• Three Earnings Reports
    Posted by on April 21st, 2016 at 1:38 pm

    This is a busy day for earnings reports. We had three before the open and a fourth is due after the bell.

    First off, Snap-on (SNA) reported Q1 earnings of $2.16 per share. That topped Wall Street’s estimate by nine cents per share, but sales came in below expectations. I’m still targeting $9 in EPS for this year. The shares are down a bit today, but not too much.

    Biogen (BIIB) is our big winner today. The biotech firm reported Q1 earnings of $4.79 per share, which beat expectations by 32 cents. Revenues rose 6.7% to $2.73 billion which was just below expectations. The shares are up about 4% today.

    Alliance Data Systems (ADS) is again our problem child. For Q1, the company earned $3.84 per share which beat Wall Street’s estimate by two cents per share. The company had given guidance of $3.83 per share.

    The problem was guidance. For Q2, ADS sees earnings of $3.58 per share which is 20 cents below Wall Street’s forecast. Traders didn’t like that at all. The shares have been down as much as 9% today. But the company said they’re on track to earn $16.75 per share for this year.

    Microsoft’s (MSFT) earnings are due after the close. Wall Street is expecting earnings of 64 cents per share.

  • Morning News: April 21, 2016
    Posted by on April 21st, 2016 at 7:39 am

    ECB Keeps Up Unprecedented Stimulus as Draghi Assesses Impact

    The $2 Trillion Project to Get Saudi Arabia’s Economy Off Oil

    Sweden’s Central Bank Expands Bond-Buying Program

    Oil Higher as IEA Expects Biggest Non-OPEC Output Fall in 25 Years

    Verizon Profit Rises, But Misses Estimates

    Mitsubishi’s Efficiency Scandal Point to Big Competition Among Japan’s Tiny Cars

    GM Beats Estimates on Truck Sales in U.S., Break-Even in Europe

    Southwest Tops Estimates on Higher Traffic, Lower Fuel Costs

    Biogen Profit Beats on Higher Tecfidera Sales

    Novartis Profit Falls as Blockbuster Cancer Drug Sales Drop

    Travelers Profit Drops 17% on Hedge Funds, Texas Hail Storms

    Qualcomm Profit Rises 11%, Dispute With LG Resolved

    Uber Overtakes Rental Cars Among Business Travelers

    Cullen Roche: 2 Concerns About the U.S. Government’s Debt

    Howard Lindzon: Let’s Talk About Web Video…Again

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  • Stryker Earns $1.24 per Share
    Posted by on April 20th, 2016 at 5:18 pm

    Q1 earnings for Stryker (SYK) are out. The company earned $1.24 per share which beat estimates by four cents per share. Net sales grew 4.9% to $2.5 billion. That’s 6.1% constant currency.

    We are pleased by our first quarter performance and expect the momentum to continue,” said Kevin A. Lobo, Chairman and Chief Executive Officer. “As a result, we have raised our full year guidance for both sales and adjusted net earnings.”

    Indeed they did. Stryker now sees full-year organic sales growing between 5.5% and 6.5%. The pervious range was 5% to 6%.

    Stryker sees full-year earnings ranging between $5.65 and $5.80 per share. The previous range was $5.57 to $5.77 per share. For Q1, they see earnings coming in between $1.33 and $1.38 per share.

    Regarding the impact of the dollar, Stryker said:

    If foreign currency exchange rates hold near current levels, we expect net sales in both the second quarter and full year to be negatively impacted by approximately 1.0% and adjusted net earnings per diluted share to be negatively impacted by approximately $0.03 in the second quarter and $0.10-$0.12 in the full year.

  • Express Scripts Responds to Anthem
    Posted by on April 20th, 2016 at 10:09 am

    Earlier this year, Anthem sued Express Scripts (ESRX) claiming that they were being cheated out of billions of dollars. Now Express Scripts has responded.

    Express Scripts filed a response to the suit Tuesday in the U.S. District Court for the Southern District of New York. Express Scripts said it denied Anthem’s allegations “in their entirety” and listed its own counterclaims against Anthem, including the allegations of failing to negotiate in good faith.

    Express Scripts is seeking a judgment stating that Anthem does not have a contractual right to any change in pricing under its agreement nor does it have a right to terminate the agreement with Express Scripts.

    In addition, Express Scripts claims that Anthem has been “unjustly enriched” by a $4.7 billion cash payout it accepted in 2009 at the beginning of its agreement with Express Scripts.

    “Notwithstanding Anthem’s conduct — ESI has at all times been committed to negotiating in good faith in an effort to satisfy its largest commercial client,” Express Scripts said in a federal filing about the lawsuit. The company said it made five separate counter-proposals to Anthem between June 2015 and March 2016, each of which offered “substantial pricing concessions that were well within the range of what Anthem publicly told the market it expected to receive,” according to the filing.

