• CWS Market Review – August 18, 2017
    Posted by on August 18th, 2017 at 7:08 am

    “Good investment advice is repetitive and boring. There is nothing exciting about it.”
    – D. Muthukrishnan

    Volatility may slowly be creeping back into Wall Street. Last Thursday, the S&P 500 fell by 1.45%. As I explained in last week’s CWS Market Review, that’s not really that big a move in historical terms. But compared with how calm the market’s been this year, it was a jolt.

    Some market watchers dismissed last week’s move as being due to jitters about North Korea. That’s right, but we got another downdraft this week, and again, it happened on Thursday. This time, the S&P 500 lost 1.54%. That’s the index’s biggest daily drop in three months. Not many other days have come close.

    I’m not ready to say that this a major change for the market. It could be a false start, and the stock market may quickly return to its sleepy ways. But it’s something to notice. Trends can only last so long.

    In this week’s CWS Market Review, I’ll highlight some of the market’s recent trends. Later on, I’ll discuss the very nice earnings report we got from Ross Stores. The deep-discounter is doing just fine against the great Amazon behemoth. Ross raised its full-year earnings guidance for the second time this year. I’ll also preview three more Buy List earnings reports coming our way next week. But first, let’s look at what’s shaking Wall Street.

    The Slow-Moving Break-Up of the Baby-Step Rally

    Three times in the last six trading sessions, the S&P 500 had a daily move of more than 1%. Normally, that’s no big deal, but in 2017, it’s enough to get your attention. Last year, the S&P 500 had 48 days in which it closed up or down by more than 1%. In 2015, there were 72. So far this year, there have been seven.

    Here a remarkable stat: Not once since election day has there been a 3% drawdown for the market. In other words, from top to bottom, the S&P 500 has never been down by more than 3%. That’s the longest such streak on record. For more than nine months, it’s been a baby-step rally the whole way. However, there are a few disparate events that seem to be coming together all at once that could shake things up. Let me take them one at a time.

    I was critical of the last Fed rate increase. Now it appears the market is starting to doubt the Fed’s commitment to more rate increases. The futures market had been expecting a third rate increase this year in December. Now the odds are slightly against it. Traders don’t give a 50% chance for another rate increase until March 2018. That’s actually more hawkish than a few days ago when the next hike was pegged for June 2018. Whatever the case, traders think the Fed will be on hold for several more months. By the way, I should add that Janet Yellen’s term ends in February. President Trump may reappoint her.

    Speaking of the president, many of the investing themes that took hold of the market after the election have quietly melted away. A good example is small-cap stocks. Last November, the Russell 2000 soared. There was a great deal of optimism that the new administration would be a boon for smaller companies. (Please note: I’m not making a political statement. I’m merely reflecting what traders believed at the time.)

    But the sector soon started to lag the baby-step rally. In the last month, the Russell 2000 has been drifting lower in absolute terms. On Thursday, the index dropped below its 200-day moving average, which is often a bad omen. The Russell hasn’t traded below its 200-DMA in more than a year.

    Watching the small-cap sector is important because it could be an early warning sign that investors are pulling back on riskier names. In a bull market, you want to see stable blue chips rally alongside the up-and-comers. Whenever the score tilts heavily to one side, you know something’s up.

    Along with small-caps, the energy sector is getting beaten up. Just like small-caps, energy stocks jumped last November on hopes of the incoming administration. But the Energy Sector ETF (XLE) has fallen for the last six days in a row, and 11 times in the last 13 days. There’s just no love for energy stocks at the moment.

    Here’s what happening: On the surface, we’ve seen a baby-step rally. The S&P 500 is moving mostly upward, with very low volatility. But below the surface, investors have been quietly shunning riskier areas and fleeing to safety. Or rather, perceived safety. But this is unusual because it’s the opposite of what we normally see in the late stages of a bull run. Typically, when investors exit safety and chase madly after risk, that’s a sign of a frothy market.

    On top of that, we’ve seen pronounced weakness in the U.S. dollar all year. Mind you, that’s not all bad. In fact, the weak dollar probably bailed out the market this earnings season. But are all these trends separate or are they different expressions of the same event?

    One possible explanation is that the economy simply isn’t as strong as people thought. That’s why investors are shifting toward safety. Despite a low unemployment rate, GDP isn’t moving so fast, and that could require more assistance from the Fed. Lower rates, or a slower increase in rates, would also make the U.S. dollar less attractive.

