me on Twitter.

Merry Everything!
Posted by Eddy Elfenbein on December 25th, 2016 at 8:05 am

I wanted to take this opportunity to wish everyone a Merry Christmas and a happy, healthy and profitable new year.

This has been an incredible year for us. The blog continues to grow its readership. The newsletter has a record number of subscribers and our Twitter following is growing as well.

The biggest news this year was the launch of our ETF. So far, it’s going very well. I want to thank all our shareholders for their trust and confidence in me.

I also want to thank my tireless editor, Marcia Hippen. She also posts the invaluable morning news links. I also want to acknowledge some of my fellow financial bloggers Barry Ritholtz, Josh Brown, Morgan Housel, Howard Lindzon, Tadas Viskanta and many, many others for their continued support.

I’d also like to thank the people who follow and interact with me each day on Twitter.

Most of all, I want to thank all of my readers for your continued support.

Let’s hope 2017 brings us more success!

“Yes Minister” Holiday Sketch
Posted by Eddy Elfenbein on December 23rd, 2016 at 3:58 pm

CWS Market Review – December 23, 2016
Posted by Eddy Elfenbein on December 23rd, 2016 at 7:08 am

Ladies and gentlemen, here are the 25 stocks for the 2017 Crossing Wall Street Buy List:

AFLAC (AFL)

Alliance Data Systems (ADS)

Axalta Coating Systems (AXTA)

Cerner (CERN)

Cinemark Holdings (CNK)

Continental Building Products (CBPX)

Cognizant Technology Solutions (CTSH)

CR Bard (BCR)

Danaher (DHR)

Express Scripts (ESRX)

Fiserv (FISV)

HEICO (HEI)

Hormel Foods (HRL)

Ingredion (INGR)

Intercontinental Exchange (ICE)

Microsoft (MSFT)

Moody’s (MCO)

Ross Stores (ROST)

RPM International (RPM)

Sherwin-Williams (SHW)

Signature Bank (SBNY)

JM Smucker (SJM)

Snap-on (SNA)

Stryker (SYK)

Wabtec (WAB)

The ten new stocks are Axalta Coating Systems (AXTA), Cinemark Holdings (CNK), Continental Building Products (CBPX), Danaher (DHR), Ingredion (INGR), Intercontinental Exchange (ICE), Moody’s (MCO), RPM International (RPM), Sherwin-Williams (SHW) and JM Smucker (SJM).

I’ll have more details on the new buys in next week’s issue.

The five sells are Bed Bath & Beyond, Biogen, Ford, Stericycle and Wells Fargo.

To recap, I assume the Buy List is equally weighted among the 25 stocks. The buy price for each stock will be the closing price as of Friday, December 30, 2016. The new Buy List goes into effect on Tuesday, January 3, 2017, the first day of trading of the new year.

The Buy List is now locked and sealed, and I won’t be able to make any changes for the entire year. I’ll have a complete recap of 2016 at the end of the year. I’ll also have more to say about our new buys, and I’ll give you new Buy Below prices.

With a week to go, this looks to be one of our rare years where we trailed the market. Through Thursday, our Buy List is up 1.93% for the year, compared with 10.62% for the S&P 500. That doesn’t include dividends, but I’ll have the final calculations in next week’s issue.

I should add two points in my defense. The first is that most of our underperformance came during a difficult spring and summer. We turned the corner recently and have beaten the market over the last two months. Let’s hope that trend continues into next year.

Also, our 11-year track record against the market is still quite good. Again, I’ll have complete details in next week’s issue.

Our Five Sells

Let me add a few words on the sells. My belief is that each new buy should last a few years. I only turn against a stock when it turns out to be something quite different from what I originally believed.

Bed Bath & Beyond was one of the most frustrating stocks to own. They had a long-time reputation for being a well-run outfit. Unfortunately, they fell behind the times. I simply stayed in this one for too long. I waited for a turnaround that never came. This week, the company released yet another poor earnings report. It’s time to let it go.

There’s a lot I like about Ford. Overall, I think the company did a good job managing its way through the recession. Ford was never bailed out. They also made an impressive change to aluminum-body trucks. I also liked Ford’s generous dividend, plus their special dividend payment. Unfortunately, the outlook for Ford isn’t as rosy as I had assumed.

I’m sad to part with Biogen. There’s a lot to like about this biotech, but I think they need to make some big changes first. Sales of Tecfidera have slowed down dramatically, and their broader pipeline is weak. Next year’s spinoff of Bioverativ is a good start. Despite its terrible name, Bioverativ could turn into a winner. I need to see results first, however.

Stericycle was a mistake from the beginning. I simply missed how poorly organic sales had been performing. Management tried to mask these issues with a series of unwise rollups. This was a massive loser for us this year.

There’s not much else to be said about Wells Fargo that hasn’t been said before. Fundamentally, WFC is a sound bank, but it’s been tainted by its indefensible behavior. At least, the stock has been a terrible performer this year.

Dow Flirts with 20,000, Gets Number, Never Calls

There wasn’t much news this week. The Dow has made a few runs at 20,000 but has so far failed to break through. On Wednesday, the index got as high as 19,986.56. On Tuesday, Wednesday and Thursday, most stock market volatility slowed to a crawl. The Dow is apparently doing its own version of the mannequin challenge. On Wednesday, the VIX briefly dropped below 11. That hasn’t happened in more than a year.

On Thursday, the government revised its report on Q3 GDP growth from 3.2% to 3.5%. Last quarter was the best for economic growth in two years. The first quarter is about to start.

Over the last ten years, there’s been a very noticeable trend of Q1 being quite poor for economic growth. I don’t know if that’s due to weather or other factors. Still, for the first time in a long time, I’m optimistic about the economy. I think there’s a good chance GDP growth for Q4 will top 2.5%. This week, we learned that consumer spending rose by 0.2% last month, while the number for October was revised up to a healthy 0.4%.

I also wanted to pass along this excerpt by Gary Alexander in Louis Navellier’s most recent Market Mail. Keep this in mind when you hear the latest forecasts from experts.

Last August, shortly after the political nominating conventions ratified Clinton and Trump as the two major party candidates, William Buiter, Chief Economist at Citigroup, and his team warned of a global recession if Trump won. His team said that a Trump win would cut world growth by 0.7-0.8 percentage points and could “easily” push growth below 2%, the threshold that indicates a looming recession. But last week, Buiter and his team reversed course and raised their 2017 forecast for global growth to 2.7%. (Source: Business Insider, December 12, 2016, “RPT-Investment Focus: Among the shocks, steady global growth is the biggest surprise.”)

(…)

On October 31st, Andrew Ross Sorkin wrote a New York Times analysis of what would happen after a surprise Trump victory. First, he quoted MIT economist Simon Johnson, who said a Trump presidency would “likely cause the stock market to crash and plunge the world into recession.” Sorkin added that Johnson’s “pessimism is shared by many economists across Wall Street, from Citigroup to Goldman Sachs. Each cites a different set of reasons the markets will fall if Trump wins.”

Remember: Prices drive narratives.

Before I go, I want to adjust two of our Buy Below prices. I’m lifting our Buy Below on Fiserv (FISV) to $111 per share. I’m also raising Stryker (SYK) to $128 per share.

That’s all for now. The stock market will be closed on Monday, December 26 for Christmas. Trading resumes on Tuesday, and the final day of trading for 2016 will be on Friday, December 30. The next issue of CWS Market Review will be on Saturday, December 31. I’ll have a complete summary of how we did in 2016, plus I’ll list the starting prices for 2017. 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