    Express Scripts said it is “confident in the strength of its legal position.”

  • Signature Bank Earns $1.97 Per Share
    Posted by on April 20th, 2016 at 7:42 am

    Signature Bank (SBNY) reported Q1 earnings of $1.97 per share. That’s their 26th record quarter in a row, and it beat estimates by two cents per share. The bank earned $1.64 per share in last year’s Q1.

    For the quarter, loans rose 5.3% to $25.04 billion and Signature’s net interest margin was 3.32%.

    “As we kick off 2016, which marks our 15th year in operation, Signature Bank delivered another quarter of solid financial performance. The 2016 first quarter saw record earnings for the 26th consecutive time, as well as both strong deposit and loan growth. We also see this as an opportune time to reflect on the growth of our business since our founding. We are extremely proud of the strong foundation and infrastructure we have built and nurtured over the years, which has helped sustain our consistent, strong organic growth,” explained Joseph J. DePaolo, President and Chief Executive Officer.

    The bank has been burned by going into the taxi medallion loan business. The price of those medallions has plunged.

    The Bank’s provision for loan losses for the first quarter of 2016 was $19.8 million, compared with $16.7 million for the 2015 fourth quarter and $7.9 million for the 2015 first quarter. The increase was primarily due to additional reserves for taxi medallion loans.

  • Morning News: April 20, 2016
    Posted by on April 20th, 2016 at 7:13 am

    After Doha Bust, Oil Bulls Find Solace in Global Gasoline Boom

    Germany Trims 2017 Growth Forecast to 1.5%

    Google Charged With Breaking Europe’s Antitrust Rules

    The U.S. Begins a Criminal Probe Into the Panama Papers Disclosures

    CFPB Sheds Light on Coming Payday Loans Rule

    Intel to Slash 12,000 Jobs as PC Demand Plummets

    Apex Changes From Foe to Suitor With $3.6 Billion Lexmark Deal

    Coca-Cola Zero Is Rebranding Itself in the UK As Britain Adopts a Sugar Tax

    Lexmark Shareholders Clear Paper Jam With China Deal

    Goldman Posts Weakest Results in Four Years; Revenue Tumbles 40%

    Blankfein’s Decade Ending With a Thud on a Humbled Wall Street

    Mitsubishi Motors Admits to Manipulating Fuel Economy Test Data

    After $90 Billion Deal Flop, Honeywell’s CEO Gets Back on Script

    Jeff Carter: The Danger of Theranos

    Josh Brown: The Riskalyze Report: Advisors Warm to Gold, TIPS

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  • Talking Small-Caps
    Posted by on April 19th, 2016 at 4:28 pm

  • Morning News: April 19, 2016
    Posted by on April 19th, 2016 at 7:11 am

    OK, Now OPEC Is Officially Dead

    Oil Market Stumbles But Recovers After OPEC Impasse

    German Investor Optimism Rises to 2016 High as China Risk Abates

    Former Treasury Officials Urge Lew to Reconsider Inversions Rules

    Early Warning Signs of Recession Flash Faintly in U.S. Jobs Data

    Visa, Wal-Mart Move to Speed Checkout for Customers With Chip-Enabled Cards

    Johnson & Johnson Beats Expectations, Boosts Guidance

    Philip Morris Boosts Outlook as Profit Falls

    Netflix Drops on Weak-Growth Forecast

    UnitedHealth Tops Expectations, Raises Guidance

    Verizon Turns to Shadow Workforce Amid Strike

    General Mills and 7-Eleven Join the Venture Capital Crowd

    Founder of China’s Tencent to Give $2 Billion in Shares to Charity

    Cullen Roche: The Myth of Declining American Living Standards

    Roger Nusbaum: Risk: Still On?

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  • ATH
    Posted by on April 18th, 2016 at 5:18 pm

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    Not for the S&P 500, but for the S&P 500 Total Return Index, which includes dividends. The S&P 500 Total Return Index closed today at 3,941.86, which is an all-time high. It surpassed the previous peak of 3,939.35 from July 20. Note that the S&P 500’s current high came on May 21. The index needs to rally another 1.7% to make a new high there.

  • This Year’s Blogger Wisdom
    Posted by on April 18th, 2016 at 1:13 pm

    For the last few years, Tadas Viskanta has asked a number of financial bloggers their opinions of important questions facing the industry. I was fortunate enough to be included in this year’s edition.

    Here’s a list of the questions, along with my answers and the answers from some of my fellow finance bloggers.

    Question: Venture capital has likely dried up for stand-alone robo-advisors. If so, where does the business of rob-advising go? Or said another way, is robo-advising simply going to be the way advisors manage client accounts going forward?