    Going forward, I encourage investors to remain focused on high-quality stocks. Two Buy List stocks that look particularly good at the moment are Danaher (DHR) and Alliance Data Systems (ADS). As always, make sure your portfolio is well diversified. Now let’s look at the good news from Ross Stores.

    Ross Stores Beats and Raises Guidance (Again)

    After the closing bell on Thursday, Ross Stores (ROST) reported very good earnings for their fiscal second quarter. This came as a huge relief for traders, as folks who keep an eye on retail had been expecting the worst. Shares of Ross had been drifting lower for much of this year.

    I’m glad we’ve stuck by Ross because it’s an excellent firm. Ross is one of the few retailers that’s been able to withstand the great Amazon beast. For Q2, Ross earned 82 cents per share. That was well above the range of 73 to 76 cents per share that Ross had been expecting. Even as a Ross fan, this is more than I had anticipated.

    Let’s dig into some of the numbers. Ross’s quarterly sales rose 8% to $3.432 billion. Their comp-store sales rose by 4%. That really impressed me. For Q2, Ross had been expecting an increase of 1% to 2%. A great number is that their quarterly operating margin came in at 14.9%, which is very good for a retailer. This tells us that Ross is holding up well within its sector.

    Now for guidance. Ross sees Q3 earnings ranging between 64 and 67 cents per share. In last week’s issue, I said I was looking for something like 65 to 68 cents per share, so that’s pretty close. Ross also gave Q4 guidance of 88 to 92 cents per share. Q4 is November, December and January.

    If you add those two ranges together, plus the $1.64 per share Ross has already made in the first half of this year, that translates to a full-year range of $3.16 to $3.23 per share. That’s an increase over the previous full-year range of $3.07 to $3.17 per share. This is actually the second time Ross has increased its full-year guidance. Things are obviously going well for them.

    Ross has also been using its cash flow to buy back tons of its own stock. I’m not wild about this practice, but at least Ross actually reduces the share count. Through Thursday, Ross was our worst-performing stock this year. That may soon change. Thanks to the earnings report, shares of Ross were up more than 10% in the after-hours session. A word of caution: the after-hours market doesn’t always line up with what the stock will do once the real trading starts the next morning.

    This time, we can congratulate ourselves. In last week’s newsletter, I told you Ross Stores was “a good value here.” We stuck by a good company when others got scared and ran away. This week, I’m raising my Buy Below on Ross Stores to $61 per share.

    Three Buy List Earnings Reports Next Week

    We have three more Buy List earnings reports next week. But I promise you, after that, we’re going into a long earnings lull period. We won’t see another Buy List earnings report until early October. Let’s look at who’s reporting next week.

    HEICO (HEI) plans to release their fiscal Q3 earnings after the closing bell on Wednesday, August 23. The company had a very good earnings report last May, but the stock market was not impressed. That is, it wasn’t impressed until several weeks later, when HEICO started a furious rally. Sure that doesn’t make a whole lot of sense, but welcome to Planet Wall Street.

    Wall Street expects earnings of 53 cents per share. The company said it expects sales to rise by 8% to 10% and net income to rise by 12% to 14%. Last year, HEICO made $1.86 per share. If we assume no change in shares outstanding, that implies 2017 EPS of $2.08 to $2.12.

    One final note. Shares of HEICO took a 4% dip on Thursday after the stock was downgraded by Deutsche Bank. HEICO is up more than 32% for us this year.

    Next Thursday, we’ll get earnings reports from Hormel Foods (HRL) and JM Smucker (SJM). Both companies will report results before the opening bell.

    Unfortunately, Hormel has been one of our weaker stocks this year. Frankly, their last earnings report was kinda blah. The company faced a headwind of an oversupply of turkeys. The good news is that Hormel is standing by its full-year forecast of $1.65 to $1.71 per share. However, they now say they expect results to be at the low end of that range.

    Hormel has missed the last three earnings reports—each time by one penny per share. This time, the consensus on Wall Street is for 37 cents per share. I think the losing streak will come to an end.

    Next week’s report will be for Smucker’s fiscal Q1. For fiscal 2018, Smucker said they expect earnings to range between $7.85 and $8.05 per share. They beat earnings for Q4, but that was due to cost-cutting. I’m all for keeping costs down, but you need to grow the top line as well. Wall Street expects Q1 earnings of $1.63 per share.

    That’s all for now. There’s not much on the calendar for next week except for the start of the Jackson Hole conference. This is the big Fed shindig every August out in Wyoming. Several times, the Fed has used the occasion for important policy announcements. I doubt we’ll see much this year. The conference begins on Thursday. On Friday, I’ll be keeping an eye out for the latest report on durable goods. 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: August 18, 2017
    Posted by on August 18th, 2017 at 7:03 am

    Thanks To A Shopping Spree, Japan Is Looking Up. It May Not Last.

    The World’s Biggest Tech Companies Are No Longer Just American

    Bitcoin: Blockchain and Bitstamp Add Ethereum

    Fracking Jobs Prove Elusive for Coal Miners Looking to Switch

    Infosys Says Vishal Sikka Resigns as CEO, Becomes Vice Chairman

    Walmart’s Online Sales Up 60% Giving Amazon A Good Run For The Money – Consumers To Benefit

    How Walmart Is Bolstering Its Grocery Business Ahead of the Amazon-Whole Foods Marriage

    For Uber, a Quiet Investor Becomes a Sudden Thorn

    Wisconsin Bill Giving $3 Billion Incentives to Foxconn Advances

    Rolls-Royce Is Pop Music’s Hottest Brand

    Jack Ma-Backed Yunfeng Leads $1.7 Billion Purchase of MassMutual Asia Unit

    What Happened Behind the Scenes as Trump’s Business Councils Fell Apart

    The Internal Combustion Engine Is Not Dead Yet

    Joshua Brown: Scott Galloway and Aswath Damodaran on Bitcoin vs Gold

    Jeff Miller: Is The Bull Market Slowing?

    Be sure to follow me on Twitter.

  • Morning News: August 17, 2017
    Posted by on August 17th, 2017 at 7:12 am

    Japan Reports Trade Surplus in July as Exports Rise Again

    Bank of England’s Caution Is Justified. What Happens When It Isn’t?

    Fed Policymakers Grow More Worried About Weak Inflation

    Really Sweating Inflation

    An Eclipse Is Just What the U.S. Power Sector’s Been Waiting For

    Here’s How Trump’s Council of Business Titans Fell Apart

    Trump’s Bruising Tweet Highlights Amazon’s Lingering Tax Fight

    China’s Online Giants Back $12 Billion Deal to Shake Up State Firm

    Hyundai Unveils New Fuel Cell SUV With Longer Travel Range

    Cisco: Thrill-Seekers Need Not Apply

    A Chinese Video Game Rakes in Cash – And Draws Young Rule Breakers

    Alibaba’s Quarterly Revenue Beats Esimates

    Cullen Roche: Robo Advisors Don’t Beat Traditional Index Funds

    Roger Nusbaum: 8 Brutally Honest Truths You Need To Hear If You Want To Get Your Portfolio Together

    Ben Carlson: The Canadian Housing Market is Bananas

    Be sure to follow me on Twitter.

  • Morning News: August 16, 2017
    Posted by on August 16th, 2017 at 7:06 am

    IMF Warns on China’s Credit Boom

    Tech Companies Ramp Up NAFTA Lobbying on Eve of Trade Talks

    Fed Minutes May Show Battle Lines Hardening Over Soft Inflation

    CEOs Walk Trump Tightrope Into New Era of Corporate Politics

    Junk Bonds Are Big Winner a Decade After Financial Crisis

    The Real Losers in Air Berlin’s Demise

    Cathay Struggles to Get Top Dollar From Fliers Amid Revamp

    Amazon Enlists Bond Market in Its Quest for Grocery Dominance

    Amazon Just Unveiled a Better Alternative to Vending Machines

    Chinese EVs Coming to U.S.?

    Target’s Profit, Com Sales Beat on Higher Customer Visits

    For Rajat Gupta, Returning Is a Hard Road

    Roger Nusbaum: Dalio Likes Gold

    Joshua Brown: My Middle Name Is Danger

    Cullen Roche: Why I’m Not Worried About Household Debt

    Be sure to follow me on Twitter.

  • Morning News: August 15, 2017
    Posted by on August 15th, 2017 at 7:24 am

    Why the U.S. Shouldn’t Start a Trade War With China

    How Nafta Changed U.S. Trade With Canada and Mexico

    Dudley Tells Skeptical Markets He Sees Fed Rate Hike

    Tallying the C.E.O. Desertion of Trump

    The Boom Is Booming and Home Depot Is Setting Records

    Why Would Buffett’s Berkshire Bulk Up on Credit Cards?