    I skipped that one because I felt I don’t have anything profound to add but here’s Ben Carlson:

    The competition for robo-advisors will continue to heat up because almost every wealth management or fund firm is going to have their own version of robo-advisor software at some point. I think the best way for robo-advisors to continue their growth will be to make a huge push into the workplace retirement business (something Betterment is already doing). The 401(k) and 403(b) markets are ripe for disruption by a low-cost provider as most of these plans are filled with terrible fund choices and high costs to plan users. Plus, the 401(k) market is much stickier in terms of clients because you have money automatically going into client accounts out of every pay check. Most companies don’t have the expertise to understand these plans on their own so offering a simple, low-cost solution would seem like an obvious way for robo-advisors to gain market share. This is especially true among small businesses who are the most over-charged group in need of a better solution.

    Question: The ‘smart beta’ or factor-investing bubble seems to be in full bloom. Is ‘smart beta’ simply the new active investing? If so, what happens to the entire fund industry which was built on the high fees associated with active management?

    Here’s me: I’m honestly not terribly impressed with Smart Beta. It’s mostly driven by marketing pitches. To my mind, it’s another form of chasing return. To the extent that any of these strategies work, it tends to be small and fleeting. (Make no mistake, I believe some are real.) The bottom line is that straight vanilla indexing is probably better for most investors, and simply buying and holding great stocks is even better than that.

    Here’s David Merkel: Smart beta is a form of enhanced indexing. It is not active management. As in the quant quake in August 2007, “smart beta” will have its own episode of failure when too much money pursues it. It will be uglier due to the lack of human intervention. Active management will continue to shrink, but those who do it will have better opportunities. Fees will be under pressure, but less so than most imagine.

    Question: Like just about every other blogger I have been writing on the rise on index investing. Should we care that the percentage of assets in indexes is on the rise, or should we just sit back and enjoy the (low cost) ride?

    Here’s me: No, I’m not worried about the rise of indexing. The investment world loves to find things to be “concerned” about. Indexing is a great benefit for investors. I find the efficient versus inefficient debate to be pretty tedious. If you’re willing to accept what the market does, then indexing is a fine strategy. Still, with a little work, you can do better.

    Here’s Josh Brown: Enjoy the ride. And know that the cure for “too much indexing” is already in progress in the form of a flat, choppy market that rises and falls but ultimately goes nowhere, which is the story of the MSCI All Country World Index heading into its third year of nothing. A few more and you’ll see a lot of the enthusiasm for low cost, passive dim.

    Question: It does not escape me that the entire distribution list on this “Blogger Wisdom” e-mail chain is entirely male. I have written extensively on why this is an issue for the investment industry. What, if anything, can be done to make the investment industry more inclusive?

    I didn’t have an answer but here’s Cullen Roche: If the men on this planet don’t exterminate each other in the future I am certain that the women will come to their senses one day and do it for us. A perfectly efficient stock market will be the result.

    Question: Think back to the last edition of this series a couple of years ago. Have you changed your mind about something (big or small) over that time period? If so, what and why?

    Here’s me: This may be an odd response, but I’ve recently changed my mind about volatility. Specifically, I think it’s incorrect to see volatility as some kind of gnome that stands above and apart from the market. To put it bluntly, the market doesn’t fall on volatility. Instead, volatility is up because the market is down. It falls when the market rises. The correlation between the VIX and the distance the market is from its six-month high is about 70%. I was surprised to see that it’s true.

    Here’s Michael Batnick: I can’t think of anything that I’ve done an about face on, but one thing I am sticking with is my conviction to minimize the home country bias. I do not believe that investing in companies that generate a majority of their sales overseas is the same thing as investing in international stock markets. These giant multinationals are highly correlated with their domestic index and do not provide the same diversification benefits.

    Question: What are you jazzed about that no one else is talking about? That could include a book, blog, Twitter feed, song, movie, app, online series, etc….

    Here’s me: A few things. It looks like an ETF based on the Buy List will become a reality. We’re still in the planning stages, but it looks promising so far.

    Another idea that’s bouncing around my head is the relationship of different market groups to each other. For example, why do bonds follow stocks for a while then break apart?

    There’s been some quant work here (multi-dimensional scaling, etc). I think this is an unexplored vein, and it could reveal some important insights on the market.

    Here’s Conor Sen: As I believe with rate hikes underway we’re in the late cycle in the US, I’m trying to think ahead to what the next cycle’s boom will be. At the moment from a tops-down perspective in the cycle from…I don’t know…2018-25? — I’d love to be in companies that are using some combination of data/analytics/information/automation/robotics, sensors, solar energy, and transportation to solve problems for consumers. More capex-heavy, less trivial app-conomy stuff.

    Lastly, here are Tadas’ answers.