    3 Reasons Netflix Stock Isn’t Losing Half Its Value

    Nvidia’s Stock Recovers As Analysts Urge Patience In The AI Business

    How Elon Musk and Cheap Oil Doomed Push for Natural Gas Cars

    New Pandora Media CEO Good Match For Struggling Music Service

    Gates Makes Largest Donation Since 2000 With $4.6 Billion Pledge

    Costco Made $3.7 Million Selling ‘Tiffany’ Rings. Now It Must Pay $19 Million To The Real Tiffany.

    Michael Batnick: Only a Market of Stocks

    Ben Carlson: Your Brain on $

    Howard Lindzon: Momentum Monday…FFFFFINTECH

    Be sure to follow me on Twitter.

  • North Korea and the Stock Market
    Posted by on August 15th, 2017 at 12:06 am

    Simon Constable writes:

    The Aug. 10 market decline of almost 200 points on the Dow Jones Industrial Average seemed to confirm the dire view of the world and egged on the talk-show pundits. That’s understandable. Bleak warnings usually make for great TV ratings.

    But the truth about the likelihood of imminent nuclear war is somewhat different, and it usually doesn’t get ratings.

    “North Korea isn’t scaring people,” says Eddy Elfenbein, author of the Crossing Wall Street blog. “Rather, people who wanted to be scared (and exit their positions) have found an excuse in Pyongyang.”

    In other words, some investors decided Aug. 10 was a reasonable time to ditch their stock holdings, and it had little to do with the potential start of another war on the Korean Peninsula.

    Investors, such as Elfenbein, are telling the world the opposite of what talk-show guests are saying. We know this by looking at the level of the stock market, which in some ways is a crowd-sourced view of the future state of the world.

  • Morning News: August 14, 2017
    Posted by on August 14th, 2017 at 7:05 am

    Japan at Top of the Growth Table Among G-7 Peers

    Eurozone Industry Shows Signs of Slowing Amid Euro’s Rise

    Commonwealth Bank Needs a Culture Shock

    Bitcoin Surges Past $4,000 on Speed Breakthrough

    U.S. Default? Unlikely, But Bond Traders Are Taking No Chances

    Trump’s NAFTA Autos Goals to Collide With Industry as Talks Start

    Walmart Beats Amazon

    Why Discount Grocer Aldi Is Getting Into the Delivery Game

    Robust China Economic Growth Shows Signs of Fading in July

    China’s Fosun, Shanghai Pharma Say Bid for Stake in U.S. Drugmaker Arbor

    The Messy, Confusing Future of TV? It’s Here

    The Incredible Shrinking Sears

    Piketty Zeroes In on Putin’s Pain Point

    Jeff Miller: Will the North Korea Threat be the Catalyst for a Market Correction?

    Roger Nusbaum: Big Gains (Five Basis Points At A Time)

    Be sure to follow me on Twitter.

  • A Closer Look at the Tech Sector
    Posted by on August 11th, 2017 at 6:43 pm

    Jeff Reeves writes at U.S. News & World Report:

    Surprising values and dividend potential. Many investors have been enamored with big names lately – Facebook (FB), Apple (AAPL), Amazon.com (AMZN), Netflix (NFLX) and Google parent Alphabet (GOOG, GOOGL). But “tech is a broad category” and the timing may be right to look beyond these fashionable names of the moment and think long-term, said Eddy Elfenbein, portfolio manager of the AdvisorShares Focused Equity ETF (CWS).

    Elfenbein points to Microsoft Corp. (MSFT), a sleepier tech name that is currently a holding in his fund because of great management under CEO Satya Nadella, who has orchestrated “an impressive turnaround” from the Steve Ballmer era a few years back.

    (…)

    But it’s not unrealistic for tech to fall out of favor after a pretty long run for the sector. Elfenbein warns that it’s dangerous to assume every name in the sector has certain growth ahead of it and investors have to do their homework.

    “We’re in the ninth year of a bull market, so many of the previous strategies have been played,” he says. “That leads to a premium being placed on growth.

    Conversely, this is a punishing environment for companies that miss those growth expectations. He points to International Business Machines Corp. (IBM) and Qualcomm (QCOM) as examples of tech stocks that yield more than 4 percent but have actually declined year-to-date because of sluggish growth outlooks.

  • Inflation is Still Low
    Posted by on August 11th, 2017 at 12:01 pm

    This morning we got the CPI numbers for July, and they show that inflation is still quite low. Both the headline and core rate rose by 0.1% last month. In the last year, both headline and core are up 1.7%.

    Here’s a look at the monthly seasonally-adjusted core rates going back a few years:

    The decline during March was a clear outlier but the four following months haven’t seen much of an uptick.

    Here’s the real Fed funds rate based off core inflation:

    I think this chart says a lot. You can see that even when the Fed does nothing, it’s tightening because inflation is getting softer. In the last 11 months, real rates have gone from -2% to -0.6%.

  • CWS Market Review – August 11, 2017
    Posted by on August 11th, 2017 at 7:08 am

    “The only perfect hedge is a Japanese garden.” – Eugene Rotberg

    On Thursday, the S&P 500 dropped by 1.45% to close at 2,438.21. This was the index’s biggest drop in nearly three months. I should restate that—this was the biggest drop by far in the last three months. Put it this way: Since May 18, Thursday’s drop was five times greater than the damage of the sixth-largest loss.

    The point is that in historical terms, Thursday’s loss really ain’t that big a deal. But in terms of 2017’s volatility, Thursday was an earthquake inside a hurricane next to shark attack.

    The reason behind Wall Street’s fearfulness isn’t hard to miss. Wall Street and the world are increasingly concerned by the behavior of North Korea. The United Nations Security Council voted unanimously to impose sanctions on North Korea. Bear in mind that the UNSC is rarely unified on anything. Despite Thursday’s bout of selling, defense stocks like Lockheed Martin, Northrop Grumman and Raytheon all made new 52-week highs.

    In this week’s CWS Market Review, I’ll bring you up to speed on the latest happenings on Wall Street. I’ll also cover Cinemark’s reassuring earnings report. Plus, I’ll preview next week’s earnings report from Ross Stores. We also had some good news for the Buy List. Snap-on is spending $500 million to buy back shares. But first, let’s look at how Kim Jong Un has spooked the U.S. stock market.

    Should We Worry About North Korea?

    On Tuesday, the Dow snapped a 10-day winning streak. This streak got a lot of attention in the financial media, but I can’t say I was terribly impressed. For one thing, most of the increases were very small. In the history of the Dow, there have been 17 win streaks of 10 or more days. This last one has the smallest cumulative gain of all of them.

    We also have to remember that the Dow is a price-weighted index. As a result, a company like Goldman Sachs has the second-highest weighting in the index even though it has the fifth-smallest market value. The S&P 500 is weighted by market value, and it barely budged during the Dow’s winning streak. In fact, the S&P 500 fell four times in those 10 days. It was precisely companies like Goldman Sachs and JP Morgan that helped power the Dow to its new highs.

    With the recent war of words over North Korea, investors are starting to feel anxious. The South Korean economy punches above its weight in the world economy. There are several prominent Korean corporations like Samsung and Hyundai. But in the last two weeks, the South Korea ETF (EWY) has lost more than 7%.

    Over the past several months, Wall Street has brought back its old habit of freaking out in the short-term over something that turned out to be nothing major. Remember the Brexit panic? The S&P 500 had its biggest daily drop in nearly a year. But shortly after that, cooler heads prevailed and doomsayers were yet again proven wrong.

    Nearly the same thing happened after last year’s election. At one point on election night, the Dow futures were down more than 800 points. The end of the world never came, and the Dow is sitting on a nice 20% gain since the election.

    My point isn’t to defend or criticize any of these political events. Rather, I’m encouraging you not be swept up by unreasonable fears. Stock prices are like a global blood-pressure machine. Historically, the U.S. stock market has been able to rally during highly-unsettling times for the country and the world. Any drop in U.S. equity prices is good for stock-pickers.

    On our Buy List, there are a few stocks I like in particular. Ross Stores (ROST), which reports next week, is a good value here. I also like Danaher (DHR), which was has been quite weak lately. DHR looks particularly good below $80 per share. I also like Alliance Data Systems (ADS). The stock is currently going for a little more than 10 times the company’s estimate for next year’s earnings. ADS has also increased its buyback program by $500 million. That’s an impressive sign of confidence. Now let’s take a look at last Friday’s earnings report from Cinemark.

    Cinemark Is a Buy up to $43 per Share

    Last Friday, Cinemark (CNK) became our final Buy List stock to report earnings for the second-quarter earnings season. The movie-theater chain said they earned 44 cents per share last quarter. That was one penny below estimates.

    What’s interesting is that shares of CNK dropped sharply going into Friday’s earnings report. That’s largely because a competitor, namely AMC, completely bombed its earnings report. Traders naturally think that whatever’s hurting one company in a sector must necessarily be hurting its competitors as well.

    For Cinemark, that’s not the case. So even though they missed earnings by a penny per share, last Friday’s results relieved investors who feared the worst. Looking at the details, Cinemark´s quarterly sales rose by 0.9%. Concession revenue per person, which is the real moneymaker for CNK, rose by 8.9%.

    “We continue to be pleased with the consistency of our financial performance, including our second quarter’s global revenue growth, record food and beverage per caps, and year-over-year box-office results that again exceeded the North American industry,” stated Mark Zoradi, Cinemark’s CEO. “We remain optimistic about film content for the remainder of the year, as well as the future growth potential that our strong foundation and strategic initiatives provide for our Company.”

    Cinemark’s screen count is up to 5,926. I’m keeping CNK’s Buy Below at $43 per share.

    Earnings Preview for Ross Stores

    Ross Stores (ROST) will report its fiscal Q2 earnings after the closing bell on Thursday, August 17. Ross is one of my favorite retailers, but the shares have been struggling this year. It’s actually our single-worst performer YTD, with a loss of 14%. Part of the reason isn’t so much about Ross but the impact of online shopping on the entire retail sector. There have been countless stories this year about how Amazon is devouring the retail world. In fact, others retailers like Macy’s and Target have been hit worse than Ross.

    Still, I’m an optimist on Ross. If you understand Ross’s business model, you see that Amazon isn’t much of a direct competitor. For their Q2 report, which ended on July 29, Ross sees earnings ranging between 73 and 76 cents per share. That’s compared with 71 cents per share for last year’s Q2. That sounds about right. For comparable-store sales growth, Ross sees an increase of 1% to 2%.

    I’ve been particularly impressed with Ross’s operating margins. Retail is all about keeping control of costs, especially for a deep discounter like Ross. In May, Ross raised its full-year earnings forecast. The company now projects 2017 earnings between $3.07 and $3.17 per share. The previous range was $3.02 to $3.15 per share. For context, Ross made $2.83 per share last year; however, this year will include an extra business week. Ross estimates that will add eight cents per share.

    I’ll be paying close attention to Ross’s guidance for Q3. I’m expecting something around 65 to 68 cents per share. There’s a good chance I’ll raise my Buy Below on Ross, but I want to see their guidance first. Don’t give up on Ross!

    I wanted to follow up on Continental Building Products (CBPX). Last week, the wallboard folks missed on their earnings report by three cents. The stock, however, reacted rather dramatically. Last Friday, CBPX jumped 8.4%. Then on Monday, it dropped by 5.4%. This is unusual but not unheard of. The stock seems have to calmed down lately. This week, I’m dropping my Buy Below on CBPX down to $23 per share.

    A few weeks ago, Snap-on (SNA) beat earnings, yet the stock fell after the report. The earnings looked fine to me. Apparently, the company is trying to take advantage of the reduced share price. This week, Snap-on announced a new buyback plan worth $500 million. That’s worth about 5.6% of the SNA’s current market value.

    Good news for CR Bard (BCR). This week, shareholders voted to approve Bard’s merger with Becton Dickinson (BDX). According to Bard, “approximately 99%” of the vote was in favor of the merger. There wasn’t much doubt about the outcome, but it’s nice to see such a strong vote.

    As a reminder, the deal calls for BCR shareholders to get $222.93 per share in cash plus 0.5077 shares of BDX. That currently values BCR at $323.57 per share. The stock is currently going for a slight discount (about 1.4%) relative to the deal’s price. That’s common because there’s always a chance that the deal could fall apart. It’s highly unlikely but not impossible. The discount has gradually diminished since the deal was announced in April. Bard said the merger will officially take place sometime in Q4.

    HEICO (HEI) has been very strong recently. Over the last six weeks, the shares are up 21%. If you recall, HEICO had a very good earnings report in May. The company has already raised guidance twice this year. I’m raising my Buy Below on HEICO to $90 per share.

    That’s all for now. We’ll get some key economic reports next week. On Tuesday, the July retail-sales report comes out. The June report was not very good, so I’ll be curious to see if there’s been any improvement. On Wednesday, we’ll get the minutes from the last Federal Reserve meeting. Then on Thursday, the next industrial-production report comes out. This data series has been improving in recent months. 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